Jorge Castaneda is joined by Harvard Law Professor Roberto Unger in a wide ranging discussion of the future of Latin America.
[Mexico must reform its legal system and undergo a revolution in education to end its current economic stagnation, former foreign minister and current presidential candidate Jorge Castaneda told UCLA students and faculty in an October 5 panel discussion. Castaneda was joined by Brazilian-born Harvard Law professor Roberto Mangabeira Unger in a panel entitled "Ideas for Change: The Future of Latin America." Both Castaneda and Unger maintained that continentwide setbacks in economic development could only be offset by a new major commitment of U.S. aid on the model of efforts made by the more developed countries in the European Union to speed growth in that continent's weaker nations. The event was part of the Burkle Forum series sponsored by the Ronald W. Burkle Center for International Relations. It was moderated by Geoffrey Garrett, vice provost and dean of the UCLA International Institute and director of the Burkle Center. The session, at the Anderson Graduate School of Business Korn Auditorium, was opened by UCLA's Executive Vice Chancellor Daniel Newman.
[Jorge Castaneda served as Mexico's foreign minister in the first years of the Vicente Fox administration. He is a professor of international affairs at the National Autonomous University of Mexico and has taught as a visiting professor at Princeton, Dartmouth College, and UC Berkeley. Castaneda holds a BA from Princeton and a PhD from the University of Paris.
[Roberto Mangabeira Unger was born and educated in Brazil and teaches at Harvard Law School. His books published in English include Knowledge and Politics; Law in Modern Society; Passion: An Essay on Personality; The Critical Legal Studies Movement; and Politics: A Work in Constructive Social Theory (3 volumes). He served as an advisor to Popular Socialist Party presidential candidate Ciro Gomez.
[Following are major excerpts from the discussion.]
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From the Introductory Remarks by Geoffrey Garrett
Things have changed a lot in the United States in the past decade. The financial crisis in Mexico in 1994-95 was a very important event in the U.S., not only in terms of the press but also in Washington in terms of the role the Clinton administration played in structuring a financial bailout package for Mexico. Compare that with the Argentinian crisis of 2001-2002, which received much less attention in the media and in Washington.
September 11 indeed “changed everything” in the United States. At the Burkle Center we followed the national trend of focusing our attention in the recent past on the Middle East. But this year we would like to make a new push to explore more closely relations between the United States and its near neighbors, most importantly in the south, Mexico and the rest of Latin America.
If you go back to the 1970s, development economists used to make a stylized comparison. It pitted on one side what they considered to be the ongoing failings of Latin America’s import substitution industrialization development strategy, against the "export-led growth" miracle of the East Asian Tigers. In politics the comparison was between endemic coups and instability in Latin American politics and what were characterized as stable and benevolent authoritarian regimes in East Asia.
But then in the 1980s and the 1990s it was as if Latin America had listened to the critics and did everything that they had been told to do beforehand. With respect to the market, Latin American countries enacted sweeping market-friendly reforms. They fought and defeated inflation. They deregulated and privatized the economy in ways that sometimes have become the envy even of the United States -- I am thinking most notably of pension reform in Latin America. And the Latin American economies went from being insulated and protected to being radically open to the international economy.
And at the same time, politics changed from settling disputes through coups and the exercise of military power to using peaceful and free elections. According to Adam Przeworski, the political scientist, there were fifteen democracies in Latin America and the Caribbean in 1980. Today there are over thirty.
Rapid Economic Growth, But Little Improvement in Incomes
Turning to the economy, more than $200 billion worth of state owned assets have been privatized in Latin America since 1985. From 1980 to 2000, exports of goods and services from Latin America increased by fully 285%. And at the same time the portion of manufacturing exports to total exports increased from 17% to 41% of total exports.
