Thursday, October 22, 2015

Mexico’s Economic System

Mexico’s economy is, of course, a mix. A mix of free market, tradition, and command. The government is basically stable and fairly involved in the economy. Despite having a large and complicated industrial base (Mexico is the world’s 4th largest car exporter), the market is still emerging; although there are areas of wealth and modernity, over half of the population is stuck in poverty, with a another quarter in danger of slipping back in. Many poverty-stricken areas remain unconnected because “many of the foundations of the modern Mexican economy were laid a century ago, in the form of roads and railways...That leaves swathes of the country unconnected.”

A majority of Mexico’s society also remain firmly rooted in beliefs of culture and tradition, and resist modernization. Such people think that small business , tied to families, provide stability and are preferable to modernizing. Small firms, usually unregistered, employ most of the labor force and sap the domestic economy because they avoid taxes. The romantic notions of these small business people (who lack skills, contacts, and opportunities) are perpetuated by interest groups who benefit from this arrangement, for example traditional political bosses whose power base resides in peasant communities.
Mexico vastly underutilizes its resources. Not only does it fail to fulfill its economic potential in cities, because of violent, drug related crime, a negative externality of the command components of Mexico's economic system is rampant corruption. Government corruption results in resources not being used to benefit the public good, fulfilling only an individual desire and results in a massive waste of resources.

While, there are exceptions, most Mexican business are struggling to grow in this current economic system. Without public services that make taxes seem worth paying and without a political establishment that serves national interest, the only trustworthy institution people turn to is family. However, despite traditional ideals and government corruption, Mexico's economy is growing and transitioning toward a more free-market style and, as a neighbor to the U.S., has a lot of bearing on our own economy.

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