IT’S fascinating watching pols say how they’re going to rescue the “rust belt” regions where jobs are disappearing and companies are shutting down or moving elsewhere.
The North American Free Trade Agreement is being blamed. In fact, “free lunches” are a big part of the reason once-prosperous regions declined into rust belts.
When the American automobile industry was the world’s leader in its field, many seemed to think that labor unions could transfer a bigger chunk of that prosperity to its members without causing economic repercussions.
Toyota, Honda and others who took away more and more of the Big Three automakers’ market share, leading to huge job losses in Detroit, proved once again the old trite saying that there is no free lunch.
While US automakers are laying off thousands, Japanese automakers are hiring thousands of American workers. But they’re not hiring them in the rust belts.
They’re avoiding the rust belts, just as domestic businesses are avoiding the high costs that have been piled on over the years by both unions and governments in the rust-belt regions.
The people who lose their jobs, and who live in communities that decline, need to look beyond the political rhetoric to the grim reality that there is no free lunch.
Where does NAFTA come into the picture?
International trade is just one of the many ways in which the competition of lower-cost producers can cause higher-cost producers to lose customers and jobs. Technological improvements or better management practices by domestic competitors can have the same result.
Jobs are always disappearing. But why aren’t new jobs replacing them? Because rust-belt policies that drove out old jobs also keep out new jobs.
NAFTA makes it easier for politicians to blame the problem on foreigners. In fact, foreigners make ideal scapegoats for politicians. After all, people in Japan or India can’t vote in American elections.
Americans who can vote would do well to start spending more time thinking about economic realities, instead of being swept away by rhetoric.