On Growth Two

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21. Victor L. Urquidi

Professor Victor L. Urquidi was born in Mexico in 1919. He studied economics at the London School of Economics and began his career as a research economist at the Central Bank of Mexico. From 1947 to 1949 he worked with the International Bank for Reconstruction and Development. In 1949 he entered the Mexican Ministry of Finance as an economist. From 1951 to 1952 he served with the United Nations Economic Commission for Latin America (ECLA). Since 1966 Professor Urquidi has been president of El Colegio de Méjico. He is a member of the inner circle of the Club of Rome. Among his publications are Free Trade and Economic Integration in Latin America and The Challenge of Development in Latin America.

You were associated with the Club of Rome almost from the very beginning?

I first heard about the Club of Rome in 1970 through a friend in the United Nations who was also a friend of Aurelio Peccei. The reason he asked me to study the background and find out what was being done was because he knew of my interest in projections, in problems arising from population growth, from the implications of science and technology for development. I have been associated with the United Nations on these topics and I had started some research in my own country on population growth, its consequences, and its relation to development prospects. After I read the background papers on the Club of Rome I became very interested because I was obviously aware that these were not purely national problems but international ones too. Shortly after that I was invited to join.

Could you give a rundown on how Mexico participates in the overall work?

We haven't yet set up a local group to systematically study the alternatives for the future of Mexico. I have participated in the Barlioche Foundation project, a Latin American model of the future. However, there are at the moment a number of people in Mexico in different disciplines who are looking into various methodologies and evaluating the results of the Limits to Growth model and other studies. We are also very hopeful of soon setting

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up under my chairmanship a study group to develop a Mexican model for alternatives. The reason why we are getting involved is not just intellectual but also because in our government and in private sectors there is a growing concern over long-term issues. Mexico faces difficult problems because of very rapid population growth. We expect a doubling in twenty years. The demographers have not yet found any evidence of a decline in fertility even among the urban population such as has occurred in the past in many countries and is already happening, for example, in Brazil, or as happened in Chile and Costa Rica over the last ten years. We don't exactly know the reason for this but we associate it with the fact that our urban population largely migrated from the countryside in recent years. They have a very low educational level and are therefore not yet motivated in terms of modern culture to have small families, nor are they equipped to find out what can be done about it and take the necessary measures. The average education of a Mexican according to the 1970 census was less than three years of schooling. Fifty-seven percent our our labor force, according to the census, fifty-seven percent of these thirteen million people either had no schooling at all or had less than four years. This gives you an idea of the cultural difficulties of achieving a demographic transition. Meanwhile, mortality has declined from twenty five per thousand in 1940 to nine per thousand at the present time. It continues to fall, although at a less rapid rate than before.

This sort of problem makes us feel that in spite of the extraordinary social changes that have taken place in Mexico over the last fifty to sixty years, in spite of the fact that on the whole we have had progressive governments involved in deep social reforms or in accelerating development, we are still facing some extremely difficult problems - in connection with food supply, urban living, housing, and other aspects of an urban concentration; in the satisfaction of educational needs, and, more recently, even in employment. Because, although we had lived under the delusion that we did not have unemployment, recent data inform us that we have. In 1970 we had at least one million openly unemployed persons, and a degree of underemployment which is equivalent to at least another million. This means in total fifteen percent of the labor force. We are just beginning to feel at this moment the impact of a whole generation of new survivors from child mortality who are hitting the age at which you are either continuing school or you are looking for employment. We suspect, although we don't have enough data, that unemployment is particularly serious among the young age groups - people below the age of twenty, fifteen to twenty, and maybe even younger.

Until recently the general position of the government in Mexico was that we had achieved a fairly rapid rate of growth. After all, six and a half percent

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over twenty years or more is very impressive. We believed until now that development itself was the answer to our problems and therefore would somehow provide for the needs of the rapidly growing population. Today, we have some second thoughts about this view. This has recently led the government to change its position on population policy from a no-policy attitude to a positive-policy attitude in terms of reducing the rate of growth by means of family planning.

Madame Gandhi stressed to me that family planning is needed but that it should be on a voluntary basis.