So the “Washington Consensus” was implemented. But what does Latin America have to show for all of this reform? If you take the simplest and some would say too simple statistic, which is increases in per capita income, the answer is “not much.” Over the past two decades per capita incomes increased by about 50% in the developing world as a whole. The Latin American figure over the same period of time is 10%. This poor economic performance is all the more problematic because citizens' expectations have risen on the promises made to them by their own politicians, and by the international community. And now they are increasingly frustrated that the sacrifices that they have made have not translated into the promised outcomes. It is thus critical that new ideas are not only debated in open forums such as this one, but that they are then implemented on the ground. Otherwise, popular frustration might begin to threaten some of the good work that has undoubtedly been done on the Latin American continent in recent decades.
Roberto Mangabeira Unger
I'm grateful to the Burkle Center for the opportunity to discuss matters that lie close to the heart and I am especially happy to do so in the company of my friend Jorge Castaneda with whom I have worked so often and so much in a common cause.
I present today three theses. The first thesis is that the dominant project that is now being carried out in Latin America has failed. And failed decisively. The second thesis is that there is a progressive alternative to this failed project, a productivist and democratizing alternative. My third thesis is that this progressive alternative, although necessarily adapted to Latin American circumstances, holds universal interest. I propose to proceed by three steps. First, the situation, then the task, and finally the obstacles to be overcome in the execution of this task.
A Devastated Region of the World
First, the situation. Latin America today is on the whole a devastated region of the world. One that has failed both to sustain growth and to achieve its most highly prized goals of social inclusion. There is no region of the world that has failed more spectacularly other than Africa. My own country, Brazil, was for the first eight decades of the twentieth century a very unequal country that grew very fast. It then became, in the last two decades of the twentieth century, a very unequal country that stopped growing. And this poisonous mixture of extreme inequality and economic stagnation is the nightmare from which the country has yet to awake.
Now something terrible has happened. Superimposed on this antecedent disaster. In many countries in Latin America would-be leftists or progressives have come to power. Having come to power they have abandoned any attempt actually to implement an alternative. The most dramatic instance is Brazil itself, where a supposed leftist government has as its project financial confidence and food stamps. This programmatic vacuum has now been filled by a systematic practice of corruption. The would-be progressives have made a deal with big money. Under the terms of this plutocratic deal, for every big transaction realized in the country that depends upon governmental approval or favor, a commission is charged by way of contribution to the party in office. The government neither allows the media oligopolies to go bankrupt nor permits them to solve their problems, but rather maintains them in a situation of persistent and anxious dependence, the better to extract from them pliant propaganda.
The little Bonapartes, the Bonapartes of the bazaar, strut around in their palaces, bored by government and contented by power, accumulating money for their campaigns and their parties, the better to do they know not what. Fake progressives genuflect to a fake economic orthodoxy under the shadow of a protection racket while millions of ordinary working men and women oscillate between frustrated hopes and sullen resignation.
"The program of the progressives must not be simply the program of their conservative adversaries with a discount."
I now pass to the second step of my remarks and the heart of my comments this afternoon. The task, the outline of an alternative project. The essential characteristic of such a project is that it must not be, as progressive programs so often are in the world today, a mere humanization of the inevitable. The program of the progressives must not be simply the program of their conservative adversaries with a discount. It must be a project that anchors a bias toward social inclusion and individual empowerment in the way that the economy and politics are organized. And in this sense it must be both a productivist and a democratizing project. Its essential demands are opportunity and law. Economic and educational opportunity for the masses of outsiders who compose the majority of these societies. And law, to suppress all the sweetheart deals that absorb the attention and the resources of the state.
But these straightforward, unremarkable objectives can be achieved in our societies only by replacing the politics of conformity, of surrender, of submission that constitute the heart of what is ordinarily called neoliberalism but might more accurately be described as the most recent form of neocolonialism.
