Beat the Press

Dean Baker's commentary on economic reporting

6/29/2006

Do Mexican Voters Care About the Economy?


The New York Times apparently doesn’t think so. In an article assessing the Mexican presidential campaign in its final days, there is no mention of the economic performance of the current administration. Since one of the two leading candidates is from the same party as the incumbent president, and pledges to continue the same policies if elected, the recent economic record would appear to be relevant.

For those who care about such mundane things as economic growth, the cumulative per capita GDP growth in the first five years of the current president has been approximately 2.0 percent. By contrast, Mexico’s per capita GDP grew 4.0 percent annually over the years from 1960-80. In other words, in 5 years under the current president, Mexico’s economy grew as much as it typically did in 6 months over the period from 1960-80. As a general rule, weak economic growth will mean weak job creation and few gains in reducing poverty, and this appears to have been the case in Mexico.

This weak economic performance probably explains much of the support for the main challenger, Lopez Obrador. As it is, the article contains very little of substance. It can probably be best described as a careful examination of the “swift boat” allegations of Mr. Obrador’s opponents. It would be great stuff for the National Inquirer, but we should expect better from the New York Times.

27 Comments:

  • At 6:15 AM, Anonymous Anonymous said…

    Tell 'em about the 80s and 90s Dean!

    80s -- slight negative growth
    90s -- 2% growth
    00s -- 2% growth so far

     
  • At 9:56 AM, Anonymous Anonymous said…

    How has the working age population of Mexico changed? In the US, our productivity growth is overestimated because we don't count the number of illegal aliens in the workforce.

     
  • At 9:29 PM, Anonymous Anonymous said…

    I lived in Mexico in 1982 when the peso started crashing which it has not stopped doing since, and I'm pretty damn sure that voters will be considering the last ten years rather than the 60's to 80's. That seems an odd period of time to pick, unless of course it was to make that 4% growth argument.

    From talking to my friends, the general impression I get is that the psychological aspect of being able to vote as opposed to being railroaded by the PRI machine is still considerable.

    Back to the U.S. I fail to see how the number of illegal aliens contribues to overestimating our productivity. In the first place, not all of them are Mexican (ok, hadda point that out, but the ruskies are the big group here), there are maybe 8 million (in a country of 300 mill!), of which a certain percentage are not working because they are children, disabled, elderly, and unemployed themselves! In addition, the types of jobs that illegal aliens hold are generally not reported in the first place, therefore not contributing to productivity data...I could go on.

     
  • At 10:04 PM, Blogger __Fair Left__ said…

    Well, no, we'd have to be a little crazy at this point to expect any different from the NY Times. Allowing their track record to be our guide.

    As for the following from anonymous:
    That seems an odd period of time to pick, unless of course it was to make that 4% growth argument.

    The Mexican economy was managed from 1960 to 1980 under Keynesian economic assumptions very different than the Friedmanism forced on Latin America by the World Bank and so on from the Reagan era onward. Comparing 1995 to 2000 with 2000 to 2005, in contrast (and for example), would compare two economic periods where the laissez-faire economic assumptions were exactly the same, with very similar bad results. It's better to compare eras with significantly different approaches to economic management and then compare the results.

     
  • At 11:07 PM, Blogger Dean Baker said…

    Fair Left is right about the policy distinctions between the pre-80 and post-80 period. But, I was actually trying to make a more trivial point, I was just trying to pick normal growth years as a basis of comparison.

    Mexico's growth in the 1960-80 period was good, but not spectacular. Countries like South Korea and Taiwan, and now China, have sustained per capita GDP growth of more than 6.0 percent a year.

    I picked the earlier period for Mexico because I thought it was a fairly typical of growth rate. I also thought it desirable to pick Mexico just to dispell the idea that there is something in their blood or culture that keeps them from growing. Clearly it didn't stop growth in the 60-80 period.

     
  • At 11:34 PM, Anonymous Anonymous said…

    I was just trying to pick normal growth years as a basis of comparison.

