Entrenched Insiders: Limited Access Order in Mexico

Alberto Diaz-Cayeros (UCSD)

Abstract: Despite advances in social development, and the presence of a very stable political order, during much of the 20th century Mexico was unable to produce rapid economic growth. Even after dramatic economic transformations at the close of the century, including trade liberalization, privatization and deregulation, economic performance has remained mediocre at best. Mexico has already fulfilled the “doorstep conditions” for transition to an open-access society (rule of law for elites, perpetually lived organizations in the public and private spheres, and consolidated control of the military), but the prevailing political arrangement and the organization of economic interests have produced entrenched insiders who are preventing such a transition.  To illustrate the nature of the socio-economic and political equilibrium prevailing in Mexico, the paper analyzes: 1) the failure of land reform as a strategy allowing for the formation of assets among poor peasants; 2) the limited role played by stock markets in the formation of capital for the vast majority of firms; 3) the regulatory framework that has assured the dominance of a small number of economic organizations, including monopolistic firms and unions; and 4) the role played by oil rents in the preservation of a ruling coalition that can be insulated from societal pressures.