April 25, 2006

BETTER THEM THAN THE FRENCH (via Tom Morin):

Time for a Tex-Mex Marshall Plan (Steven Hill, April 23, 2006, Washington Post)

Two years ago, the European Union admitted 10 new members. Like Mexico, all of these nations were poor, some of them fairly backward and most recently ravaged by war and communist dictatorship.

To deal with the situation, the leaders of the European Union wisely created policies for fostering regional economic and political integration that make efforts such as the North American Free Trade Agreement "look timid and halfhearted by comparison," according to Bernd Westphal, consul general of Germany.

Europe realized it had to prevent a "giant sucking sound" of businesses and jobs relocating from the 15 wealthier nations to the 10 poorer ones. It also had to foster prosperity and the spread of a middle class in these emerging economies and prevent an influx of poor workers to the richer nations.

So for starters it gave the new states massive subsidies -- billions of dollars' worth -- to help construct schools, roads, telecommunications and housing, thus making these nations more attractive for business investment. [...]

This bold yet carefully planned E.U. approach suggests the direction that policy between the United States and Mexico should take. Increasingly the demands of the global economy will push North American regional integration out of the realm of a shadow economy and flawed free trade agreement. But what might such an American-Mexican union look like?

It would start with massive subsidies from the United States to Mexico, a Tex-Mex Marshall Plan, with the goal of decreasing disparities on the Mexican side of the border and fostering a climate riper for investment. This would create more jobs in Mexico and foster a middle class, homeownership and better schools, roads and health care. Fewer Mexicans would then want to emigrate north. Instead, they'd stay home, becoming consumers of U.S. products.


Though he's often praised for it, Bill Clinton's failure to extract significant reforms from Mexico as a condition of propping up the peso was a terrible mistake.

Of course, we essentially funnel them billions in aid already, THE SILENT GLOBALIZATION OF REMITTANCES (Richard Reeves Mon Apr 24, 2006, Yahoo)

More than 20 million Latin American and Caribbean citizens living abroad sent home an average of $2,500 each last year, according to Business Week magazine. The total sent was $52 billion, an increase of almost 10 percent over 2004.

This is how it works, according to Geri Smith of that magazine, who chronicled the life of a young Mexican husband and wife who left $4.25-an-hour work in the fields of California to work in a pork-packaging plant in Iowa: "They each earn $12 an hour now, and after income taxes and
Social Security are withheld -- yes, they do pay U.S. taxes -- they clear about $3,500 a month. That's nearly 10 times what they could earn in Mexico, and it's enough to buy a used two-bedroom trailer and a 1998 pickup truck to cart their two preschool children around town. Once a month, he wires $250 to his 50-year-old mother in Mexico City."

A former Washington Post reporter, Robert Suro, added this in a foundation-funded study a few years ago: "During the course of the summer in Los Angeles, Esteban did everything, including painting, landscaping, loading and unloading trucks at garment district warehouses. The pay was always close to the minimum wage and always in cash. Esteban figured that he wired home (to Mexico) between $150 and $250 a week. Housing was a blanket on the floor of a church-run shelter. All his belongings fit into a small gym bag. 'On Saturday,' he said, 'I send back whatever I have and keep $5 for myself.'"

Officials of the IMF and many government economists argue that private consumption is less efficient than planned development. Maybe, but private consumption is the American way, and is also a way to make America more secure. Without remittances, the world, and particularly North America, would be a more dangerous place. It is not in the interest of a rich country such as the United States to have even more poor and desperate people living just across its southern border. Legal or illegal, those remittances make Mexico and Central America more stable and the United States more safe.

Posted by Orrin Judd at April 25, 2006 12:06 PM
Comments

Anyone who says "private consumption is less efficient than planned development" should be disregarded as a serious thinker.

Absent the need for a limited government protecting the rule of law, the entire proposition is absurd on its face.

Posted by: Bruno at April 25, 2006 12:35 PM

Reading these two pieces together presents a simple juxtaposition of worldviews that work and don't work.

Letting billions be sent to individuals is so much more efficient (as well as morally superior) than providing a corrupt government with OUR taxpayers' dollars that one wonders how anyone can even argue for the latter.

Posted by: Bruno at April 25, 2006 12:45 PM

They're hardly mutually exclusive.

Posted by: oj at April 25, 2006 12:49 PM

Improving the skill level of workers in Mexico is a key here. While the maquildora system created many factories just across the border for products to be exported to the U.S., with the current skills level, you can only raise the salaries so much before those factories become cost ineffective compared with plants in China or other countries with low-cost labor in Asia and elsewhere.

Posted by: John at April 25, 2006 1:02 PM

This might work if Mexico was a much less corrupt society.

Posted by: Ali Choudhury at April 25, 2006 1:13 PM

Finish what Polk started in '48 and annex the rest of the parts we should have grabbed back then. Turn those areas into territories on the road to statehood. Take what's left in the south and establish protectorate Commonwealths like Puerto Rico. Add Cuba to the latter list as soon as possible, as well as any Central American country that wants in.