    Then wouldn't the previous 20 years be of interest? Closer government policies, closer technological change, closer trade patterns, etc.

    The Mexican voters know that things really are better than both the stagnant 80s, the crisis and recovery of the 90s.

    A broader middle class is emerging and the World Bank records that extreme poverty has decreased in Mexico since 1998:

    rural 50% to 30%
    urban 20% to 10%
    total 33% to 18%

    That is worth noting.

     
  • At 1:34 AM, Anonymous Anonymous said…

    I really doubt the average voter (mexican OR american!) is going to sit down and find suitably different economically managed periods of time for a subjective analysis. What's your average Joe (or Juan) going to do? Use more recent periods of time -- that he remembers -- for comparison. Whether or not that's sensible from an educated economist's point of view, of course.

    It does occur to me, I wonder if they just figure that the economic policy is shoved down their throat either way, so they're looking at different things. Honestly, you can't underestimate the sense (fairly or not) of the U.S. as the giant 800lb gorilla in the north that pulls an awful lot of those puppet strings.

    In any case, this is the second election for which there are actual, viable, multiple, candidates running. PRI is still pretty dominant in many places, and has the entire party apparatus in place, still, which newer parties are building up but are way behind. So there's plenty of major league big issues going on here.

    I don't mean to get into a dissertation on this or anything, and this is a blog on economic policies and such. But assuming that people in general of any culture will have a dry, rational, objective, similar view on how to evaluate economic policies struck me as sort of odd which motivated my original comment. (3rd anonymous).

    --Anon3

     
  • At 6:45 AM, Blogger Dean Baker said…

    well, there are two issues here. First, whether the article should have discussed economic performance at all. This one seems an absolute no-brainer. How can the economy not be an issue.

    The second is the appropriate metric for assessing the economy. I will grant this is more open-ended. The basic story is that Mexico had a long period of healthy growth following World War II. This came to an end in the eighties (in part because of debt built up during this period). The 80s were absolutely horrible for Mexico. The 90s were bad, but better than the 80s. The 00s are comparable to the nineties.

    Should/will Mexicans look to the recent past and say its better than the 80s, or worse than the 70s? I don't know, but it would be good if the news stories at least put these facts on the table.

    By the way, it is important to be careful with the poverty numbers. The last few years look pretty good in part because of the sharp downturn following the peso crisis in 1994. The nationwide poverty rate jumped 17 pp between 1992 and 1996. It has fallen since, but the 2004 number was just 5.6 pp below the 1992 poverty rate. That is not great progress for a 12 year stretch in a developing country.

     
  • At 1:35 PM, Anonymous Anonymous said…

    It seems that Mexican voters would be more interested in the recent 3% growth of 2005 -- right between the bad 90s and good 60s.

    I'd also think it isn't just the decling poverty rate voters might absorb but 'extreme poverty' which has steadily fallen from 38% in 1996 to 17% today.

    Then there is the issue of unemployment ....

     
  • At 1:49 PM, Blogger Camille Roy said…

    I'd be interested in your views on Obrador's (sp?) desire to re-negotiate NAFTA to protect small farmers, and also your sense of what NAFTA did for / against Mexico, overall.

     
  • At 10:47 PM, Blogger __Fair Left__ said…

    Mexico has a proud economic history and I'm sure that probably most Mexicans are aware of the strong economic growth of the 60s and 70s. The more recent decades have been economic bad news, and recent 2% growth is more decline from a real, per capita perspective. So, Mexicans _should_ be looking back to the last period of long-term, 'better than population increase' growth. They won't find solutions anywhere else in their economic history, and that would be a tragedy.

     
  • At 5:28 AM, Anonymous Anonymous said…

    This focus on Mexico's economy 40 yeras ago is pretty amazing. PAN can say 'extreme poverty has been cut by 1/3 and Mexico per capita growth has remained above 3% for the past two years.' The Economist reminds that it is the first presidental term in decades to avoid an economic crisis.

    The median age of Mexico is 25. Most voters have no memory of the 60s and 70s and the ones that do will obviuously be focused on the recent past.

