Volume 43, Number 170,
July-September 2012
Economic Growth and Industrial Policy in Mexico
Cuauhtémoc Calderón ** and Isaac Sánchez***
Date submitted: September 4, 2011. Date accepted: February 29, 2011
Abstract

This paper analyzes a problem that proves crucial for the economic development of Mexico: slow economic growth and the subsequent inability to generate necessary employment. On the basis of Kaldorian growth theory, it is supposed that this problem is the result of economic policy errors, in essence the abandonment of active industrial policy in favor of structural change and economic development. Evidence is provided which highlights the high correlation between slow economic growth and slow growth in manufacturing output, a result consistent with the findings of other researchers. Having implemented an active industrial policy, the growth rate in the manufacturing sector would prove greater than that observed and would improve global economic development. Given the importance of this type of industrial policy, this paper outlines the reasons why the policy was abandoned and suggests that it be reinstated.

Keywords: slow growth, employment, industrial policy, Mexico
INTRODUCTION

Mexico has passed through different phases of rapid and slow economic growth throughout her modern economic history.2 From 1982 to date in particular, the Mexican economy has shown very slow growth. Growth has been insufficient to generate the number of jobs required by a population that is rising each year. Without economic growth and employment, the conditions necessary to overcome obstacles to economic growth in the country are not being generated.

A constant factor during the period 1982-2010 was the average economic growth rate of gdp per capita below 1.0%, and more recently (1993 to 2011) disappointing macroeconomic stability, given that although the inflation rate was reduced, a moderate deficit in public finances was maintained and the external deficit controlled. There is an acute unemployment problem and recurring economic crises (in 1982, 1986, 1995, 2001 and 2009).

In view of the above, the general objective of this paper is to highlight that economic growth has been extremely slow in Mexico from the 1980s to date. This is mainly the result of the neoliberal policies imposed by the current economic model, derived from the Washington Consensus reforms, which resulted in insufficient growth in the industrial manufacturing sector. This paper aims to contribute to the literature and debate on slow economic growth in Mexico.

The paper is structured in four parts: the first outlines the theoretical framework in relation to the current stage of slow growth. Explanations are summarily offered to support the Kaldorian theory. In the second part, literature is reviewed enabling the hypothesis maintained in this research study to be contrasted with other works, permitting a more extensive analysis of the problem. In the third part, the reality of slow economic growth is demonstrated both in terms of income per capita and employment. In addition, the strong correlation that exists with insufficient momentum in manufacturing is demonstrated.3 The fourth part analyzes the current lack of active industrial policy implemented by the State, a topic of concern given the information outlined in previous sections.

SLOW ECONOMIC GROWTH AND MANUFACTURING INDUSTRIES

The quest for economic progress has been a constant concern for economists and it was Smith (2004) who established the foundations of modern contributions on the subject. This author believes that the principal source of richness for nations and regions lies in the division of labor, especially in manufacturing activities, given that they generate greater specialization among workers and promote inventiveness and imagination (productivity).

Division of labor is the cause of rising productivity and is therefore a crucial factor in less or greater economic growth. Given that Smith understood that causality relationships are fairly complex, he supposed that, in turn, division of labor stemmed from extending the market, given that the larger the market (demand) the greater the extension in which differentiation and specialization are implemented, resulting in greater productivity. In this way, division of labor in manufacturing is a consequence of extending the market, but extension of the market results from greater division of labor.

1 The authors are grateful to three anonymous adjudicators for their comments and evaluation.

** Research Professor at the Colegio de la Frontera Norte, sni Member Level II. Email address: calderon@colef.mx

*** Research Professor at the Universidad Autónoma de Ciudad Juárez, Mexico. Email address: isaac.sanchez@uacj.mx. Candidate and National Researcher for the Sistema Nacional de Investigadores [National System of Researchers] (sni)

2 According to Esquivel (2010) the Mexican economy has passed through at least four stages. The first begins with recovery from the damage caused by the Great Depression and culminates around 1970. During this period, the economy experiences rapid growth along with relatively stable prices. The second stage took place between 1970 and 1982, an era in which the economy continued to grow but at the expense of greater macroeconomic instability. During the third stage from 1982 to 1994, the country underwent a period economic adjustment, negative external shocks and various economic reforms. Finally, from 1995 to date, the economy has slowly returned to macroeconomic stability, although with relatively slow economic growth. Moreno-Brid and Ros (2009) were also consulted for the characteristics and an alternative explanation of the stages of the Mexican economy.

3 The term refers to the slow economic growth observed in the manufacturing industry.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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