NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico

That wages have remained so low for so long is not by accident; it’s by design.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

President Trump’s repeated bashing of the North American Free Trade Agreement between the US, Canada, and Mexico has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s much cheaper labor costs. Tecma Group, a firm that helps US and Canadian firms relocate to Mexico, has more business than ever. In the past few weeks alone, it has helped a cleaning equipment company and packaging company move.

Mexico Consulting Associates, headquartered in Chicago, has three new clients interested in Mexico. Keith Patridge, who heads McAllen Economic Development, estimates that at least 12 companies will be installed this year in the north-western city of Reynosa. Another firm, Tacna Services, has helped two companies get set up in the Baja California area.

The southward migration of U.S. companies continues unchecked even as Trump threatens to abandon NAFTA, provoking fear and consternation among manufacturers that have production and supply chains spread across the three countries. If Trump followed through on his threat, traded goods would be subject to tariffs of around 3.5% in the case of Mexican companies and 7% in the case of US ones, according to Benito Barber, an economist for Latin America for Nomura Holdings.

On Tuesday a new coalition of major automakers, suppliers, and car dealers urged Trump not to withdraw from NAFTA. The members of the “Driving American Jobs” coalition include trade associations that represent major global car manufacturers such as General Motors, Toyota Motor, Volkswagen, Hyundai Motor, and Ford Motor.

The coalition has sponsored an advertising campaign aimed at convincing the White House and American voters that NAFTA has been instrumental in boosting production and employment in the US auto industry — a dubious claim given that all global vehicle manufacturers, which can manufacture just about anywhere in the world, always search for cheap labor to maximize the bottom line.

And in NAFTA-land the cheapest labor is in Mexico, where assembly line workers earn an average hourly wage of around $2.50. The average hourly wage for workers in US motor vehicles manufacturing is $28.70 and in auto parts manufacturing it’s $18.19, according the Bureau of Labor Statistics.

For companies that employ thousands of workers, it’s hard to resist the lure of such cheap labor. The company Intermex industrial parks, which provides real estate and factory services to global manufacturers, claims on its website that it can save overseas companies $20,000 per worker per year.

So vast is the gap between Mexican salaries and those in the US and Canada that it’s become one of the biggest bones of contention in the ongoing renegotiation of NAFTA, much to the dismay of global car manufacturers and the Mexican government, which is determined to protect the cheap manufacturing wages that have underpinned the country’s economic model since NAFTA was signed on Jan 1, 1994.

It was supposed to be a very different story. According to NAFTA’s original proponents, the trade agreement would not only increase wages in Mexico, bringing them gradually closer to US wage levels; it would also relieve downward pressure on US wages. But the opposite happened. Wages in Mexico stagnated in real terms while living standards in the US were slowly eroded.

This is where Mexican wages place on the global auto manufacturing scale (based on 2015 data, gathered by the WSJ in Sep 2016):

The fact that Mexico’s wages have remained so low for so long, even compared to other emerging economies, was not by accident; it was by design. As the late Sir James Goldsmith, one of the wealthiest and most influential business magnates of the late 20th century, presciently warned in a 1994 interview with Charlie Rose, the only possible beneficiaries of trade agreements like NAFTA would be the major multinational corporations who would have free rein to roam the globe in pursuit of the cheapest labor:

“The top 100 companies account for one-third of all foreign direct investment. Now, how do they operate? They’re no longer linked to the United States or to France or to Britain. They operate by farming out their production to whatever country produces most cheaply, where they can get the biggest return on capital and pay the lowest part to labor.”

Now, President Trump seems intent on undoing some of the key provisions that led to this state of affairs. In the most recent round of talks, he proposed changes to NAFTA’s rules of origin for cars, used to determine how much of a vehicle is manufactured at a particular location. The proposed new standards were considered unviable by automakers, as well as the governments of Mexico and Canada.

