Tuesday, November 22, 2016

The truth? . . . NAFTA gutted the economic base of the rural Southeast Posted by Richard Thornton

This all needs to be said.  There was never anything wrong with the core concept of free trade.  It happens to be a natural development for the USA and Canada and also all of Europe generally.  The short term costs of free trade are directly offset by increasing markets and increasing investment.  It is really no different that moving an auto factory from Union town Detroit to Georgia.  This naturally counters shifting economic condition in one region that are not sustainable.
What has to be understood though is that replacement jobs need to be readily available.
What has happened instead is that we are actually going too far too fast.  The cost of producing those replacement jobs has been ducked by the political class and by the companies. worse than that hte Chinese in particular has engaged in predatory trade practices as well in an effort to keep their over built industry alive. Thus we are returning to the need for supply management as a temporary measure to protect sectors so threatened.
Please note my use of the word temporary.  Many such systems are easily imagined but all need to have a decay program put in place provided all competing parties cooperate.  By this i mean that a counter tariff is imposed blocking say Chinese steel, but it decays at say five percent per year.  This stops immediate dumping but still informs the market to adjust for future competition.  usually other markets resolve the whole issue by the time the tariff dies.
That worked very well with NAFTA and in Canada's case, it drove serious and beneficial changes long overdue though we are in the same boat as the rust belt as far as auto manufacturing is concerned.  There the problem happens to be unnaturally low wages in Mexico also held back by Chinese competition.
Had it only been NAFTA behind a Tariff wall Mexico and the South East would be booming today. There is also something called too much of a good thing too soon.....  

The truth? . . . NAFTA gutted the economic base of the rural Southeast

Posted by Richard Thornton | Nov 9, 2016

It has been quite obvious to many “regular folks” that the national leaders of this country have become completely out of touch with the impacts of their actions on the regular folks. The North American Free Trade Agreement (NAFTA) was a contentious issue in the Democratic Presidential Primary and the national Presidential Elections. Personally, I was outraged by some of the ignorant statements made about the impact of NAFTA by national TV network talking heads, based in New York City, but because it was a intra-party and then a partisan political issue, I stayed silent until after the election. This is an issue that directly affects most of our readers. You should speak up, if Congress agrees to revamp this treaty and consider ratification of a similar treaty with nations in the Pacific Basin.

Most Southeastern Native Americans either live in small towns or rural areas. We like to take daily walks in the woods. Therefore, NAFTA has had a disproportionately negative impact on Southeastern Native Americans and, in fact, has been the major cause of serious socioeconomic problems in the rural Southeast. In general, the national government’s trade agreements with other nations has made it very difficult for Native American tribes throughout the United States to attract industries to their reservations. In many cases, industries that were on reservations, closed their doors and moved to Mexico, Haiti or China.

Editorial Opinion

Andrews, North Carolina: It’s 6:00 PM on a Saturday night in the fall leaf season in the Western North Carolina Mountains. The streets of Andrews are dark and deserted. It almost seems to be a ghost town. There are three cars parked at the McDonalds. Several of the once thriving restaurants have closed. There are two cars in front of the Chinese restaurant and about a dozen in front of a new restaurant that opened about a year ago when the Cherokee Casino opened. Most of the motels have gone out of business, but one near the four lane highway has three cars parked in front and no lights on in the office. Down the highway is a dark void, where once a textile mill hummed with activity. When open, it was the economic foundation of the community. Stores that go out of business leave empty shells. The massive indoor Andrews Flea Market was once a regional tourist attraction that featured live blue grass bands. It closed about two years ago.

Most young people leave the Andrews and Murphy, NC area after high school. Few decent jobs are available within driving distance and about the only job for a new college graduate is being a school teacher. There have been very few, if any, positive changes to this community since the year 2000.

