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Financialization in Mexico - Dr. Gregorio Vidal

Financialization in Mexico - Dr. Gregorio Vidal

270 JOURNAL OF POST

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

FINANCIALIzATION IN MEXICO: TRAJECTORY AND LIMITS 271 Figure 3 Workers outside of the formal labor force/overall labor force Percentage 56 54 52 50 48 46 44 42 Source: INEGI, 2010b. Mexico (World Bank, 2009, p. 67). This is the extent of the global crisis in Mexico and the scope of the challenge of analyzing this specific case of financialized capitalism. Conclusions As we have attempted to show, Mexico has had a front-row seat to the process of global financialization over the past three decades. As a highly hierarchical phenomenon, Mexico has never assumed a leadership position in the process, but has rather been at the fore of the repeated implosions of asset bubbles. While financial crises increase in number, scope, and depth, which is an inherent element of financialization, we have sought to highlight another factor, namely, the growing divergence between the financial needs of an economy and the profit-generation requisites of the global (and Mexican) economy’s largest banks and nonfinancial corporations. In cases such as those of Mexico and other developing countries, the profit-generating space of global corporations have come to encompass all the strategic areas of the economy, including ones previously dominated by the state, creating dynamics of ever greater profitability for these corporations, but at the cost of a constant

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