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Is Mexico "Neoliberal"?

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03/28/2019

Recently, Mexican president Lopez Obrador officially declared the end of Mexico's “neoliberal” model. For him, “neoliberalism” is the cause of many of Mexico's social problems: from its corrupt political system, to the fact much of its population still lives below the poverty line as Mexican billionaires get richer. Since this topic has become extremely popular in Mexico it is necessary to ask ourselves: What really is “neoliberalism”? Is Mexico “neoliberal”?

What is “Neoliberalism”?

Although there is still some debate on the origin of the term “neoliberalism,” it is undeniable that currently it has been used, for the most part, by its critics to refer critically to the advocates of capitalism and the free market system.1 Within this group, we can find a great amount of diversity: anarcho-capitalists, minarchists, classical liberals, fiscal conservatives, libertarians who don't identify with any of the previous political identities, among others. The existence of such diversity, as well as the popularity of these political identities, shows that the percentage of advocates of capitalism and the free market system who identify themselves as "neoliberals" is almost nonexistent. Some of those exceptions are the Adam Smith Institute and an essay written by the Chilean philosopher Axel Kaiser. Because it has been mostly defined by its critics, “neoliberalism” has gradually turned into a straw man fallacy. An example of the fallacious nature of “neoliberalism” is, as many leftist academics and activists have previously argued, the claim that Trickle Down economics is one of its core beliefs . Nevertheless, as economist Thomas Sowell has previously explained: "No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of The New York Times and The Washington Post to the political arena."

[RELATED: "What the Difference between Liberalism and Neoliberalisim?" by Ryan McMaken]

According to many of its critics, this new belief system has its origins in the 70s from the works of economists such as Milton Friedman, Friedrich Hayek, Ludwig Von Mises, among others.

There is an enormous lack of precision in this position. For example, critics of neoliberalism speak of the Chicago School and the Austrian School as if they were essentially identical. Similarly, they regard Hayek, who supported the idea of national welfare and regulatory states, as indistinguishable from laissez-faire theorists like Ludwig von Mises.

Considering this, it becomes clear that the true target of anti-neoliberal critics is not a “new” ideology created in the 1970s, but the broader, older ideology now known as classical liberalism — or simply liberalism — which dates to at least as far back as the nineteenth century.

Is Mexico “Neoliberal”?

Even if we took the existence of "neoliberalism" as a true premise, Mexico is still not a "neoliberal" country. This is due to the fact that this country has highly interventionist legal structures and governmental institutions: from the impossibility of full property rights (see article 27 of the Mexican Constitution), and a large number of free public universities, to the existence of state owned companies with negative net earnings. Mexico is not only not "neoliberal," it is far from being a leader in economic freedom.

Within the index of economic freedom (2019) of the Heritage Foundation, Mexico ranks 66th; while in the ranking of economic freedom 2016 of the Fraser Institute its place is even worse, at 82nd:

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While it is true that these indexes take into account certain variables such as property rights, government integrity and judicial effectiveness, it is also possible to only evaluate their performance within other economic freedoms such as labor or financial freedom (both examples of negative liberty).

Regarding business, labor, financial and investment freedoms, Mexico is below countries like the U.S., Chile Canada and Switzerland in the Index of the Heritage Foundation. Although Mexico has experienced various processes of economic liberalization, this country is far from being "neoliberal."

  • 1. For evidence of how "neoliberalism" is primarily used as a negative and pejorative term, see figure 2 of "Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan"  by Taylor C. Boas Jordan Gans-Morse. (https://link.springer.com/article/10.1007/s12116-009-9040-5)
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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