The Revolution Betrayed
In 1982 President López Portillo ended his term, taking a hit from the oil boom that boomeranged. When the frustrated President discovered that banks were sending huge amounts of capital abroad, he nationalized the banking system. This act infuriated the business class.1
After a nine-month populist presidential campaign, President Miguel de la Madrid took office in December 1982 and found the economy falling into an abyss: capital fleeing abroad, no investment, no growth, no jobs. Inflation was soaring into the skies: Mexico had to buy tools, parts, technology, materials, whole factories from the United States with López Portillo's devalued pesos. Costs rose, and so did prices. Prices pushing into the clouds panicked the government as inflation began to feed upon itself, later reaching 150 percent a year.2
The economic wizards at the International Monetary Fund and the Banco de Mexico advised incoming President De la Madrid to raise interest rates in order to cut investment and make businesses contract; they urged him to shrink the money supply so that consumers would have less in their pockets to spend; they asked him to stop government spending on public works and to hold wages down to survival level. To control inflation, millions of Mexicans would become a horde of ragged people with empty pockets, looking for work while goods on shelves rotted until prices fell. Those are the tools of orthodox economic theory
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Publication information: Book title: Mexico, the End of the Revolution. Contributors: Donald C. Hodges - Author, Ross Gandy - Author. Publisher: Praeger. Place of publication: Westport, CT. Publication year: 2002. Page number: 127.