Obama's Mexican challenge
Faux, Jeff
When Barack Obama and Hillary Clinton pledged to Ohio Democrats last spring to renegotiate the North American Free Trade Agreement, they were immediately charged by the mainstream press with...
...It is no accident that Ronald Reagan was the initial proponent of NAFTA...
...Department of Homeland Security now says it needs the wall along the Mexican border to contain the spillover of drug violence as well as illegal immigrants...
...Chinese leaders, for example, have explicitly rejected the idea that they might use their $1.9 trillion in foreign reserves to help "save" the world...
...As one corporate lobbyist said to me during the debate over NAFTA, we had to support Mexico's new president Carlos Salinas because he was "one of us...
...Today, even the U.S...
...Both the United States and Mexico run chronic trade deficits, and Canada's surplus depends entirely on the U.S...
...Perhaps, but it is an unverifiable assertion...
...GDP and was primarily satisfied by imports, not domestic production...
...protectionism...
...The European Union, for all it problems, has put itself on the road to an integrated society...
...China can only save herself," said one high Chinese official in early December...
...The Bush administration's response was to provide Mexico with roughly a billion and a half dollars worth of guns, military equipment, and training to fight the narcos...
...Other linked areas for joint planning might include older industries like autos and steel and services sectors, such as the improvement and integration of health care services...
...Moreover, the governments of all three have openly declared their intentions to further open their economies to free trade and investment with the rest of the globe...
...The latest forecasts show negative growth in all three NAFTA countries...
...Once again, as Richard Nixon quipped a quarter-century ago, "We are all Keynesians...
...In Washington, a new paradigm, although certainly not a complete consensus, is emerging...
...Not to mention the strengthening of U.S.-based criminal groups that are the business partners of Mexico's drug lords...
...But there is little doubt that the failure of the economy to provide widely shared growth and to alleviate the maldistribution of income and wealth has played a major role...
...Yet, in January 2009, Michael Hayden, the outgoing director of the CIA, told the Baltimore Sun that the two top national security priorities for the new president would be the nuclear threat from Iran and the political instability in Mexico...
...But even putting these two issues on the table would give desperately needed hope for those in Mexico and here on the front lines of the narco wars...
...Today, the neoliberal pinata is busted and empty...
...The debate over NAFTA was carried out largely over the abstract, polarizing question of "free trade vs...
...The case must be made that a more unified North America will make each country more competitive and make the vast majority of its citizens better off...
...consumer market, it is hard to believe that conditions there will not get worse when that market deflates and decelerates...
...On the other hand, each of the three nations has pursued bilateral and multilateral agreements with other nations that dilute the sense of a North American community...
...These ideas are not just as a reaction to the current short-term emergency but represent a permanent change in the way U.S...
...But "things changed," he shrugged, explaining that the opportunities for profitable investment in China dwarfed anything that Mexico had to offer...
...To my surprise, some of them expressed bitter disappointment with the agreement...
...But, whether this was "worth" the costs of dislocation, a more unequal distribution of income and wealth, and social deterioration is a value judgment, not an economic fact...
...In 1989, the first year of Salinas's term, the chief of the national police was found with $2.4 million of drug money in the trunk of his car...
...But, if the agreement had been just about free trade, it would have needed only a few pages...
...Despite the post-September 11 tightening of the U.S...
...But, if further integration of North America is a reasonable response to the new economic era, it must be based on a broader, more credible and inspiring vision than NAFTA...
...The question of what kind of North America we want in ten or twenty years needs to be part of the domestic politics of all three nations...
...On this issue, the policies of all three countries are contradictory and confused...
...economic policy has been that globalization involves a one-time transition...
...But in a time when unregulated markets—domestic and foreign—have been discredited, Obama may not be as easy to manipulate as was Clinton...
...With the financial crash, the assumption that the United States can continue to borrow cheaply for consumption has been shattered...
...At some tipping point, a combination of no work and rising violence could swell out-migration to a flood, creating a much more severe anti-immigrant reaction in the United States than we've seen so far...
...Contingency plans call for quick-response border patrol teams with armored vehicles, aircraft, and heavy weaponry to respond to large-scale violence along the frontier...
