This chapter examines the strategy employed by Mexico's ruling elite to contain the political damage stemming from recent policy failures along with efforts undertaken by the state to regain the initiative in attempting to surmount the nation's developmental impasse. It focuses on the state's relationship with the private sector and with labor during the recent critical juncture. The chapter discusses the regime's strategy for political and economic stabilization over the longer term. The stability of Mexico's authoritarian regime has stood in marked contrast to the instability of governments elsewhere that have confronted similar economic and political difficulties. President De la Madrid initiated efforts to stabilize Mexico politically by calling for an array of political reforms designed to shore up the regime's legitimacy and arguably to provide an acceptable outlet for pent up frustrations. While the regime continues to exercise "rectorship" in the economy, it is forced to pursue a set of policies fundamentally at odds with statism.