SYNOPSIS: An air of political legitimacy is important to the Economy

When Mexico's peso plunged at the end of 1994, it didn't come as all that much of a surprise; quite a few economists, myself included, had more or less seen it coming. But the severity of the economic crisis that followed was unexpected. Confidence collapsed, and with it investment and consumer spending. Only a huge emergency loan saved Mexico from a financial, and probably political, implosion.

What happened? Mexico suffered from a syndrome that has since become depressingly familiar. A currency crisis merged with a banking crisis, companies that had borrowed in dollars were pushed to the brink by the plunge in the peso, and so on. But it also suffered from political uncertainty: investors had to wonder whether a government that had a questionable claim on legitimacy, that had staked its claim to power mainly on its supposed ability to deliver prosperity, could survive a major economic downturn.

In short, Mexico's crisis was partly the revenge of its 1988 election.

In that election, a major figure in Mexico's then-ruling Institutional Revolutionary Party (PRI) — Cuauhtemoc Cárdenas, later the mayor of Mexico City — had broken with his party and run against it on a populist platform. He attracted a great deal of support, and seemed to be doing quite well as the first election returns came in. Then, suddenly, vote reports started to be delayed; computers began experiencing mysterious crashes; and in the end Mr. Cárdenas was reported to have lost to the PRI's candidate, Carlos Salinas, even in areas of the country where most people thought he had overwhelming support. And there was no objective judicial system to turn to.

True, by the time of the economic crisis another election had taken place, and the winner, Ernesto Zedillo, surely really did win. But the sins of 1988 (and the mysterious assassination of the PRI's original candidate in the 1994 election) hung over the political landscape, and made it much harder for Mr. Zedillo to re- establish confidence.

Fortunately, Mexico has done much to put that history behind it. Mr. Zedillo was a good president, but his best act was his last: He allowed the PRI to lose, and the democratic legitimacy of the new government of Vicente Fox is one of the country's most valuable economic assets.

Meanwhile, north of the border, we have a problem.

Many financial analysts have said that the decline in the stock market that has accompanied the post-election turbulence is silly; eventually we will have a president, and business will go on as usual. Indeed, the limited mandate of whoever wins could be a good thing; if the next president cannot pass either huge tax cuts for the rich or smaller but complicated tax cuts for the middle class, so much the better.

That's basically right, on one condition. We don't necessarily need a president who is popular, or even one who is able to pass major legislation. But we do need one who is acknowledged by both sides as legitimate.

There's room to blame everyone in this mess. But here, as in the campaign, to try too hard to be evenhanded is to distort the truth. Al Gore's people may have made some rash statements, but at the urging of other Democrats and the massed voices of the punditocracy they have avoided committing themselves to the position that only a Gore victory could be legitimate. Where are the voices of caution on the other side?

George W. Bush's people don't seem to have hesitated, even for a moment, about raising the stakes in this dispute. And conservative pundits are already railing about "larceny" and "coup d'état." This is a risky game. What if court decisions actually do lead, through due process, to a Gore presidency? And conversely, how well can our nation be governed if Mr. Bush is declared president only because partisan officials use their discretion to tilt the process in his favor?

Mr. Bush had the overwhelming support of corporate executives; maybe they can get the message to him that it is more important — if only for the sake of the economy, and their own bottom lines — that the next president have legitimacy than that that president be their first choice. Otherwise we may find ourselves envying the political maturity of Mexico, a country that finally learned that democracy means sometimes having to take the risk of losing.

Originally published in The New York Times, 11.15.00