Is it worth it?
Is the transition period of political turmoil that globalization brings worth it? While there are many economic factors that go into globalization, one consistent with both the United States and Mexico is that as free trade increases, the middle is falling out of the
US and the Mexican economy. The GDP is rising, unemployment may even remain small, but the gap between the rich and the small is also steadily increasing. In this respect, globalization is not an economic question, it is a moral quandary. As we have already determined, in a free trade scenario we place one group above another, we destroy the middle class and put faith in the fact that we will simply create a new one; by doing so we destroy the immediate livelihood of an entire group of people. For me, it was easier to see this destruction as a wrong when looking at Mexican farming than it is when looking at it within my own culture.
Weather we see this change as good or bad it is an undeniable moral quandary. I think that this is what creates the most political problems. Economic theory is still just economic theory, and it is hard to hold clout when faced with real flesh and blood people. We had a discussion in class about why non free traders do better in American politics. Granted, I’m the type of person that takes three days to decide weather or not I want to switch my regular sandwich from a tuna fish or PB and J, but if I were to chose from a higher GDP and job security, I would chose job security hands down. If I had kids to feed, I would fight tooth and nail for job security over a higher GDP. I’m going to throw a crazy idea out. Maybe in addition to being hopelessly corrupt (as politicians doubtlessly are) they are also pulled by an undeniable sense of injustice. And for many non-economists this doubtlessly wins out over faith in economic theory. So no, I don’t think that the turmoil created from a national economy to a global economy is worth it, I just think that their aren’t any alternatives that don’t just lead down a harder road, or act as band aids (as tariffs would)
Perhaps uniform environmental law is something that would be a plus for the concept of ‘fair trade’ and still wouldn’t hurt the economy (especially not when compared to the overall cost of environmental degradation.) The theory used to support forgoing these regulations suggest that there is a tipping point for which these countries will gain enough economic clout that they will begin to establish their own economics laws. Studies of Mexico and NAFTA show that this is either not the case, the ‘tipping point’ occurs much later than we expected it would. Unfortunately, uniform law would require massive donations from developed to developing countries to help them improve their infrastructure. It does seem like the United States and Europe should be able to reach an agreement.
Fair trade products also seem like a good idea, but currently account for only .01% of all the products made in the world. People simply can’t be convinced to spend more money for the good of humanity, and each consumer in a consumer group makes little impact, and therefore has little motivation to continue making contributions
The effect of NAFTA on the Mexican economy seems to be a good example of the effects of free trade on countries in the short and long terms. NAFTA came into effect on Jan. 1st, 1994 while Mexico was in the middle of a financial crisis arising from bad economic policy including, among other things, the inflation of the paco because of lack of outside competition. The agreement immediately added to the problem. The agricultural and milk industries which were previously subsidized were probably hit the hardest simply because they were not prepared to compete on the global scales. Mexico’s agricultural wealth became increasingly centralized in the power of a few industrialized farms; causing a polarization of wealth and political backlash. This perhaps, can be compared to the manufacturing industry in the
United States – and its effects seem similar; the polarization of wealth. As more education is required for the job force to remain employed it seams probable that the economy will continue this split between the educated and the uneducated.
Despite this, both the US and the Mexican economy are fairing pretty well. Most economists seem to credit Mexico’s recovery to the forces of NAFTA which forced reform upon the Mexican infustructure. Mexican exports to the US and Canada have doubled since 1994. Indeed,
Mexico now has a free trade policy which is more open than most other countries in the world.
It is worth noting that the recovery of the Mexican economy required heavy subsidies and government incentives similar to the
US’s own agricultural subsidies which support both large and small scale farming efforts. The Mexican economy also is highly subsidized by remittances from Mexican immigrants in the United States, and Mexico received preferential trading rights while their economy was recovering. Therefore, although for all countries free trade may be beneficial in the long run, it most likely will cause temporary economic and political problems during the transition period, and Mexico this period was amplified by problems with infrastructure.
An artical in this week’s Washington Post related directly to what we’ve been talking about in class. The unemployment rate, according to the article, is lower than it has been scince 2001. Bieng bellow 5% it is considered the optimal level of employment, espacially when considering that many are unable to work. Job loss in industry has been more that offset by higher end service jobs in areas such as finance (as the math geaks of the world breath a collective sigh of relief). One of the things that still bothers me about this outlook is that it seams to be almost temporary. Yes, as of we can keap the high scale jobs, but for how long? The huge potential supply of cheap labor in China is also such that it has the possibility of distrupting labor markets for a long time; delaying and lowering the international equilibrium predicted by economic theory. It is estimated that China currently has a workforce of 328 million in the areas of agriculture, forestry, and fishing, with a growth rate of -5 from 1990 to 2000. Still, their is .39 hectars per laborer; a hectar bieng equal to only 2.471 feat! China’s growing population adds to the concern; in the 90’s the number of rural non-farm jobs increased by 57 million, while the number of farm workers decreased by only 5 million. Although this problem is bieng addressed, China’s growth rate for 2006 was still as high as 0.56. The supply of Chinease labor keaps on going, with the possibility of draging american benifits down even further.
As a side note, one of the things that I found most striking about the web site I found my information from was the focus it put on education in rural areas in china in order to increase worker productivity, and theirfor enhance wages, and the ecconomy as a whole. We all strive for betterment, even if the chinease just have lower standards in what is considered an uppen level job -for the moment…
While each of the four companies highlighted in the series has a slightly different situation, some factors are common in several of the companies. One of these is access to a more knowledgeable labor pool –proof perhaps, that knowledge and specialization are key to success in the job market. While this is most obvious in the pipe making industry, the reasons for not outsourcing the making of tractors was the creativity induced by having a labor source familiar with tractor equipment, and the orthopedic company is all situated in a knowledgeable labor pool. Another reason to stay in the country is easy access to transportation to customers within the United States. However, protections also seam to come from specific situations which are difficult to replicate. Perhaps specialty products or boutique jobs are easy to keep in the country, but the broader picture will be much more negative. Even harder to duplicate is the circumstances found in the orthopedic industry, where complicated government regulations and fear of malpractice has become the virtual equivalent of a tariff in that it successfully creates an atmosphere which favors home grown industry, and in this sense is rather protectionist. One thing that I found interesting in reading the series was the author’s focus on quintessentially American places in the mid west in stead of, per say, New Jersey. I wonder if part of this is simply because these towns are so representative of America that the fact that industry still thrives in them is a point of comfort, or because mid –westerners simply have a better work ethic than those in the east. After all, several companies gave their reasons for staying in the US as being the excellent quality of the workers.