...economy...
...And since September 11, 2001, the governments have collaborated politically, with Canada and Mexico becoming extensions of U.S...
...But it works for elites on both sides of the border...
...The re-regulation of the domestic economy is bound to affect U.S...
...Central to this financial recycling system was the faith of global investors in the honesty, transparency, and integrity of American financial markets...
...The failure of competition to self-regulate financial markets in the United States and elsewhere and the subsequent massive state bailouts of the financial sectors have revealed, once again, that competent state intervention is a condition for healthy markets...
...4) Facing up to the reality that the problem of narco-trafficking criminality cannot be solved in Mexico, or any other supplier country, without (a) drying up the market for illicit drugs in the United States—probably through regulated legalization—and (b) controlling and reducing the export of weapons...
...But Salinas and his cronies were not quite as advertised in Washington—especially as regards the narcotics trade...
...But as the debts of the Treasury pile up it is hard to believe that the world's investors will not begin to piece together other safe havens and to demand significant risk premiums for recycling dollars back into the U.S...
...government can't deal realistically with its drug problems...
...The absence of North American identity also encourages the illusion that major cross-border problems can be resolved by national policies alone...
...debt, it made sense for Mexico and Canada to take advantage of their neighbor's ballooning market...
...Such an effort might begin with coordinated trade, tax, education, technology, and investment policy efforts to develop internationally competitive domestic, that is, North American industries based on the needed transformation of our economies to an energy-efficient future...
...Among other consequences has been a substantial depreciation of the Mexican peso...
...Guillermoprieto quotes a retired PRI politician: "When I see how these people [the traffickers] are climbing right up into the beard of the state, I think, Holy fuck...
...Protected by the government, the Mexican gangsters muscled out the Colombians who had previously dominated the routes to the United States...
...For many in the Washington policy class, NAFTA was not principally an economic issue...
...The special status of the dollar as the world's reserve currency along with "exchangerate protectionism" in Asia kept the dollar strong, adding to the deterioration in U.S...
...Outward migration, of course, has increased, not decreased...
...The U.S...
...But in a world of 6.5 billion people and more than 200 national economies each seeking to create competitive advantage, the twin problems of creating comparative advantage and adjusting to change are permanent and cannot be left to unregulated market forces alone...
...This requires more than renegotiating NAFTA, it requires an economic redefinition of North America...
...economic policies that they thought they had been promised...
...protectionism" debate that has dominated the discussion of the U.S...
...The deregulation of trade and investment through NAFTA, the World Trade Organization (WTO), and the structural adjustment programs of the international agencies was an extension of the deregulation of domestic markets...
...trade policy as well...
...The assumption, of course, is that the United States, which has been unable to deal with its own criminal drug industry and has spent six billion dollars in a failed effort to solve the problem in Colombia, has the answer for Mexico...
...But they are unlikely to be able to do both at the same time...
...The United States will finally be forced to deal with its trade/current account deficit and its degenerating competitiveness...
...North America, in contrast, never confronted that question, and its leaders never engaged their own populations in a serious discussion of their collective future...
...Treasury, which has a few problems of its own, to intervene in currency markets in order to keep the peso afloat...
...So the ball is still in play...
...A large share of the recycled dollars was funneled into the speculative finance and over leveraged "buyouts" that left companies deep in debt and even less competitive...
...The result is that North America has no real identity among the people of the three countries...
...NAFTA was a deliberate effort by the U.S...
...The "old" PRI in effect had a live-and-let-live deal with the smugglers...
...M exico is in the midst of a bloody and chaotic civil war...
...There is no reason why trade policy in support of domestic development should somehow be an inflexible exception...
...We may be on the brink of a worldwide deflation or simply a long and deep recession...
...market...
...Among other things, this will require an understanding that in an integrated market, workers, small businesses and farmers, and local officials increasingly have common interests across the borders and should have the political room to express them...
...Governments in Europe, Asia, and elsewhere have ramped up spending...
