Poverty in Puebla 1

Poverty in Puebla

Ariel Alberto Hernández Román

UPAEP

ING117: Global Perspectives

Rafael Márquez Flores

Fall, 2021
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Abstract

Poverty is one of the big problems in Mexico and its state Puebla. Throughout history,

Mexico has implemented policies that increase the control of government and reduce economic

freedom. Thus, corruption and big government are daily occurrences in Mexico. It is important

to understand the causes of poverty since there cannot be a proposal if the problem is not well

stated. The problems are inflation and the lack of private investment because of the control of the

government in the economy. This essay will study the causes of poverty and provide a solution

based on Hayek’s views on the economy.

Keywords: Economy, poverty, inflation

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Story

This story began in 2020 in a small little place in Puebla, where everyone enjoyed and shared

with their loved ones. A place where people can be served and listened to, full of the most

tasteful dishes and extraordinary scents. In this place, two stories from two different persons

converged. It’s strange how these people suffered the same fate. It could be seen as a joke from

destiny, the same calamity happened to both of them. Maria is a strong, intelligent and

hard-working woman, she’s the mother of three children and was the owner of a coffee shop.

That place was frequented by any person, it had something for everybody, it was always full.

However, one day things changed. On March 23th of 2020, Maria had a meeting with her

supplier, named Mario. They had a strong relationship, they knew each other since 2010 when

Maria started her business. When the sun rose Mario’s greetings were heard all over the place, he

was the first customer of the day. Maria had a great smile on her face and she hugged her friend

with great respect and they talked about businesses and the strange situation of a new and strange

disease. They knew the government would shut down the economy, but they weren't worried,

since they survived every difficulty in the past, like increases in taxes and financial crisis and the

government stated that the shutdown would last a week. So Maria bought her usual merchandise

and said goodbye to her friend.

She would never guess what was about to happen. Things got worse in the country, the disease

spread in biblical proportions, people thought that the world was going to end, they bought

everything they could since the government stated that the people needed to stay at home for a

longer period of time. Maria saw her children and tried to comfort them. She knew things were

not good but she had savings for a couple of months. On the other hand, Mario was worried since
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all of his clients were in trouble and stopped buying from him. He had savings, but he knew they

were not enough. Things got worse because of the taxes, he had to pay and the government did

not provide tax aid. Plus inflation got worse, and prices went up. Time passed, and everything

turned darker and darker. Mario’s business went bankrupt since the government did not help,

they left private companies without benefits. But Mario persevered and he had to work in many

different jobs.

Maria resisted till winter, but she could not afford to pay rent, she had to trespass her coffee shop.

She was once bright and ambitious, with shining eyes and her smile would brighten up the room.

But when she had to sell her beloved project, she stopped. Smiles ceased to happen and there

wasn't a shine in her eyes. Despite it wasn't her fault she felt guilty, she hadn't prepared for

something like this. She thought that the government would help her, that for at least that

moment the government would support individuals and reduce taxes, she knew that she had to

search for financial freedom. So with all the sorrow and insecurity, on a cold winter, she sold her

coffee shop.

On a blue morning, she received a call from her old friend. He invited her to her old coffee shop.

He wanted to remember old times and to talk about the hope of starting a new business. The only

problem was that they needed to invest in financial education, but if they did, they could ensure a

brighter future.
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SDGs

The SDGs or Sustainable Development Goals are part of an agenda created by the United

Nations and their purpose is to create a more secure, peaceful and sustainable world. They were

proposed in 2015 as part of the 2030 agenda. To achieve a better world, the SDGs fight big

problems, such as poverty, inequality, hunger, climate change and pollution. In addition,

governments are committed to achieving these goals and developing their countries to fulfill the

2030 agenda. However, governments can act as they please to achieve these goals. There are

many proposals to end poverty, but only one has succeeded. According to Forbes (2009),

capitalism or the free market is the only economic system that provides for the needs of the

people and also respects their individual rights and freedom. On the other hand, Mexico has tried

to fix the problem of poverty with restrictions and the power of government and has failed, so it

would be a good idea to change the economic paradigm and start implementing free-market

policies.

Information

Poverty is a big problem in Puebla. According to Aguilar (2021), six out of ten persons live in

precarious situations. In other words, more than half of the state lives in poverty. Also, in the last

two years things have gotten worse since poverty went from “58% in 2018 to 62.4% in 2020,

that is, an increment of 7.4%; while extreme poverty went from 8.1% to 12.7%” in the same

period. To understand this phenomenon it is important to state that there are many causes of

poverty, including the pandemic, however, the problem is deeper.

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One of the main reasons for poverty is the lack of economic freedom. According to Stansel,

Torra, & McMahon (2020), Mexico is the least economically free country in North America.

Furthermore, the study analyzed the economic freedom of each Mexican state and Puebla is a

mediocre state in terms of freedom. It is positioned in the twelfth place. Also, the study analyzed

each state of North America and the freest state in Mexico is less free than all of the Canadian

and American states.

It can be inferred that economic freedom and economic well-being are deeply related since there

is a positive relationship between free-market policies and an immediate higher income and

economic growth. For example, the study concluded that a 10% increase in economic freedom

was found to be associated with a 5% increase in real per-capita gross state product. In addition,

it can be observed that there are three factors that limit free markets and have a correlation of

being the causes of poverty. These three factors are regulations, inflation and disrespect for

private property.