The best benefit would be to apply American law equally in the whole area,with the end result that the more corrupt will be heading south to more friendly climes, while the poor will have less incentive to migrate just to escape poverty imposed from above.

Posted by: Raoul Ortega at April 25, 2006 1:45 PM

Leaving aside the negative effects on our own economy for a moment, building a wall, shutting down remittances, and shoving 10 million angry people back into Mexico would create a powderkeg that the rulers (and ruling class) of Mexico richly deserve to have go off in their faces.

If it weren't for the human suffering of those who don't deserve it, it would be good policy.

Posted by: Bruno at April 25, 2006 2:01 PM

Why is Mexico so poor? Mexico is similar in natural resources to the U.S. Like us, they too have mile after mile of glorious sea coasts, high snow-capped mountains and great plains. In addition, they have mucho oil to spare bringing in large revenues. The Mexican people are hard working and devoted to their families and unlike the eastern European countries to which it is being compared in the articles above, Mexico has not been a victim of decades of Communist oppression, but has been a free country for lo these many years.

Yes, their government is socialist and corrupt, but even so, ordinary citizens having learned how to be prosperous from their sojourns into the U.S. should be able to transform their home villages and develop a middle class which in turn will elect a government that is responsive to their needs.

So why then should U.S. taxpayers be asked to fund programs to help Mexico develop a middle class?

Posted by: erp at April 25, 2006 2:40 PM

erp;

Because they're going to be our fellow citizens, one way of another.

Posted by: oj at April 25, 2006 2:47 PM

erp

Some would say the answer to your question is here Though of course I would never suggest such a thing

Posted by: h-man at April 25, 2006 3:10 PM

"Officials of the IMF and many government economists argue that private consumption is less efficient than planned development." So why did the Soviet Union disintegrate? Why did the Chinese Communists abandon their five-years plans? Why haven't the EU economies thrived on their Lisbon plan? These officials are so full of it, full of self importance that they can decide what is good for the people better than the people can decide what's good for themselves.

Posted by: ic at April 25, 2006 3:10 PM

It takes more than spending money. If Poles and Czechs and Hungarians are not all leaving for the west, it is because their economies are growing - live is getting a little better every day. EU payments are only a small part of it and I bet they come with expensive EU regulations attached.

Compare with formerly communist East Germany. They are objectively wealthier than Poles. They got massive investment in infrastructure, similar wage levels and the same social safety net as in the west. But despite this enormous transfer of money, certain areas are almost emptied of young people. They are moving west because there are no jobs - the country is standing still.

Most people generally do not leave their home because of a few bucks more. They leave because they see no way at all of bettering themselves.

Posted by: wf at April 25, 2006 3:25 PM

wf:

Yes, you have to use the money to buy reform.

Posted by: oj at April 25, 2006 4:58 PM

Unfortunately aid alone is not enough, and perhaps not even really necessary. The real test of EU economic aid is not the new members inducted 2 years ago, but the older cases.

The Mezzogiorno (Southern Italy) is still a basketcase despite a lot of aid and the example of Northern Italy (which really is a top rate economy). The Greek economy remains tepid. Spain, and to a lesser extent Portugal, have done alright, but nothing spectacular - certainly not in comparison to the Asian Tigers. The real success story is Ireland, and the root of their success is abandoning the old socialist ways in the past 10 years - not the aid they received over 30.

Same way for those countries in Eastern Europe which have received almost no aid, but have embarked on Thatcherite reforms.

If Mexico did the same, they'd be similarly successful. But despite efforts in that direction by Salinas and Zedillo, Mexico has not gone far enough and remains far too corrupt.

Of course, that's just being too Anglo for some I guess.

Posted by: Chris Durnell at April 25, 2006 7:28 PM

It's not the money at all, just buying reforms. That's why the Marshall Plan failed--we enabled them not to reform.

Posted by: oj at April 25, 2006 7:33 PM

oj, do you seriously believe frankenreich -- after 1000 years -- is finally ready to admit the anglo-saxon way is right?

They prefer to sell what's left of their souls to islamofascism to see that not happen.

Posted by: Sandy P at April 25, 2006 10:08 PM

Sandy:

They would have in '45, but we enabled them to rebuild as socialist states.

Posted by: oj at April 25, 2006 10:20 PM

Heck, OJ, according to some books I've read, we Demanded they rebuild as socialist states, so as to insure that the Nazis couldn't return! State has been broken for a lot time.....

Posted by: Robert Mitchell Jr. at April 25, 2006 11:57 PM

It wasn't just State then.

Posted by: oj at April 26, 2006 12:00 AM

Thanks for your time OJ. From what I've read, State had a lot more respect and status during and after WWII, and was driving. What do you recommend I read to get caught up?

Posted by: Robert Mitchell Jr. at April 26, 2006 12:11 AM

No one mattered under FDR, but Truman did revere Marshall. The important thing is that both of those presidents believed in the social welfare state.

Posted by: oj at April 26, 2006 7:35 AM
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