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Monday, August 12, 2013

8/12/92: A (Economic) Date which (Should) Live in Infamy


Today's one of those days in the world of finance and markets where quite honestly there's little to nothing significant to write about or give commentary on..

Call it the dog-days of August we suppose..

And unlike other sites, we don't write just for the sake of it.. makes the quality of the content weaker and readers can only stand so much repetition before tuning out and turning away..

So we thought we'd look at what happened in history on this date, August 12th
And like every day, there's always interesting factual tidbits like in 30BC, Cleopatra committed suicide by asp (snake) bite or that today in 1898, sovereignty was transferred from the Republic of Hawaii to the US...

Of course many horrible events on this day like every other day-- needless war, needless death and cruelties..

Then we spotted one event that occurred today which made our stomachs collectively churn:

1992 – Canada, Mexico and the United States announce completion of negotiations for the North American Free Trade Agreement (NAFTA)
NAFTA... genuinely one of the darkest days in all of US history..

The goal of NAFTA was to eliminate barriers to trade and investment between the U.S., Canada and Mexico.

The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of Mexico's exports to the U.S. and more than one-third of U.S. exports to Mexico.

All U.S.-Mexico tariffs would be eliminated within 10 years.. Most U.S.-Canada trade was already duty free.

What did all that mean?

In simple terms it meant US companies could send their manufacturing base down to Mexico where the hourly labor costs were cheaper and they were not obligated to provide insurance for workers, and when those products were sent back to the US to sell, there'd be no additional expense by way of tariffs.

As mentioned a moment ago, most US-Canada trade was already tariff free but the wages and benefits received by Canadian and American workers were so similar that it didn't pay most companies on either side of the US-Canada border to switch operations to the other side...

But Mexico was/is not immune from feeling economic pain..
It has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from US agribusiness, and like in the US, has contributed to the rising levels of economic inequality in Mexico

One question some of you may be asking is why is there still such a great influx of illegal immigrants seeking to enter the US if over the past 2 decades NAFTA has created jobs in Mexico while destroying them here?

Simple.. as we said before, its about wage disparity.
In America minimum wage is $7.25/hr.

In Mexico, there's different minimum wages based on one's profession but the general minimum wage on average is 64.76 pesos per hour.

Using a currency exchanger, this comes out to $5.12/hr.

So an American burger flipper at $7.25hr would make $290/wk and $15,080 yearly

A Mexican garment worker at equivalent of $5.12/hr would make $204.80/wk ($85.20 less than US worker) and $10,649.60 yearly ($4,430.60 less than US worker)

And that's comparing skilled Mexican worker with unskilled US burger flipper..

You can see how much these bloodthirsty, soulless US and Canadian corporations would save by closing factories in their home soil where perhaps they were paying their workers $10-$25/hr and now paying out $6-$14

And the fact that Democrats and Republicans both supported this was sickening at the time and even more now..  The treaty was negotiated by Bush Sr. and signed into law by Clinton.

Ross Perot was the only candidate in the 1992 election who both understood the danger of NAFTA and was honest about it.  The other two men were completely bought and paid for.
Perot warned that drug traffickers would take advantage of open Mexican border and that NAFTA would provide Mexico escape from US environmental regulations.

He warned that NAFTA would yield US sovereignty to international organizations, its main beneficiaries would be the 36 wealthiest people in Mexico who own half the nation, and the treaty allows prison-made Chinese textiles into US via Mexico.
 
Most thought he was a kook or couldn't get beyond the Pathetic impression of him weekly on Saturday Night Live to actually listen to the message and heed the warning...

A few did listen but what can be done when the two-headed one political party monster decides its best for all the 1% people to enact it?
~ "When will this darned debate be through!  I will miss Carson.."

From USA Today, Dec 22, 2012:

"Economy.com, an economic consulting firm estimates 1.3 million manufacturing jobs have been moved abroad since the beginning of 1992 — the bulk coming in the last three years. Most of those jobs have gone to Mexico"

If the average worker made a mere $10/hr which comes to $20,800 and you multiply that by 1.3 million people, that equals $27.04 Billion dollars in lost annual income for Americans.

If the Government would have received a mere 15% back as income tax, that comes to just over $4 billion Less annually the government could have been taken in to pay its debts

Talk about intentionally sabotaging one's future...
You know democracy is a funny thing-- give a person the mere illusion he/she has a true say in their nation every so many years and it lends to utter complacency..

We wonder if the French or Russian Revolutions would have ever occurred if the people had the vote?
Could the masses have contented themselves with starvation and abject poverty just a few years longer until the next election to select the King or Czar?

Certainly has done the trick here...