...Mexico's rapid growth would more than compensate for dislocations in Mexican agriculture, the undercutting of wages in the United States and Canada, erosion of control over borders, and other concerns of NAFTA's opponents...
...and Canadian grain, virtually decimating Mexican rural areas and adding several millions to the stream of migrants heading north for work...
...Mexico is becoming a narco culture...
...Rather, as Jorge Castaneda, who later became foreign minister, observed at the time...
...What is needed now is not a revision of NAFTA but an entirely new approach to North American integration in light of the two most important changes...
...As the U.S...
...It seems that they had expected NAFTA to create a partnership between businesses producing in the United States and Mexico to meet the growing global competition—especially from Asia...
...While U.S...
...role in the international economy for the last quarter-century...
...It recognizes that in order to avoid major longterm reductions in living standards the United States will need new policies that put it on a "high road" to increased competitiveness, as opposed to the "low road" of competing on the basis of lower labor costs, consumer austerity, and a depreciated currency...
...The causes of the rising power of the drug warlords are complex...
...Indeed, it is instructive that while Bill Clinton was promising the country that NAFTA would create a bonanza of new high quality American jobs, the three members of his Council of Economic Advisers—concerned about their own professional reputations—never provided an estimate of the jobs that NAFTA would create...
...As it turned out, few if any of the important promoters of NAFTA, in the United States at least, took that idea seriously...
...Ideologically, NAFTA was a part of a general shift among developed capitalist nations to market deregulation as the governing paradigm for economic policy...
...DOES NORTH AMERICA HAVE AN ECONOMIC FUTURE...
...Few sensible people would suggest that tax, monetary, fiscal, or sectoral policies should be fixed for all time...
...market to China through the WTO, Bill Clinton assured Americans that enduring a short period of sacrifice would enable them to reach a new stable prosperous equilibrium at the other side of the "transition...
...Even among the continent's elites, it is a vague and confused idea...
...A first step is to define North America's economic boundaries, that is, what is inside and what is outside, and what are the special privileges and obligations of people who are inside the definition...
...One change is the stunning deterioration of Mexico's social and political order...
...The people in effect had rejected the "neoliberal" free market policies being imposed by a new generation of oligarchs dedicated to economic deregulation, privatization, and the repeal of social protections...
...After all, both candidates merely suggested strengthening the agreement's labor and environmental protections, which even fierce champions of NAFTA now concede are inadequate...
...Mexicans would become middle class, and Americans and Canadians would become richer because of privileged access to this vast new market...
...Pursuing the North American option requires an understanding that successful economic development—of a country or a continent—demands a wide variety of flexible policy tools, including trade policy...
...He has gotten a thirty billion dollar line of credit from the U.S...
...As the economy has flattened and investors move their money northward, the narcos are a growing source of risk capital...
...5) Intentional creation of a "continental" political consciousness...
...Before NAFTA, illegal migration from Mexico was a minor problem for the United States...
...But it is at least equally utopian to think that, having created an integrated common market, we can now walk away from the economic and social consequences of what we have done...
...Several years ago, I had a discussion about NAFTA with a group of Mexican businessmen...
...recession has brought back fewer Mexicans from the United States than expected, in part because returnees are assumed to have more money and are therefore targets of violent robbery...
...policy establishment to strengthen these "reformers" and, at the very least, to enshrine their reforms in an international treaty with the United States that would be difficult if not impossible for a future leftist government to change...
...This was hardly what Adam Smith or David Ricardo had in mind...
...Drug money finances small business, farmers, real estate, movies, and even beauty pageants...
...This implies a future in which no one of the separate nations of North America has a particular obligation to the other two, other than what is normally required between nations with common borders...
...competitiveness strategy...
...One argument is that Mexico would have been worse off without NAFTA...
...They include many things beyond Mexico's control—such as the hugely profitable illegal drug market across its northern border...
...economy at the moment is not in its private sector financial markets but, ironically, in its public sector...
...My own starting place for a cross-border politics would begin with the following elements: (1) A "grand bargain" in which the United States delivers humane immigration reform and long-term aid for investment for human development and infrastructure in exchange for a serous verifiable commitment by Mexico to substantially reduce corruption as well as to reform tax and social welfare policies to assure that the benefits of economic growth are widely shared...
