South of the border

Robert Samuelson questions why Mexico’s economy lags so far behind in “Mexico’s missing prosperity”:

The subtext for the United States' immigration debate is Mexico. Why doesn't its economy grow faster, creating more jobs and higher living standards? That's the question that inevitably confronts the winner of this Sunday's Mexican presidential election, but it is also a critical question for Americans. A more prosperous country would not be sending so many of its poorest citizens north. Since 1990 about 20 to 25 percent of U.S. immigrants have come from Mexico.

Here is an illuminating comparison. In 1970 average incomes in South Korea were about half those in Mexico. By 2004 Korean incomes were more than twice Mexico's. During those decades, reports the Organization for Economic Cooperation and Development (OECD), average Mexican incomes rose 57 percent, to $9,178 (expressed in constant "2000 dollars"); the comparable Korean gain was 574 percent, to $19,148.

Quel surprise, Mexico’s problems are rooted in an immiscible capitalist model where socialist policies and state-owned businesses hobble the entire economy:

An extreme case in point is Pemex, the state-owned monopoly oil company. Without competitors or complaining shareholders, its operations are lax. In 2004 Pemex had $69 billion in sales and 137,722 employees, according to its Web site; in the same year, Exxon Mobil had $291 billion in revenue and 85,900 employees.

And then there’s the shadow economy which operates outside Mexico’s tax laws which cannot grow and expand. According to Samuelson, up to two-thirds of Mexico’s work force is employed in this “informal economy.”