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Show Hinckley Journal of Politics Spring 2000 Conclusions The Mexican Peso Crisis and the subsequent debate that took place between Congress and President Clinton may not seem like an abnormal congressional debate. However, the first 50 years of U.S. economic prosperity came at least partly as a direct result of a large cold-war military build up. But with the end of the cold war the United States no longer faces a strong military enemy, and thus it has seen cuts in its military, forcing it to rely more upon the globalized economy versus a militarized economy. Interestingly though, as witnessed during the Mexican Peso Crisis, many Americans and many U.S. politicians are hesitant to support the continued shift towards globalization. They argue that dependence upon foreign economies will come at the expense of U.S. sovereignty. They also see a potential for future job loss in America, believing that as more and more foreign companies are allowed to compete for the U.S. consumer, because of cheap foreign labor foreign companies will have an unfair advantage over their U.S. counterparts. Therefore, the lack of adequate congressional support in this case is due in large part to the efforts of the isolationists right and labor left, who labeled the aid package as a bailout and further claimed taxpayers would be financing the brunt of Mexico's problems, while bailing out the rich Mexican and American investors who had gambled on Mexico's miraculous ascent and lost (Sanger, 1995a). In contrast, many members of Congress who may have viewed sending financial aid to Mexico as justifiable, felt the American public was not in support of a bailout. Because the American public did not want the passage of the Mexican Stabilization Act, these congressional sympathizers too were compelled to vote with their constituencies or face possible repercussions as they tried for re-election. This fear was portrayed in the Wall Street Journal as its reporters interviewed Rep. Zach Wamp, a newly elected Republican from Tennessee. Why the newcomers were isolationists was obvious, they were being loyal to their constituencies. Rep. Zach Wamp stated, emerging from a briefing with Federal Reserve Board Chair Alan Greenspan, "He's a whole lot smarter than the people of east Tennessee who I was elected to represent, but I'm going to vote with them this time and not with Mr. Greenspan" (Carrington and Calmes 1995). Thus, although until the Mexican Peso Crisis the U.S. was successful in entering NAFTA and other trade liberalization treaties, it appears the peso crisis marked the end of any current movement towards liberalization of trade. The makeup up the newly elected 104th Congress surprised everybody. Starting with the peso crisis and continuing through the 106th Congress, Congress has continued to frown upon legislation that deals with increasing the globalized economy. A more recent example was seen with the 1997 "fast-track" legislation debate. Fast-track would have allowed the President to negotiate independently of the Senate on treaties dealing with trade. Once again the isolationist right and the labor left joined forces, and were able to convince many Americans and most of the other members of Congress that this legislation would have given the President too much power, and could possibly have resulted in major US job loss. (The argument by the trade-liberalization advocates is that such job loss will be more than offset by job-gains through increased U.S. exports.) Finally, the question remaining is, as the U.S. currently moves more and more towards isolationism will the U.S. break this trend and once again support trade liberalism? To have any possibility of predicting future economic policy decisions, economists, investors and others must have a clear understanding of those who form U.S. policy, the legislative and executive branches. Looking at the peso crisis, we see that in large part, because of the executive branch and its support of globalization, an aid package was able to emerge. When the White House could no longer count on Congress for support it was able to quickly collaborate with the power of the Federal Reserve and use the Exchange Stabilization Fund. Next, the White House was also able to quickly call upon and receive international support. The ability of the White House to have access to the Federal Reserve and the Department of the Treasury, along with instant access to international support, gave it power over Congress in this instance. And in retrospect it seems clear that the February package actually represented a better alternative for Clinton and America than his original proposal. Clinton and his Cabinet were able to send Mexico the relief they felt Mexico needed, while not forcing the United States to bear more than a fraction of the economic burden if the aid package failed. With the international support contained in the new package, it also allowed moderates such as Dole and Gingrich to be able to endorse the new package without fear of much party or constituent backlash. Thus despite the efforts of the isolationists and the labor camp, Clinton succeeded. The outcome of the peso crisis suggests that the executive branch is quite powerful. And as long as an isolationist or labor enthusiast is not elected to the White House, these movements will most likely be quite limited in their influence. However, during the peso crisis their influence over Congress was large, and of course Congress is not without power. During the crisis the isolationists and labor supporters were successful in forcing President Clinton to backpedal, and among many who have studied the crisis it has been suggested that neither President Clinton nor Congress was successful during the crisis (Roett 1999). Therefore, as the trend towards isolationism continues to develop within the U.S., will the U.S. be able to enjoy another 50 years of economic success? The author feels that in order for the U.S. economy to continue to grow, it must continually move towards a liberalized economy or in other words a globalized economy. This may require aid to countries such as Mexico and more recently Russia and Indonesia, but without their success the U.S. economy cannot possibly continue to grow as well as it should. As a testament to the importance of such aid, four years after the peso crisis Roberto 39 |