According to Stansel, et al (2020), economic restrictions and higher taxes are the cause of

poverty and instability. For example, the relatively free Virginia does much better than the

relatively unfree West Virginia. The same restrictions of West Virginia are the ones affecting

Puebla but on a bigger scale. Restrictions on freedom prevent people from making mutually

beneficial transactions. Usually, free transactions are replaced with government actions. This is

marked by coercion in collecting taxes and a lack of choice in accepting services. Also, a big

problem in Mexico is the difficulty of hiring and firing employees by private enterprises. The

number of regulations applied to the labor market and its lack of flexibility is a huge impediment

for free enterprise. This makes companies look for other free places and avoid the problems of
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Puebla. This would be solved with incentives for private companies, incentives that reduce taxes,

cut restrictions on the labor market and that allow free transactions between individuals without

coercion.

On the other hand, what scares away investors and therefore job creation and poverty reduction

is disrespect for private property. Stansel et al (2020) state that Mexico does not enjoy

protection of property rights and rule of law. This is proven with the many expropriations that

happen in Puebla. According to Hernandez (2019), the governor Miguel Barbosa announced that

he would expropriate more because it was necessary for the good of the state. This contributes to

poverty since it strips people of their property and in return they receive very little profit. In

order to generate well-being, societies must respect private property since it is one thing that

protects us from tyranny, the only power that people have against the government. Eric (2018)

states that John Locke considered life, liberty and property as fundamental rights since people

are born with them. For example, we all own our vitality, our abilities and one property, our

body. Being born with these virtues we have the potential to mold goods to exchange them and

own them, we have a natural right over it.

Finally, inflation is the other problem that Mexico is facing. According to Reuters (2021), the

inflation is at 7,05%. So the increase in prices is affecting the Mexican families, even to start

businesses. According to Inflation (2021), this phenomenon is the increase in prices provoked by

a government currency monopoly inflating the money supply with money not backed by actual

physical wealth. In essence, inflation is legalized counterfeiting by the government central bank.

In order to fight inflation society must end the monopoly of the central bank and establish free

banking and in a short time of period, the society must choose a way to backup money, some sort
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of physical wealth like gold or cryptocurrencies that resists the impacts of inflation since they

have a limited emission. The problem would also be solved if people could choose the currency

that they prefer to make transactions.

Examples

There is a recent example of the success of a free market economy at a big scale.

Singapore was a country with high rates of poverty, corruption and crime. Since they applied a

free market and a strong rule of law they have been enjoying a very stable growth and general

well-being. According to Singapore (2021), the GDP per capita in this country is higher than in

many other countries including developed ones. Also, unemployment is very low in Singapore

since it has attracted many investments in advanced manufacturing, pharmaceuticals, and

medical technology production. Also, Singapore is working to strengthen its position as the

leading country in financial and technological services.

Call to action

In conclusion, the free market is a viable system since it solves real problems like inflation,

restrictions and provides a counter for authoritarianism, that counter is private property. Also,

there are many examples of its success like many Western countries and recently Singapore. The

free market has created the weapons to fight poverty and allows a stable economic growth, so it

would be a good economic system to implement in Mexico to fight inequality, poverty and even

corruption.

In addition, it is important to solve these three problems to reduce the levels of poverty in the

population of Puebla. There are two ways to confront poverty. The first one is to be informed and
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read about the strategies and policies of the free market and second it is important to

communicate the importance of liberty, the rights of private property and the immorality of taxes

and restrictions imposed by the government. It is important to defend the idea of liberty and free

market since it’s a system that has worked since the past century, reducing poverty in great

percentages and creating more opportunities for everybody. We have to act and fight for our

freedom!
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References

● Aguilar, I. (2021). Seis de cada 10 personas viven en situación de pobreza en Puebla.

Publimetro México.
https://www.publimetro.com.mx/puebla/2021/09/29/seis-de-cada-10-personas-viven-en-s
ituacion-de-pobreza-en-puebla/
● Eric. (2018). Why Private Property is a Fundamental Human Right. Liberty RI.
https://libertyri.com/why-private-property-is-a-fundamental-human-right/
● Forbes, S. (2012). How Capitalism Will Save Us. Forbes.
https://www.forbes.com/2009/11/03/capitalism-save-us-opinions-forbes_land.html?sh=4e
f0cce8258c
● Hernández, A. (2019). Ante ediles, Barbosa anuncia la expropiación de cinco predios
para recuperar reservas ecológicas - Puebla. La Jornada de Oriente.
https://www.lajornadadeoriente.com.mx/puebla/barbosa-expropiacion-reservas/
● Inflation. (2021). Capitalism.org. https://www.capitalism.org/depressions/inflation/
● Reuters. (2021). Banxico ve más riesgos para inflación en México, influenciada por la de
Estados Unidos. La Unión Noticias.
https://launion.com.mx/morelos/nacional/noticias/194256-banxico-ve-mas-riesgos-para-i
nflacion-en-mexico-influenciada-por-la-de-estados-unidos.html
● Singapore. (2021). Forbes. https://www.forbes.com/places/singapore/?sh=d89776c959b8
● Stansel, D., Torra, J., & McMahon, F. (2020). Economic Freedom of North America.
Fraser Institute
https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-north-america-20
20-US-edition.pdf#:~:text=Economic%20Freedom%20of%20North%20Americais%20an
%20attempt%20to ‌