Industry, the State, and Public Policy is a study of the economic and political roles of Mexican industrialists based on data from the Mexican central bank, original survey research, interviews, and Mexican newspapers and magazines. Story argues that the nature and extent of the industrialist’s participation in the economy and public policy arena provides evidence that Mexico is not a standard case of associated dependent development or authoritarianism.
The book has three key findings. First, Mexico experienced enviable industrial success due, in part, to the efforts of domestic entrepreneurs. Second, industrialists enjoy a significant degree of relative autonomy from the Mexican state. Third, industrialists have significant influence in the formulation and implementation of government economic policy.
The first part of the book informs us that, relative to the rest of Latin America, Mexico industrialized early and quickly. Story claims that this challenges the argument that Mexico has experienced dependent development due in part to the weakness of domestic entrepreneurs. However, the associated dependent development model does not deny industrialization will occur, it claims that growth will be structurally imbalanced. Despite his effort to challenge the model, Story winds up supporting it as he qualifies his conclusions, and notes the numerous structural imbalances in Mexican industrialization: the cyclical nature of Mexican growth, economic dualism, inequality, chronic balance of payments deficits, oil dependence, and relative weakness compared to other newly industrializing countries.
Story also argues that Mexico does not fit the associated dependent development model because the state has not supplanted private capital. He asserts that, despite tremendous growth in the extent of public ownership, public sector participation in the economy has not actually grown when measured in terms of public expenditure in areas competitive with private capital and of public sector investment as a proportion of total investment and GNP. Yet Story’s own data partially contradict his argument—he shows public investment in agriculture and industry rising as a percentage of total investment between 1950 and 1980. Further, the consensus among Mexican economists is that the relative share of public sector investment fell from 1940 to 1965 and then began to rise again.
Story also tries to minimize the weight of the state sector by declaring that state participation in the economy benefits the private sector. This kind of evidence could actually support the conceptualization of a relatively weak national bourgeoisie that Story is trying to debunk. It shows that Mexican entrepreneurs will not invest unless subsidized and protected by the state.
Story again has to qualify his argument against associated dependent development when he analyzes multinational corporations’ participation in the Mexican economy. His regression results testing the relative impact of national, foreign, and state investment on growth from 1951 to 1980 indicate that foreign investments have the most weight. He also finds that MNCs dominate activity in key (capital goods) sectors of industry, and that they tend to aggravate the chronic international payments deficit.
Story is on firmer ground in the next two parts of the book, where he reevaluates Mexican authoritarianism by showing the relative influence industrialists have with the government. The problem here is that private sector influence over government may not necessarily be antithetical to authoritarianism. Story uses results from a survey of one hundred industrialists and case studies of several economic policy decisions to show that there is pluralism within the business community (proven by struggles for leadership of business associations), high mobilization among industrialists, and business influence over public policy. Story explains how this influence affected Mexico’s decision not to enter GATT in 1980 and its formulation of the 1979 Industrial Plan. He construes bank nationalization as a failure for business. Yet if he had carried through in his distinction between differential business influence in the formulation and implementation stages of policy making, Story could argue that business influence was evident in the de la Madrid administration’s partial reversal of the nationalization decree.
The static nature of Story’s argument and its tendency to deemphasize important changes in Mexican political economy is a major shortcoming which leads to some confusion about the evolution of government-business relations during the López Portillo administration. (Story says that serious business opposition to López Portillo did not arise until 1980, yet the debate he narrates over the Industrial Plan was in 1979.) Story misses the main point of recent research on Mexican business, which aims to explain the breakdown of the government-business “Alliance for Profits” which has existed since the 1940s. This is unfortunate, because the nature of change in government-business relations will be crucial to Mexico’s political and economic future.
