Detroit City The NAFTA Disaster
What started with president George H Bush in December of 1992 ended with president Bill Clinton on December 8, 1993. In his remarks before he signed the North American Free Trade Agreement into law Bill Clinton said that NAFTA would promote “more growth, more equality, better preservation of the environment, and a greater possibility of world peace”.
He also said it would create 200,000 jobs, he didn’t say in which country. He also failed to mention what would happen if he was wrong.
What if NAFTA lost American jobs instead of creating them like Bill Clinton said? About ten years after NAFTA was signed by Bill Clinton The Economic Policy Institute published a report by Robert E. Scott that documented 879,280 jobs were “displaced”. That would mean instead of adding 200,000 jobs like Bill Clinton said more than 4 times that many jobs have been lost.
Imagine what losing nearly 900,000 jobs from an economy would look like? Actually you don’t have to imagine just visit Detroit, Michigan USA and you can see it for yourself.
What was once called the Paris of the West is now being called a ghost town. The same city that was celebrated for generations because of its tremendous history in music, architecture, and manufacturing is now famous for its $1 houses for sale.
All those “displaced” jobs have to come from somewhere. American manufacturing took advantage of NAFTA faster than you could blink. They relocated assembly plants to Mexico and lowered the wages/benefits for the workers that remained in the United States. This resulted in stories like Bob Bowen who worked for Ford Motor Company for 35 years before retiring one year after this act went into effect.
In a featured article for The World he reflects on NAFTA 20 years later and also talks about his son who has now worked for Ford for over 8 years and only earns $18/hour–the same amount that Ford was paying Bob Bowen 20 years ago.
General Motors and FORD made headlines when it was discovered they were paying the assembly plant workers in Mexico only $26/day. This is less than they were paying American workers PER HOUR to assemble the same cars in Detroit.
This is the reality in Detroit city.
Why did this happen? The only real means that any country has to grow or earn more money over time is from trading favourably with other countries. The total amount of money that a country earns from exporting goods should always be greater than the total amount of money that it spends importing goods. This is how it used to be in America back in the day but trade policies like NAFTA ruined the surplus party.
The North American Free Trade Agreement took an already large trade deficit in 1992 of -$39B and grew it exponentially to -$417B by 2002. Since then it’s continued to balloon out of control. The situation has worsened to the point that taxpayer funded “bailouts” are being used to provide funding for the same companies that actually closed American plants and relocated to Mexico in the first place. General Motors who’s headquartered in Detroit received over 30 Billion dollars from taxpayers after filing for bankruptcy in 2009.
It’s now clear twenty years later that NAFTA hasn’t provided prosperity for the American worker as promised, it has instead introduced poverty while promoting corporate welfare and greed.
Millions of Americans knew in the 90’s that borrowing from tomorrow in order to “appear” successful today is a foolish strategy that would result in a disaster. Today you can visit Detroit and witness ground zero for yourself.
What was once a great example of the American Dream has now become a nightmare. With the big three auto makers laying off people by the thousands and heading for the border what’s been left behind is tragic. Detroit, a big city once known as Motown is now getting known as “murder town”.
In 2012 Detroit had the highest rate of violent crime in the United States. This is due in part to the continuing flight from the city as residents continue to move out at a staggering rate.
When NAFTA was signed the population in Detroit was about 1 million people today there are barely 700,000 people living in the City.
Another reason why the auto industry in Detroit fell off is due to the lower quality of products they began to produce and the lousy deals they started making as a company.
In the same time that upstart Korean manufacturer KIA was blossoming by offering affordable cars with attractive styling; Detroit automakers were stiffing their most loyal customers by cancelling their most popular brands and offering new models with bland or uninspiring designs.
Even after the bailout GM still can’t seem to find a way to really impress new customers. The first car they made with the bailout money the VOLT get’s less miles per gallon than a car they were making in the pre NAFTA days, the Geo Metro.
There already were great cars on the road before NAFTA was signed with excellent fuel efficiency, ironically GM was one of the manufacturers. GM’s Geo Metro was getting over 40 miles per gallon for only $9,740 in 1991 and now GM’s offering a VOLT for $39,145 that requires you to plug it in AND put gas in it to only get 37 miles per gallon.
I guess you can call that a deal if you like to worry about your gas bill AND your electricity bill.
The future of Detroit looks grim. There appears to be nothing on the horizon that would stop what’s happening there today.
Property values are still diving as the exodus continues, the tax base has vaporized leaving massive budget deficits and a lack of funding for basic civil services like schools, the courts, and fire fighters.
Due to this calamity in 2012 the local government formally known as “the city of Detroit” followed GM into bankruptcy and has now been placed into some weird “government in repo” situation where the mayor is not elected but appointed in a first of its kind re-organisation that’s about as easy to understand as the text in the original NAFTA bill.
Welcome to Detroit City.