Selected Skirmishes: Sucking Sounds

This is a transcript of my robust, if hypothetical, debate with the Hon. H. Ross Perot, American Patriot, on the North American Free Trade Agreement. Denied an opportunity to participate in his recent network infomercial warning America about the evils of international commerce, I must carry on this dialogue here. And, since he answered for me on TV, I will gladly observe reciprocity by answering for Ross in this forum. Out of courtesy, this debate will be conducted in Ross's native language—Texan. To absorb this column properly, you therefore have to read it aloud, in Perot-style Texas twang. (Laughter is denoted by a splitting "Ha! Ha!, " roughly analogous to the sound made by a large crow with gastrointestinal trouble.)

Ross: I am here to talk to you, my fellow Americans, about the Mexican free trade agreement. It includes Canada, but I don't worry about Our People competing with Their People, in a white-wage—I mean, high-wage—environment. It's those poor Mexicans who are gonna put America Inc. right in the dumper.

Me: Capitalists don't pay high wages just because they like you, Ross. That would be high-wage robbery! You're a capitalist, Ross, so you tell us: Do you pay your secretaries less than your engineers because you like the engineers better, or because the secretaries don't need the dough?

Ross: I pay 'em a fair wage for a full day! It's like milkin' a cow: The richer the milk, the more I like to squeeze her.

Me: Almost, Ross. Whereas the cow just goes along for the oats, you have to pay your workers a market wage to induce their cooperation, and that wage will be mighty close to what consumers will pay for their output. That's where supply and demand equilibrate in the labor market, Ross.

Ross: I just love you intellectual boys. Spend all day drawin' on the chalkboard, then forget how to get home at night. The real reason I pay so much is it's damned expensive to live in America! Do you know how many bills my employees have?

Me: Do you mean to tell me that all the Bangladeshis would have to do to prosper is run up a Sears charge card? You're upside down, amigo. The reason you pay so much for your American workers in general, and for your engineers in particular, is that if you don't pay them the market value of what they produce, another sharp entrepreneur will steal them away—at a profit!

Ross: But those Mexican workers—they've got no standard of living at all! They live in shacks and eat dirt for dinner! They've got a minimum wage of 58 cents an hour! How can the American workingman compete with that?

Me: I want to compliment your very special breed of humanitarianism, Ross, being so anxious to protect rich Americans from competing with the poor Mexicans. But Mexican workers average only about $1.50 per hour in wages—more than East Europeans but below American or Canadian levels—because that is the value of what they produce. If today's Mexican workers were capable of producing more, those crafty Hong Kong (or Saudi, Japanese, or Swiss) businessmen would snatch 'em up, save a fortune in labor costs, and clean your clock in the marketplace. It's like water runnin' downhill, Ross.

Ross: Name me one rich economist. Ha! Betcha don't even know half a one!

Me: We're filthy rich in knowledge, Ross. Take some notes. Right now, we produce Chevys. Open up a free-trade zone with Mexico, and—whoosh!—the big sucking sound: G.M. moves the plant to Tijuana to take advantage of cheap labor, relaxed pollution controls, and so forth, and our jobs head straight south. Now, G.M. ends up with higher profits; that money is still spent right here at home. And the Mexican workers get all these U.S. dollars. For what? To buy U.S. goods; exports to Mexico are now about $40 billion annually. (I'll bet you're surprised those poor "little brown ones" livin' in shacks had $40 billion to blow, Ross!) That's $6 billion more than we buy from them, and since their tariffs are even higher than ours, our exports should shoot up like a jack rabbit during huntin' season once NAFTA kicks in. The Mexicans work cheap, but they don't work for free; they work for U.S. dollars: tickets to buy stuff at the Made in America counter. Hallelujah! That's a two-way sucking sound, Ross.

Ross: You academic pointy-headed types make me laugh. Ha! Ha! You got all them theories and more hot air than the Goodyear blimp. But I've actually gone out there and produced jobs in the marketplace and I can tell you a thing or two, Mr. University Economist! Hey, tell me what GDP will be, fourth quarter 1994! Ha! Ha!

Me: Listen up, ol' billionaire buddy. I'm surprised as a pregnant bull that a world-class businessman such as yourself would engage in such shoddy merchandising. Now, if you were selling me something in the economic marketplace you wouldn't dare shoot yer mouth off without knowing exactly what you could deliver. You'd get all your company experts in a room to tell you precisely what your service could do, where the competition was, and how the customer could get the best value before makin' your sales pitch.

But when yer out peddlin' these political ideas, you seem to shoot from the hip, pardner. You don't know what the hell yer talkin', and lotsa times yer talkin' trash. Old, discredited theories, last century's discards. Do a little larnin' 'bout the way the economy works, Rossaroo, and see if you cain't give those "owners of America" a world-class trade policy.

Remember how yer daddy always warned you about reducin' GDP by 10 or 20 percent with hare-brained, populist scare tactics just so's you'd get elected president?

Ross: Ha! Ha!

Contributing Editor Thomas W. Hazlett teaches economics and public policy at the University of California, Davis.