elcomputo
Dec 27, 2003, 10:49 PM
Post #4 of 24
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I think you're correct on just about all points. But as an economist friend once told me, a fellow who's retired from the World Bank, there's really no such thing as free trade. Somewhere along the line, whether it's a government subsidy to one of its industries or some kind of protective tariff or whatever, any attempt at balance gets thrown off somewhere along the line.
I think the chief problem with NAFTA, aside from the lack of mechanisms that would have buffered the resulting shocks to workers, was the failure to take into account (1) the wide variances in the costs of labor from one country to another and (2) the way the cost of oil stays low despite the fact that the world is producing no new sources of the stuff; the result of this is cheap transportation of goods. Those are the reasons we're seeing production racing from one country to the next. It's cheaper to build stuff in China, even given the distance the goods have to be shipped.
In the long term, the cost of labor does balance out, as we have seen. No longer does Japan have an advantage in manufacturing automobiles, as it did in 1970, because its labor costs rose along with their output. And even though transport is still cheap from Japan, there are greater economies in now in assembling their cars not only in cheap labor countries like Korea and Mexico, but even the US, where labor does not cost as much as it used to (because our workforce has long been in the process of being beggared by management) and the cost of transport is zilch.
But during the 25-year boom period for Japanese production, laid-off auto workers in Michigan went on permanent relief, and cities like Flint became ghost towns. Jobs may someday return to Michigan, but a lot of those laid-off auto workers have had a miserable forced retirement and some died poor. It's like Mr. Keynes said: Maybe this all works out in the long term, but in the long term, we're dead.
The same thing is now happening to workers in industries other than the automotive business because of NAFTA and other shocks to our economy. One such "other shock" was the dot.com bubble, which provided temporary relief to the long-term trend of disappearing jobs until the bubble burst. And my job was one that disappeared when the bubble burst -- along with my home and my auto and my savings. You're correct in saying that production is going down all over the world; that has been the trend for more than just the past couple of decades. The dot.com thing was just a fluke.
I also recall from my course in money and banking that Mr. Keynes also said free trade works because each nation develops a particular advantage in the production of certain goods. (Is the US specialty the manufacture of weapons?) However, Mr. Keynes came up with his theories at a time when an economy was either agrarian or it was industrial. Nowadays, it's either agrarian, pre-industrial, industrial, or post-industrial, a sea change which probably hobbles a lot of his theories. We seem to be witnessing the demise of one such theory -- that huge federal spending for prosecuting wars will bring us quickly out of recessions or depressions. It worked for Reagan, but it hasn't been working too well for George.
But you've touched on a key point for all of this -- the biggest consuming society in the world, the US, appears to be sated. The world is overproducing because Americans just aren't buying the way we used to. It's too bad somebody can't figure out how to get control of the situation to shift that production over and away from fulfilled private needs to responding to unfulfilled public needs, such as universal medical care, inadequate Social Security, and collapsing infrastructure.
As far as Mexico goes, you're correct there, too. NAFTA didn't put Mexico into the bind it has been in for decades. NAFTA simply didn't produce the lasting miracle the country had been promised and was hoping for. But I don't believe higher taxes are really necessary to correct the situation. Taxes, particularly the IVA (I think that's what the sales tax is called here, right?), are already pretty high for most of the populace, given that half of all able-bodied males are unemployed, wages have been stagnant for a long time, and the cost of living keeps going up.
What I think this country needs is, first, a lot more patriotism on the part of its super-rich, who need to be investing more of their wealth into supporting the county that provided them that wealth in the first place. They need to use their capital and their clout to build up Mexico's workforce and infrastructure rather than continuing to build onto their own palaces. Lacking that, the federal government needs to get more serious about setting up realistic tax structures (the property tax structure in this country is a joke) and enforcing the collection of income taxes that are due.
However, everyone knows that neither of those things are going to happen. Corruption is just too pervasive and institutionalized to expect those kinds of reforms tomorrow. Until a nation with a lousy GDP, like Mexico, stomps out at least most of its corruption, it isn't going to accomplish much of anything. Corruption produces despair, and despair spells death to incentive. Yes, the standoff between the parties in the federal government does not bode well for stomping out corruption. But remember, Mexico had what amounted to its first free election in its history in 2000. It will take a little more time before the populace figures out how to make that freedom work and gives a dominant reform party the mandate to get control of government.
I could add that Mexico needs to get a handle on its overpopulation problem, but I think that would be a natural outcome if more good jobs were created, more people were put to work, and more students got the opportunity to pursue a college education. Improved job prospects and standards of living have led to drops in population growth in countries like Ireland and India. They can have the same effect for Mexico. And all of that would make for more effective free trade agreements, too.
Sorry if I've bent your ear. I have difficulty stopping once I get going. Thanks for your response.
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