In the meantime, real salaries in Mexico continue to stagnate, even as more and more companies relocate there. In fact, according to a new joint study by the Economic Commission for Latin America and the Caribbean (CEPAL) and the International Labor Organization (ILO), Mexico was one of only two countries in the region (the other being Peru) to see real wages slip in the first half of 2017 when inflation averaged 5.5%.

In other words, the opportunities for multinationals to exploit Mexico’s vast pool of cheap labor are arguably richer than ever. How long it will remain that way depends on how negotiations proceed between NAFTA’s increasingly divided partners. By Don Quijones.

Mexico’s wage repression scheme creates Nirvana for global automakers. Read…  $2.25/hr to Build a $40,000 Vehicle

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  51 comments for “NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico

  1. michael says:

    What happened to the proposed border tax?

  2. Gershon says:

    According to NAFTA’s original proponents, the trade agreement would not only increase wages in Mexico, bringing them gradually closer to US wage levels; it would also relieve downward pressure on US wages. But the opposite happened. Wages in Mexico stagnated in real terms while living standards in the US were slowly eroded.

    When you ask yourself the all-important “cui bono?” question – who benefits? – was there ever any doubt that NAFTA was all about making the globalist oligarchs even more filthy rich on the backs of both American and Mexican workers?

    • John says:

      Those oligarchs care not one whit for any of the labor that provides them their lavish life. When their turn comes to be used and abused, hopefully no one will care about their plight either.

      • Tom Welsh says:

        If you are waiting for the billionaire bosses to become impoverished and have to live in cardboard boxes, I am afraid you will be disappointed. That won’t ever happen. At the very worst they would move into some family member’s billionaire residence.

        What may be more likely to happen is that they will find themselves dangling from ropes. Human patience in not unlimited, as Louis XVI, his family, and the French aristocracy discovered – no doubt to their immense surprise and resentment.

    • alex in san jose AKA digital Detroit says:

      Gershon – You’re getting closer … that could almost be a direct quotation from Marx.

      A lot of people are getting closer to putting 2 and 2 together these days.

      Lower wages for everyone, worldwide, isn’t a bug, it’s a fundamental feature of capitalism.

      • robert sinclair says:

        Its not capitalism’s fault was dont use capital we have currency created by the issuance of credit (debt). Alll new credit devalues existing currency in circulation. Its a dollar based, ponzi scheme and workers pay the price. It was the same in 1790s france.

        • dave says:

          Correct. Not capitalism but the users of capitalism. Just like Marx predicted the end would be. So we need a new economist to solve the new problems. Now that capitalism is on deaths door how dò we evolve from here?

        • James Levy says:

          Let me sizzle it for you: money is created because without it, demand stagnates as competition drives down wages and prices, thus less need for investment and pressure to cut costs further. The money creation is not exogenous to capitalism–it is baked in. Even Milton Friedman said you had to increase the money supply over 3% per year or the system would collapse.

          Capitalism needs growth but refuses to acknowledge there are limits to growth. Greed always outpaces wages. The desire of some for ever greater piles of riches outstrips the ability of the broader population to absorb new production. Thus the introduction of credit in the 1920s. Thus the continuing crises as profitable production outstrips demand (wages). Thus the drive for cheaper labor combined with the drive to increase access to money and credit to keep the system going.

        • P. Pidgin says:

          Adherence to debt-based currency works (or used to work) in on a perpetually growing planet. The finite reality of Earth necessitates that there will be new crises in funding and liquidity. I think that the controllers of our society know this and perceive it as an added benefit, rather than a design flaw; it adds to the preeminence of the financial sector, as they can eternally hold governments, corporations, and individuals hostage for moar bailouts as the crises continue to surface. Likewise, political power continues to be centralized with the wealth which becomes restricted to fewer hands, which explains how the fascism dial remains at eleven, no matter who is in office… The fear of collapse keeps the small players ceding more and more to sustain the new normal. In a few decades, millenials will look back on the present and remember this as “the good old days.”

      • d says:

        “Lower wages for everyone, worldwide, isn’t a bug, it’s a fundamental feature of capitalism.”