Well, because Mexico is a Catholic country and because of the position taken by the Church and the fanaticism that develops around these topics, the government is making it very clear that it remains very respectful of the individual decision taken by couples. However, what so far was not available was hard information. The government has started family planning programs through every part of the hospital system in the country, through social security, and through the national hospitals, and is finding an overwhelming demand for information. What the Mexican government wants to do is help people understand the issues in terms not only of their family situation but also in relation to national problems, and supply them with information that will enable people to make choices. If there is any sort of compulsory family planning it would fail; it would backlash immediately.

To go back to what I was saying earlier, we have begun to unfold a series of perspectives for Mexico which are not as hopeful as they were in the past, regarding not only the question of how to deal with a population doubling in twenty years; but also how to transform the economy to make it less dependent in terms of international relations, to intensify exports of manufactures and therefore to compete in world markets with other industrial countries and defend the prospects for our main exports, which are still basic products, and to develop tourism, which has been a tremendous help in our balance of payments. At the moment, in the medium term the balance of payments prospects for Mexico are extremely difficult and involve a necessary increase in foreign indebtedness which might eventually become a very heavy burden.

Because of a very close relationship between Mexico and the United States with, on the one hand, the obvious failures of American society, and, secondly, the restrictive economic policies that the United States is continuing toward Mexico and other nations, Mexico has to break out of this North-South relationship and is doing so under the present government. Mexico will have to seek its own way through ties with many different

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countries, not only in Latin America, but with the European Common Market, with countries in the Orient, with a view not only to selling our exports of basic products and manufactures, but also to attracting new forms of foreign investment in association with Mexican capital, or by attracting technology.

When Henry Kissinger became Secretary of State of the United States, his first act was to visit Mexico and to underline, he said, the importance the USA was to attach to the hemisphere. The New York Times merely commented that it sounded fine if it were really true.

You recall Nixon's famous speech on Latin America which really announced nothing new and gave rise to the so-called low-profile toward Latin America. I think that policy statement plus the enormous difficulties in securing the essential contributions to the Inter-American bank, which after all was a Latin American instrument of development, plus the frequent restrictive practices with regard to trade of the North American lobbies, which mobilize themselves to prevent the entry of Latin American products (this is very much felt by Mexico in terms of exports of vegetables and fish products and so on), all this has led to a complete disbelief in the intentions and in any positive policies on the part of the United States.

When President Echeverría visited the United States in 1972, he expressed a very critical attitude toward American policies, and toward the Organization of American States in terms of its utility and its capacity to handle the big issues, especially the economic issues. He was very forceful on the question of specific matters of cooperation between the United States and Mexico. Among them was the very sore point of a salinity deriving from the Colorado River which was literally destroying large areas of agricultural land in northwest Mexico. Our President said, ‘We are surprised that so much energy is shown and efforts are being made to reach agreements with enemies when nothing is done to solve problems between friends.’

There was an immediate reaction from the United States government with the result that within eighteen months this matter has found a very solid solution which satisfied Mexico to a large extent.

I met in Geneva with Ambassador Hernán Santa Cruz of Chile, who was chairman of the Algerian Conference Economic Committee. There are now plans to set up a development bank by the so-called Third World nations themselves. Well, as you know, we have a regional bank, an Inter-American bank in Latin America, and there are three subregional banks: the Central American, the Andean Corporation, and the Caribbean Development Bank.

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Financed entirely by Latin countries?

They are financed by contributions from all the interested countries. In the case of the Inter-American Bank it includes the United States, which is of course the major contributor. It now also has contributions from Canada, from some European countries, and, recently, from Japan. But, after all, this is an operational institution. It has worked for more than ten years now. It has tremendous experience and it has access to the capital markets throughout the world. What is needed now is to reduce the dependence of the bank on the will of the United States, as expressed through the US Congress and its contribution to a special trust fund of the bank for the soft loans, and as expressed also in the voting power of the American executive director. Finally, there's an opportunity, because the two oil-rich countries of Latin America, Venezuela, and Equador, may be in a position with additional contributions, also from major Latin countries such as Argentina, Brazil, and Mexico, to contribute more capital to the Inter-American Bank, and thus earn more voting power.

