The real China shock came to Mexico

Mexican manufacturing job loss induced by competition with China increases cocaine trafficking and violence, particularly in municipalities with transnational criminal organizations. When it becomes more lucrative to traffic drugs because changes in local labor markets lower the opportunity cost of criminal employment, criminal organizations plausibly fight to gain control. The evidence supports a Becker-style model in which the elasticity between legitimate and criminal employment is particularly high where criminal organizations lower illicit job search costs, where the drug trade implies higher pecuniary returns to violent crime, and where unemployment disproportionately affects low-skilled men.

That is from a recent paper by Melissa Dell, Benjamin Feigenberg, Kensuke Teshima, forthcoming in AER: Insights.

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"Mexican manufacturing job loss induced by competition with China increases ..." opioid and alcohol abuse and deaths of despair in the USA. However, these are considered a small price to pay for lifting tens or even hundreds of millions of Chinese out of poverty. As an interesting side effect, it also makes a few well connected people fabulously rich.

Lazy Americans who abuse drugs and alcohol get what they deserve. Work hard like a Mexican or Chinese or else you deserve death!!

You will get no argument from me.

Americans need to relearn the work ethic and work so hard that the Chinese go on opioids like they did centuries back!

Brevity Is The Soul Of Wit.

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Technology is at least as important as trade in causing manufacturing jobs losses. Opioid-addled Luddites unite and destroy the robots!

Not exactly a surprise that a corrupt, incompetent government of Mexico can't get its economic act together and so they resort to more cocaine trafficking.

Your cruel disregard for those destroyed by deliberate trade policies is disturbing. Certainly technology, AI, and automation have played a role, but I would not call millions of Chinese assemblers automation. Ironically, NAFTA preceded China's designation as "most favored nation". I guess it didn't work out too well for Mexico either.

Your cruel disregard for many more millions of American consumers is disturbing. The jobs would have been lost eventually due to technology or trade, so it's just whining to single out China today (much like Japan was singled out in the past).

China deserves to be singled out because unlike the Japanese, they hate democracy and human rights. Japan apologized numerous times for their past but the CCP pretends they didn't commit genocide on their own people. Either they become democratic themselves or we make them. They have a certain cockiness about them that deserves a comeuppance.

It is not true. Japan is an enemy, too. There is no moral difference between Red China and Japan.

Which is why Brazil genuflects before Japan.

It is a lie. My Brazilian friends tell me their President Captain Bolsonaro is courageously fighting the Japanese traitors in our midst.

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@EdR:

Are you sure you'd prefer "sweatshop" factories full of Americans putting together phones on an assembly line? Are those the kinds of jobs we wish were done here?

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Though irony noted, any talk of "lifting Chinese out of poverty" by people who would seriously mean it would be a fairly serious error.

The shocks described to Mexico are all post-2000, due to bringing China into WTO, by which point the bulk of China's poverty reduction would've been done.

Reproach with Dengism may have made sense earlier in the 80s and 90s, and a little openness to help take China away from the absolute frontiers and show them what capitalism could do for them, but by 2000 there is in hindsight no argument for continued welcoming of China into the fold, post-2000. Even for those who trumpet "poverty reduction".

China is poorer than Mexico *today*. If improving conditions in Mexico (or poor Americans) counts as reducing poverty, so does improving conditions in China post-2000.

No, it doesn’t.

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Certainly you can, I'm just arguing that the global citizen welfare arguments for continued reproach with China were relatively weak by 2000 - negative employment and crime shocks and lost trade across the board in democratic partners for continued welfare improvements in Communist China, after the bulk of extreme poverty reduction and life expectancy improvement completed in China? And they're weaker still, today.

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Drug and opioid deaths are a disease of affluence. Look at the list of countries by opioid addiction rate. It’s very tightly correlated with GDP per capita. Drugs are not cheap.

Beyond a lower bound, there is not much correlation.

Patterns are not obviously because fentanyl and the like is particularly expensive; it's more because fentanyl abuse thrives in liberal countries with relatively deregulated drug laws and laissez-faire moral norms about drug abuse and capable of doing the complex (but not especially expensive) steps to produce... which, tend to be richer. Partly this is the legacy of repressive communist and right wing authoritarian states (Duterte style death squads and all) in the Middle Income zone, particularly in regions with no Russia style collapse.

They're not really a disease of affluence, but a disease of liberalism and liberal political orders.

Which is perhaps fine as a tradeoff (better than a life of repression and subordination, hey?), but let's be honest about the drivers.

See - https://ourworldindata.org/grapher/prevalence-of-drug-use-disorders-males-vs-females?time=1990.

Note the Middle East has some unique issues due to drugs (opiates particularly) as a culturally acceptable alternative to alcohol.

