Austeridad Republicana and Contradictions in Mexico’s Response to COVID-19

By Andrew R. Smolski, Doctoral Candidate in the Department of Sociology and Anthropology at North Carolina State University and member of the Latin American Perspectives editorial collective
 

On May 3^rd, 2020, Andrés Manuel López Obrador (AMLO) published “Algunas lecciones de la pandemia COVID-19”. In this brief document, the President of Mexico makes clear that neoliberal policies, such as privatization and austerity for public universities, have led to a crisis in public health exacerbated by the pandemic. AMLO has consistently pointed to four decades of neoliberalization as creating many of the ills Mexico confronts, from a majority of the population employed in the informal sector to almost a majority of the country living in poverty. And he is not wrong. 

For instance, in public health neoliberalization has had a major negative impact. Since the late 1990s, Mexican public health institutions, like the Instituto Mexicano del Seguro Social (IMSS), have seen market reforms that reduced the amount and quality of care. This is the case, even while healthcare expenditures increased in Mexico since 2000. So, you have reductions in care with increasing costs and poorer outcomes. In 2006, a year before the drug war began in earnest, life expectancy stalled, a trend continuing to the present. That ended more than four decades of increasing life expectancy.

AMLO’s administration has sought to reverse that trend through a reinvigoration of the universal right to healthcare, itself enshrined in Article 4 of the Mexican Constitution.  The major policy has been the Instituto de Salud para el Bienestar (Insabi), which is meant to augment public health by covering people not covered by IMSS or the Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE). Through an increase in public provisioning of medical services and pharmaceuticals and a rollback of market reforms, Insabi could reverse the neoliberalization of public health and return Mexico to a positive trend for life expectancy. 

“Algunas lecciones de la pandemia COVID-19” also develops an alter-modernist vision, one that is strikingly reminiscent of liberation scholars. AMLO writes “that the bottom, marginalized, and scorned…are in reality filled with solutions.” This bottom-up vision is also reflected in the administration’s response to COVID-19. On April 5^th, AMLO unveiled an economic package in the National Palace to confront the adverse effects of COVID-19 on the economy. That package largely focused on small businesses (microempresas) and the informal economy. In response to critics of the package, AMLO stated that “there is not going to be a rescue for big companies, banks, much less the biggest.” Such a statement would have been anathema to any of the previous administrations, wedded as they were to a vision of corporate Mexico.

Yet, there are contradictions in the Fourth Transformation (4T), the label AMLO and MORENA have given to the administration’s policies. While the public health policy is rhetorically about the universal right to healthcare, the budget has not reflected a sufficient economic investment to provide such a right. Although, it’s important to note, that in theory no one in Mexico will have to go into debt for treatment, unlike in the United States. But this may be of little consolation if there is little to no healthcare facilities to access. Furthermore, the years of hollowing out from neoliberalization have left the public system without a sufficient number of hospital beds to treat COVID-19 patients. This fact led to a voluntary agreement with private hospitals on the part of the government. The agreement will have the government cover costs at private hospitals for treatment, which will mean the government becomes a source of profit for those entities that in pre-COVID-19 times excluded the majority from healthcare.

Additionally, the economic response to COVID-19 crisis in Mexico does not lend itself to a Keynesian conception of counter-cyclical spending. The creditos solidarios of 25,000 pesos for up to a million micro-businesses are relatively small, although they do not have to be paid back. The other micro-credits the government is dispensing reproduce a neoliberal policy that was popular with NGOs. Businesses that receive these small loans will have to pay them back within three years, even though there is no clear indication that they will keep businesses afloat or out of a cycle of debt. Even more, the refusal to raise taxes or create new taxes means that the government will have limited fiscal options to expand programs without accumulating debt, also rejected by AMLO.

Much of these contradictions arise from AMLO’s “austeridad republicana”. That has involved cutting government salaries, moves against corruption, and at times, reductions in budgets to certain agencies. It is based on a not incorrect belief that the state misallocates funds, because the neoliberal state had become a support for businesses, rather than the public good. It is from this idea that debt rejection arises, whether private or from international institutions like the International Monetary Fund, as a vehicle for funding government programs. And, this is understandable, as debt has been a primary way that privatization was pushed, just as corruption has been an endemic problem for Mexico. But, it also means that AMLO’s transformation of Mexico away from neoliberalism takes place within a state already constrained by four decades of neoliberalism.

It is not clear that what is entailed in the 4T is a transformation of Mexico’s political economy, or that it will be sufficient to address the COVID-19 crisis. Or, possibly better put, there is a lack of confrontation with the entrenched oligarchy, ever ready to use capital strike, capital flight, and other measures to stall the economy and harm the chances of a Left-led revitalization. One can only speculate as to why AMLO and his administration do not act more aggressively, whether it is current international conditions, too much emphasis on corruption and not enough on class struggle, or a general philosophy of “doing more with less”.

Of course, AMLO is constrained, as Mexico can’t just print money like the US, and there isn’t a commodity boom to finance the expansion of a welfare state. Actually, there is the exact opposite, an oil crash harming a state that receives large amounts of its funding from the sale of oil. As well, AMLO is constantly attacked in national and international media outlets, with his administration’s move under a magnifying glass to make claims about authoritarianism. Plus, the peso has been consistently devalued over the past decade eroding purchasing power, with an ever-present threat of inflation cutting purchasing power even more. Thus, there are clear reasons that AMLO and his administration seek a route that seeks to re-orient the state within current coordinates, as opposed to a more frontal challenge to Mexico’s class structure and entrenched corporate power.

AMLO and his administration are correct in noting the corrosive effects of neoliberalization on Mexico and human dignity. And many moves should be commended, such as Insabi. And, there is the expanded role of the Fondo de Cultura Economica in supplying discounted books to the populous under the directorship of Paco Ignacio Taibo II. That is, AMLO and his administration have produced an ideological space that provides real opportunities for 4T, for a political economy to transition away from neoliberalization and for a general education of the populous about demands that should be made on the state. But for now, with austeridad republicana the policy driving this transition, 4T is much less than promised. And that will be more than problematic, as the COVID dead mount and 4T stalls.