        It is a feature of a system that can not work. A globalised system, with out a globalised rule book. The result of which is, poor, labour, safety, and environmental standards, exploitation.

        Capitalism does not destroy its affluent consumer base.

        This globalised system does.

      • Cynic says:

        More of an inevitable failing of late-stage industrial civilisation, rather than (also late-stage)Capitalism as such.

        But also a sign that no one in charge fears revolution, perhaps unwisely.

        Welfare and the internet help: in the 19th and early 20th centuries, unemployed men had nothing to do except hang around in the street and get fired up by revolutionary speakers, while their children half-starved at home – that has been neutralised.

        • Wilbur58 says:


          It’s been neutralized by transportation and communication technologies.

          Business owners no longer live near labor. A Chinese wage slave doesn’t live near an American corporate master. An American call center employee, distribution center employee, manufacturing plant worker, bank teller, etc… doesn’t live at all near his/her corporate master.

          This has been enabled by transportation technologies, open borders, and electronic communications- emails and reporting.

          We would have seen the pitchforks by now, but we literally can’t. Labor doesn’t even know where to go. 100 years ago, Henry Ford was in Michigan.

          I keep harping on this, but almost no one writes about it. The profound effects of modern shipping and flight… and email/the web. Owners can completely distance themselves from labor.

        • Cynic says:

          Excellent point Wilbur, about communications and transportation: where do the revolutionary mobs head for?

          The boss no longer sits in the biggest mansion in town, over-looking his pride and joy factory.

          Domination is now formless and placeless, when once it cast a shadow right over the heads of the workers.,

  3. roddy6667 says:

    Hourly wages do not mean a lot, especially when quoted in US dollars. The workers in other countries do not get paid in dollars and they do not live in (expensive) America and spend their paychecks there. A better method would be to measure the workers’ pay as a percentage of what it takes to be middle class in their own country.
    For example, the Chinese auto worker makes $5.75 an hour. This chart is old. This pay buys a middle class lifestyle in China, measured by Western standards. This includes good working conditions, job security, health insurance, pension, all that. In other words, they get paid better than the American worker who is making $24 an hour.

    • Hiho says:

      Average salary in absolute terms does not mean a lot when trying to find out how much purchaching power different workers around the world have.

      Yet, for those companies that offshore your jobs it does mean something. 20 $ are 20 $ in Mexico and in USA. The fact that living costs in China and Mexico (eg) are far lower than in the usa is precisely the reason why you are getting deindustralized.

      One word: financialization.

    • Mike G says:

      This sounds like Thomas Friedman’s globalist-pollyanna shtick — “Don’t worry, Bangladeshi garment workers actually live well because everything costs a fraction as much there!”
      Some local goods cost less in China, while other globally traded goods like cars and appliances cost more. And the standard of living considered ‘middle-class’ varies wildly from country to country.
      Their cost of living my be somewhat lower overall, but there is no way living in China costs less than 1/4 as much as the US.

      • roddy6667 says:

        I was referring to Western standards applied equally in different countries. I am a retired American living in China. The US dollar goes about 5X as far as it does in America. $9600 US household income (not personal) gives a middle class lifestyle. People own, most of the time with no mortgage, their home, have nice furniture and clothing, eat well and dine out frequently, take vacations and travel every year, have substantial savings in the bank, and send their kids to college without loans. On $9600 a year. Yes, it is true. My wife and I (two people) have an income of less than $20,000 a year. We live very well, upper middle class, live in a high rise in a gated community, and have plenty of money left over to travel. We have not touched our savings.
        America is a VERY expensive place to live or run a company.

        • Jimmy the Grunt says:

          This is very, very far from the truth. I have spent around 6 months in Beijing twice, the first time about seven years ago and the second earlier this year.
          There is absolutely no fricking way the US dollar goes 5x further in China. This is out and out BS. I am a Briton. Comparing costs of food, consumer goods, takeaways (what Americans call take out), taxis, I would say that the costs are actually broadly similar, with some things actually more expensive in Beijing than back home. The only stuff that is cheaper is some of the stuff you buy from street vendors on dirty dusty polluted street markets.

