Since 2000 the United States has lost 5,500,000 manufacturing jobs, most of them paying middle class wages. We've also lost countless jobs for people who used to support those workers in those factories.
2,700,000 of those manufacturing jobs went to China, as our trade deficit went from $84 million in 2000 (before our trade agreement) to $315 billion in 2012. That subtracts around 3% from our GDP annually.
Imagine for a moment those manufacturing jobs never left. The political debate wouldn't be about deficits, or unemployment extensions, or bankrupt cities, because none of that would be happening.
I've started to see a lot of serious people talking about how technology is destroying middle class jobs.
No one is doubting that technology has destroyed some jobs. Probably a lot more jobs than it has created.
However, this is just a distraction.
Those who are pushing this false meme want us to blame our economic problems on forces that can't be stopped and shouldn't be stopped, like technology.
It's also distracts us by focusing on a minor reason for job loss, rather than addressing the major reason for job loss.
The truth is very different.
Our middle class has been gutted by design and purpose, for short-term gains by an international elite through trade agreements with 3rd world nations.
The truth is that free trade agreements are, at best, a non-issue when it comes to trade and economic growth. What free trade agreements do best, and this is true all over the world, is transfer wealth from the working class to the wealthy.
NAFTA and FTAs
January 1 was the 20th Anniversary of NAFTA, the last time the country ever had an honest public debate about the merits of free trade agreements.
Since then our government has signed free trade agreements with 18 more countries without any real debate.
It's interesting to hear Perot point out how health care was the largest cost in manufacturing. That was in 1992. Health care costs are much higher now.
It's safe to say that our political inability to reform health care was the reason for manufacturing to leave, while the trade agreements opened the door for them.
First of all, we have to get past the term "free trade". It isn't simply an agreement to not put restrictions on trade between countries. If that was the case then it would only take one page.
As Perot said, NAFTA was a 2,000 page agreement. As for the proposed Trans-Pacific Partnership (TPP), just the intellectual-property chapter is 30,000 words. In fact only a small part of these FTAs are about "trade". Most of the agreements concern “investor rights.”
These trade agreements are consistently written by a select group of transnational corporations with no allegiance to this country or its people.
"Should job exports continue apace, the U.S. will be a Third World country in 20 years."
- Paul Craig Roberts, 1999
Despite predictions that NAFTA would create 170,000 American jobs in just the first two years, Congress set up the NAFTA-TAA (Trade Adjustment Assistance) program for displaced workers. Between 1994 and 2002, 525,094 specific U.S. workers were certified for assitance under this program. Because the program only applied to certain industries, only a small fraction of the total job losses were covered by this program.
The Economic Policy Institute (EPI) estimates that as of 2010, 682,900 U.S. jobs have been lost due to NAFTA. That's net jobs, taking into account jobs that NAFTA created.
Government data clearly shows manufacturers fired American workers in order to move factories to Mexico.
Public polls show Americans are overwhelmingly against free trade agreements. This is true for Republicans, Democrats and Independents, and yet politicians keep trying to sell us FTAs.
The betrayal of politicians is completely bipartisan. NAFTA was negotiated by Reagan and Bush I, but pushed through Congress by Clinton. Most of the FTAs since then were pushed through by Bush II and Republicans in Congress, but the new TPP is being supported by Obama.
"Outsourcing is just a new way of doing international trade."
- N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors
I'm not even going to bother going over the fact that FTAs prevent nations from protecting its citizens with environmental and consumer protection laws.
What's more, NAFTA job losses are skewed towards high-paying jobs.
Since 1979, the real wage structure of our economy has moved significantly downward, as increasingly more workers have slipped into lower income brackets. NAFTA contributes to this trend: while only 21% of jobs in the 1989 economy were in the high-wage bracket, 23% of the jobs eliminated by NAFTA trade fall in that category. In contrast, the low-wage bracket represented 36% of 1989 jobs but only 32% of NAFTA casualties.And it wasn't just the wages of Americans that fell. The wages of manufacturing workers in Mexico have done nothing but go down in relative terms. In 1993, Mexican hourly compensation costs for production workers in manufacturing were 14.5% of those for their counterparts in the United States. By 2001 they had fallen to 11.5% of U.S. costs.
Over one million Mexican campesino farmers were driven out of business because of NAFTA. They likely became part of the 300% increase in illegal imigration since 1993.
To measure this another way, trade deficits with free-trade agreement partners has increased $144 Billion since FTAs were implemented. Meanwhile, trade deficits with non-FTA partners has shrunk by $55 Billion since 2006.
Over the past decade, export growth to non-FTA partners has grown 38% faster than export growth to FTA partners.
In other words, the only trade that FTAs help are imports into the United States.
