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Web Letters | The Nation

Web Letter

Mr. Faux got it right: NAFTA just didnt work. Great article, BTW.

Middle class thriving? I am sorry, but I just don't see that. I just see people who are deep in debt trying to mantain a facade via their credit cards. People discontented and living for the day. Small and middle-sized businesses closing, unemployment rising.

Want an accurate economic X-ray? Check out how the percentage of unpayable debt in credit cards has risen. The middle class (what remains of it) is in deep debt. The number of millions of poor people just rose. Check the latest census (past two years) just given out by INEGI and Ceneval.

Narcos only in the north of Mexico? Look again. Narcos are all over the country. In Michoacan (south) , in Durango (center), in Chihuahua (north), etc. If I may add, this war against narcos that Calderon has embarked us into and that has lasted over three years with over 13 thousand casualties (more than Iraq) should never have taken place in our soil, since the main consumers are on the other side of the border.

Global market was a fiasco. Dump prices and protectionism were very real. We need to close up, rebuild inside, create the needed jobs in our respective countries, and then, when things are stable again, try again the global market thing with different rules.

Bertha Garza

Monterrey, Nuevo Leon, Mexico

Aug 7 2009 - 1:14am

Web Letter

The modernization process is well along in Mexico, but you are looking at a seventy-year process, minimum.

Looking for a final result now is like saying pregnancy doesn't work because the baby isn't born in six weeks.

One of the amazing positive results, so far, is that there are three viable, competitive parties in ther system. With the PRI's thuggery and election-stealing, the one-party state lasted seventy-two years.

It isn't going to be perfect, but there are tremendous advances.

John D. Froelich

Upper Darby, PA

Jul 20 2009 - 7:24pm

Web Letter

Unfortunately, the author's intent at disparaging NAFTA not only misses the central theme of the post-NAFTA Mexico but also childishly simplifies the current narco-based violence, which is mainly centered in the northern region of the country.

First, the author incorrectly portrays Mexico as a country devoid of any middle class. In short, the data as well as anectodal evidence starkly contrast with the author's views: Mexico's middle class has blossomed over the last fifteen years, mainly as a direct result of free-market competition; NAFTA reflected the globalization of free-market competition much less than it instigated it; the changes formalized under NAFTA were already well underway prior to Clinton's signing of the agreement.

The author fails to mention that per capita GDP has essentially doubled in PPP terms since NAFTA and that Mexico's GDP has more than tripled since 1993, including the disastrous Peso Crisis years of 1994 to 1997. Jobs, education, healthcare and business have expanded so much that Mexico hardly resembles the country it was in the early nineties. Ironically, Mexico's contraction in 2009 does not seem to have nearly the same impact similar crises have had historically. Retail is off, but not as much as one would suspect; rents are down, but business is remarkably resilient; the banking system steered widely clear of exotic mortgages, and one can still finance a jumbo loan in Mexico; credit is available and while expensive, the underpinnings of the economy are intact. Finally, Mexico's institutional memory of big government has given way to a new generation of entrepreneurism and, most importantly, optimism.

Second, the narco wars are the result of the cleansing of corruption from within the government itself. The fact is, the seedy underside existed long before NAFTA but it was institutional. As the current and previous administrations' have focused efforts on rooting out corrupt practices, including the military and the judicial police, the warlords have taken the issues public. Narcos are quickly realizing that all the violence is simply bad for business and there has been a remarkable decline in violence since peaking earlier this year. Obviously, the spike in violence is tremendous cause for alarm, but the author's conclusion that NAFTA is the cause of this quite simply falls very short of convincing.

Finally, there is a firm consensus that Mexico's correlation with the US economy is so high that once the economy turns en el Norte, Mexico's will turn as well. Were NAFTA not in place, could we say the same? It's unfortunate that folks of obvious mental aptitude fail so clearly to achieve at least a modicum of balance. Mexico is not without its problems, nor is the US; and NAFTA, as are most bilateral agreements, is often far from perfect; but the blatant need to pooh-pooh NAFTA for the sake of doing so does a tremendous disservice to both Mexico's progress over the last fifteen years, as well the complexities of cross-border economies.

What would you suggest in lieu of NAFTA? Shall we go the failed route of import substitution again?

James Anderson

New York, NY

Jul 20 2009 - 10:50am

Web Letter

What a strange article, and even stranger first web letter. Both, especially the web letter, are a brew of half-logic, slogans, non sequiturs, and distortions of fact. Hmm... hard to know where to begin.

Maybe with first principles.

NAFTA has nothing to do with the current "crisis." The crisis has nothing to do with evil Wall Street bogeymen. It has everything to do with interference in and distortions in the normal operation of the market by, mostly but not exclusively, leftist politicians in America. Artificial and politically motivated low-interest rates, leftist (Democratic) control and mismanagement of Fannie and Freddie, the Community Reinvestment Act (a massive market distortion requiring the private sector to make uneconomic loans) driven by ideologues and hacks like Franks and Dodd. Legislators who also refused to regulate Fannie and Freddie--in return for massive campaign contributions from Freddie and Fannie.