      • roddy6667 says:

        Cars do not cost more in China. Every car company I know of (except Subaru) has a factory here. Appliances cost a LOT less. I bought a large flat-screen TV, a refrigerator, and and washing machine for less than $1000 US.

      • James Levy says:

        How is that Chinese auto worker going to buy a home? Housing costs in the big cities are 80-100 year’s salary. And how are they going to send their kid to a Western university, the absolute gold standard of upward mobility in China today, on %5.75 an hour? The American auto worker in Alabama or South Carolina can afford a house and send their kid to a solid state university. The Chinese person cannot.

        • roddy6667 says:

          You are thinking like an American, who borrows all the money they need for major purchases. The Chinese save 36% of their income and make cash purchases. Your numbers on house prices are bogus. In most Chinese cities, new housing is affordable to the blue collar citizens. A house can be bought for 20X one years income in most areas. I travel all over China. As a former Realtor, I have a keen interest in the market here. You have been reading Gloom & Doom blogs that quote Shanghai, HK, and Beijing prices as if they were the same everywhere. Families buy a house for their son when he gets married. This happens when he is about 30 years old. They save 30 years to make this purchase. They own their home outright so they have no mortgage to pay, and there is no property tax here. Also, the grandparents, who often live in the same house, will donate cash to the cause, and the kids have been working at least 8 years and they chip in. It’s not hard to do. Americans cannot comprehend this.
          As for the education thing, I can only say that you should spend time here before you start making statements on what the upwardly mobile Chinese person needs or wants. You are believing the propaganda.

      • Enrique Bermudez says:

        The cab driver I talked with in Penang the other day would beg to differ. Presumably.

      • RagnarD says:

        I’ve done a lot of overseas backpacking…Eastern Europe, South America, SE Asia, China, Turkey, India etc. And my rule of thumb is that developing countries are about 1/3 the price of the USA.

        Normal city/town USA, not expensive city USA.

        ie, Motel 6 = $45 to $60 USA, pay $15 to $20 in developing country equivalent. And this is traveling to the cool, interesting, desirable places. Sleeping and dining at relatively western standards. If you were to actually live there you could probably substantially reduce daily costs. So I don’t have a problem with the 1/4 or 1/5 #s either.

        Regards cars, there a LOT of Chinese car manufactures. I’m not sure of the quality. But you are probably not getting a Honda Accord for 1/3 to 1/5 of the USA price.

        But who cares about cars? In SE Asia you get to drive around on a cool 125cc Honda Wave motobike, like everyone else, and they cost just $1500 new or <=$1000 used. Or rent for a day for just $5.

        The USA is a great place to make good money, but relatively expensive place to live. Work and save here, retire over "there".

  4. Harold says:

    Anyone notice that despite Mexico having a population 1/3 the size of the USA and with a third world educational system somehow companies have no problem finding tons of ‘skilled labor’ that is apparently lacking in the USA.

    Gee, must be that Americans are all stupid drug using has beens! The Mexican labor force is so innately skilled that even twelve year olds can assemble cars on an assembly line!

    • MC01 says:

      Yes, it’s the same thing in many countries: companies always bemoan the lack of “skilled workers”, yet always seem rather reluctant to hire said skilled workers in their home countries.

      But here’s the incredible part: when the company starts operations in Vietnam, Mexico or another “cheaper than China” country, the aforementioned skilled labor shortages disappear as quickly as a million in the hands of a municipal council.

  5. Duane Snyder says:

    North America to me does not include Germany, South Korea, Japan, etc, yet those countries can take advantage of NAFTA and cheaply manufacture in Mexico and export to America, taking market share away from North American companies, (specifically car companies). Meanwhile they protect their domestic markets in Eurpoe and Asia. Short term it’s great for American consumers, who generally don’t care, long term the US manufacturing sector has no future and the record trade deficits will continue unabated. (It seems trade deficits don’t matter and aren’t even worth mentioning, just consume you mindless dope).

