For Betty Krump, last of 3 articles

MEXICAN EDUCATION AND MEXICO'S CURRENT CRISES

Paul Rich

In this last of three articles about the prospects for education in Mexico, and particularly about the prospects for technical education, the point has to be stressed that there is not just one crisis in mexico but "layers of crisis". The first set of problems were being debated after the signing of the North American Free Trade Agreement (NAFTA) and were themselves enormous. A critical issue was the need to upgrade education so that Mexican workers could compete with Canadian and American workers. A corollary problem was finding the money to introduce new technology into industry, including computers. Contrary to what many Americans believed - that Mexico would steal American jobs - there were signs that Mexican jobs would be lost to the better trained American and Canadian labor market.

American opponents of NAFTA missed the point that the worldwide trend is towards technological development, which requires constant educational change and capital investment. It was obvious that Mexico could not fully take advantage of NAFTA without enormous reform of its educational system. What Mexico needed was something like the School to Work Opportunities Act. It needed its own version of Tech Prep. But it had not even had the advantage of the Smith-Hughes Act of 1917. In other words, the country had not come to terms with the fact that real success in the post NAFTA era depended on a radical change in attitude towards vocational and technical education.

Just as the debate about that issue was getting underway, in December 1994, the Mexican financial system collapsed. The peso was devaluated by 50% and total chaos was only avoided by a controversial fifty billion dollar bailout engineered by the Clinton administration. Now the chief concern was not how to face the new world created by NAFTA, but how to survive at all. In the first six months of 1995, more than one million Mexicans lost their jobs. Inflation became rampant: gasoline went up by 35% in one jump and then began further monthly increases. Similar price rises involved such staples as food and electricity.

In analyzing the present situation, historical comparisons are always dangerous. Obviously no two events are exactly the same. Nevertheless, there are striking similarities between the current Mexican economic situation and the American situation in the 1930s.

The American depression had its roots in the exuberance and optimism of the 1920s, when at least for the American Middle Class there was an apparently unprecedented prosperity. The stock market soared and there was a general attitude that things were just going to get better and better: optimism, faith in economic individualism, and confidence in the free market were prevailing beliefs. In an election campaign speech in 1928, Herbert Hoover denounced the Democratic Party and government intervention in the economy:

In effect, they abandon the tenets of their own party and turn to State socialism as a solution for the difficulties...It is a false liberalism that interprets itself into the Government operation of commercial business. Every step of bureaucratizing of the business of our country poisons the very roots of liberalism - that is political equality of opportunity.

In retrospect, just as Americans did in the Roaring '20s, Mexicans too felt that (during the Salinas administration) with the signing of NAFTA and with the handsome gains on the stock market that a rosy future beckoned. In both cases, had anyone bothered to look deeper, there were disturbing signs that not everything was well. There was considerable poverty, the problems associated with technological advance and the dislocation of employment that such advance brings, and considerable unemployment - all matters raised in the first two articles in this series. In short, the feeling of wellbeing in both countries was not matched by the realities. More humility would have been appropriate. Mexico was certainly premature in 1994 in announcing that it had become a first world country.

What can be learned from the American experience and applied to the current Mexican situation? One conclusion could be that the government in such a severe downturn has to intervene, no matter how convinced the leadership is that the longrange policy should be one of less government. In the United States, gross investment fell enormously between 1929 and 1933. The gross national product plummeted. Construction virtually ceased and unemployment soared. In such circumstances, psychological considerations overpower economic considerations.

What America needed - and got with Franklin Roosevelt - is what Mexico now needs, a restoration of confidence. Roosevelt's remedies may or may not have contributed as much as was claimed to the actual economic recovery, but there is no denying that they contributed mightily to the recovery of confidence. The virtues and vices of Keynesian economics are not the point in a situation such as Mexico faces; there will be no substantial investment in Mexico in the coming years unless strenuous efforts are made to restore confidence in the country's economy. It was Roosevelt's charismatic leadership and an increase in the money supply that can be singled out as major contributions to helping America work its way out of the Great Depression.

In the present Mexican crisis, what is needed is strong executive leadership along with a willingness to preserve liquidity and not sacrifice the country's future because of unbending attitudes about inflation and the money supply. In the present situation, employment and confidence have to take precedence over other concerns, not matter how important such other concerns may be in the long run. This is a time for wise intervention and bold action. The "percolation" theories of Hoover and Dawes did not work for the Americans, and they will not work for the Mexicans.

The comnparison with the Great Depression is interesting, but there is significant difference between Roosevelt's day and the present: the sea change in attitude towards the free market. We never before have lived in a time when there was so much unanimity about the values of the free market. Taking its lead from the United States, the Mexican educational and administrative elite has become almost completely entrepreneurial in attitude. What is worrisome is that this is in a country where the poor are very poor indeed, far pooer than in the United States.

One has to consider just what happens in a country during the free market transition period when social programs are being dismantled. This resurgence of the right's latent political power is one of the underlying reason why the income share of the very small percentage of Americans in the top brackets has bloated (the top 20% now have 44.6 % of the total national income while the lowest fifth have only 4.4 %) and the number of poor in America has so increased. For starters, in what was to become a long litany of special interest legislation, the Revenue Act of 1978 awarded 75% of all its tax reductions to the wealthiest 2% of the country.

In 1970, 25.4 million Americans or 12.6% of the population were living below the official poverty level specified by the U.S. Department of Commerce. By 1980 the number had increased to 29.3 million and 13%. By 1990 the figure was 33.6 million and 13.5%. At the beginning of 1993, there were "officially" 36.9 million Americans living in poverty, and that was 14.5% of the population. Interestingly, all racial groups had shown an increase in the "poverty percentage" : in 1992 the figures were 11.6% of the whites, 33.3% of the blacks, and 29.3% of the Hispanics. The situaiton is much more extreme in Mexico, where at least thirty million people are outside of the money economy altogether. The campesino or farmer-peasant sees very little cash at all, and has no government safety net staving off such dire consequences of the current problems as malnutrition and homelessness.

There is no need to belabor the political trouble that could be coming to Mexico unless drastic efforts are undertaken. While the December 1994 devaluation has created terrible problems, Mexico needs to look beyond that crisis towards the much bigger crisis - the inability to take advantage of the NAFTA accords unless a workforce can be education to take advantge of the lowering of the tariff barriers. Never was there a better example of the importance of technical education. Without a massive effort in education, Mexico will get nothing out of NAFTA. The survival of the country literally depends on vigorous and drastic educational reforms.

Dr Paul Rich is Titular Professor of International Relations and History, University of the Americas, Puebla, Mexico, and Fellow, Hoover Institution, Stanford University.