Progress breeds pressure for more progress. The basic goal, seen especially in Brazil, is to grow. Would you say that there is a realization in Mexico that economic growth has to be somehow slowed down?

Well, this is a difficult question, because clearly in any country where the standard of living is still on an average quite low - in Mexico it is still about seven to eight hundred dollars per capita - with the obvious need to industrialize and to absorb people into employment, no government can fail to say that it must speed up economic growth. But the question that has come up clearly in Mexico in the last three or four years is that economic growth without a better distribution of income cannot be the objective of society. Also, through the work of our economists, it is becoming increasingly plain that a better income distribution will also lead to a better employment pattern. But what has been happening in Mexico is that we have developed a modern sector in agriculture which employs very few people and a modern sector in industry which through the indiscriminate use of labor-saving technology derived from the techniques developed in the industrial countries is producing commodities but not offering large-scale employment. Therefore, in terms of our political background, in terms of the Mexican revolution and its goals, and in terms of the policies followed at some stages during the last fifty years, we must place the emphasis on social and cultural objectives. All this makes it politically impossible to follow a pattern or a model of goals that does not simultaneously try to achieve what is generally called social justice. This means in effect the promotion of redistributive

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policies. A balance should be achieved in the participation of different social groups.

If we are to follow a goal pattern which continues not only to encourage the rich, but that favors their economic position and with it the political pressure exercised through this preferential position of business groups in Mexico and then assume that somehow the rest of the economy will pull together and integrate into this system of privileges or into an open capitalist system; if it did that, then we will not be solving the basic problems of the country, which are still structural. The whole purpose of the Mexican revolution was to bring about social justice within a free society.

Some of the Africans I interviewed said it was too early to speak to students of ‘limits to growth’ in Africa at this point. Would talking to students in Mexico about these problems also be premature?

The Meadows study of limits to growth enjoyed great success in Mexico. It is being read widely, not only in Mexico but elsewhere in Latin American and in Spain. I think on the one hand it led many people to become aware of world problems in a way that had not been so graphically, so dramatically put to them before. On the other hand it has made many people understand that growth as such implies a structure of society which in the long run will not be socially just. Nobody in his right senses would suggest that Mexico stop growing. In fact, we would not suggest that the industrial countries should stop growing for the time being, because our own development is linked to their growth. But the idea is also getting around in Mexico that the patterns of growth should change, that the terms of consumption of the industrial, or postindustrial societies, are wasteful, that we in the modern sector of our societies are imitating that same pattern, and therefore that we are producing for ourselves the same kind of values that will arise from unnecessary consumption, from wasteful use of energy, from deterioration of the environment, especially the urban environment, and from many other aspects which have now been coming to light. As these ideas are developed and as these thoughts about the future crisis extend to broader sectors in the population, an awareness will be created which will lead to a reconsideration of much of what we are doing today in terms of waste. In effect, when the energy crisis developed late in 1973, the immediate reaction in Mexico was to say, this does not affect us, because we are more or less self-sufficient in fuels, from oil to gas. But it turns out that we are not, that we are requiring imports to meet about fifteen percent of our needs and that all of a sudden the cost of these imports has quadrupled. Therefore, we in Mexico must make efforts not only to be self-sufficient, but now we must be much more careful

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about wasteful consumption of energy. I think, on the whole, that the idea that there are limits, that resources do not materialize overnight, that excessive population concentration can be harmful (as you can see for yourself in a city of the size of Mexico), and all this combined with tremendous inequality, tremendous poverty, and marginalization of the population, which increases social pressures, is not a healthy state for any country. If two years ago nobody heard about these problems, we can now say that after the dramatic presentation of Limits to Growth, even though people may not subscribe to what they call the fatalistic implications of the Meadows report, we will have these questions being asked continually and, at least, people admit that there is cause for grave concern.

The sort of natural reaction to all this is to say, ‘Things won't turn out as badly as a total collapse, because we are capable of seeking different solutions and the world should do something about it.’ Now, how and through what means, nobody knows exactly. But the idea is there. I think that among intellectuals and among people responsible for the government in Mexico, there is a very clear awareness not to be pessimistic or fatalistic. Because fatalism and pessimism imply that all we have to do is to accept the consequences of whatever will come from the development of modern industrial capitalism. Although in many respects we are a modern industrial capitalist society, we also have another side to our history and to our intellectual development which makes us feel that we are capable of doing something about it.

