The Hypocrisy of Helping “The Poor”

October 6, 2015 Hunter Wallace American South, Dixie, Economy 20

By Hunter Wallace

In The New York Times, travel writer Paul Theroux talks about his new book on the Deep South and the multitude of towns he found that have been devastated by globalization:

“EVERY so often, you hear grotesquely wealthy American chief executives announce in sanctimonious tones the intention to use their accumulated hundreds of millions, or billions, “to lift people out of poverty.” Sometimes they are referring to Africans, but sometimes they are referring to Americans. And here’s the funny thing about that: In most cases, they have made their fortunes by impoverishing whole American communities, having outsourced their manufacturing to China or India, Vietnam or Mexico …”

In National Review, cuckservative Kevin Williamson responds by saying that some towns just deserve to die:

“The town where my parents grew up and where my grandparents lived no longer exists. Phillips, Texas, is a ghost town. Before that it was a company town, a more or less wholly owned subsidiary of the Phillips Petroleum Company. Phillips had already lost a great deal of its population as highway improvements sent residents off to the relative urban sophistication of Borger, and there were fewer than 2,000 people living there in 1980 when an explosion at the refinery destroyed practically all of the town’s economic infrastructure, along with a fair number of houses. …”

The New York Times has a review of “Deep South”:

“In “Deep South,” Theroux set out to do something different. This time, he would travel within his own country, through some of the poorest sections of the rural South — the Lowcountry of South Carolina, Alabama’s Black Belt, the Mississippi Delta and the Arkansas Ozarks. Instead of climbing aboard a train or pushing off in a kayak, he would drive, and rather than pick a destination, he would meander, visiting and revisiting the same “smaller places and huddled towns” through four seasons. A road trip in America is a “picnic,” he writes. “In the travel narrative of struggle, I was not the struggler. I was the bystander or the eavesdropper, recording other people’s pain or pleasure. I knew very little discomfort, never sensed I was in any danger. No ordeals, few dramas.”

The truth is somewhere in between Theroux and Williamson.

My hometown was originally an antebellum plantation and later became a railroad depot in the early 20th century. It ceased to have any viable economic purpose after the demise of the railroad. In the 21st century, truckers driving down US-82 have replaced the railroad which used to run between Eufaula and Montgomery.

At the other end of the spectrum, take a look at Birmingham, which used to be one of the biggest cities in the South. The “Magic City” never recovered from the demise of the steel industry and the triumph of the Civil Rights Movement. In the case of Selma, it was a combination of the Civil Rights Movement and the shuttering of Craig Air Force Base. Nearby Prattville, which used to be a textile town, has reaped the benefits of White flight from Selma and Montgomery.

The Alabama Black Belt counties which Theroux toured have been losing population for generations now. King Cotton lost his throne in the 1920s and new technology made black sharecroppers superfluous in the agriculture of the region. While that is irreversible, countless factories have also been shuttered in the region due to globalization. There are many layers to the economic malaise of the Black Belt, but tax and trade policy are unquestionably one cause of it.

About Hunter Wallace 12391 Articles
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20 Comments

  2. My family came North in the 60’s because there was no work in Kentucky because of the coal mines becoming mechanized. Every job in Eastern KY depended on the mines, you cut timbers for use in the mines, company stores, etc. My family members worked largely as loggers but they also were in the mines.

    During the 1970s, Northern plants, which had belched copious amounts of coal smoke into the air, suddenly because of the Clean Air Act were forced to change to burning oil or gas. Suddenly the outmoded factories, some as old as 100 yrs old, were not economical to heat or keep open so they closed. The relocations coincided with a horrible decade of winter as well. Thousands of people relocated South to Georgia etc, but mine stayed.

    Now deindustrialization has hit Dixie as the corporations move to Asia Africa etc. Not surprised at all

  3. Much has been made of the non-union, heavily state subsidized foreign automobile plants in the South, but time will tell how long that lasts. We don’t have true free trade with Japan and Germany.

  4. Jeff,

    It’s more like our state heavily subsidizes the foreign automakers and the profits made from non-union labor flow back to Germany, Japan, and South Korea. Isn’t it also true that foreign automakers are required to assemble cars in the North American market?