I propose a project organized around four axes. The first axis is to raise a shield over developmental heresy. Many Latin American countries today have subscribed to what is in effect a functional equivalent to the nineteenth century gold standard. Low levels of taxation, low levels of domestic saving, and emphasis on fiscal realism to be achieved by restraints on public spending rather than by increases in the tax take. And freedom for capital to move while labor remains imprisoned within the nation-state.
The practical consequence of this syndrome is to make national governments depend on the vetoes, the interests, and the prejudices of the financial markets. We must overcome that syndrome by first, a forced raising of the level of domestic saving through a scheme of mandatory national saving, to be realized especially through the pension system. Compulsory saving progressively proportional to the income of the individual. Second, a rapid multiplication of linkages between national saving and productive investment, both within and outside the capital markets as they are now organized. For example, through new forms of decentralized public venture capital.
Third, the maintenance of a very high tax take. A very high tax take as a practical matter can be achieved in the short run only through a heavy reliance on admittedly regressive taxes such as the VAT. And this heavy reliance is legitimate and therefore feasible only to the extent that it is seen by the nation as taking place within the framework of a broadly progressive project oriented to the democratizing of economic and educational opportunity.
And fourth, temporary and selective restraints on the free flows of capital to be preceded when necessary by forced rescheduling of the public debt, and then to be followed when possible by a regime of freer convertibility of the currency.
The combined effect of these measures is to implement a war economy without war through a forced mobilization of national resources.
The second axis of this alternative project is the democratic reinvention of the market economy. The most wonderful event in Latin America today is the appearance on the scene of millions of would-be small-time entrepreneurs. The first responsibility of the state in economic affairs is to give arms and wings to this new culture.
This progressive intervention on the supply side has two presuppositions or counterparts. The first presupposition is that it be accompanied by a progressive intervention on the demand side. We should not imitate China in betting on low-wage labor. We should create an institutional framework that imposes an upward tilt to the returns to labor. At the top level of the wage hierarchy, by generalizing step by step the principle of participation of workers in the profits of their firms. And at the base of the salary pyramid, by direct and indirect subsidies to the employment and qualification of low-wage labor. And by the complete abolition of all taxes and charges on the payroll.
The second presupposition of this progressive intervention is destroying and criminalizing the sweetheart deals.
Judicial and Education Reform
The third axis of this alternative project is an educational effort designed radically to transform the tenor of national culture and consciousness. When this flexible mechanism fails to work, the citizen must have recourse to the judiciary, and the judiciary must have the power to seize budgetary funds to secure the realization of the legal and constitutional rights of public education.
The second characteristic of this program is a radical change of the content of education. No more education for memory. Education in our countries must be analytic and problematic rather than informational. It must be selective rather than encyclopedic.
The fourth axis of this project is the institutional development of a high energy democracy, a democracy designed to accelerate transformative politics. First, I propose that we preserve the presidential regime in most Latin American countries, but that we combine the traditional presidential regime with mechanisms for the rapid resolution of impasse between the president and the congress. When there is an impasse over a proposal of structural reform, either of the two political branches of government should unilaterally enjoy the right to call anticipated elections, which, however, would always be simultaneous for both branches, and thus the branch that exercises the right would have to pay the price of the electoral risk.
Second, we should expand the power of states and localities to opt out of the general solution and to try something else out. As society proceeds down a certain track, it hedges its bets by creating within itself small counter models of an alternative future.
Obstacles to Reform
I now turn to the third and final part of my remarks, the obstacles and the resources with which we can overcome them. The first obstacle is the coalition of material interests ranged against such an alternative. But on the other hand there is a vast range of contrary interests that can be marshaled in favor of such a productivist and democratizing alternative.
The majority of the entrepreneurial classes, who are not beneficiaries of these sweetheart deals, and behind them the vast masses of small-time and would-be entrepreneurs in countries in which the mass ideal is now much more petty bourgeois than proletarian.