...Such an adjustment is likely to produce economic pain, dislocation, and political anxiety, including increased demands to protect U.S...
...The socalled "Washington Consensus" was unraveling even before the financial market crash...
...Now it is a major political headache...
...As journalist Alma Guillermoprieto reported in her November 10, 2008, article in the New Yorker, the introduction of U.S.-style media campaigns to Mexico requires enormous levels of campaign spending—up to sixteen or seventeen million dollars for a congressional campaign...
...So long as the world was willing to finance the U.S...
...competitiveness...
...In arguing for NAFTA and subsequently for the opening up of the U.S...
...All other benefits—jobs, rising living standards, public services—would eventually follow...
...Their leaders show little enthusiasm for collective international action and none for stimulating their economies to generate more imports...
...The alternative to a failing state might be a return to the authoritarian past...
...undersecretary of commerce at the time predicted that Mexico's growth for the foreseeable future would be "between a supercharged six percent a year, worthy of Asia's tigers, and a startling 12 percent per year," comparable to China...
...The polls suggest that most voters across the continent are not convinced...
...There is a good argument for a coordinated continental economic redevelopment program...
...One effect of NAFTA on the growth of narcotrafficking is that it lowered the barriers to illegal as well as legal commerce...
...For Mexico and Canada, whose export markets depend on the United States, this is not good news...
...Those who understood that this state of economic affairs could not last forever were consoled by the expectation that when the day of reckoning came, market forces would increase demand in the surplus countries to compensate for a slowdown in the United States...
...If the policy of each nation is to open up its economy to all of the nations of the world, then "North America" ceases to be a useful economic concept, and deepening NAFTA will make even less sense to the citizens of the three nations...
...Exports of illegal drugs are a major—and perhaps the major—earner of hard currency dollars for a Mexican economy that is otherwise not competitive in the global market...
...However, the world has changed dramatically since the treaty came into effect in 1994, making the economic and political assumptions upon which it was based obsolete...
...A second effect was the failure of the economic model upon which NAFTA was based to reduce the poverty, inequality, and lack of opportunity that feeds the culture of violence and corruption...
...Both of these are politically difficult and will take years of public debate...
...The idea of an enlarged political vision for North America will appear utopian to many people...
...Moreover, given the high level of narco infiltration in the military and police, it is a safe bet that a fair share of the U.S...
...Markets in Europe, Asia, and elsewhere are contracting, not expanding...
...Fifteen years later, Mexico's growth has been far too small to provide jobs for its people...
...The result was that NAFTA was not so much a step toward the creation of a continental economic community as it was a step toward a global economy governed by rules that freed the corporate investor from labor, environmental, and other social constraints enforced by national governments...
...consumption of imports will likely slow down substantially, and foreign competition will become more intense, NAFTA is becoming irrelevant...
...Treasury is still seen as a safe haven for capital fleeing from countries vulnerable to the global credit crunch...
...It is no longer sensible to assume that a majority of Americans and Canadians can maintain their living standards competing in an unregulated global economy that can hire computer engineers, designers, and accountants in India and China for a fraction of their North American cost or that Mexican workers can prosper in direct market competition with low-cost labor in poorer developing nations...
...Changing them would have little effect on the rest of the agreement...
...Certainly that is true...
...A revised agreement should recognize that free and independent trade unions and public interest institutions are essential for ensuring an equitable distribution of income, wealth, and political power...
...With easy credit and low interest rates, consumption steadily rose as a share of U.S...
...Specifically, the U.S...
...Earlier, a Pentagon report on future security threats concluded that the most worrisome danger was the prospect of the "rapid and sudden collapse" of Pakistan and Mexico...
...Every day, the media report dozens of drug-related murders of narcos, of soldiers, of police officials, of judges, of journalists, and of innocent bystanders caught in deadly crossfires...
...The war is both between the government and criminal bands of narcotraffickers and among the drug cartels themselves for control of territory, trade routes, and the state itself...
...It was clearly an over reaction...
...Competition, it was argued, is a sufficient regulator...
