Monday, November 5, 2012
'It is a Glorious Thing to be a Pirate King'* (a la Mexicana)
By George Baker
In explaining the surge of productivity
in the American economy in the early 19th century, Professor Tim Kehoe of the University of Minnesota, speaking in Houston
at a seminar organized by the Federal Reserve Bank of Dallas, observed that there were two reasons: 1) increases in management
skills, and 2) eliminating the pirates.
"Today," he continued,
"the ‘pirate' is the individual who, either within or beyond the law, appropriates a public good for private
or institutional use." Examples of a "public good" include personal safety, democratic rule, property rights,
contract enforceability, public oversight, accountability, freedom of speech and assembly, and rule of law.
Mexican tycoon Carlos Slim was identified as a ‘pirate' in this modern sense: he
appropriates from the budgets of individuals, households and organizations a monopolistic premium that annually amounts to
billions of US dollars, an amount equivalent to some 2% of Mexican GDP. It is his vocation as a pirate that has made
him the richest individual on the planet.
This sour experience in the
1990s of taking one public monopoly and passing it, intact, into private hands, has given Mexican society yet another reason
to distrust the privatizing of the energy sector. It happened not only in telephony but in banking and other areas of
Mexican (and Cuban and Venezuelan) banks act as pirates when
they channel loans to the government, bank directors and other insiders. Getting banks to lend to small businesses to spur
growth has not happened on the scale that is needed.
As a group, the public sector trade unions are the best-known pirates in Mexico.
By denying their members the right of a secret ballot in the elections of officers, union leaders steal from society's
store of democratic values and government. With respect to Pemex, in refusing to make union finances public, union leaders
offer no accountability of the use of union fees and the generous Pemex stipends, loans and grants that the union receives
annually from Pemex.
The court system, by focusing primarily on criminal
matters, acts as a pirate in stealing from the confidence of the general public and private investors in the rule of law as
a factor of economic development. It took the Supreme Court over a decade to take notice of the abuse of the judicial system,
with its easy-to-file injunction (amparo), to affirm the right of the investor in natural gas distribution to proceed
with the requirements of his CRE franchise without the threat of judicial harassment by local and state jurisdictions.
The federal government, in permitting only one brand and retailer of gasoline,
deprives the consumer freedom of economic choice.
Similarly, in prohibiting
the successive reelection of public officials the Congress is stealing from the goodwill, experience and motivation of office
holders to achieve reform measures that actually deliver tangible benefits to society. When asked about energy reform after
his presentation on "Why Do Reforms Not Help Deliver Growth in Mexico" (at a seminar held in Houston on November
2, 2012), CIDE's Professor Fausto Hernández Trillo speculated that the privatization
of the oil sector would bring about an increase in capital formation, but offer few other benefits to the economy.
One wonders if such piracy in the aggregate is the unexamined phenomenon that explains how
Mexico has, according to Professor Hernández, negative TFP (Total Factor Productivity), the metric that is said to
be indicative of the rate of technological change and innovation in society.
* From The Pirates of Penzance. Ed.
 As for the modern pirates in Cuba and Venezuela, we defer to the observations of Mary O'Grady in her weekly
"Americas" column in The Wall Street Journal.
 Actually, the court decided only on a matter of the conflicting rulings of two appellate
courts; the underlying economic issues were ignored. See our report "Tésis 193/2011: Jurisprudence by Contradiction
(MEI 143), October 3, 2012.
is the director of Energia.com, a publishing and consulting firm based in Houston. He can be reached via e-mail
at email@example.com. Mexico Energy Intelligence, Baker & Associates, Energy Consultants, Houston,