I was impressed by what you said about the younger age group: the rise of unemployment, the young people who cannot study in the field they want to because the universities are too crowded, the faculties are full. This concerns the future of Mexico. What can be done? What should be done? How can one give them hope, or belief in the future? Otherwise they will be terribly frustrated.

This is obviously a very very deep and important problem. After all, Mexico is a country of young people. Forty-six percent of our population is under the age of fifteen, with the expectation, from several studies, that this percentage will continue to rise through the end of the century because of a high birthrate and declining mortality of children and infants. The Mexican educational system differs from that of many other Latin American countries. It is not as highly developed as, for instance, that of Chile and Argentina and to some extent Costa Rica. But in the early twenties, after the revolution, the Mexican government made a really gigantic effort to develop basic education including rural education. However, in spite of these notable

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educational efforts, we still have about twenty-five percent illiteracy. As I told you, fifty-seven percent of our labor force has had less than four years of education. Therefore it remains functionally illiterate.

If you take the usual ratios of enrollment in schools by age groups, you find that whereas in urban centers the ratio is quite high - we perhaps don't have a hundred percent enrollment in primary schools, but we do have maybe sixty or seventy percent - in rural areas the rate is still extremely low. This is because children are not motivated enough to stay in school and because the government through its various channels is unable to provide the schools and teachers needed in small communities. It may surprise you to learn that our of Mexico's population of fifty-seven million, fifteen million, or over twenty-five percent, live in communities of less than a thousand people each. You can imagine what it is to provide schools on that scale to almost a third of the school-age population. With developments in primary education over the last fifteen years, we did not foresee in time their impact on secondary education. There has been a literal explosion in secondary education in the last six or eight years, with the government frantically building secondary schools, technical schools, high schools throughout the country. But what has happened is that the aspiration of people, of youngsters, is not to get into technical work, into trade schools, but to go for the general educational system. Because that gives them social status and leads to office jobs, where you dress differently, where you earn better salaries, where you are cleaner, where you are a white collar worker.

The impact of the universities is the same. The universities have traditionally been not only a place of learning and a place for acquiring certain skills, but have above all meant prestige. In this respect our university educational system is not different from that of the rest of Latin America. What is different in our educational system is the emphasis on general overall schooling, the uniform system of schooling in terms of national objectives and so on. What is not different as yet is our middle- and higher-educational system. Here, we haven't paid enough attention to all the diversity of purpose which an educational system can have, which after all is not to simply teach people history, some mathematical ability, and some scientific knowledge in order to put them through to the higher system, so as to produce lawyers, engineers, economists, accountants, and so on and so forth, while at the same time they will not have really integrated in the modern patterns of society at all. Again, we are aware of this, and one of the reforms that is going on in Mexico under the present government is in the educational system, starting from the primary schools, where new textbooks have been developed of a modern kind, textbooks that tend to make the

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children aware of the world around them, of reality, of social interactions within the community and among the diversity of communities in Mexico. I know about this because I have participated in the preparation of some of the new textbooks. If they are successful it is going to cause a complete change in the mentality of children as they emerge from primary schools. They will be much more socially aware of the country's problems. They will have acquired knowledge not as something to learn out of books, but as something that is useful to them in understanding their daily life.

