Well, good opportunity to post this comic explaining it (Also features a giant robot).
Comic blames NAFTA for the decline of the middle class
Comic is shit for doing so
Seriously, anyone who blames NAFTA for the decline of the middle class SHOULD NOT BE LISTENED TO.
In the five years after NAFTA, imports from Mexico doubled, about a 4 billion dollar increase. In the five years before NAFTA, imports from Mexico increased by 75%. So if you think that NAFTA lead to some MASSIVE expansion in trade with Mexico you are wrong. The 4 billion dollar increase was in a 9.5 trillion dollar economy. So the increase was about %0.05 of US GDP. As a general rule of thumb, a 2% increase in GDP corresponds to a 1% change in unemployment, this is known as Okun's law. So lets suppose that all of that Mexican trade came at the expense of middle class American jobs. Let's assume that Okun's law gives us the rate it costs jobs, a pretty generous assumption. That %0.025 decline in employment applied to an economy with 132 million workers. That means our generous estimate of the number of middle class jobs destroyed by NAFTA is 33,000 jobs. That's 6,600 jobs a year. In a country of 279,000,000 people. And that's not even counting the jobs created by NAFTA, although those were similarly tiny and probably a teensy bit smaller.
So what, we are talking about a loss of a 1000 or so middle class factory jobs a year? But what happened to the middle class? Well, there was this devestating rise in healthcare costs, there was an erosion of middle class bargaining power and there was a technology shift that replaced a lot of jobs. But there was also creation of jobs in completely new industry like Information Technology. What really happened to the middle class is that people are really shit at looking backwards and have confirmation bias. The good old days were never that good...
The effect on american jobs was tiny. The effect on the Mexican economy was huge. NAFTA didn't just lead to mexico exporting to the US, it lead to a huge inflow of foreign capital to invest in the Mexican economy. The main consumers of Mexican goods are Mexicans after all, like in every country that isn't a microstate. So foreign capital pours in and builds things like the largest tower in Latin America where Mexican businesses have office workers who work for businesses making products for Mexican consumers.
NAFTA was a "free trade" agreement but trade between the US and Mexico was already very free. A few companies lost their privileged positions (like the one Ross Perot ran) but what it mostly did was let capital move abroad easily. Now TPP is a "free trade" agreement but trade between the US and the Pacific Rim is already very free. What TPP will mostly do is make it easier for multinational corporations to operate.
That's hardly an inspiring battlecry "make it easier for multinational corporations". No wonder Obama prefers to call it a "free trade agreement." But there are some reasons it's good. Multinational corporations are more productive then the shitty "mom and pop" businesses that people irrationally fetishize. Economies of scale exist after all. Bigger companies generally pay better then smaller ones in the same sector. The US would prefer to have it's companies have foreign holdings then not have foreign holdings because it increases American economic power. The counter parties want foreign investment to develop their economies which dont have enough capital. And against this are the conditions created that the multinationals want. Do we care enough about multinational development to allow for these copywrite laws?
These are at the end of the day not huge issues. But the employment effects will be tiny in comparison to even these small potatoes. If you want to judge the TPP then judge it on what it actually is, an international business agreement and not a "free trade" deal between nations that already have free trade.
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Topic: TPP and TTIP (Read 37863 times)