Mexican ex-president talks Lapid, pot, and the economy

If you look at every good aspect of Mexican life in the last 80 to 100 years... you will find a member of our Mexican Jewish community playing an important role.

ERNESTO ZEDILLO 370 (photo credit: Courtesy)
(photo credit: Courtesy)
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.
Though 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 Center.
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?
I was 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.
I simply 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.
And 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 approval.
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 sequester.
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 years.
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 sustainable.
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.
I think the German surpluses were the source of the problems in Europe.
By 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 Jewish person.