Few people are uniquely qualified to talk about a range of issues spanning the
Fed’s quantitative-easing program and the legalization of marijuana, but Ernesto
Zedillo isn’t just anybody. Having served as Mexico’s president from 1994-2000,
the Yale-educated economist led the country through its peso crisis, leading it
back to growth and fully repaying its US bailout package early.
the 61-year-old embraces the global economy, he is also a fierce advocate for
protecting the economic rights of developing countries to ensure they have a
fair shake in the process. But even embracing the technological innovation of
the global economy doesn’t mean he embraces technology personally. “Tom Friedman
and I agreed on three things we would never do: smoke cigarettes, Facebook and
Twitter,” he quips outside the Jerusalem International Convention
Zedillo, in Israel to celebrate President Shimon Peres’s 90th
birthday and receive an honorary doctorate from the Hebrew University of
Jerusalem, sat down with The Jerusalem Post to give his opinions on a broad
range of issues.Israel’s economic leaders are getting flack for
unpopular policies. Having been an economist and a politician, how do you
balance necessary, tough measures that are unpopular with keeping support?
very lucky because I never had the time or opportunity to play music for the
crowds. When I became president I needed to do what was needed to avoid the
collapse – economic, political and moral – of the my country.
thought about it and used the power that people have given me in the electoral
process to take whatever decisions I had to take. At no moment did I look at
popularity or approval indexes because I would have been depressed.
to be honest, that’s the way to do it. When I finished office, a friend came to
see me and showed me a graph showing that my approval at the end was very high,
about 70 percent. But when I looked at it, I also saw my approval in April 1995,
and I think my approval was lower than the country’s rate of inflation! And I
told my friend, do you know what moment I thought it was most important to be
president of Mexico, what was my proudest moment as president of Mexico? It was
in April 1995, when I was asking my people to understand that we needed to raise
the VAT 50 percent, we needed to raise the price of gasoline, we needed to cut
government expenditures by 3 percentage points of GDP. I only had tears to offer
to my people, but that was my best moment, not when I finished and had
It’s a good reminder that our adjustments are small. But people
are still pretty unhappy with the finance minister.
I think he should
stay the course, just do it, and eventually he will do fine. Mr. Lapid is
a good man.Israel has a Green Leaf party for legalizing marijuana. Many
economists say the US’s criminalization of drugs has fueled conflict in Mexico.
What are your thoughts on the subject?
The drug problem is a problem, but
fundamentally, the question is whether it is a criminal problem or a medical,
public-health problem. In my view, dealing with it should be a public health or
even a human-rights problem.
If I start with that premise, then I think
we will have different approaches.
First we have to realize that the
medical consequences of addictions are different depending on the drug. It’s not
the same to be addicted to heroin, or tobacco or alcohol or marijuana, so you
have to have differentiated policies.
Depending on the drug, you may want
to decriminalize consumption and put policies in place to manage the question of
supply. What you really want to do from the organized-crime perspective is to
destroy the black market.
You don’t want organized crime to profit from a
black market that has been created by wrong-headed policies. It’s agony! The
state wants to solve a problem with good intentions, and then it creates a
disaster in which rich criminals use their money and power to get rich, promote
violence and sometimes undermine the state.
These policies have been
failures, and we know better than we knew when the policies were put in place 50
to 60 years ago. We can have many policies, but I think decriminalizing
consumption of any drug should be number one.
Putting ill people in jail
because they’re ill is wrong. That’s against a very basic human right. When
someone is ill, you put them in hospital, not a jail. In that context, I think
decriminalizing the consumption and production of cannabis would be a good
policy, but it’s just a small part of the problem – you have to do much more
than that.What do you think are the major economic trends and challenges
the world is facing?
In the short term, at least the developed countries need to
get their act together to fully overcome the crisis that started in 2008 and
that, quite frankly, we are still enduring. If you look at the unemployment rate
in the US and Europe, and if you look at practically any other indicator, it is
clear we cannot see a victory. A depression was prevented, but what we have had
is a rather too long process of recession and too modest a recovery. If low
growth, or negative growth in terms of Europe, continues for too long, the very
fundamentals for the success of the market and the global economy will be put
under question, and when that happens we’ll be under real risk of seeing a
backlash to the market economy.
Forces may be unleashed that could make
us backpedal in processes that I think have been very important to achieve
prosperity, to fight poverty.
It is very urgent that developed countries
get their act together and reconcile two things that may seem contradictory in
the short term: Do what it takes to get reach escape velocity on the growth
path, but at the same time do produce credible programs, which are politically
very toxic, to restore fiscal health.Do you think the tide is turning on
austerity as a policy for recovery?
You have to strike a balance. I think it was
a mistake in the short term for the US, for example, to allow the
But at the same time it’s urgent that the United States pull
its act together and produces a coherent, credible, sustainable fiscal program
that shows that eventually the size of the national diet will be reduced. But I
would not endorse the idea that irrespective of the short-term consequences you
should ignore the fiscal adjustment right now, or you’ll abort the recovery. You
have to have escape velocity from this trap.
Europe is very complex, and
the way in which the members of the union have managed the crisis has been very
disappointing. They have shown two problems: One is that they never really work
hard to complete the other elements that are necessary to make the monetary
union viable, even after the dramatic events of the last few
Second, they have not been proactive, but reactive, to events.
They’ve only done something when they’ve been against a wall. They have failed
to do the other necessary things: to consolidate and make the union
One of the problems is that Germany wrongly believes that it
has a current account surplus because it’s productive.
That may be true,
but it’s not the explanation for the surplus. In a way, it has been a poison for
the monetary union.
You could not think of the absurdities that were done
in the Greek economy, that orgy of overspending; you could imagine what happened
in the realestate sector in Spain; you could not imagine the fiscal
irresponsibility in Portugal – without Germany trying to pursue the huge
current-account surpluses they have had the last 10 or 12 years.
the German surpluses were the source of the problems in Europe.
protecting them, they are preventing more accommodative policies for the others
to overcome the crisis, which I think is in Germany’s interest.Is there
anything else you want to add?
I want to make a comment. There are many things I
am proud of, but one of the things I am proud of the wonderful Jewish Mexican
community we have in Mexico. It’s little known outside Mexico, but if you look
at every good aspect of Mexican life in the last in the last 80 to 100 years, in
culture, science, government, you will find a member of our Mexican Jewish
community playing an important role. That for me is very interesting because it
is proof of the universality of the human spirit. They are Jewish, not all
religious, they care about the State of Israel and have contributed within their
modest means, and at the same time, they are among of the best Mexicans. Some
people say they conflict, but you can be a good Mexican, and you can be a good