...No one knows the future...
...market is that the street price of marijuana and powder cocaine in the United States is about half of the price in Western Europe...
...Obama's chief economist was alleged to have assured Canadian officials that his candidate, if elected, did not really intend to deliver...
...The army and police are notoriously brutal, and the incidents of civil rights violations in their war on the narcos is rising...
...Free trade, it was said, would close the wage gap between Mexico and its two North American neighbors, much the way wages in Spain, Ireland, and Portugal responded to Western European integration...
...credit bubbles has proved to be an illusion...
...The reputation of Wall Street as the world's most trustworthy financial market is now discredited with the revelations of widespread deceit, fraud, and incompetence...
...policy makers must now think about the country's economic future...
...Today, while economic integration involves all classes, political integration in North America is primarily among those at the top of the pyramids of wealth and power...
...John Maynard Keynes's arguments for government guidance and management of the economy were replaced by Milton Friedman's arguments for the strict separation of market and state...
...Lack of security could in turn disrupt the production lines that now cross the border, and further shift low-wage jobs to China...
...Bill Clinton assured Americans that under NAFTA, "There will be less illegal immigration because more Mexicans will be able to support their children by staying home...
...The issue is particularly stark for Mexico...
...In Winston Churchill's famous metaphor, the political pudding named NAFTA "has no theme...
...A measure of the increased supply of narcotics coming into the U.S...
...Another is that consumers in all countries have benefited from lower prices...
...business gets the benefit of docile, low-wage labor that helps keep down labor costs...
...it was "an agreement for the rich and powerful in the United States, Mexico and Canada, an agreement effectively excluding ordinary people in all three societies...
...Put bluntly, if Mexico could not grow fast enough to employ all of its people during fifteen years of access to a bloated U.S...
...NAFTA'S CRUMBLING ECONOMICS NaFTA was conceived and born in a world in which the United States was the financial stabilizer and engine of market growth for the globe...
...arms have ended up in the hands of the cartels...
...Why should the Mexican government risk political turmoil because the U.S...
...Not only did he and his colleagues have little interest in a North American competitiveness strategy, they had little interest in a U.S...
...Mexico's chief law enforcement officer told the New York Times in early 2008, "Corruption among police officers is part of their everyday life...
...It is, of course, an odd conception of economic development that encourages the out-migration of ambitious, working-class risk takers—precisely the kind of people that Mexico needs if it is to build the strong middle-class economy that was supposed to be the goal of NAFTA...
...jobs and incomes from more foreign competition...
...Rather, its primary purpose was to keep the Mexican populist Left out of power...
...In an era in which the U.S...
...The shift away from "free-market fundamentalism" is not just a consequence of the current macroeconomic and credit crisis...
...The presidential election of 1988—which the ruling Partido Revolucionario Institucional (PRI) had to steal in order to win—shocked the establishment on both sides of the border...
...With the current conservative government discredited by the violence that its hard-line strategy has generated, and the leftwing party that was again cheated out of the presidency in 2006 now consumed by internal bickering, many Mexicans see the old corrupt PRI as the only political institution that can deal—that is, "make a deal"—for peace with the narco bosses...
...The answer is the narcos...
...It involves massive new investments in physical and human infrastructure and research and development as well as expanded market regulation and new tax policies in order to create new "green" industries and a much more energy-efficient economy...
...In the absence of policies deliberately designed to reverse the trade deficit, the market will demand some form of austerity through a substantially lower dollar, lower wages, and a shift from consumption to internal savings...
...Since the beginning of this decade—way before the 2008 financial crisis—its economy has been virtually stagnant...
...Although the more honest promoters of NAFTA acknowledge these disappointments, they argue that, on net, it was good economic policy...
...However long and through whatever means it will take for the markets to recover, we are unlikely to go back to the world in which NAFTA was created...
...When Barack Obama and Hillary Clinton pledged to Ohio Democrats last spring to renegotiate the North American Free Trade Agreement, they were immediately charged by the mainstream press with pandering to labor, thus re-igniting the simplistic "free-trade vs...
...Congress...