You also have to add into all this though, that the US and Anglo-sphere is largely more effective at enforcing repression of drug users in overseas locales, through targeted use of aid and regime support, than they are at home, where Draconian policing it is fairly rightly held up as infringing on liberties. The patterns would look somewhat different with no international war on drugs, more successfully advanced overseas than at home.

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Whoops. Like discovering one is on the losing end of evolution.

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'The real China shock came to Mexico' ? You have to be pretty myopic to see that and ignore the damage done to US communities where manufacturing was shut down and transferred to China. Haven't the people who write this stuff looked at their own country? In a way the Mexicans adapted better and faster to the changed conditions, maybe not legally or in a pleasant way but they did adapt. The poor US citizens obeyed the law and drowned themselves in despair and drugs.

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I'm sympathetic to the idea that American grand strategy in 1990-2000 should have favored Mexico far more than China.

On the other hand, lots of cocaine was flowing through Mexico in the 1990s, so I'll to think about the time some far.

We bailed out Mexico and gave them NAFTA. China didn't join the WTO until 2000. I'd say the US did exactly as you said.

I'd vacationed in Mexico maybe seven times from 1967-1986, but when I finally got back again in 1996, it was much scarier, with goons with automatic weapons standing around all over the place and the rich living in new palaces. In retrospect, the changes were mostly due to Mexico taking over the cocaine trade from Colombia c. 1993 when Pablo Escobar was killed.

So, as you say, that was when Mexico had NAFTA and China didn't yet have WTO.

Of course, NAFTA was bad for poor Mexican corn-growing peasants by opening up the Mexican corn market to Nebraska corn. I guess the more honest illegally immigrated to Mexico and the more vicious went to work for the cartels.

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I can imagine some lower level henchmen types and goons working in factories instead if they had the option. But would drug kingpins, the movers and shakers of the drug trade, etc. be working in factories instead and pass up on being drug lords? Hard to believe that would be the case.

A successful law enforcement reform in L.A. over the last dozen or so years has been to abandon the traditional policy of going after the Drug Kingpins, and instead rolli up gangs from the bottom-up with mass RICO warrants to arrest scores at once. It turns out that criminal mastermind kingpins really aren't that hard to replace, but if you send 60 gang members off to prison in the Midwest in one day, that actually makes a difference in South-Central.

Ya'... briefly...

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The article mentions briefly one relevant topic. Manufacturing jobs drive internal migration from rural to urban areas in Mexico.

One of the greatest advantages of manufacturing in Mexico is labor flexibility. It's really easy to increase or decrease your personnel count to adapt to seasonal or longer period changes in demand.

So, starving people leave their home in a rural area, find a job in a big city, get fired 4 months later because of an optimization of the supply chain or Christmas has passed. Now they live in a urban shanty town where's not possible to grow their own food. They have less survival options available when compared to their life back in the rural area. They may get into drug jobs to survive the 2-3 months before getting a new manufacturing job. Some can live in the gray zone for a long time, others go full villain.

The manufacturing business model relies on a flexible workforce which is good for profits. The externality is a large shanty town full of poor and anxious workers.

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At least, we got trinkets from the bargain. We are so clever.

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More about US drug policy shock than a China Shock.

Absolutely, and another Beckerism: Tax and regulate; regulate and tax.

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My issue with this paper and the original Autor one is that it looks only at relative differences between areas that faced more Chinese industrial competition and less, totally ignoring the benefits of Chinese trade and therefore unable to answer the question of what effect Chinese trade had on the country as a whole. The findings in this and the original China shock paper are equally consistent with the idea that Chinese trade benefitted the entire country, with the largest benefits accruing to the areas that did not face increased competition.

Overall drug crime in Mexico is probably influenced much more by high drug prices, caused by demand from rising ability to pay in the US and supply restrictions from our draconian drug laws. Speaking of drug crime and competition, what is the effect of competition from Chinese fentanyl imports sent through the mail on Mexican drug crime?

Of course. Trade is good, every good economist knows that. Saying that the rise in the crime rate in Mexico is caused by trade with China is completely nonsensical. Thanks to increased tax revenues from China-related businesses the police should have a bigger budget and hence the effect of reducing crime rates.

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Competition for the 'drug of choice' is the comeuppance that the USA deserves for trying to dictate how the planet spins & how we all try to hang onto what we have before it gets taken away. Anyone who believes that the shenanigans at the WTO level &/or major trade agreements like Nafta truly represent an improvement in the lot & life of the people most affected are truly delusional.
Like most of the politicians who perpetrate the agreements...….

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Apparently, Ricardo still has not been properly understood by some economists.

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And people wonder why we want to build a wall?

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