Public services and expenditure: Effects of budgetary adjustment

Abstract

From the debt crisis of 1982 to the present day, the economic policies of the Washington Consensus (WC) have been continuously and uninterruptedly obeyed in Mexico. Three generations of these recommended-imposed policies, which have sought to recover debt payment capacity, privatize state-owned companies, and open and deregulate the national economy, have followed the interests of private creditors and companies expanding in the region, while at the same time greatly weakening not only local businesses, but also public institutions and the political class in general. As this article argues, the most damaging fundamental principle of the WC is the need for a balanced budget, which greatly diminishes productive capability, job creation and ultimately governability. However, the belief that a balanced budget is necessary is also the element of the WC that has most deeply penetrated both left and right leaning ideologies throughout LA. After discussing the origins and trajectory of Washington-based policies, the article highlights how privatizations and the servicing of the public debt has diminished both fiscal receipts and expenditures, leaving the state completely dependent on the revenue of oil production and basic public services. As analyzed, such sectors face an increasing participation of foreign companies, undercapitalization and the threat of privatization.