The second obstacle is the silence of ideas. We are now in Latin America under the influence of two forms of fatalism. The first is the decayed remnant of Marxism. And the second is the trivialized, apologetic version of American social science exported by the American university system. The two have now merged in the minds of the Latin American intelligentsia into one long apology for fate. We need another way of thinking that associates the understanding of the real with the anticipation of the possible.
The third obstacle is moral. The absence in the masses of ordinary people of an idea of their greatness, of their powers of collective originality. It is this idea of greatness that must now be aroused.
First I would also like to thank the Burkle Center for this invitation and for the opportunity to share some views with you, and mainly to be here with my friend Roberto Unger, with whom we have worked hard often and I think productively over the years.
My contribution today will be more brief and more concrete and specific, because unlike him now, but like him a couple of years ago, I am more directly involved in politics than in academia and consequently I have to be more specific and more cautious than I was before and than I am sure I will be later on in life, as he was more cautious when he was running the fund raising for Ciro Gomez's campaign in Brazil a couple of years ago and when he was advising Ciro Gomez in his campaign for the presidency of Brazil a couple of years ago.
Nonetheless I think there were three broad areas that I would like to share with Roberto and perhaps try to bring them down to the Mexican reality. The first has to do with the question of failure or what you called the disturbing results of the effective implementation of the Washington Consensus.
Stagnation of the Mexican Economy
Roberto said Brazil was a country that grew for 80 years with great inequality, then kept the inequality and lost the growth. Well, that's pretty much what happened in Mexico also. Mexico perhaps grew for fewer years, but it had very high levels of economic growth from 1940 to 1980, and subsequently with the exception of a few good years has not grown at high and sustained levels, and it has not grown either in GDP per capita terms or in productivity terms or in income terms or just about in any terms except for absolute levels of exports.
So the failure clearly is there. And the argument whereby things would have been worse otherwise, in addition to being by definition unprovable, is not a very satisfactory one to people who do not find jobs, whose incomes do not improve, whose educational systems are lousy, whose health and pension systems are dysfunctional. There is not just frustration and despair over the insufficiency of the results. There is an objective diagnosis of failure in terms of the results produced by the economic reforms implemented over the last, in Mexico at least, roughly twenty years.
And this is something that no government has been able really to move ahead on. We thought for some time -- some people thought, I was never truly convinced but the evidence seemed to be interesting -- toward the end of the previous administration and the first few months of the Fox administration that just through sheer inertia, through sheer momentum finally high levels of growth would be achieved once again. This was true in 1999 and 2000, and then all of a sudden it disappeared from 2001 onward and has not reappeared to date.
The Fox administration's economic performance, if things go well the last three years, 2004, 2005 and 2006, will be an economic performance of around 3% average growth per year, which in per capita terms will be about a little less than 1.5% per capita per year. This is the administration that was supposed to reap the benefits of all of the previous years of economic reform. So there are the benefits. It doesn't take us very far.
If in addition you factor in the inequality of society, or you factor in how many parts of the economy are linked to the U.S. and consequently don't affect people, probably you are seeing levels of consumption in Mexico that have been flat for the past twenty years. Except that there are about 40 million more Mexicans.
Staying One Jump Ahead of Poverty in Oaxaca
This does not always square with the situation on the ground. And I want to mention this somewhat complicated aspect because it's not often seen this way. One of the things one finds on the ground in a country like Mexico is that the big numbers don't always reflect reality. Let me just give you a brief example of the state of Oaxaca, which is probably the second poorest state in Mexico, the first one being Chiapas. There are roughly 6 million Oaxacanos, of which about 3.5 to 4 million live in Oaxaca. Another 500,000 to 1 million live in Mexico City, and another couple of million live here in the United States.
Of the 3.5 to 4 million who actually live in the state it is almost certain that probably 80 to 90% of them have some combination of what Roberto calls food stamps and what in Mexico is now called opportunidades and previously was called progressa and previously was called solidaridad, which is a form of direct assistance from the state to mothers with children in school. It is small subsidy but it is not a meaningless one.
