Financialization in Mexico - Dr. Gregorio Vidal

270 JOURNAL OF POST KEYNESIAN ECONOMICS
Yet while the transmission of the current crisis has been more passive
than in the previous two crises, the government’s response has been
consistent. As has been mentioned, a significant part of public expenditures
has been channeled toward the payment of financial services of all
types by national and local governments and public companies. What is
more novel in recent years is the massive contracting of private sector
firms for the realization of a large part of public functions. These contracts
represent a sure and stable source of (easily securitized) income
for many years to come and convert new segments of public spending
(beyond that which is destined to paying interest, commissions, etc.)
into financial rent.
However, as with other processes of financialization, the destiny and the
forms of the public budget are now also exercising a contractionary force
over the economy, particularly when public expenditures are realized in
an environment highly dominated by large consortiums, most of which
are foreign-based. As such, growing segments of public expenditures in
reality have a concentrating and not a distributive effect. The financialization
of the economy converts growing parts of public expenditure
into privately held financial rent. This contractionary force is highly
destructive for basic public services and creates extreme inefficiency in
public functions (including national security), which inexorably restricts
the legitimacy of public expenditures and also the institutions that in past
years gave coherence and cohesion to the country.
At the same time, the effects on employment and income distribution
have been striking. A handful of Mexican families have greatly
benefited from the dynamics of financialization. In 1996, there were
fifteen Mexicans on Forbes’s list of billionaires worth $25.6 billion,
while in 2008, nine people had amassed $96.2 billion (Forbes, 2010).
For the vast majority of the Mexican population that does not live off
of financial rent, employment continues to be scarce, precarious, and
poorly remunerated. As can be seen in Figures 3 and 4, over half of
the working age population in Mexico is currently excluded from the
formal labor market. It is also worth noting that 58 percent of the labor
force earns the equivalent of three times the minimum wage or less
(INEGI, 2010b).
As has happened in each of Mexico’s three crises in the decades
analyzed in this article, those who earn less have lost the most during
the current crisis, both in purchasing power (World Bank, 2010) and in
increasingly limited access to public services and social programs. It
is also worth noting that approximately half of all people thrown into
poverty in Latin America as a result of the current global crisis live in