Did Globalization Fail Mexico?

Over at the immigration website VDARE, Edwin Rubenstein has an interesting post about immigration and Mexican economic trends. One particular graph caught my eye:

The ratio of per-capita GDP between the U.S. and Mexico has risen slightly since 1995--despite NAFTA and despite the very large outflows of legal and illegal immigrants. Does this mean that even a huge dose of globalization cannot overcome the structural problems with the Mexican economy? Where did the economic models go wrong?

Comments

[Pat Toche]

Romer's and Lucas's and other increasing returns models predict things like that...

[Thomas Jackson]

Mexico's wealth remains concentrated in the hands of the few, worse despite Mexican propoganda about La Raza one only needs watch their television and political elites to realize they could have stepped off the boat from Europe yesterday. The real Mexicans have little hope of social mobility, which explains the distain Mexicans treat American-Mexicans. The odd thing is if you gave the US and filled it with Mexicans you'd have Mexico again in 50 years, and if you gave Mexico to Americans in 50 years you'd have another USA.

[pwyll]

I'd say that the missing "x factor" that explains the discrepancy is IQ... see this post at Marginal Revolution:

http://www.marginalrevolution.com/marginalrevolution/2007/07/iq-and-the-weal.html

The evidence is compelling that the three factors which most influence a country's standard of living are its natural resource wealth, its amount of economic freedom, and the average IQ of its citizens.

[Peter Schaeffer]

Some folks (see Restoring Brad DeLong's belief in NAFTA? http://www.marginalrevolution.com/marginalrevolution/2007/07/restoring-brad-.html) have pointed out that some regions of Mexico have done well since NAFTA. As it turns out, the nation of Mexico signed the NAFTA treaty. As a consequence, it only makes sense to look at how Mexico as a whole has done under NAFTA. The answer? Not very well. The September 2006, IMF WEO database provides all of the data needed to compare Mexico with a very long list of other nations.

Since 1994, Mexico’s economic growth rate has been 2.87% with per-capita growth of 1.37%. The comparable numbers for the US are 3.17% and 2.09%. For Chile 4.91% and 3.55%. For Venezuela 2.32% and 0.36%. For China 9.32% and 8.51%. For Korea 4.83% and 4.07%. For Taiwan 4.54% and 3.81%.

As you can see, Mexico has underperformed every country in my sample save for Venezuela.

As I have pointed on other occasions, Mexico’s economic growth in the post-WWII period was very high. Mexico grew at an average of 6.32% per year from 1945 to 1980. The shift to neoliberalism has been accompanied by much lower growth rates.

For better or worse, Mexico did considerably better under illiberal economic policies. Liberalism has not worked for Mexico.

[Peter Schaeffer]

Let me try to offer a relatively non-contentious post on this subject. If you compare Mexico to the Asian Tigers, at least six major differences appear.

1. The Tigers have a stronger education ethic, compared to Mexico.
2. Family life is stronger in the Tigers. All have much lower levels of illegitimacy.
3. Work hours are longer in the Tigers.
4. The Tigers are homogeneous compared to Mexico.
5. The Tigers have higher savings rates.
6. The Tigers are more entrepreneurial.

The Tigers also appear to be more authoritarian as a group.

[Aaron]

Competition between Mexico and China for many types of low to medium skilled labor heated up in the mid 1990s just after NAFTA was passed. If anything, NAFTA probably alleviated the effects of this competition on the Mexican economy.

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