    • d says:

      “North America to me does not include Germany, South Korea, Japan, etc, yet those countries can take advantage of NAFTA and cheaply manufacture in Mexico and export to America, taking market share away from North American companies”

      thats an intelligent and important point.

      Even we could not believe that flaw and various of our exploiters set up in Mexico almost immediately Dumping workers locally their excuse was the freight was cheaper from mexico.

      To this day the admin of the Mexico operation, lives in the US. is paid in US dollars Outside the US tax system, With US rate housing allowances, and drives into mexico to work, every day.

  6. mean chicken says:

    Implement a $15 minimum wage, lol, yea, that’ll fix everything and flush the unfunded obligations and bumper crop of debt out to sea.

    I can’t believe I’ve been subjected to this level of stupidity for so long.

    • James Levy says:

      People with decent paying jobs don’t need the same level of social services (saves money), don’t commit as many crimes (saves money), and don’t get sick with debilitating diseases related to alcohol, drugs, and obesity as much (saves money). They also pay taxes. These are no small compensations and will help those deficits in the long term.

      • mean chicken says:

        We’re discussing cross-border free trade, why on earth would I pay someone $15/hr when I can hire 6 workers in an undeveloped country and enjoy no tax liability to the destination market?

        Thanks for the gift, sucker!

  7. William Smith says:

    I don’t understand. The people supplying the cheap labor can’t afford to buy the goods in their own country. The only people apparently able to afford are the ones who are gladly shipping their jobs overseas by not buying locally manufactured goods. At some stage in the job transfer operation, a tipping point will be reached where there is no market able to afford those products, and where a certain asian superpower now owns all the assets/land/bonds/farms etc as payment for their cheap crap. What happens then? Or do the oligarchs just play leap frog while methodically raping one country after another. How many countries are there and how long can they go on for I’d like to know. What is the tipping point? Can it be measured/graphed as some convoluted ratio of GDP, average wage and Trade Deficit? Maybe this whole QE smokescreen is just an attempt by the Fed criminals to hide the fact that things have already tipped over. Ponzi schemes eventually collapse don’t they? Even with a criminal sitting at the door blowing freshly printed paper into it, surely someone would notice? … someone???? … maybe??? Perhaps I’m just naive to the new ivy league “economic model.”

    • Kent says:

      The tipping point has been reached. Which is why Donald Trump was elected President (not that I’m a supporter). The people I know who voted for him didn’t do it because they thought he was sharp, they did it because they’ve seen what’s on the other side of the tipping point and wanted to send a big middle finger to the folks who got us there.

    • Kraig says:

      Exchange rates Russia has become cheaper than China due to loss in rubles value. If the wages get too high relatively governments can always use Quantitative easing and other money supply tricks to devalue their currency

  8. Felix_47 says:

    Average US auto worker is 15 dollars per hour? I was making 9 dollars per hour at Ford Mahwah (NJ) 50 years ago and build quality was in the toilet. In those days, of course, no one would dare cross a picket line. Mexico is our demographic future. Due to birth rate and migration the US will be largely of Hispanic descent. Language is not a factor. We all need to speak Spanish to deal with the US workforce today. Why not push to integrate Mexico into the US? That way US unions would have a chance to organize the Mexican (US) auto industry and strikes would mean something. We might do better introducing the rule of law….maybe. Right now the US taxpayer is getting taxed to support mothers and children without the benefit of resources and land. The southern border of Mexico is a more natural border anyway.

  9. Stevedcfc72 says:

    Please can somebody answer this question for me.

    I used to work for an automotive company in the UK who had factories in the USA also.

    What we always used to hear was the fact that there was always issues with the US factories due to the fact the works unions got involved so much.

    Is that still the case? Is the automotive industry still heavily unionised?


    • 2banana says:

      It is the main reason that nearly EVERY major auto factory open in the United States for the last 30 years has been in a “right to work” state.

    • Wolf Richter says:

      There are quite a few non-union auto plants in the US. So this statement is not applicable to all US auto plants. But in unionized plants, the union does get involved in all kinds of work-related issues.