     
  • At 9:32 AM, Blogger Dean Baker said…

    The reference to Mexico's growth in the pre-1980 period was just to give a benchmark as to what normal growth in a developing country is. I could pick many other countries over many other time periods, the point is that Mexico's growth over the last 5 years has been pathetic.

    It is absolutely true that one can find periods (e.g. the 80s) where Mexico did worse, but in a developing country, it is reasonable to expect per capita GDP growth of 3-4 percent. The stars (e.g. South Korea, Taiwan, China) have sustained per capita GDP growth of 5-6 percent for decades.

    I have no idea to what extent the Mexican population is aware of how bad their country's recent economic performance has been by international standards. They presumably know that their living standards are barely changing. Whether or not the PAN's spinmeisters can still paint this as a success story (it's not Darfur), I guess we find out tomorrow.

     
  • At 8:37 PM, Anonymous Anonymous said…

    Mexico's GDP/capita growth per year:

    50s 2.5%
    60s 4%
    70s 4%
    80s 0%
    90s 2%
    00s 2%

    2004 4%
    2005 3%

    Why cherry-pick two stronger decades out of over five decades and claim that is typical? I don't see the logic here.

    To the extent that voters care about the growth rate as opposed to the reduction in abject poverty, etc, it would seem that they know the past two years have been higher than the average over the past 25 years, about matching the halcyon days of the 70s.

     
  • At 9:19 PM, Blogger Dean Baker said…

    Anonymous,

    I'm not sure what your source is, but the IMF's World Economic Outlook (WEO) has per capita GDP growth in the 90s at about 1.4% annually (not 2.0%) and about 0.4% annually in 00s (not 2.0%). So unless I hear why the WEO data is flawed, I am going to continue to rely on it. (I don't think the IMF has a stake in making the post 1980 policies look bad.)

    The fact that the 80s were so bad should have made it easier to grow in the nineties. We usually think of economies as having a trend growth path based on labor force growth, capital stock growth, and technology. If you get knocked off this trend, as Mexico clearly did in the eighties, the economy should grow more rapidly in subsequent years than would otherwise be the case. That is the reason the U.S. economy tends to grow most rapidly in the years immediately after a recession.

    As far as the reduction in abject poverty -- let's get something straight. This happens all the time in developing countries unless their governments are doing ungodly stupid things or suffering from war or natural disaster. Boasting about a reduction in poverty is like boasting that your 9 year-old child is taller than when she was 8 years old. Unless the kid has been sick or malnourished, they grow taller. The real issue is the rate that the kid grows, or the rate of poverty reduction, and this has been horrible in Mexico.

    As I said in prior notes, it is entirely possible that the ruling party will be able to sell their record as a good one. In fairness it is possible to have done worse. But by the standard of Mexico's past growth, and the standards of developing countries around the world, it is a pathetic record.

     
  • At 11:20 PM, Anonymous Anonymous said…

    I was using different sources since the Penn Tables only go to 2000. (I think my first 90s % was high since I took 2000 and went backward 10 years) So when measuring per capita income using 1996 dollars, I get

    ---------------
    1950s 2.6
    1960s 4.0%
    1970s 3.3%
    1980s -.5%
    1990s 1.0%
    --------------
    I then went to the Mundi Tables to get

    2000s 2.2%

    The 'economic fact sheet' in the Economist has 'real GDP growth' 2001 - 2005 at 1.8% (2000, a fantastic 6.5% growth year, not included.)

    With respect to extreme poverty, the World Bank graph reproduced in the current issue of the Economist does not coincide with your statement.

    The Mexican economy was in a slump in 2001 and 2002. Yet 'extreme poverty' continued steadily downward downward:

    1996 36%
    1999 29%
    2002 20%
    2004 18%

    If the trend continued, it should be around 16% today.

    It is hard to blame Fox for the economy he walks into in 2001.
    The GDP/capita (ppp) shows
    2001 $9,080
    2005 $10,100

    Not exactly rapid growth, but I think it is a stretch to call this 'pathetic.'