Another 30 to 40% receive remittances from the United States. Oaxaca receives almost $1 billion a year in remittances from the United States. And a much more difficult to determine but significant number nonetheless is linked to drugs, to drug trafficking, both growing marijuana and amapola in the highlands and transshipping cocaine and other products from Colombia and points south to the U.S. and points north.
So you have a very poor state where a large part of the population nonetheless has some form of assisted existence, which doesn't make it that poor any more. It is a strange type of nonpoverty, because there are no jobs, there is no industry, there is not much tourism, there are no banks, there are no services. And yet it is a population which, while not living well is probably significantly above the poverty level in many of these cases through these three factors -- that don't appear on the books.
Failure of the Educational System
So anyway, just to come back to the first point of agreement with Roberto, the failure is there. I don't think anyone at this stage can dispute it. The two other aspects I agree with him on and that I would like to mention very briefly because they are two of the most important priorities and chapters I have established in the brief platform I've tried to draw up for my candidacy for the presidency of Mexico are what he called educational economic opportunity on the one hand and law on the other. I refer to it more as an educational revolution and the rule of law, but I think the issues are essentially similar.
In Mexico we have now achieved a level of educational lag behind other OECD countries and other Latin American countries and most importantly the United States and Canada, our two largest trading partners, that if we don't do something about it very quickly we will probably never be able to overcome that lag. We face an enormous lag in elementary school, junior high school and high school, and higher education and in science and technology and research and development, at all levels from the very beginning to the very end of any kind of education. We have all of the defects that Roberto mentioned about education throughout Latin America, memorizing informational education, not learning to learn. All of the defects are there and none of the advances in education carried out elsewhere in the world are really being applied in Mexico.
If we do not carry out a major educational revolution, which implies increasing spending for students, not necessarily increasing spending overall, which implies a major reform of the teachers' union, which implies a major reform of elementary education and the way the entire educational structure is built -- if we do not do that now, and it can be done, we will not be able to make up this huge lag that we have in relation to other countries.
Lacking the Skills to Move Up the Salary Scale
And then we will continue to see happen what has been happening to our people from Mexico in the United States for so many years. When Mexicans first arrive here they begin to work at $6, $7, sometimes $8 and even $9 an hour, which is up to ten times more than they make in Mexico. And they are of course very satisfied with that situation despite the oppression, the racism, the discrimination, because, after all, to make ten times more money overnight is quite an achievement. And then five years later they are still making $7 or $8 an hour. And ten years later they're making $7 or $8 and hour. And twenty years later they're still making $7 or $8 an hour.
Why? Because the educational skills with which they arrive here, even those who no longer come from the countryside but who come from the cities with at least a junior high school education and in many cases now a high school education, those educational skills do not allow them to move up the salary scale in the United States -- as undocumented immigrants from other countries are able to move up in the salary structure in the United States. And this is clearly a reflection of the Mexican educational system.
We will never be able to reduce inequality in Mexico, we will never be able to be competitive and keep jobs in Mexico, we will never be able to prepare our people for the jobs of the future in Mexico unless we carry out a major overhaul of our educational system. Beyond whether one wants to place this specific issue in the context of a bold and visionary alternative such as the one that Roberto has described or whether you want to give it a more, I would say, Clintonian, gradualist, and very modest ambition in itself, as this is what we can do over a two-year period, let's do it, and not necessarily place it in a broad context. Whichever of the two ways you want to look at this specific issue it is absolutely fundamental in Mexico today for us to carry out this educational revolution. Short of that there is no way we will ever be able to give the Mexican people the standard of living they want and that they deserve.
