A good story, by Kate Linthicum of the Los Angeles Times, A Tale of Two Cities, What Happened When Factory Jobs Moved from Warren, Ohio to Juarez, Mexico, should give us pause about that part of the “jobs to Mexico” template that was conceived in the late 80s and grew under NAFTA into a slum-lord’s boondoggle.
That was when my own billion-dollar company shifted its labor force south of the border, and I bolted the company to show American companies how to beat the Chinese at their own game in Asian labor markets.
We know things today we didn’t know was buried in the fine print in the 1994 NAFTA free-trade agreement that made it, well, less free.
I first became acquainted with Mexico in 1975 when I took an Army assignment along the Mexican border at Ft Huachuca, Arizona. My father had retired to Arizona in 1972, had a serious heart attack, so I extended my military service a year to be close by. After I left the military I took up residence to practice law in northern Arizona.
What I learned first-hand in those years was that Mexican-born residents in the southwest are inveterate small business people; mainly in buying and selling and the service industry. Being in America enabled them to lay plans for future generations. a dream not only impossible, but virtually illegal south of the border.
And that’s the purpose of my writing this now.
(Yes, there were illegals in those days too, but illegal border traffic was not the massive political issue it is today, and besides, Simpson-Mazzoli was supposed to have cured that in 1986.)
My first bits of knowledge about economic life on the other side of the border came from my father, who wintered in Mexico for most of the Reagan years. There he became acquainted with the Mexican professional classes, and was much impressed by their sophistication and education. He hadn’t known their type in Arizona.
But in passing Dad commented about the economic incongruities of living in Mexico, noting that you could buy coffee for 19 cents a pound, but almost nowhere could you find a coffee-maker except in exclusive shops. And they were almost twice the price one would pay at a Walmart. Almost everyone could buy coffee, but only a few could brew it at home.
There is a reason for this, and I later learned, while working in Asian and east European economies, it is almost universal.
I learned that most societies in the world are stratified, by design, between a small, wealthy elite ruling class, insulated by a middle class made up largely of professionals (doctors, lawyers, professors) and civil servants (government employees), all working at the sufferance of and for the benefit of those wealthy elites, and whose principal purpose is to protect the “social arrangement”, the status quo ante…and the other 80%, a poor labor or peasant class, with virtually no access to upward mobility, and a very limited access to consumer products, such as the coffeemakers just mentioned.
Since NAFTA a smaller management class (largely engineers and tech specialists) has grown in Mexico, but those professions and their size depends almost entirely on foreign investment. So their size fluctuates depending on the amount of foreign investment made into their countries and not a rising domestic economy. Unlike America, where the “managerial middle class”, who actually do “add-value” to a product, contradicting one of Karl Marx’s principal axioms on his theory of labor, largely produce goods and services for their own domestic American economy, and therefore to its benefit.
I.e, a company builds a factory in a particular town, and the entire town benefits, from retail sales growth to entertainment to a growth in services.
This is not the case in most of the world.
In Latin America especially, but also found in almost every nation, not just second and third world, mind you, but developed Western Europe, built into their systems are limitations as to how much their “commoner classes” can benefit from the production of new wealth. In Mexico and the “South” this is based on a genuine class dislike for the lower classes. The Mexican state class looks upon common laborers as barely human. It is centuries old. In Europe and other places, and growing in popularity in America, this separation, while still class-based, is more based on wanting to insure an entrepreneurial middle class (small business) cannot get too big for its britches. It’s almost impossible to start a business in the EU. One of the main purposes of Obamacare, (and one of its main successes) was to bring the American small business class down a peg or two…to the benefit of the white-collar bureaucratic state class, who believes air-conditioner repair services have no business out-earning the Director of City Parks.
This is important to remember.
Today 29% of Mexicans have internet access, while 90% have cell phones. Their government reports that 42% live in poverty, 9% in extreme poverty. Still America has a $60/billion trade deficit with Mexico. Where has that money gone? Ask Carlos Slim, a genuine Mexican billionaire businessman. Ask the growing number of Mexican millionaires who, like their SE Asian counterparts, have a limitless labor supply, and partner with American companies and joint-ventures to produce goods for various foreign markets, but their $1/hr workers still can’t find a cheap, home-produced coffee-maker so they can enjoy some of that fine 19-cent coffee grown in the highlands.
The reason trickle-down hasn’t worked in Mexico is that lifting the boats for those 80% at the bottom is unthinkable to the top 20%. It isn’t allowed. It’s that simple.