     
  • At 1:23 PM, Blogger Dean Baker said…

    Anonymous,

    I'm afraid I'm going to have to stick with the IMF. The World Bank and OECD have comparable data as does the Economist, according to your account [ I assume those numbers are GDP growth, not per capita GDP growth}.

    As far as the base of comparison, sorry, I'm a tough grader. It is nonsense to say that just because developing countries are growing, then they are successes. That may be fine for the Clinton and Bushes of the world, but not for serious people.

    Developing countries are supposed to be catching up the developed world, and that is what succesful ones do. Per capita GDP growth in the United States averaged 2.3 percent over the last 45 years, it seems to reasonable to say that a successful developing should at least top that. And, as I said, many have.

    In the period from 1960-80, Latin America as a whole averaged per capita GDP growth of more than 3.0 percent annually. East Asia averaged more than 4.0 percent annual per capita GDP growth over this period and then 5.6 percent growth over the next 20 years.

    So, I know it's tough being a politician, but I'm not willing to set the bar so lwow than any performance is considered acceptable.

     
  • At 10:53 PM, Anonymous Anonymous said…

    Dean,
    I think you need to include the current strong growth which one does not sense from reading any of your posts. I appreciate tough grading, but I assume you are fair as well.

    A May 11th Economist article states: " Growth will be 4.5% this year, forecasts JPMorgan, an investment bank—the highest figure since Mr Fox took office in 2000."

    That is 3% per capita even if the forecast is off a bit.

    I'm not sure what is wrong with World Bank data with respect to per capita GDP. One can see this in the most recent Economist:

    2000 5%
    2001 -1.5%
    2002 0%
    2003 0%
    2004 2.5%
    2005 2%
    ----------
    00s = 1.3% not 0.4% as you write.
    (other sources I have seen are about the same)

    real GDP growth for 00s = 3%

    Then figure the likely end result of Fox after ignoring the boom 2000 growth (he wasn't in power) and the recession year he inherits (2001)

    One gets 1.5% per capita growth and importantly going in a steady upward direction.

    You have also not mentioned a low inflation rate -- (now similar to the U.S) nor that the country has not faced a financial crisis under Fox unlike every other president before him.

     
  • At 12:45 PM, Blogger Dean Baker said…

    Anonymous,

    I think that we're getting there. You don't get to count the 2000 growth for Fox (he took office at the very end of the year), which gives you 0.6 pp annually for 2001-05. That sounds about right.

    As far as the trend -- sorry, I'm an economist. I never heard of an economic theory that forecasts that you have upward accelerating growth rates as an ongoing phenomena (I'm always open to a new story though.)

    The more plausible story, in my view, is that the next president will face a very difficult time. Mexico has hitched its economy almost entirely to the U.S. economy. This means that when the housing bubble bursts and sends the U.S. economy into a recession, Mexico's economy will go with it. So, the next few years might look even worse than the relatively weak growth of the Fox years.

    I guess the PAN can run for re-election in 2012 on the same slogan, "it could have been worse."

     
  • At 10:03 AM, Anonymous Anonymous said…

    Not that Fox has that much to do with the economy, but I don't see how we can blame him for low growth he walks into in 2001. He certainly gets 2006

    this is the Economist data for GDP/capita
    2002 -1.5
    2003 0
    2004 2.5
    2005 2 <--- 0.8 so far
    2006 2+ <--- overall expected

    Fox almost certainly has 1% gdp/capita average growth, not .6%

    The acceleration is only from 2001, so I wouldnt label it that. For true acceleration in productivity, look at mature economies like the US and UK. Be sure not to limit the range to the past 50 years but past 250 or so.

     
  • At 7:02 PM, Blogger Dean Baker said…

    when you run for re-election, you don't get credit for your projected growth, only what you have delivered.

     
  • At 9:24 PM, Anonymous Anonymous said…

    Well, Fox delivered 6 months of 2006 prior to the election. It is an interesting question if the electorate assumes decent growth through 2007 as many analysts project.

     
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