The Bear’s Lair: Time for Mexico to bring back Diaz

Picture of Porfirio Díaz, Former President of Mexico

Porfirio Diaz, who had ruled Mexico with multiple re-elections almost continuously since 1876, was ousted from power in 1911. In 107 years, you would think Mexico would have found another equally competent ruler, but it hasn’t, and Andres Manuel Lopez Obrador seems very unlikely to break that track record of failure. Maybe it is time the Mexicans re-evaluated their most successful ruler and ceased venerating the revolution that removed him and the corrupt statists that succeeded him.

Diaz began his career by participating in another revolution, the “Reform War” which removed the unfortunate Emperor Maximilian and Empress Carlota. An independent Habsburg empire, ruled by the capable brother of the benign Austrian Emperor Franz Josef I, is one of the better ideas people have had for the government of Mexico, but alas it did not work out. Diaz seized power in 1876, confirmed it by election in 1877, retired in 1880, then was reelected in 1884 and several times subsequently, albeit by flawed elections.

Diaz pursued a policy of free-market economic development, welcoming foreign investment, keeping taxes low and preventing the government from meddling in projects, even if they were foreign owned. In consequence, his rule saw the fastest rate of economic growth that Mexico has ever achieved on a sustained basis. Like many conservative governments, then and now, he met with hysterical opposition by urban liberals, which eventually overthrew him but were themselves overthrown by more radical forces. The result was the Mexican Revolution, which has underlaid the structure of Mexican politics to this day.

Successful revolutions pollute the politics that succeeds them, often for centuries. The destructive activities and ideologies that led to the revolution or that arose during it become sanctified, and embedded in the political culture, often warping subsequent leadership actions and electoral choices. This was true even for Britain’s bloodless 1688 revolution, which was venerated to a quite extraordinary extent in the centuries after it occurred, so that Robert, Lord Liverpool’s Tory governments of the 1820s tied themselves into intellectual knots to convince themselves they were following 1688 principles, when they were really following the principles of the Restoration Tories who had opposed 1688. The 1688 principles were those of Thomas Babington Macaulay and the Whig incompetents who followed Liverpool’s demise.

More damagingly, the 1789 French Revolution has polluted the politics of that country ever since, with even conservative British historians writing hagiographies of the economically illiterate military despot Napoleon Bonaparte. The best government France has had since 1789 was the only one that rejected the ethos of the Revolution: the benign Restoration monarchy of 1815-30, with Armand, duc de Richelieu, Jean-Baptiste, comte de Villèle, Louis XVIII, Charles X and above all the monarch manqué sans peur et sans reproche Louis Antoine duc d’Angoulême, King of France as Louis XIX for a mere twenty minutes in 1830. The rulers of this period rejected the French Revolution’s follies, and were consequently greatly preferable to their successors, all of whom from Louis Philippe onwards accepted them.

That’s why France has never developed a proper free market economy, why its state remains bloated and unresponsive and why there is a strong streak of the extreme left in its politics. Even its best leaders, Charles de Gaulle and Georges Pompidou, were hopelessly compromised by the need to pay lip service to Revolutionary values. When Margaret Thatcher, on the 200th anniversary of the Revolution, presented French President Francois Mitterrand with Charles Dickens “A Tale of Two Cities” she erred; Dickens himself being a leftist sentimentalist who was at best ambivalent on the subject. She should have made the gift Edmund Burke’s “Reflections on the Revolution in France,” which demonstrated that the French Revolution was utterly wrong in principle.

You can see other examples of the malign effects of long-dead revolutions. In China, the ruling elite is incapable of developing the economy on a proper free-market basis because of their excessive reverence for the dead lunatic despot Mao Zedong. In Russia, Vladimir Putin longs for the certainties of 1917, even though he recognizes that Communism as an economic system does not work. Yet though Communism is dead in Russia, its harsh police state is not. The better Czars, Catherine the Great, Alexander I and II, were all considerably more enlightened, modernizing and tolerant of opposition than Putin.

