Academic journal article
By Tanski, Janet M.; French, Dan W.
Journal of Economic Issues , Vol. 35, No. 3
"It's very sad ... We don't have a middle class in Mexico. We have the worst distribution of income in the world. We only compare with Africa." 
--Vicente Fox, President of Mexico
Mexico has long been known for its unequal distribution of income and wealth. Although several academic studies imply a tendency in the Mexican economy toward increasing concentration of wealth and growing polarization between regions, income groups, manufacturing sectors, and exporting companies vis-a-vis non-exporters (e.g., Morales et al. 1992; Dussel 1997; de la Garza Toledo 1998; Marichal 1997; Cruz Serrano 1991), few studies carry out an in-depth analysis of concentration of capital in Mexico.  Such studies could provide insight into the underlying causes of increasing income and wealth inequalities in Mexico and elsewhere. In this paper, we attempt to further contribute to the research on this topic by presenting (a) a detailed analysis of different measures of concentration and market power in Mexico's manufacturing industry and (b) an analysis of the role that trade liberalization might play with respect to the industrial and market structure of Mexico.
The first section of the paper reviews the relevant orthodox and institutionalist literature on the topic of industrial concentration. The second section analyzes concentration ratios in different Mexican manufacturing sectors and their comportment between 1970 and 1993. The third section of the paper analyzes the role of trade liberalization with respect to concentration levels. The fourth section analyzes the limitations of using the concentration ratios and offers alternative methods. These alternatives include a presentation of concentration of sales of the top conglomerates as a percentage of total gross domestic product (GDP), concentration of exports among top companies, the percentage participation of the largest 25 companies in the sales of the largest 500, the percentage ownership of equity of the largest 500 companies in Mexico, and the effects of privatization on the manufacturing as well as the banking sectors in Mexico. The fifth and sixth sections look at the role of the process of privatizatio n in increasing capital concentration and the effect of mergers between Mexico's industrial magnates and institutions in Mexico's financial services sector. The last section looks at data on the real wages and benefits of workers in the manufacturing sector. Overall, the data in the paper suggest that trade liberalization, combined with other policies of structural adjustment and the structure of the international economy itself, have led to greater, not lesser, concentration of economic power in Mexico. Finally, the paper summarizes the findings and addresses the particular reasons why this situation is problematic for economic development in Mexico.
Market Power and Economic Theory
Concentration of capital and market power has been of concern to neoclassical as well as to institutionalist economists but for different reasons. Orthodox economics assumes that economic decisions concerning what is produced, how it is distributed, and how much income is received by individuals are, or should be, principally determined by impersonal market forces, that is, by supply and demand determinants within a social framework where no individual or organization commands excessive coercive power and where the individual consumer is sovereign (cf. Harberger 1971; Willig 1976; Hausman 1981; Scitovsky 1962.). Economists working within the mainstream paradigm have paid little attention to the concepts of social and economic power and their ramifications for the discipline since imperfections in the market are usually considered somewhat "rare." If they do exist, they are only temporary while the market adjusts and other firms take advantage of market incentives to enter monopoly or oligopoly markets as addi tional suppliers (Baumol, Panzar, and Willig 1982). …