...So it is not surprising that whatever growth in Mexico that did occur after NAFTA further imbalanced the already uneven distribution of income among sub-regions and income classes Raising Mexico's living standards through faster growth was the central economic rationale for NAFTA...
...But it is already a place where few citizens dare to trust the local police, who are widely assumed to be incompetent, abusive, and part of the criminal class...
...The pledge also produced a whiff of the cynicism that has characterized the politics of trade...
...And soon after the election, Washington insiders were betting that Obama's pro-Wall Street economic team would bury the idea—much the way they buried Bill Clinton's 1992 campaign promise that he would not sign NAFTA unless it had labor and environmental protections with "teeth...
...Today, Mexican politics is floating on a sea of drug money...
...In effect, it is an acknowledgment that government can and should pick "winners and losers...
...Deepening integration only makes sense if it is a credible instrument for a much wider participation in the benefits of growth and in the political debate...
...Americans could ignore their own deteriorating competitiveness and enjoy the dot com and housing bubbles, while the nation's savings rate fell, and its current account deficit and foreign debt rose relentlessly...
...Trade is increasingly likely to be seen—as it was throughout most of America's history—not as an end unto itself, but as an instrument to achieve national economic redevelopment goals...
...Smuggling marijuana into the United States was a modest-sized enterprise before the 1980s...
...At that point, they realized that Mexico—and Mexican businesses—would not have the privileged place in the formation of U.S...
...Mexican president Felipe Calderon, who spent much of 2008 assuring his people that they were immune from the U.S...
...Thus the costs of dislocation—however painful—are short term and eventually are eclipsed by the long-term benefits of a more efficient economy...
...The kidnapping epidemic is so widespread that public service billboards in Mexico City warn parents against the latest racket, in which small-time thugs steal cell phones from adolescents and then call their parents and threaten to kill the child—who is not actually in their hands—if ransom is not paid immediately...
...The violence has fed upon itself...
...The U.S...
...Thus, the United States is attempting to treat illegal immigration from Mexico simply by changing laws in the United States without reference to the problem of inadequate and unequal growth in Mexico...
...Mexico is forced to deal with the immense problems of narcotrafficking without reference to the demand for drugs in the United States...
...But when the Mexican free-market reformers came to power in the administration of Miguel de la Madrid (Salinas's patron) in 1982, they invited the cash-rich narco-traffickers into their circles...
...About half of all the police and a good chunk of the army are on the payroll or otherwise compromised by the narco-traffickers...
...Treasury cannot put a value on the securities it has acquired and guaranteed as a result of the massive bailouts...
...Instead, it is a thousand pages promoting deregulation, privatization, patent protections, and a wide variety of other investor privileges...
...Mexico is not yet a "failed state...
...3) Cooperative competitiveness planning for the economic redevelopment of the three nations...
...The central question now is, will the three countries of North America compete and develop separately or develop together...
...Moreover, flexibility to deal with changing conditions is an important element in any long-term policy regime...
...Analysts say that the U.S...
...But, they complained, a few years after NAFTA went into effect, the United States opened up its markets to China...
...Where is the money to come from in such an impoverished country...
...2) Rebalancing NAFTA by adding the enforceable protections for workers, environmental, and human rights that were left out of the original agreement...
...On the one hand, the governments continue to promote the "deepening" of the more or less common market for goods, services, and money...
...Under Barack Obama we will surely see a much stronger role for government as both a guide and nurturer of long-term economic development, a regulator of the market, and an enforcer of the social contract...
...By providing extraordinary protections for capital mobility and undermining the governments' capacity to protect the social contract, NAFTA reduced the bargaining power of workers, farmers, small businesses, and other "ordinary" people in the new continental market that the agreement created...
...government has already had to commit some $7.7 trillion—half of the country's GDP— to guarantee against losses from the financial debacle...
...In the post-Bretton Woods era, the American economy was a substitute for the absence of global institutions of fiscal and monetary policy...
...Already, the out-migration of unskilled and semiskilled Mexican workers is being joined by that of middle-class professionals and businesspeople increasingly concerned about lack of physical security...