In Mexico, the 10-year Revolution left the country with a hatred of conservatives and a tolerance for socialists, even Marxists, that has hobbled Mexican politics and its economy ever since. The worst of its inescapable corruption and statism occurred during the 71-year rule (1929-2000) of the Institutional Revolutionary Party (PRI), whose very name demonstrates the damage the revolutionary tradition can do.

Lowlights included Lazaro Cardenas (1934-40), who nationalized all the foreign oil companies, concentrating the immense resources of Mexican oil in a state company Pemex, that has been a by-word for corruption and incompetence for 80 years.

Then there was Jose Lopez Portillo, who ruled at a time (1976-82) when with high oil prices optimism for Mexico was intense. However, he imposed a system that was described to me by a leading Mexican industrialist over breakfast at Brown’s Hotel (the kipper was particularly good, I remember) as “Joan Robinson economics,” inspired by the dotty Cambridge Marxist. In that system, all prices were state-decreed and investment was directed by the state. The result, high oil prices or no, was national bankruptcy in 1982.

The serious entry of organized crime into the Mexican political system (it was always present to some degree; the country has been very corrupt since the Revolution) appears to have occurred during the Presidency of Carlos Salinas de Gortari (1988-94) a supposed reformer, who negotiated the North American Free Trade Agreement, during whose Presidency the telecom system was “privatized” to Carlos Slim.

In 2000, to numerous cheers from Mexico’s friends, the opposition PAN took over. Unfortunately, like many right-wing parties seeking to win a difficult election, it chose the most “moderate” candidate possible, Vicente Fox, electing whom was about as useful as the GOP electing George Will to the Oval Office. No significant reform was achieved during Fox’s Presidency, or during that of his PAN successor Felipe Calderon, during whose term the drug cartels diversified their operations from looting and extortion to mass murder.

Giving up on the PAN, the Mexican public returned in 2012 to the PRI, a sign of despair if ever there was one. Enrique Peña Nieto has been modestly useful, to be fair; his reform of Pemex, allowing in foreign investment to Mexican oil for the first time since 1938, was a politically brave step that may do some good. Yet he failed to solve the drug cartel problem, and now, in a sign that the old Revolution spirit is not dead, the Mexican people have elected Lopez Obrador.

It is not clear what place Lopez Obrador occupies on the political spectrum between Brazil’s Luis Inacio Lula da Silva and Venezuela’s late unlamented Hugo Chavez, yet anywhere on that spectrum his Presidency is bound to be thoroughly damaging. Not only will he solve none of Mexico’s problems, he will worsen most of them, as well as making as much trouble as he can for the United States (thank God he is facing a U.S. President who will stand up to him and not cave in, as too many U.S. Presidents have done in the past). The one consolation is that, by the end of his 6-year tenure, which under Mexico’s Revolutionary Constitution he cannot renew, the Mexican people should be ready to try something genuinely new.

Over the past 20 years, Mexico’s labor productivity growth per hour worked has been a pathetic 0.56% per annum, compared with the United States’ annual 1.83%, Brazil’s 0.78%, Colombia’s 1.17% and Chile’s 2.10%, according to the Conference Board’s Total Economy Database. It is thus little wonder that Mexicans never get any richer. That is the concrete economic result of a century’s clinging to the ideals of the country’s utterly deplorable Revolution.

In 2024, if Mexico’s democracy and economy survive Lopez Obrador’s rule, a new approach is needed. A candidate must run promising to restore the sound governance and economic policy of Porfirio Diaz, and to reform the constitution to remove its Revolutionary excrescences. For example, Presidents must be allowed to succeed themselves – the single term offers no incentives for good government and every incentive for looting, though a maximum of 12 years should probably be retained to remove youthful populists who get lucky with the economy.

Mexicans will be surprised to hear a candidate extol Diaz – they have been taught to demonize him. But perhaps this will be the only way to convince a disillusioned electorate that the new candidate really represents something new, with a chance to remedy a century of corrupt Socialist ineptitude. Alternatively, I suppose one could make a call to Karl von Habsburg, the current heir, and see if running Mexico was his thing.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)