Kate Linthicum’s Berta Lopez in Juarez earns a buck-an-hour and now she can afford a used car, but her market options have not grown very much. She can’t buy better clothes because no one can risk to offer her better clothes without permission. The ruling elites not only control all the products exported into the country, such as coffee makers, but also who may strike out and design and build an inexpensive coffeemaker locally which local folks can afford to buy. This means that ONLY a connected guy in Mexico can come up with the building of a factory to make coffee-makers in Mexico, and that won’t happen because he’d be considered a traitor to his class. …as Thomas Jefferson was in 1776 when he came up with that silly notion about the universal rights of Man.
This social arrangement between the upper and lower classes has defined world history for thousands of years.
But just across the border they can smell a different coffee aroma.
Of course, it’s the “American exceptionalism” come-hither finger of freedom that distinguishes America from that economic immobility Mexico is faced with. And they can smell it, free markets and opportunity to build their own House and make of themselves what they want, and then pass the blueprint on to their next generations. This is how it has always been in America
This is also why, even as I am a staunch anti-illegal partisan, I have a great deal of simpatico for those who want to come here.
I want to see them all make it, only in their home land. This has been a cause with me for nearly 30 years.
I think Donald Trump can make it so they won’t have to.
The Trump Card
It seems we now have a president who sees the world through this very lens of personal achievement rather than the eyes of politicians who believes that all things should pass through their hands before it can pass muster. Entrepreneurship and hard work, instead of the butt-kissing game of front office, white collar politics, for the past century, but especially since Reagan, has grown to define the true nature of “to be American”, or as they say in Juarez, “ser Americano.”
Considering all the millionaires and billionaires American money has spawned south of the border, surely we can insist that there should be a trickle-down clause in the contract so that a better class of buyer there can spawn a small business class at home.
Consider again Berta Lopez in Juarez. She earns $1/hour, a rate that is likely never to increase, since there are many more who can stand in and replace her. This is why no number of new jobs exported to Mexico will keep those hordes from coming north. It is also why, among poorer Mexicans, it’s those who can slip across the border who are seen as life’s winners, not those who drew the short straw and had to take dead-end jobs punching out auto parts for a buck an hour.
They deserve better.
America gave the world a new economic model, but after more than a century it’s been clear the world’s government class will have none of it. At least voluntarily.
And they have now joined with a modern corporate business class, usually two-three generations removed from the rolled-up-sleeved entrepreneurs who actually built their companies, to forge a new world order. It goes by several names, but as I’ve written repeatedly, is fascist in nature, based on a superiorist view of society which actually reflects what the old royal classes and modern George Soros, Jonathan Gruber’s, and Skillings & Fastow’s, all see as their proper station in the world.
By defining themselves by who they are not.
But by our Founder’s ideal, this is all positively un-American.
It is French.
Berta Lopez instinctively knows these people.
For reasons that now seem obscure, America’s largest and most successful “small businessman”, Donald Trump, instead of becoming our most revered role model for all those little guys who want to build something of permanence, has become the world’s most mocked, proving the ruling-elite bug has smitten many in both the political class and elements of the corporate business world in America.
A politician would have an impossible time getting a handle on this notion, but it’s second nature to the likes of Donald Trump. If we are going to swap money for goods with any country we should be able to embed terms in that trade that certain percentages of the trade revenues go to improve the lives not only of the workers who produce those goods, but the local economies who support them.
The art of the deal, a genuine quid pro quo.
I have been preaching this message since 1989, to convince investors in textile operations in Asia; tee-shirts, underwear, tennis shoes, etc, that they frame their contracts so they provide some marginal gain to the workers in buying power. In dozens of clever ways they can provide a competitive equalizer with the vaunted Chinese labor markets, which are laden with hidden costs most foreign competitors knew nothing about.
The former Soviet Bloc, Eastern Europe has a head start on the rest of the world, I’ve found, with even a surprising amount of potential in Russia, considering their many mafias who like to take a cut of every pie.
Today, major American corporations who want to invest in Mexican labor have open arms that can be twisted in their partnering arrangements, in a way that can lift all boats, and provide Mexicans a reason to stay home, especially since they’re going to find the going tougher getting here, and staying here anyway.
This will be worth your trouble, Mr Trump, and one of your enduring legacies.
For more on How the People Found Donald Trump, see my book “Donald Trump and the Common Man” at Amazon.com, covering the campaign, currently under revision, carrying the story through the inauguration. These essays were the first to connect Donald Trump to the comman man, and to define how they (we) found him, and not the other way around.