The second question that Roberto also mentioned is this question of the law. And this is particularly pertinent in Mexico because, perhaps unlike some of the South American countries like Brazil itself, like Argentina, like Chile, like Uruguay, in Mexico we never truly had even an elite-based system of the rule of law. In Brazil, if I am not mistaken, certainly in Argentina, in Chile, in Uruguay, perhaps even in Colombia, in a strange way in Colombia, granted, there existed a certain type of rule of law before, which obviously was not applicable to society as a whole, only to some people, and to others it did not apply. But it did work for some. It worked for the upper classes and it worked for the emerging and growing middle classes during most of the twentieth century.
That was not the case in Mexico. What we had in Mexico was a very effective authoritarian rule of order, not of law, which was effective, which was functional, but was totally undemocratic, totally unequal, and totally authoritarian. By definition this stopped working when we moved on to at least the trappings and the essentials of democratic rule, and we had to replace it with what is more or less known as the rule of law everywhere else, and we haven't been able to do that.
So today we find ourselves in Mexico in a situation where we do not have the essentials of the rule of law, either for the foreign investors or the Mexican magnates, but more importantly, for those thousands of small entrepreneurs who exist in Mexico and for the millions of poor people in Mexico who are those who suffer most from the absence of the rule of law. They suffer most from the absence of the rule of law not only in terms of law enforcement, not only in terms of security and insecurity and delinquency, but they suffer most from the absence of the rule of law because of the enormous difficulty of titling their very meager properties, of having access to credit, of having access to insurance, of having access to ways of transferring savings from one part of the country to another, from one part of the family to another, from one part of a neighborhood to another.
The absence of the rule of law in Mexico affects the people of scarcest resources more than anybody else. At the end of the day the magnates can find a way around the absence of the rule of law. The poor cannot. And this is the most important reform, probably, together with education, that Mexico needs. We have to establish a legal system that guarantees the basics of the rule of law quickly, that inspires sufficient trust on the part of the people, in the police and in the administration of justice and the prosecution of justice so that people begin to trust the institutions, at least partly, and begin to use them to their advantage instead of seeing them as enemies.
If we do not do this there will be no way in Mexico, for example, to combat poverty. It is impossible to abolish or combat poverty in a country like Mexico where 50% of the people are poor if there is no access for the poor to the essential basics of the rule of law, of creating capital. Fifty-five percent of so-called properties in Mexico are untitled. And I'm not just referring to land in the countryside. Land in the countryside, land in the urban areas, housing in the urban areas, little shops, places in the market, places in the street vendors' markets, automobiles. There are 4 million illegal automobiles and trucks in Mexico, brought in from the United States illegally. We send you what you call illegal people, you send us what we call illegal trucks. I think you come out on the winning side, but that's I guess open to discussion.
The fact is that this is one more aspect of property that is not titled or has no deed in Mexico. And it sounds silly, but if your car has no deed to it you can't sell it at a market value, you can't insure it, you can't inherit it, you can't use it as a business, you can't do much of anything with it, or at least you can't do as much with it as you could if you had a deed to it.
We have to establish these basic aspects of the rule of law in Mexico for anything else to be able to move forward.
From the Question Period
[All questions have been summarized.]
Q. To Jorge Castaneda: What is your view of NAFTA?
Jorge Castaneda: When we took office with Fox there were some groups in Mexico who thought that Mexico should reopen NAFTA and renegotiate some of its aspects. It quickly became apparent to anyone in Mexico, and right now I think there is a consensus on it, that that is not possible. One can argue endlessly about the benefits and drawbacks of NAFTA over a ten year period. It is at best a wash and probably not something that if we could look back on it now many people would have done. But the fact is it has been done and there is not much to do about it.
Then we decided, well, given that, what can we do? And we thought about pursuing three or four different aspects of what from the very beginning Fox and I and others had thought should be added to NAFTA and that were not. One was of course the free flow of labor. And that was the notion behind the whole question of an immigration agreement with the United States and with the Bush administration during the first year of the Fox and Bush administrations. Whether this did not happen because of 9/11 or whether 9/11 was a pretext for it not to happen, we can argue about that endlessly. The fact is that, one, it didn't happen, but two, it is now clearly on the bilateral agenda in a way that it had never been before.