Going back to the universities, the universities in Mexico have barely been able to face the quantitative impact of the enrollment emerging from the secondary school system. They have been literally swamped, overwhelmed. With the additional circumstance that the allocation of funds from the country's federal budget, which is the main support of universities in Mexico, has been quite insufficient to cope with this avalanche. A large part of it has gone merely into construction of buildings, to provide classrooms. Very little has gone as yet into reinforcing the teaching staff and raising salaries, except in our national university. There aren't enough full-time posts for teachers. Most teachers are still part-time: they have jobs as engineers, doctors, lawyers, economists, and may go and teach a few hours a week. The size of classes has become gigantic. People don't know each other any more. It is a dehumanization of education. The libraries are so poor that they are hardly worth mentioning, except for some isolated institutes of research, both within the universities and a few outside, like my own, the Colegio de Mexico. Except for some schools or some particular courses, which indeed are of very great merit, the general quality of teaching has declined and the whole atmosphere of the universities has become deplorable in the sense that there are no good academic standards. There is very little discipline and we are faced with an intervention of politics in a narrow sense, in the sense that political sympathies often interfere with the grading of students and the standards applied by teachers. We see graduates emerging with degrees from the universities who are completely inadequate to deal with the kind of problems that they have to deal with in government or business or anywhere else. We always have of course an elite of students, the bright students, who in spite of the system make it and go on to postgraduate work in Mexico, the United States, Europe, or anywhere and come back and make up the elite, and capture the top posts. We have no difficulty in placing good university graduates. In fact, there is such a demand that they earn very high salaries in almost all the professions. But we are also producing a large quantity of mediocre and half-baked, poorly skilled individuals who cannot find a place in modern society - that is, in modern industrial activity - who

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are not good enough for research in government or anywhere else, who are frustrated, and who are unhappy about the whole situation. Behind these, you have those who do not manage to enter the universities because there is no place for them, youngsters of seventeen or eighteen who have not acquired a good enough middle education to enable them to get jobs or whose social aspirations are such that they will not accept low-paid jobs.

The Mexican writer Octavio Paz remarked a short while ago that ‘Latin America is becoming more and more a heap of ruined ideas and victims' bones.’

Well, I think that if you look at the situation not only in Mexico, but even in Argentina or in many other countries - take for instance the disruptions that occurred in 1973 in Chile - you end up by being pessimistic. But it is not total pessimism, because there is a minority who will, as we say go, ‘contra viento y marea,’ against the wind and against the tides, ‘will come out on top.’ This will be the managerial and administrative elite of our countries and of Mexico. But will they be able to handle his uninformed mass of uneducated people who are pressing for participation but who deo not have the training to hold the key jobs?

What should the advanced nations do? It sounds as if you could use twenty-five hundred young Americans who know Spanish and would come out to teach in Mexico.

No, this is utterly impossible. I think that what's happening in Mexico is that in spite of our lip service to social reform, including educational reform, in spite of what we are doing, which I think is more important now than it was, say, eight years back, we are not as a society able to allocate enough resources to creating the necessary number of skilled individuals, or to create the necessary structures that will permit the individuals to be formed.

Is it a mere question of money?

Well, it is more than money. Naturally it is money too, because if there were more money for universities under the present government, they would certainly get it. But in the first place, we are short of skilled people. Therefore, we have to start by training them. However, it is still more than that. The emphasis in the last twenty years has been on economic growth, largely through government spending on the infrastructure; through foreign loans, spreading electricity, irrigation, road building, urban infrastructures, and so on. At the same time we have stimulated a policy of industrial enterprise largely through private individuals who received all kinds of

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incentives: protection from above, long-term financing, guarantees of foreign loans, and so forth. In order to promote the Mexican revolution and its consequences in the historical circumstances, in order to encourage the private sector to play its part, to run its risks, to invest its accumulated capital, there reigns a sort of informal understanding that taxation will remain light. Now, we cannot make a big dent in the social problems and in education without a tremendous expenditure which must be backed up by a proper tax system. The overall tax burden in Mexico, including every imaginable tax and even tollroad fees, does not exceed fourteen percent of the GNP. It is one of the lowest in the world by any standards, by whatever measure you use to compare tax burdens. Many articles were published about this situation in journals in the United States and Europe. This, to me, is a political problem and not a problem of technique. You can say, there is a lot of tax evasion. Well, so there is anywhere else. Whether there is more in Mexico no one can tell. If you use large computers, put everybody under a tax number, and pursue these things; if you could improve the administration so that it became perfectly honest, maybe you could collect a lot more taxes. Perhaps we could restructure certain taxes. But basically it is a political problem. As long as we have people in Mexico, and I include politicians, who are making and have always made their money on the side in various kinds of business deals, both honest and dishonest - I even include the middle class, which has accumulated land and property and thus made enormous capital gains, I include the professionals, who earn extremely high incomes - if all these people continue in a sense to hold the state to ransom, and reason, ‘If you don't make it profitable for me, I cannot risk my resources, I cannot cooperate in the common good,’ then it will remain impossible to introduce a proper tax system. Until we do, we are not going to be able to handle the other problems. In that respect I am pessimistic. Look at my own work. I first started looking at tax problems back in the 1940's and I wrote in the 1950's about the need for tax reform in Mexico. In the 1960's I participated in a high-level working group, in which we had the advice of Nicholas Kaldor, to reform the Mexican tax system. The same issues arose. By then we had, however, much better proposals to make. But I have not participated since, because I witnessed the same exercise only two years ago with the same frustrating results, so that amounts to twenty years of clear identification of the problem without any possibility of solving it.

