Crony Capitalism, Corruption and
the Economy in the State of New Mexico

A Summary and Action Plan for Business Leaders

Crony Capitalism in New Mexico

New Mexico’s economy is stagnant, largely because of the state’s reputation for corruption and crony capitalism and an environment that fosters pay-to-play behavior. 

The Committee for Economic Development commissioned a survey in 2016 that looks at New Mexico business leaders’ perceptions about the influence of money in politics, campaign finance reform and transparency, and the effects of crony capitalism on government corruption. 

250 Business leaders were surveyed, and found that:

  • 91% believe New Mexico has had a very or somewhat serious issue with the ethical behavior of state elected officials over the past 20 years; 57% think the state has had a very serious issue.
  • 55% say the state’s campaign finance system needs a complete overhaul or major reform; 17% want a complete overhaul.
  • 61% think New Mexico’s elected officials are more responsive to lobbyists than to voters.
  • 86% said big campaign donors have at least some impact on state government corruption; 41% said they have a great deal of impact.

A comparison of the same poll taken in 2015 reveals a now-greater sense of pessimism in multiple areas:

  • Just 24% of business leaders feel that things in New Mexico are headed in the right direction in the 2016 study, compared to 39% of those surveyed in the 2015 study who felt things were headed in the right direction.
  • 57% believe New Mexico has had a very serious issue with the ethical behavior of state elected officials over the past 20 years; that view was shared by 44% in the 2015 study.
  • 51% of those surveyed in the 2016 study think most elected officials are looking out mostly for the needs of those who finance their campaigns rather than the needs of their constituents; 38% held that opinion in 2015.

We have identified several factors, some unique to New Mexico and some not*, that have led to crony capitalism in the state.  They include: 

  • Government favoritism:
    • Businesses seek favors from government officials in return for providing political support.  The long history of political corruption in New Mexico, coupled with its refusal to enact rule changes that discourage corrupt behavior, have created incentive structures that all but force the business community to engage in crony capitalistic activities.
  • Regulatory biases:
    • Regulatory policies are established by industries to benefit those that are regulated. Larger governments, like New Mexico’s, tend to regulate more because there is more private sector-government interaction to be regulated. This encourages regulatory biases because firms have an incentive to enter the political process to gain governmental and bureaucratic favors.
  • Influential interest groups: 
    • Interest groups have become so intertwined in the political process that firms can gain more from political activity than from their own economic productivity.  As regulations increase, as they have in New Mexico, economic actors are drawn into interest-group politics, where groups are rewarded for political connections rather than economic productivity or merit.
  • Underpaid legislature:
    • New Mexico is one of just 16 states with a “citizen legislature”.  Paid less and provided fewer resources, citizen legislators are susceptible to interest group politics and lobbyists because they lack staff and resources to do their own research and depend on lobbyists for basic information on issues.
  • Skyrocketing election costs:
    • Election costs grew 211% from 1998 to 2012. Not surprisingly, spending on lobbying also climbed and continues to rise.  By May 2015, spending on lobbying had already reached $519,000, higher than total spending had been in each of the prior four years.
  • Self-perpetuating corruption:
    • The state’s long history of corruption, dating back hundreds of years, continues unabated in the 21st century. With spectacular scandals erupting every few years, the state’s reputation feeds on itself.  

*Our report found that rent seeking, regulation capture, and interest group politics were common components of crony capitalism across the country and were not unique to New Mexico.