  7. Hunter,

    It is unfortunate that auto manufacturers are subsidized. Those subsidies (or as the states call them, incentives) were not the main driver in bringing them to the US. The subsidies did play a major role in decided which states to site their plants. It’s been years since I read a lot of automotive publications but a main driver in the decision by foreign manufacturers to build plants here is currency exchange rates. Fluctuations in currency exchange rates has a major impact on prices. At times when the US dollar is weak or the European/Asian currencies were strong resulted in foreign made vehicles to lose a competitive pricing advantage in the US market. Bringing manufacturing here made those companies less susceptible to currency fluctuations – although they lose a competitive advantage when the US currency is strong. And I think the subsidies have come into play much more recently (last 20 years). Honda has had a plant in Ohio for more than 35 years. I think the Toyota plant in Kentucky is at least 30 years old. I don’t think that either state offered subsidies (although I could be wrong).

    Although there are no foreign automotive plants that are unionized, workers do make a good wage. According to Glass Door, a production team member at Toyota’s Georgetown, Ky plant earns $27-$29/hr.

    http://www.glassdoor.com/Salary/Toyota-Motor-Manufacturing-Kentucky-Salaries-E19267.htm

    UAW has tried multiple times to unionize a foreign plant to no avail. For the VW in Tn, VW wants a Worker Council to represent their workers. The UAW failed twice in their effort.

    http://www.redstate.com/2015/05/09/foiled-uaw-fails-now-strip-vw-employees-secret-ballot-election/

    There is no requirement that cars must be made in the US. Many cars are still imported into the US. There is a high tariff on foreign made pickup trucks (25%).

    https://en.wikipedia.org/wiki/Chicken_tax

    This drove Toyota to build its truck plant in Indiana.

    Volvo recently broke ground for a new plant in SC

    http://www.washingtontimes.com/news/2015/sep/25/volvo-breaking-ground-on-500m-manufacturing-plant-/

    Cars have been manufactured in Mexico for a long time. GM, Ford and VW have plants there. Many “American” cars are actually manufactured in Canada. All of my dad’s Buicks have been assembled there.

  8. It should be remembered the only reason there are Japanese, German, and now Korean auto plants in the United States is protectionism. Those plants are largely in the South due to the South’s traditional business-friendly policies, but the only reason they’re here at all is that the USA briefly got tough on auto imports in the 1980s.

    Of course, cars domestically produced by foreign automakers in the United States are still a bad deal for Americans compared to cars made by American companies for the reason Hunter Wallace cites.

    There is another factor, often underappreciated: foreign automakers often assemble their cars in “free trade zones”. FTZs are a Depression-era creation which were originally intended to allow manufacturers to import components duty-free if the final good is intended for export.

    Foreign automakers have realized they can use FTZs to import foreign parts, duty-free, and then “export” the resulting car at a lower duty than they would’ve paid on the parts.

    One of the reasons I am sometimes harsh on Southerners (not Hunter Wallace) is they are traditionally economic traitors comfortable with being compradors.

  10. From what I have read, it is due to a combination of long supply chains, state subsidies, non-union labor, the tariffs which are still in place (which I understand TPP phases out), and requirements to use locally manufactured parts. It is also a way to reward congressmen and US senators – a plumb, so to speak – for giving foreign companies access to the lucrative US market.

  11. NAFTA and now TPP will have rules of origin on automobile parts:

    http://www.cbc.ca/m/news/canada/windsor/trans-pacific-partnership-officials-claim-it-s-a-win-for-auto-sector-1.3256871

    “Foreign affairs officials claimed Monday they had “protected the auto sector” in the new deal with 11 other Pacific Rim countries, stipulating 45 per cent of imported vehicles and core parts will originate in a TPP country; and 40 per cent of other auto parts will have to originate in a TPP country.

    Under the North American Free Trade Agreement, the rule is that 62.5 per cent of the value of cars and 60 per cent on auto parts imported from a NAFTA country must be made within the NAFTA region.”