Some will point out that we don't have an FTA with China. That is true. However, China's entry into the WTO in 2001 gave it quota-free access to U.S. markets, combined with granting China Most-Favored (Trading) Nation status, which gave it nearly tariff free trade.
A study by the U. S.-China Economic and Security Review Commission (USCC) on North Carolina showed how China's enhanced trade status completely destroyed North Carolina's textile industry, and how most of the workers never recovered even years later.
Quick History of America and Free Trade
"Jesus Christ is Free Trade, and Free Trade is Jesus Christ."
- Dr. Robert Browning
The High Priests of Economics tell us that "globalization cannot be stopped," much like the wrath of the Inca's Volcano God. We've been told that there is no alternative to neoliberal globalization other than utter ruin.
First of all it is important to understand that historically free trade is the exception and protectionism the rule. Before 1846, and for all of the history of western civilization the entire world trade system was based on mercantilism, where every nation tried to gain trade surpluses with tariffs.
Starting with Britain repealing the Corn Law in 1846, Europe shifted towards free trade. By 1892, most of Europe had abandoned this first experiment with free trade. So what effect did these free trade laws have?
|Annual growth rate of economic sectors of europe|
|British Liberalism 1846-1860||6.0%||1.5%|
|Europe Liberalism 1860-1879||3.8%||1.7%|
|Shift to Protectionism 1879-1892||2.9%||1.2%|
As you can see, economic growth was actually stronger after protectionism was put into place.
But what does this mean for America, which had the highest trade barriers in the western world during the Industrial Revolution?
The American System: The blueprint for prosperity
Most Americans aren't aware that America once had a national economic plan, and it existed from the days of President Lincoln to President Nixon in one form or another. During that 112 year period America grew from an agrarian, frontier nation, to the most mighty economic power the world had ever seen.
The roots of the American School of Economics go back to Alexander Hamilton, Friedrich List, and Henry Clay of the Whig Party.
The American School of Economics was far different from the dominant economic thought of today.
The key components of the American School directly confront, deny and refute the economic imperialism that the so-called "Free Trade" school championed then by England and imposed by means mostly foul upon Europe over the years. It rejects free trade by imposing a system of duties, tariffs and other measures designed to defend the nation against economic threats by foreign predators. It uses government-directed spending projects meant to provide the infrastructure necessary for individuals to develop into the highly-educated and highly-trained people capable of being the ambitious and enterprising productive people we are famous for being. It chartered a national bank, owned wholly by the government, that administered the lines of credit necessary to get all of this done and otherwise oversaw the monetary policy of the state- and thus remained utterly accountable to the people by way of Congress and the Presidency.
The American School of Economics also involved government support for the development of science and a public school system. Through this economic philosophy America set the standard in manufacturing, higher education, scientific research and development, finance, and general standard of living.
So what happened? Under President Nixon the decision was made to remove protective trade barrier and go to a Free Trade model in 1973.
According to The Myth of Free Trade by Dr. Ravi Batra:
"Before 1973, the U.S. economy was more or less closed and self-reliant, so that efficiency gains in industry generated only a modest price fall, and real earnings soared for all Americans....Moreover, it turns out that 1973 was the first year in its entire history when the United States became an open economy with free trade.Trade barriers had been dropped a great deal under FDR, but they still existed for important industries all through the 1950's and 1960's. Also, where tariffs were dropped, a system of subsidies were put in place, while infrastructure spending was accelerated. This hybrid version of the American System ended with President Nixon.
"Since 1973 and free trade, the link between real wages and productivity was severed, where its commitment to free trade soared faster than domestic economic activity....Free trade skews the real value of manufactured goods, through cheaper foreign labor or weaker foreign currencies in relative prices, despite increased productivity and innovation, in turn creating a shrinking consumer base."
One last thing that must be mentioned is the mythical Smoot-Hawley Moment. Passed in 1930, it supposedly made the Great Depression worse. At least that is what the globalists tell us today.
In truth is that Smoot-Hawley was a non-event. Total U.S. trade at the time was far less than 1% of GDP.
As economist Michael Hudson points out in his book Super Imperialism what was actually crushing world trade at the time was WWI debts. Specifically, the debts our allies owed to Wall Street banks.
To give an example, England and France defaulted on the debts they owed America before Germany defaulted on the debts it owed England and France.
The good news is that we know exactly what needs to be done to put our economy back on track - we need to raise tariffs to protect industries critical to our national security. That way the most productive workers in the world will reap the benefits of their labor, rather than the multinational corporations reaping all the benefits from the cheapest labor.
The bad news is that the elites who control our government don't want that to happen. They are making too much money from gutting the remains of our middle class.
"[They say] if you had not had the Protective Tariff things would be a little cheaper. Well, whether a thing is cheap or dear depends upon what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer. Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man."
- President William McKinley