Coming back to your original question, whether we could reallocate resources to social priorities; we should be able to provide, to train people for skills, and to equip libraries for the higher-educational system that a country like Mexico would need.

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I would almost conclude from listening to you that Mexico could use another revolution.

Well, yes. Exactly. I think we must be quite clear as to what the Mexican revolution meant. The Mexican revolution was an unheaval of a most anarchic kind, which cost over a million lives, which, of course, broke up the ruling system, but which led to ten years of chaos until fairly conservative forces within the revolution began to organize the country and put it together again. What we feel, looking back at what happened later, is that some of the more radical aspects of the Mexican revolution have become to some extent betrayed. We use a word in Spanish which is very hard to translate - ‘mediatizados.’ They have not become fully what they were intended to be. They have become something less, so that land reform, educational reform, social justice, the rights of workers, all this has not developed as some of the early aspirations seemed to indicate or as some of the intellectual participants of the revolution thought was necessary for the country. There's a book by Roger Hansen called The Politics of Mexican Development which deals extensively with this sort of question. Hensen blamed it all on the Mexicans themselves. I think there's one factor which he did not take sufficiently into account and which I think is very important, and has been long forgotten. An outside observer does not realize it anymore. Namely, to what extent the Mexican revolution and the new policies in the 1920's were threatened by outside interference, in fact, by the United States. Even to the extent that they obtained recognition for the republican government, Mexico had to make important concessions regarding petroleum legislation. There were times when the threat of armed intervention was very near. The second factor to realize is that during all that period of the 1920's and early thirties, whatever Mexico was trying to do to develop in any modern sense had to be done without foreign aid of any kind. Not only that, but capital even left the country. The feeling is very ingrained in Mexico that foreign pressure was such that many of the more radical objectives - and you can say this applies to the whole Cardenas administration, which expropriated the petroleum industry and pushed land reform to the limit - were gravely jeopardized all along by the need to sell commodities to world markets, mainly the United States, and by the need to have at least a nonhostile attitude on behalf of American capital. It was not until the Roosevelt Administration that, at least on a government-to-government basis, relations became civilized. So we suffered, and over a long period, as Chile suffered recently in a period of less than three years, tremendous foreign pressures which were brought to bear to prevent a national policy from being carried out in terms of objectives. Allende in Chile stuck to his

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guns. Mexican administrations throughout the twenties and thirties, with the exception of Cardenas, frankly compromised. Perhaps not totally, because there was no neglect of local legislation, education, and social services, but there has always been a demagogic strain in the statements of Mexican Presidents and their policies, a slightly populist approach. All this was done, but never to the point where it threatened the system. A balance was maintained, a very cleverly woven balance of interests, to the extent that the labor movement in Mexico was never strictly independent. It is still managed very much as a part of the establishment. In the face of foreign threats, however defined, you don't rock the boat!

This is the situation and it explains the peculiar form of the Mexican revolution that we have had, going from armed upheaval to a series of social reforms, while still using the word ‘revolutionary’ for what in many respects has been in reality a far from revolutionary development. This explains much of the unrest of the last few years. The crisis that built up in 1968, for example, was a manifestation of this. It was not strictly a student movement. All this has focused on the need for further changes, deep changes, for looking at basic issues. If you want to call this a new revolution, then in a European sense of the word it is a revolution. In Mexico you would not use the expression a new revolution, because in Mexico that would mean another violent upheaval, or to some it might even mean the implementation of a socialist system, like in Chile or in Cuba, which, I think, in Mexico would not receive widespread support.