Twenty years ago, on a Saturday night during leaf season, the streets of Andrews would have been packed with tourists’ cars and the motels completely filled with guests. After their economic vitality began declining starkly, the citizens of Andrews were promised that when the Cherokees built a casino down the highway, it would be boom times for everyone. Many businesses held on by borrowing money to stay afloat in anticipation of better things to come. The State of North Carolina planned grandiose landscaping and transportation improvements to the region around Andrews and nearby towns of Murphy and Robbinsville . . . in anticipation of the vast increase in tourism for the region because of this casino.

Groups of investors from Charlotte, Raleigh and Atlanta bought up land in and around Andrews, anticipating the boom. At least a dozen Native American burial mounds were bulldozed illegally so that they would not get in the way of these investors becoming rich overnight.

The Cherokee Valley River Casino opened exactly a year ago. If anything, the economy of Andrews has gone down hill since then. All the landscaping and transportation improvements have been postponed . . . waiting for the tourists to arrive. So what happened?

Ten miles southwest of Andrews on a divided lane highway, the Cherokee Valley River Casino sits on a high, barren, man-made terrace overlooking the Andrews Valley. It is one of the most grotesque examples of site planning that I have ever seen. On a Saturday night during the peak tourist season, 3/4 of its parking spaces are empty.

It is hard for an outsider to gauge the economic success of this project. The Eastern Band of Cherokees claims to making a profit. However, the reviews by past guests are so horrific that the enterprise is forced to pay people to write reviews on the internet that say just the opposite. Local political leaders and newspapers praise the economic impact of the project, but tribal real estate is exempt from property taxes. The most recent “good news” for Murphy is that the Eastern Band of Cherokees is “considering” the construction of a $100 million data center next to the casino. If built, it will be a massive climate-controlled warehouse, holding server computers. It won’t hire many people and won’t pay a penny in real estate taxes.

Whatever the fiscal situation of the tribal projects, there is no visible positive changes to the townscape of nearby Murphy, since I temporarily lived near there in 2010 and 2011. Several businesses have gone out of business and left unoccupied shells. During the period between 2003 and 2007, when the rest of the nation was booming, people living in and around Murphy were forced to drive 75 miles one way southward to our town on the edge of Metro Atlanta just to get a job as a supermarket cashier. There were not even any menial jobs in their community.

If anything, that situation has worsened. Furthermore, few jobs in a casino pay well enough to even purchase a home. Murphy’s realtors were at the forefront, pushing for construction of the casino. They failed to realize that $7.25 to $12 an hour wages won’t buy a house and that many families shun a community containing a casino.

Eating fried chicken at a Bojangles in Murphy on a Saturday night put me in a microcosm of the reality of a casino town. Three out of five of the customers were middle aged men, with strange expressions on their faces, as they gambled on lap top computers and sipped on Bojangles coffee. This fast food restaurant was in the heart of the “tourist district.” The motel next door had rented three rooms. The upscale motel across the street, had a virtually empty parking lot. Murphy had a bit more auto traffic than much smaller Andrews, but it clearly had changed very little in the past 16 years.

Andrews and Murphy are not isolated situations in the rural Southeast, but actually more prosperous than most small towns in this part of the United States. At least they have seasonal tourism . . . or at least they did have tourism. Gamblers spend very little money outside the casino. Elsewhere, in the less scenic landscapes of Dixie, small and medium-sized towns are “dying on the vine.”

Crawfordville and Talliaferro County near I-20 between Atlanta and Augusta are bellwethers of the trend. There are so few children left among the county’s 1,690 residents that the high school only has five teachers. Crawfordville is essentially a ghost town, whose highest and best use is as a movie set.

Between the 1960s and the mid-1990s, most small and medium sized towns in the Southeast steadily became more prosperous. Some like Andrews in North Carolina and almost all the towns in the North Georgia Mountains even boomed. Then their factories began closing. The elite families, who ran these communities, weren’t too concerned when blue collar wage earners, lost their jobs and had to move away. They assumed that more affluent, “desirable” folks would take their place. Perhaps in some towns, retirees and artsy folks, did take the wage earners’ place for awhile, but then they began to die of old age or drift away due to lack of economic and cultural opportunities. Before long, stores began closing on the courthouse square and new tenants didn’t replace them. Then it was too late. What happened?