      • Stevedcfc72 says:

        The two companies I worked for, the plants in the USA were heavily unionised. (States of Carolina and Georgia).

        I got the impression the plants in the US didn’t make much profit if any, too many issues such as unions getting involved, it was almost these global companies I worked for saying have a small presence in the US just to say they were there.

  10. Bill says:

    One reason an auto worker in Mexico may be able to afford a car is that some of the cars sold to the public there may have fewer costly accessories than those sold elsewhere in the world. Elaborate environmental controls, safety provisions (airbags and other items), and entertainment systems, among other things, are standard if not mandatory in the U.S. Imagine if some of these systems on U.S. cars were optional — how would the auto price be lower? Perhaps significantly. Years ago, probably in the 1970s, I read that Mexico would choose one model car, annually, to subsidize for the masses to broaden affordability. At that time they chose a stripped-down version of the VW bug. Mexico may still have such a policy.

    Applying this notion to other costs the Mexican worker and his or her family may face in daily life, I thus suspect the Mexican worker’s standard of living may effectively be higher than some may assume.

    • MC01 says:

      Actually the whole affordability issue is mired in the infinite factors of labyrithine Mexican politics.
      The Volkswagen Type 1 was selected by the Distrito Federal in 1971 to be the standard taxi used in Mexico City. It was probably some sort of compensation for VAG after the Tenencia Vehicular (car ownership tax) was introduced in 1963 to ostensibly pay for the 1968 Summer Olympics and the 1970 Football World Cup, resulting in declining sales throughout Mexico.
      In 1989 VAG and the federal Mexican government struck another deal: in return for tax credits, VAG would substially cut the price of the Type 1, now called Sedan, and work towards reducing emissions, for example by introducing a catalytic converter in 1991 and electronic fuel injection in 1993.
      To cut the price the way it did, VAG cut corners, for example by using many of the cheaper components it was already using on Brazilian-made Type 1’s. There was a further cheapening in build quality in 1996, in the aftermath of the Tequila Crisis, which Mexican drivers did not take kindly: sales of the Sedan dropped dramatically, both as a result of worsening economic conditions and of better alternatives, far more modern cars available at a cost only slightly higher than a Sedan, such as the Chevrolet Pop (based on the Spanish-made Opel Astra).

      The final blow came in 2002 when the DF prohibited the issuance of taxi medallions to two-doors cars, a decision which favored Nissan so much suspects of shady dealings surfaced.
      VAG termianted Sedan production in 2003, with many of the final production cars being auctioned off to collectors around the world and the very final unit being sent at its ancestral home in Wolfsburg.

      • d says:

        The BIGGEST cost in the production of a car, is ,ENERGY.

        The larges consumer of energy, is, welding.

        Hence cars made in Brazil and Mexico among other places, not for use in the US or Euro Markets, have MUCH WEAKER, and many less, welds in them.

        Crash-testing, and road death numbers in South America, Mexico, india, china Ect prove this.

        In the US, Japan, and Europe, you cant not make and export these D grade, safety standard cars, in Brazil, Mexico, china, and india, you can.

        Labour is an insignificant cost in Auto manufacture.

        The real costs are Energy, Garbage disposal, Worker safety standards, Workplace conditions, Plant emissions, land. All the places Auto manufacturers gravitate to.

        Supply cheap (DIRTY) energy. Have low/NO environmental standards, no Garbage disposal regulations, and no worker safety regulations, of any consequence. AND they dont forbid the manufacture of D grade safety standard cars, for local use, or export.

        Keeping the spotlight on Labour costs. Keeps the debate, WELL AWAY, from the real reasons, the companies, go to these places

    • Dale says:

      Are they still using OBD1 environmental controls in the cars in Mexico?

      In the USA we’re now using OBD2 (why check engine lights come on so often today vs years ago.). OBD1 cars were very cheap and easy to repair. A very good reason to buy a Mexican car.

