Economic Crisis and Economic Populism: The PRI and the Middle Classes in the 1970s

This paper studies the changing fiscal relationship between the urban middle classes and the Mexican state and how the Luis Echeverría and José López Portillo administrations handled economic crises of the 1970s, which marked an end to the extended mid-century boom (Mexican Miracle).  The political economy of the Miracle had been based on a shaky but consistent pact between the PRI, nationalist capitalists, and the middle classes, whereby the government subsidized risks taken by capitalists and middle class consumption.  With the onset of economic crisis, the PRI struggled to continue its financial populism.

In this paper, I argue that during the 1970s the PRI began to negotiate with the middle classes as consumers. The PRI shifted from populism, in the form of increases to real wages for the middle classes, to the expansion of consumer credit through public sources of credit.  In particular, I examine the role of Fondo Nacional para el Consumo de los Trabajadores (FONACOT) and the PRI’s encouragement of private credit through subsidizing national banks and opening the financial sector to credit cards.  This expansion of credit allowed some sectors of the middle classes to maintain desired purchasing power.  I also analyze the creation of the Procuraduría Federal del Consumidor (PROFECO) and the implementation of the Impuesto de Valor Agregado, (IVA) as part of the changing fiscal relationship between the middle classes and the state.  Together, FONACOT, PROFECO and IVA suggest that the urban middle classes acquired a new official identity—at least from the perspective of the PRI.

The analysis is based on economic and political documents from the López Portillo and de la Madrid presidential archives, FONACOT Memorias and the PRI’s political communication strategies regarding IVA.  I also analyze press accounts of public debate about FONACOT, PROFECO and IVA as well as secondary literature.