The Rick Scott Plan

We Floridians are subject to one of the most radical economic experiments in recent U.S. history. Gov. Rick Scott’s 7-7-7 plan (a seven-step plan to create 700,000 jobs in seven years) is about much more than adjustment, fiscal conservatism or job creation—it’s a profound makeover by cutting taxes, deregulating and privatization that will benefit entrepreneurs, investors and corporations. Is that good or bad for Florida?

For lack of a comparison at home, let’s look at what a similarly radical experiment achieved in Mexico.

Forget about the cartels and corruption for a moment. Mexico has been a beacon of deregulation and privatization, a magnet for foreign investors, home to some of the world’s biggest fortunes, and one of the most dynamic economies of the hemisphere. Absorbed that?

If you followed Latin America in the 1980s, you’ll remember how free trade was the answer to all economic ills, and Mexico became the model patient, a true champion of the cause, outdid its U.S. teachers in implementing free trade, deregulation, shrinking government and privatization.

Over the past two decades, Mexican governments turned the country into an export-oriented manufacturing powerhouse for the U.S. market, signed free-trade agreements with more than 40 other nations, and logged in some of the highest budget surpluses in the hemisphere, while tenaciously—but not always successfully—pushing to privatize almost every function of the state.

Thanks to a foreign investment boom in manufacturing, Mexico was one of the fastest-growing economies in the hemisphere from the mid-1990s until about 2006. Manufacturing in North Central Mexico has been growing by leaps and bounds, and most cities in that region are flourishing.

But Mexico is also a country of stagnating real wages, cyclical booms and busts, mushrooming consumer debt, persistent poverty and little social mobility.

The biggest drawback of Mexico’s liberalization experiment is the failure to create a thriving domestic market. The privatization wave of the 1990s produced the world’s richest man, and most of the two dozen or so pre-existing oligarchic families did become super-wealthy. Yes, there have been boomlets in consumption and home buying, but that’s been driven by debt rather than savings. At the same time, the average Mexican has the longest workday of any OECD country (more than 10 hours), while wages never recovered from a steep drop in the mid-1990s. Despite the boom, average real wages in manufacturing have not matched their 1995 peak again; on the contrary, after plummeting in 1996 and slowly recovering in the late 1990s, they have been falling again since 2002. Poverty began a fast decline in 1996, but the trend reversed in 2006, and now poverty levels are back to those of 1992.

In other words, Mexico’s wealth creation model has led to wealth redistribution—but in the shape of concentration at the top. Growth based on demand is unsustainable if the redistribution side of the equation is missing.

If Scott manages to generate any growth with his tax cuts and privatization—and that’s a big if—I think it will benefit only a tiny group of Florida businesses. You’d better prepare to sell either premium-priced goods to the cream of the crop, or rock-bottom goods to the working pauper, rather than continuing with pipe dreams about selling to an ever-shrinking middle class.

Johannes Werner is editor of Cuba Standard (cubastandard.com) and hosts the Florida-Caribe show on WSLR 96.5 FM in Sarasota. He has won first-place Charlie awards for "Outside In" from the Florida Magazine Association for the past four years. He can be reached at [email protected].