Monday, April 25, 2016
Mexico's Failed Relief Programs and Mushrooming Poverty
By Rafael Ruiz Velasco (PanAm Post)
● If the budget for such programs increases yearly, why is poverty also on the rise?
Mexico’s poverty is a problem. About 50 million Mexicans live on less than US$5
a day, and about 2.5 million are in extreme poverty, living on less than US$1.25 a day.
But the situation affects all of Mexico. On the one hand, poverty generates various types of anxiety,
depression and insecurity in people who suffer it. On the other hand, it is the main engine for the rise of organized crime, suicide, family
violence and addiction.
The Mexican government has been trying to
address this issue with social programs. Year after year there are new initiatives, and millions of pesos are allocated
to government resources intended to dignify and improve the living conditions of the neediest Mexicans.
One of the most recent examples is the “Crusade against Hunger,” a
milk subsidy and support for the transition to digital television.
But if the budget for such programs increases annually, why does the number of people suffering poverty continue
to rise? Here are some answers:
- Increased tax burden: A higher level of social spending requires a higher
level of tax collection. Mexico is not productive, and therefore there is no other way to finance such programs than by punishing
those who themselves are productive.
- Seed of corruption: Thousands of contracts are held above market price, and are assigned to friends and or partners of
officials in public office.
- Lack of incentives: Contrary to what happens in private entities, the government and its employees have no incentive to be effective when
it comes to achieving goals. Whether they meet their goals or not, public servants continue to receive their pay each month.
- Paternalism and politicization of support: Rulers and politicians in general
need the existence of the poor. They present themselves as social benefactors and generate greater dependence on their programs.
This way they can easily profit from politically loyal citizens.
For every 100 pesos we pay in taxes, only 40 are used correctly. The rest
are lost along the redistributive process that is bureaucracy, corruption, price inflation and diversion of resources,
among other things.
Today it is necessary
to change the way we think about the roles of both government and citizens.
We need to understand and eventually make politicians understand that the country doesn’t need to redistribute
wealth, but rather generate it. The only solution to poverty is productivity. Only through entrepreneurship, education, investment,
work and savings can the country achieve a true citizen empowerment to enable those living in poverty a potential to
succeed in a fair and sustainable manner.
If we call things as
they are, then social programs are nothing more than hotbeds of corruption and, paradoxically, also hotbeds of poverty. A
freer economy with a simpler, even and thin tax system would contribute more to reducing poverty in Mexico (through foreign
investment and the creation of new small and medium enterprises) than billions of pesos collected and redistributed by the
With these changes, everyone has a
chance to get ahead and fight for their dreams.
This article, "Mexico’s Poverty Relief Programs
are a Failure," by Rafael Ruiz Velasco, was
first published on Apr. 21, 2016 at PanAm Post under a Creative Commons license. Rafael Ruiz Velasco earned a degree
in Business Administration from the University of Anáhuac in México. He's passionate about development,
project management, economics, soccer, and comic books.