The second aspect was the question of energy. In a traditional sense we have always looked in Mexico as the country that produces energy and that the United States imports energy from Mexico, so we wanted to limit how much energy the U.S. imports from us. Well, the small problem with that is that we are now importing several billion dollars of natural gas from the United States every year because we can't produce enough ourselves, which means we are not an energy exporting country, at least not in gross terms, although we are still in net terms, but barely. And secondly, we have a need for funding for what we want to do on social terms and oil is probably one of the best ways to get the money to do what we need to do. So energy is a second aspect of NAFTA which we have to include.
The third one is some sort of transfer of resources from the United States and Canada to the poorer regions of Mexico in order to begin to work, like the Europeans did, in terms of social cohesion and infrastructure.
On these three fronts we have not achieved anywhere near what we wanted, but I think that is the direction we should go in.
Q: To Roberto Unger: What do you think of trade and regional trade blocs such as Mercosur or a European Union-style trade agreement?
Roberto Unger: First, in principle one might think that free trade would be most attractive either between economies that are at similar levels of economic growth and technological evolution, or between economies that are at radically different levels. Free trade arouses more suspicion and more justified resistance when the trade is proposed between economies that are at different levels in a situation in which the inferior economy is within striking range of a superior economy. Now that is precisely the situation that exists in the relations between the United States and the most advanced economies of Latin America. This can be translated into a very simple reflection. If free trade between the United States and a Latin American country were such a good deal, Puerto Rico would be a paradise.
Now here's my second remark. The suspicion of free trade with the United States would be overridden if the proposals of the free trade area took the direction of an arrangement such as the European Union. That is, if the proposals included, first, freedom of movement of people, and second, practical mechanisms to contain and diminish inequalities among the members of the union. What we do not want is a type of free trade arrangement with the United States that is a pretext for making money out of the contrast between the mobility of capital and the immobility of labor.
On the other hand the case for resistance to free trade with the United States, or the other advanced powers, is weakened to the extent that we fail to produce a viable alternative development strategy in Latin America. An economic union of the Latin American republics makes sense as a platform of a shared strategy, cemented by common institutions. In the absence of those institutions and of that strategy, all we can hope for by ideas such as Mercosur is to play for time. And that is all that we have done, and now the time is running out.
Q: Puerto Rico is a paradise. Puerto Ricans live better than 80% of humanity. You say you want a mechanism to narrow the inequality between the north and the south. But in Brazil you do not have a mechanism to narrow the inequality between the northeast and the south. How would you do it?
Roberto Unger: There is a long history in Brazil of arrangements for the correction of regional inequalities. Almost all of them were failures, but it has been a national obsession for over a century.
Q: Is Latin America irrelevant and is that why the United States doesn't care about it?
Jorge Castaneda: No, the U.S. has transformed Latin America into what it wanted. Clearly to the extent that much of the agenda of the United States in Latin America has been achieved, at least rhetorically, there is much less to do. I think there is a lot of that in the views from Washington about Latin America and particularly in this administration. Most of what they wanted on the trade area in Latin America they've gotten, except for Brazil. And since that looks like a pretty tough nut to crack anyway, they are not really insisting on it too much. And most of the market reforms were carried out in most of the countries. So there isn't much of a U.S. agenda for Latin America any more.
Now whether this is true or not is a totally different question and whether this is good for Latin America is an even bigger question, and I disagree with both of those assessments. But I think that there are people in Washington who view things in this way, absolutely.
Roberto Unger: If one were to look at the situation myopically one might say what would be best for the United States is that Latin America not be as successful as Korea or Japan, but not be as unsuccessful as most of Africa. So it not be a possible rival, but it not be a permanent ward and problem. Well, that's just what most of it is. So by those cold terms, the Americans have been successful, in maintaining and helping to maintain Latin America in its present situation of inconclusive mediocrity. This would be very short sighted on the part of any American statesman or any American citizen. And I want just to make the fundamental point that this discussion we've had about alternatives in Latin America is in every crucial respect also a discussion about alternatives in the United States. The program I presented isn't just a program for Latin America. Why isn't it in another version a program for the United States?