Magazines like The Nation don't like to dig into these kinds of issues because their writers and readers are, frankly, economic illiterates. And as a matter of personal identity they are deeply invested in leftist mythology. To go after the real causes of the current crisis would be too dry and complex and hard to follow for the average Nation reader. And would threaten their self-definition. Better to stick to the stale old myths of the stale old anti-modern left. Happier to continue on wrapped in invincible ignorance. But let's try.

The US economy and the economy of the EU have worked relatively well (compared to any known alternative) because, in part, they allow relatively frictionless trade--the easy (efficient) movement of people, ideas, goods, and wealth to the most productive location. Societies that try to lock down "local" economic activity into small, supposedly self-sustaining cells or to preserve jobs in inefficient industries through trade barriers (a favorite, older leftist version of this concept) invariably descend into abysmal poverty, chaos and oppression. The empirical evidence of failed leftist states in the twentieth century is overwhelming on this score. "Sustainable, local production at fair prices" is merely a new wrapper for this disastrous and, frankly, old-fashioned point of view.

The relative wealth and standard of living of a US citizen/worker is due in part to the open economic model--one that, again, allows an easy flow of goods, services, money, people and ideas across a large and diverse area. The result is efficiency; efficiency produces lower cost goods and services; lower cost goods and services means an effective increase in buying power, which means an effective increase in income and a higher standard of living--for workers.

The idea that all or any significant part of the lower cost of goods is due only to reduction in labor rates through "unfair" competition is frankly nuts. That view is medieval. Luddite. Flat Earth sort of stuff.

It is based on the concept that labor input is the only significant input in production. And that wealth itself is a fixed finite entity that can only be redistributed, not created. Completely misreads the value and importance of other sorts of inputs such as capital, management, organization, technology and the market revolution itself, which creates and rewards efficiencies of the kind produced by NAFTA.

Again, it also overlooks the fact that labor benefits from lower cost production of goods when labor goes to buy them. Virtually every study of significance indicates that a substantial portion of the gains in efficiency generated by free market practices are recaptured in increased wages to labor--not in a reduction. See China's recent experience. As well as our own and Europe's. Don't isolate on a particular industry or a particular moment in time. Look at the overall arc of the economics of these cultures. The same positive phenomenon has shown up virtually everywhere.

Ah well, NAFTA is merely an extension of the same broad frictionless movement concept that has helped to enrich countries like the US--and its workers. It's one of the reasons that Mexican workers want to come to the US. Life in a market-driven free movement economy is better for workers. It's a proof of the NAFTA concept. People who oppose NAFTA probably (logically they must) support trade barriers between Illinois and Indiana. Or between counties within a state. Of between townships. Medieval, indeed.

Yes China is more competitive than Mexico. Mexico needs to address the reasons why. It's simplistic and in fact idiotic to chalk it up only to wage differences. There are a hundred other reasons. And if a fraction of those could be addressed, much of the impact of the China-Mexico wage difference would be eliminated. And Mexico would be on a much stronger footing. Fact is, if NAFTA hadn't been enacted, and trade barriers had remained in place, China's rise as a manufacturer and exporter would have driven Mexico into an even deeper (much deeper) economic hole. Truth is, NAFTA helped to counter China's advantages and helped support the Mexican economy and Mexican workers.

Without NAFTA, which allowed Mexico to leverage its advantage in transportation costs, China would have captured vast additional amounts of Mexican production. Mexican unemployment and poverty and social unrest would be vastly greater. American unions (by the way, unions are not "progressive social institutions," they are mere businesses that seek to sell labor for monopoly rates, which end up artificially raising prices and reducing income for all other workers) and their misguided ideological partners at The Nation worked very hard to keep NAFTA from having its full positive effect. And in doing so did much to damage Mexican workers. And eventually American workers as well.

Robert D. Cocks

Johnsburg, IL

Jul 20 2009 - 9:51am

Web Letter

The analysis of the problems caused by NAFTA and other trade agreements was excellent. It was clearly demonstrated that "free trade " globalization was a disaster for the Mexican and American economies. Mexico needs to develop its own economy behind a wall of tariffs. It needs to kick foreign multinational business interests out of Mexico, and develop the Mexican economy for the the benefit of Mexican citizens. This article was a clear demonstration of how economic imperialism works. Mexico has to make the importation of foreign goods too expensive by creating tariffs against the US, China and other developed countries. Infant Mexican companies will pick up the slack and employ Mexican labor in Mexico. Wages in Mexico need to be increased, which will create disposable income for a consumer-driven economy.

Produce goods for the Mexican market only! A trade-dependent economy is unstable, and economic failure overseas puts the national economy at risk. Kick American Agribusiness off their leased property, and put Mexican farmers back on their land producing food for Mexico.

Along with a stimulus package, this is what China is doing now, and their economy is growing. The target of 8 percent growth is too conservative! It will soon exceed 10 percent! The only certainty is that economic growth will go through the roof. This is how the US became a major industrial nation!

Pervis James Casey

Riverside, CA

Jul 16 2009 - 1:25pm