  11. Mike Earussi says:

    It is not in the best interest of the U.S. for Mexico to become a failed state, which it’s very close to becoming in many ways. It is much better for U.S. and other foreign companies to move to Mexico than to China or India because it helps to financially stabilize the U.S.’s southern border country. Also the more jobs available in Mexico the less pressure on Mexicans to come to the U.S. in search of jobs. Plus Mexicans buy a lot of U.S. exports, so the more money they make the more from the U.S. they can buy.

    Mexican bashing accomplishes nothing except to further alienate them from the U.S. The U.S. has a huge border with them so it is much better to have them as friends than as enemies.

  12. GSH says:

    What border? The West Coast is a wide-open sanctuary. Most small towns in rural CA, OR, WA have long been taken over by Mexicans. It used to be seasonal migration of farm workers, now they just stay permanently. It is a form of slave labor. No American could afford to work in the fields at the hourly wage/lack of benefits paid to the migrants.

  13. Automation is the cause of declining wages in manufacturing. Jobs leave America because the skills and education level is much lower than it used to be. The study of Scientific Management should make it clear this was corporate strategy all along. Workers own the intellectual rights to robotic manufacturing, and therefore need not grovel, or unionize, or take arms. They only need demand a royalty. The corporate overlords are using their skills against them.

    • Beard681 says:

      As a percentage the number of workers with college degrees is higher than ever. Automation increases output, quality and is required to produce the level of production consumers will pay for and does not reduce overall employment. Look at countries with highly automated production like Germany and Japan and they have high manufacturing employment levels. Water wheels, electricity, mechanization and a host of other capital improvements improved productivity to a much greater extent than automation.

  14. George McDuffee says:

    At the core, the NAFTA controversy appears to be due to differences in accounting practices and views of the “economy.”

    On one side we have the silo or enterprise model, which externalizes as much of their costs, including labor, as possible, and national benefits/GDP is assumed to be the sum total of their “profits.”

    On the other side, and IMNSHO the correct more correct valuation, we have the holistic or aggregate model, which nets out total costs against total profits.

    For example, while NAFTA or the other trade pacts may indeed “create” 50,000 jobs due to “exports,” if it also “destroys” or “exports” 100,000 jobs and exacerbates the current account trade deficit by billions due to “imports.” While enterprise accounting will proudly proclaim the addition of 50,000 new jobs and considerable business profits, the net or aggregate result is a 50,000 job loss and a massive and growing trade imbalance.

  15. Eric says:

    Wolfgang Streek has considered the tension between those who and those who have not in western societies.

    “Democracy was always a problem in a capitalist society. There’s an enormous inherent tension between the two. Democracy is inherently egalitarian because every citizen has one vote. And the rich also have one vote but the rich are only five percent. Whereas in the market, every dollar has a vote. And the capitalist economy in particular functions according to — I think it’s [the Gospel of] Matthew — where it says he who has will be given [more]. And he who has [little] will have even what he has taken away…

    And where you have capitalism and democracy at the same time, you have a contest between these two principles of distribution: egalitarian versus inegalitarian. This is why democratic politics have always tried to intervene in the markets and tried to contain the “Matthew effect”. You can also call it cumulative advantage if you want a more elevated term.”

  16. Dan says:

    A quickly evolving technology – 3D printing – will totally change both the relationship between workers corporations and consumers. As the tech improves from making expensive parts to common durables, the need for employees in manufacturing, logistics and distribution will be cut drastically as will wages. The cost savings for corporations will also transfer to consumers as they will adopt the same technology foregoing purchasing what corps sell.
    3D printing is a game changer for both corporations and consumers.

    iN THE END consumers will still make what they need without the need for MANY businesses.

    • Beard681 says:

      LOL. What hype. You can already design anything you want in a 3-D program, export a file and have it sent out to be either CNC machined or 3-D printed. (Why would you own a machine that you use occasionally versus renting time on another machine.) It will never be cheaper or better than a mass produced product with good old stamped, forged, machined, sintered or cast parts (as appropriate to the application).

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