...His response reflected the prevailing view in Washington that the goal of trade policy is to provide maximum opportunities for cross-border investment...
...The economic crisis has also brought a crisis in the policy regime that created and supported NAFTA...
...Kidnapping has become a fastgrowing industry...
...In his plan for economic recovery, without using the phrase, Obama has already signaled his intention to pursue forms of "industrial policy...
...To put it bluntly, Mexico, Canada, and the United States can choose to give priority to further integrating with each other or to integrating indiscriminately with the rest of the world...
...This country could really collapse...
...Similarly, the assumption that expansion of the world's surplus economies would compensate for the bursting of the U.S...
...In the coming era, the pressures for sending production, technology, and jobs offshore will increase...
...NAFTA opened up Mexico's rural economy to competition with highly subsidized U.S...
...In the spirit of free trade, the Mexican drug lords use the dollars they have earned from their exports to import guns, grenades, missile launchers, and other arms from the United States—the world's largest seller of lethal weapons...
...borders and increased pressure against undocumented immigrants, a huge amount of cross-border mobility is accepted, and people continue to cross borders in substantial numbers...
...Whatever confidence remains in the U.S...
...All three nations are being challenged by global competition...
...The U.S...
...Up until now, the prevailing assumption of U.S...
...The "side agreements" ostensibly protecting labor and the environment were widely understood to be cosmetic, aimed simply at giving political cover to members of the U.S...
...Mexico gets rid of large numbers of frustrated workers who might contribute to political unrest and receives the benefit of hard currency remittances...
...The victims are not just rich people or the middle class...
...At the time NAFTA was being negotiated, the Salinas family itself was up to its neck in the narcotics trade—an item that the Clinton administration conveniently suppressed in its effort to sell Salinas as a champion of democracy, modernization, and clean government...
...The enormous pressure to speed up the increased volume of trade across the border has made effective inspection of freight impossible, creating a drug superhighway across the border...
...market opened up in the 1990s, its growing trade deficit was financed by recycled dollar earnings of the Chinese and other surplus nations, supporting a debt-fueled mass consumer market that absorbed even more imports...
...Economic historians may argue about the exact contribution of the international sectors to the success of the major advanced nations, but any fair reading will conclude that managed trade policies— sometimes protectionist, sometimes free, and often in some combination—were part of the picture...
...This brings us to the NAFTA connections...
...Because of this promised pinata of prosperity, the people of the three nations were told that social protections were unneeded in this new continental economy...
...In 2008, there were roughly six thousand drug-related assassinations throughout the country, more than double the number of the previous year...
...Homeland Security policies...
...As someone who did not support NAFTA when it was proposed, I had nevertheless thought that the strongest argument for the agreement was that economic integration among the three nations would create a continental economy more capable of competing with Europe and the rising economies of Japan and China...
...Despite the overwhelming support for NAFTA among the governing class and the establishment media, the economic case was weak...
...At their meeting in January, Obama insisted to Mexican president Felipe Calderon that he wanted to "upgrade" NAFTA...
...financial implosion, is faced with accelerating unemployment, widespread bankruptcies, and a peso that has lost 80 percent of its value in the last six months...
...A counter reaction from the growing political power of Latinos could create some ugly politics...
...foreign policy pundits fret over the possibility of "failed states" in the Middle East, central Asia, and Africa, they give short shrift to the slow descent toward chaos of a country of almost 110 million people on our border...
...keep it within bounds, out of the public's eye, no violence—and we will look the other way...
...He acknowledged that during the negotiations there had been some vague talk about a "partnership" with Mexico...
...A few months later, I mentioned the episode to a prominent Wall Street investment banker, who had been the person most responsible for convincing Bill Clinton to approve the NAFTA treaty...
...The third and perhaps most important connection between NAFTA and Mexico's woes is political...
...The financier George Soros called it "free-market fundamentalism...
...For several years, economists and development specialists have been questioning the notion that all governments had to do to promote prosperity was to "get out of the way" of the animal spirits of private entrepreneurs and investors...
...In the opinion of most Mexicans, the government is losing its war...
Vol. 56 • April 2009 • No. 2