Q: Will the Mexican government take steps to control emigration to the United States?
Jorge Castaneda: [You should not assume that] the Mexican government should or will want to control emigration. To begin with because constitutionally it is very complicated. Secondly because remittances are today the single largest source of hard currency for the national economy. And they are a particularly progressive source of hard currency. Why? Because since the people who tend to emigrate tend to be poor, and they tend to send the remittances back to their communities, it has an immensely progressive impact on redistributing wealth throughout the country.
On the question of controlling, the answer is no, I don't think any Mexican government, and mine certainly would not seek to control it. Now obviously the ambition one has for a country like Mexico over a reasonable period of time is to create sufficient jobs, and good jobs and stable jobs and lasting jobs in order for the inclination to emigrate to diminish as much as possible, understanding that this does not happen overnight. It does happen.
There are clear examples where this has happened. Roberto referred to the European case of free trade type of agreement, the European Common Market and then the European Union type of scheme. In the late 1950s, millions of Italian emigrants left southern Italy to go and work in the north. In the 1970s, hundreds of thousands if not millions of Spaniards and Portuguese left their countries to work in northern Europe. Today these countries, Italy, Spain, and Portugal, not only no longer send emigrants to the rest of Europe but they receive immigrants from North Africa. That is, over a twenty or thirty year period of time it changed, things changed.
The U.S. Needs to Make a Commitment to Help Develop Mexico
So I think we can create those jobs in Mexico, over time, with economic growth, with improved education. But to be very blunt about it, it is going to be immensely difficult to do this without the type of resource transfer that the rich European countries sent to the poor European countries over the last forty years by stages. Or as [Jose] Moya was saying about Puerto Rico. I tend to agree with him on Puerto Rico. There is just a small detail. In the peak periods, when Operation Bootstrap began, in the late 1940s and early 1950s and then through the fifties and sixties, the United States was transferring something like 25% of Puerto Rican GDP in different types of subsidies to Puerto Rico.
That would be the equivalent of around $150 to $170 billion a year from the U.S. to Mexico. Now, if you give us that money, I'm sure we can turn Mexico into something much better. But even better, of the three odd million Puerto Ricans that there were then, about a million of them went to live in New Jersey. If we were able to send a third of Mexico's people to live legally, with papers, with everything, as American citizens -- because Puerto Ricans in the United States are American citizens -- I don't think Mexicans would all want to become American citizens, but to live legally here. If we could send 30 or 35 million Mexicans to the United States to live legally, so if we had 35 million fewer Mexicans and $170 billion more dollars per year, probably we could turn Mexico into, if not Puerto Rico, clearly we would be able to change many things.
I am exaggerating the case, but the real point, what is important here, is that the United States does have to assume a commitment to the development of Mexico. Developing Mexico over the next twenty years is going to require an enormous amount of money. We do not have it. So either we get it somehow, or Mexico will not develop. I agree with Roberto that the fundamental source of this has to be domestic savings. But on the margin, 4, 5, 6 percent of GDP, has to come from abroad. And abroad in Mexico means the United States.
So how do we address this issue? There does have to be a commitment from the United States, similar to the commitment that the French and the Germans and the Dutch and the Belgians made, first with the Italians, and then that the British and the French and the Dutch and the Germans made with the Spanish, the Portuguese, and the Greeks and the Irish. At one point, Ireland was receiving up to thirteen points of GDP per year from Brussels. It's not as good as Puerto Rico, but it wasn't bad. And Ireland today is not Puerto Rico. I think we can find something in between Ireland and Puerto Rico that might work.