The Big Lie

For many decades, there has been an increasingly large faction of economists, who believed that unrestricted trade and elimination of tariffs would solve all the world’s problems. These are the same people, along with far too many national politicians, who equate human lives as commodities equivalent to a truck load of soya beans. I remember an economics professor in graduate school at Georgia State University, who had a gleam in his eye as he stated, “In a perfect world there would be only management, stockholders and machinery operating costs . . . with no wages or employee benefits to deal with.” I raised my hand and asked, “Sir aren’t you talking about slavery? I thought we fought a war about that and settled the issue? If people have no income, how can they buy the products that these plants manufacture?” He looked at me blank-faced and said nothing.

The free trade economists worship Adam Smith as a god. Remember him from “Introduction to Economics” in school? He was the 18th century English writer, who we were told invented the concept of free trade. Actually not, if you read more in-depth histories written in the United Kingdom, it was Adam Smith who wrote the blue print for Great Britain imperializing its global colonial empire.

As least as early as the Reagan Administration, talks began between Canada and the USA to reduce tariffs and trade restrictions. The talks were being pushed by executives of several industries and Wall Street. These negotiations eventually led to a formal treaty being ratified in 1988. Then talks were extended to Mexico. China was given “most favored nation” trade status. Foreign factories were not going to be held to the same environmental and labor standards as the United States.

The final terms of this treaty made many congressmen of both political parties from non-metropolitan areas balk. They were ultimately convinced to ratify the treaty because of the testimonies of “experts on the information age,” who convinced the politicians and general public that in small towns and rural areas, low wage paying mills would be replaced by high tech industries, paying high wages. Specifically in the Southern Highlands, residents were promised that tourism and retiree homes would replace industrial jobs. No one gave any thought for programs or policies that would provide new jobs to American plant workers and management, when their factories closed and relocated to another country. You know . . . that would be socialism. No thought was given by national politicians about the terrible impact their signatures would have on millions of American workers. Well . . . it was good for Wall Street, you know.

The NAFTA treaty was ratified in 1996. Now you can go to almost any small or medium town in the Southeast and see factories that have been abandoned for about 15 to 20 years.

Almost immediately as production shifted to Mexico and then more so to China, incomes exploded for executives and stock values soared on Wall Street. Initially, no one seemed to care that folks were losing their jobs “at the mill” and then moving away. Certain consumer items were cheaper. In the Southern Highlands and coastal regions, large numbers of retirees and Florida transplants created temporary booms in the local economies due to real estate transactions and home construction. Meanwhile, there has been a radical movement of wealth from the middle class to a small percentage of households. Consumers no longer had the disposable incomes to buy as much as they had in the past. They compensated by using high interest credit cards as short term loans. This only accelerated the outflow of middle class income to large banks.

First the 2002 Recession hit, which was followed by radical inflation of construction costs in 2006, large numbers of bank failures in 2007 and $4 a gallon gasoline in 2008. Something like 35 million households lost their homes during the Mega-Recession. Most of these people have no hope of ever owning a home again. The tourism industry collapsed in rural areas such as the Southern Highlands. Most of rural America has been stagnant or dying since 2008. We are now in a era when local politicians and economic leaders desperately search for “magic fixes” like casinos that will make things better again.

During the past sixteen years, the decision makers in Washington, DC and major metropolitan areas have felt no pain from the policies they executed. They are not accountable for their actions and only associate with their own kind. They assume that their way of life will go on forever, no matter how much the quality of life declines among the majority of Americans. In short, they jet from metropolitan airport to metropolitan airport to international conferences to glamorous vacation spots, without ever seeing Andrews, North Carolina on a Saturday night during the tourist season.

My comment on yesterday’s election? . . . it’s the economy stupid.

So ironic that the husband of one of the candidates was newly elected President of the United States, when he made that famous statement. Three years later, he signed the ratification of the NAFTA Treaty.

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