  12. Hunter a good example is Saturn, which was in the era of explosive growth in Tennessee and now its gone. As of right now the other plants are there but eventually manufacturing will be dead. We have to survive this mess somehow.

  13. And yet, HW doesn’t like the prospective 35% tariffs on foreign autos entering this country, that Trump mentioned about bringing American jobs back? Because he’s envious that the rich will have lower taxes?

    Myopia.

  14. Hunter, TPP and NAFTA are not “free” trade agreements. They are managed trade agreements. A true free trade agreement would have no rules or barriers to trade between countries. As you have noted, TPP and NAFTA have myriads of rules regarding trade. And those rules were devised by the economic elites of the various countries to serve their private interest. These “free” trade agreements aren’t free at all.

  16. Yes, there is a lot of protectionism built into both NAFTA and TPP. Specifically, the rules of origin on automobile parts which has the effect of keeping (some) manufacturing jobs within the regional trade pact zone. I stress some because look at all the auto plants that have been built in northern Mexico under NAFTA. The South will eventually lose its auto industry to Mexico.

    You’re right that it is not pure free trade. If it was, the factories and jobs that are still here would have vanished offshore a long time ago. It is my understanding that TPP has a lower rules of origin ratio than NAFTA which means more auto parts than before will come in from places like China which are outside the greatly expanded NAFTA trade zone.

  17. There are a lot of built in advantages to have local suppliers. Especially since most auto companied employ Just In Time Manufacturing.

    http://whatis.techtarget.com/definition/just-in-time-manufacturing-JIT-manufacturing

    I don’t think JIT is possible when procuring parts from overseas. There’s a lot of lead time necessary to have parts shipped from China. That’s why the economic impact of auto manufacturing extends beyond the plant itself. Auto companies need local suppliers. The availability of local ISO 9000 auto suppliers itself starts a positive feedback loop which in turn attracts other auto manufacturers.

    SC’s new Volvo plant is located in proximity to Port of Charleston. Volvo stated that having the plant near the port was a major factor in choosing the site. This may mean that there will be vehicles exported from SC to other worldwide markets.

  18. http://mobile.nytimes.com/2015/10/06/business/international/what-changes-lie-ahead-from-the-trans-pacific-partnership-pact.html?referer=

    The agreement has elaborate “rules of origin” that determine which goods will qualify for duty-free treatment. In the auto industry, for example, 45 percent of the value of each car or light truck will need to be produced in a Trans-Pacific Partnership country for the vehicle to be charged little or no duty by customs officials.

    By comparison, the North American Free Trade Agreement used a different methodology that effectively required 53 percent to 55 percent of the components by net cost to be produced in North America. So the new agreement has the effect of allowing slightly more components to come from outside the trade region, most likely from China.

    Labor leaders and companies vulnerable to import competition warned that the deal could lead to job losses in the United States. “It’s complete devastation of the auto supply chain,” Leo Gerard, the international president of the United Steelworkers, said in a telephone interview. “If you look at the autos these days, they’re assembled from parts from all over the place.”
    The Obama administration contends that the system will be tightly enforced to make sure that the minimum content standards are met.

    Chinese auto parts are already pouring into the United States in large volumes anyway, as Detroit automakers increasingly use them in their factories.

  19. WSJ is already crowing that TPP will lead to a stampede to Southeast Asia:

    http://www.wsj.com/articles/company-stampede-to-southeast-asia-seen-on-trade-pact-1444230531

    Even before the ink is dry on the Trans-Pacific Partnership trade deal, companies are laying out plans to expand in Vietnam and Malaysia, both rapidly developing Asian nations whose growth depends heavily on external trade.

    Manufacturers of apparel, rubber gloves and bikes are among those considering increasing production in the Southeast Asian countries to capitalize on export growth expected from the accord, which sweeps away tariffs to markets including the U.S., the world’s biggest economy.

  20. I miss the South of my childhood. Growing up in the 70’s outside Atlanta, Cullman and Tuscaloosa I witnessed first hand the slow erosion of everything I love/loved. The genocide against we Southerners is the greatest and least spoken of/acknowledged crime against humanity of the 20th century, right up there with what is happening to the Afrikaners.

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