Mexican Economy One of the Term Paper

  • Length: 8 pages
  • Sources: 8
  • Subject: Economics
  • Type: Term Paper
  • Paper: #11173428

Excerpt from Term Paper :

Faux finds that this promise has not been fulfilled, in part because of what NAFTA does not do:

NAFTA provided no social contract. It offered neither aid for Mexico nor labor, health or environmental standards. The agreement protected corporate investors; everyone else was on his or her own. (Faux 35)

For Mexico in particular, says Faux, NAFTA has been a failure, and the economy still depends too heavily on the remittances sent back into Mexico by immigrants in the United States, both legal and illegal, to support their families.

The economic disparity between the U.S. And Mexico has become a way for some American companies to exploit workers in Mexico by building factories along the border to benefit from lower wages. This helps Mexican workers to a degree, though it does not do so in a way that raises the standard of living in that country or that keeps many Mexican workers at home when they can make more money working in the United States itself, even for more menial work. In an analysis of the developing globla economy, William Greider shows how the global economy ties countries together so that a ripple effect has more and more power. Various world crises show how countries are tied together in ways that may not be perceived until there is a crisis. The growth in the global economy has been touted as a major boon to smaller countries and countries on the economic margins, but Greider also finds that here, again, the way these countries are tied to the system has produced a return to what he calls "the old barbarisms that had long ago been forbidden by law" (341), by which he means poor working conditions for third-world workers. He finds two reasons -- profits, and more vitally, the quest for and abuse of power: "Firms behaved this way because they could, because nobody would stop them" 341). The very structure of the global economy has been such as to drive down the prices paid for human labor, which creates a situation where abuse is not only possible but quite likely.

Of course, there have been other forces at work in Mexico that have contributed to the movement north and also to the inability of the Mexican government to improve the Mexican economy sufficiently. The long rule of the PRI created a habit of corruption and incompetence that has been hard to break, and the change in political parties after more than 70 years of one-party rule has been a challenge that has not been fully met as yet. Mexico is a democracy, but it is not a strong democracy and is given to repressive measures from time to time. The drug traffic from Mexico to the United States also increases tensions along the border and endangers many immigrants as well. The economic incentives for illegal immigration are simply too great to be overcome with the measures in place to date, and overcoming this problem will require much more economic development in Mexico than has been achieved so far. As helpful as the oil discovery in Mexico has been, it has not done enough for the poor even as it enriches the elite and the government itself.

From the start of the NAFTA debate, analysts noted that the globalization of industry and related changes were having a profound effect on the U.S. labor force, which must contend with increased quotas, reduced union power, job flight, high unemployment, and other issues related to international competition and its effects on U.S. manufacturing. These same forces are having some effect on labor in other countries as well. With reference to NAFTA, it is believed that each government has sought to maximize employment in is own region without unduly antagonizing the other patterns. The American concern is that NAFTA will only increase job flight to Mexico. The door was opened in the first place when Mexico liberalized export restrictions, and though it is denied by U.S. companies taking advantage of it, the main attraction is clearly cheap labor. There are plenty of such workers in Mexico, the pay and benefits are low, and by U.S. standards the regulatory environment is lax. A survey shows that U.S. companies in Mexico have been even more assiduous than Mexican companies in keeping labor cheap. The reverse concern is that while jobs are moving south, worker are moving north looking in some cases for the same jobs that are being exported to other parts of the world as a cost-saving measure. The fact that illegal immigration has not stopped or even slowed suggests that either the salaries in Mexico are too low for these new jobs or there are not yet enough of them to make a difference. Correcting this might thus necessitate sending even more jobs south, which American workers certainly oppose, or raising the pay in Mexico, which is opposed by business because that is why they moved there in the first place.

Indeed, much of this problem was foreseen by opponents of NAFTA in the 1990s. they noted then that labor has had an important role in Mexican politics for a long time. Traditional free-market thinking as embodied in NAFTA holds that job growth in Mexico makes for a more prosperous region while slowing migration to the north. Increased prosperity in Mexico will be accompanied by an increased appetite for North American goods and so will also preserve high-wage jobs in the United States. Opponents, however, claimed that an unlevel playing field is created by Mexico's industrial policy because the government holds down salaries and keeps a tight grip on unions so that Mexico will attract jobs under NAFTA as U.S. companies move plants south of the border. Because wages are held down, Mexican workers will not be able to afford to buy even what they make (Baker, Smith, and Weiner 86). This situation was clear before NAFTA and has not changed significantly since so that the economic imbalance between the two countries remains.

Mexico is a very unequal society in terms of income distribution, with many poor people who are very poor compared to the smaller wealthy class. The upper class is tiny, with a much broader middle class of merchants and professionals. The different social classes have very different lifestyles. Politics is the most conspicuous means of social mobility. One difference noted between Mexico and the developed world is the fact that many Mexicans lack formal paying jobs and are instead part of an informal economy in which they are self-employed in tiny businesses where they and family members work without wages. Perhaps as much as a quarter of the population is so employed. There is also a wide gulf between the rural and urban regions of Mexico, with rural poverty affecting more than half of those who live in the countryside. This has also contributed to the emigration of the population to urban centers, where poverty increases as more and more people vie for the same number of jobs. Racial differences are also noted in Mexican society, which began as a caste society, though the latter has been rejected. Racial inequalities persist even though the government has sought to minimize race consciousness. The Indian population is much affected by poverty and discrimination. Rural Indians are affected twice so that they tend to be deeper in poverty and more involved in subsistence farming. They also tend to be more tied to the land and to value those ties (Schneider and Silverman 86-95). Addressing all of these issues is necessary if Mexico is to improve its economy enough to keep more of its population home and to raise the standard of living for the population.

Works Cited

Faux, Jeff. "How NAFTA Failed Mexico: Immigration Is Not a Development Policy." The American Prospect, Volume 14, Issue 7 (July-August 2003), 35.

Fitzgerald, David. "Nationality and Migration in Modern Mexico." Journal of Ethnic and Migration Studies, Volume 31, Issue 1 (2005), 171.

Greider, William. One World, Ready or Not. New york: Simon and Schuster, 1997.

Baker, S., G. Smith, & E. Weiner.

NAFTA: The 'side agreements' take center stage." Business Week (19 April 1993), 84-92.

Castaneda, J.G. & C. Heredia "The Wrong Free-trade Deal?" World Press Review (March, 1993),14-17.

Castaneda, J.G. "Can NAFTA Change Mexico?" Foreign Affairs (September/October 1993). 66-80.

Maxfield, S. "International Economic Opening and Government-Business Relations." In Wayne a. Cornelius, Judith Gentleman, and Peter H. Smith. Mexico's Alternative Political Futures, 1990, 215-236.

Mexico Factfile." Geographical Vol. 72 (April 2000), 58..

Robinson, Linda and Dabrowski, Andrea. "Reaching to the South." U.S. News & World…

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