« Freakonomics Radio

185. Should the U.S. Merge With Mexico?

2014-11-06 | 🔗
Corporations around the world are consolidating like never before. If it’s good enough for companies, why not countries? Welcome to Amexico!
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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worldwide trend. You might call it independence, The poles have closed in Scotland and the vote over independence went down to the wire closer than a lot of people. Imagine tat they plan to split California in six different states is one step closer to a vote. This morning, hundreds of thousands of people gathered in Barcelona to demand the right to vote on independence from Spain. Now Catalonia is not alone in the battlefield for sovereignty and others punish region, the basque country, is also seeking a referendum on independence in Iraq. The presidents of the country's autonomous kurdish North has asked the regional parliaments to prepare for a referendum on independence, but countries are threatening to break apart. Companies are moving in the opposite direction. Giant, burger king, is emerging talks of canadian coffee and, though not chain to importance. If the deal goes through and will create the world's third largest boss,
food chain, dollar general has gone a hostile and it's better by rival family dollar. Do America's two biggest cable companies announced of forty five billion dollar merger The four largest german deals ever have happened in two thousand fourteen. We seem sixty one billion dollars worth of Germany. but he's buying yours companies this year. But here we are again and is just another example of an eminent friends. It is it really. A frenzy had three multi billion dollar deals. Just in the last week, I see a lot of cross border deals, yeah it's a frenzy. You know that voice, don't you Kramer and I'm the host of mad money with Jim Kramer because squawk on the street. Most of the market's commentator for this street die we had Cramer on the line because we had a question if all this Consolidation is good enough for companies went out for countries that is rather than independence fever. Why not merger fever?
This came from a listener. Indian Warner reasons email. He wrote, I was lying awake last thinking about what might happen if the? U S somehow incorporated Mexico, I'm not talking about waging war taking over, but rather a mutually beneficial merger. Now, last year, Jim you said quote. I think Mexico is a great by leave you're talking about Mexican. Ex Fond- maybe some individual socks, but I wonder Jim, if that goes for mexican stocks, you think it might go from Mexico as a whole. Think. Maybe we american should think about acquiring Mexico. I think they were if currency matters We all do the dollar's wait. Two strong thirteen pesos did we make that acquisition? Then I think our gross domestic product goes up. Our workforce will be I'd say: energized end, there is a country with tremendous natural resources that we have been able to exploit the surest we do
and what, if there were a stock offering for this merger, this new conglomerate called Mexico or maybe mix America that IP, oh when everyone in warned the pay twenty percent above the price talk, because I think people are short selling Mexico, because they think it is just a place where you just have lawlessness. They have not been to Mexico. They realize the immediate premium this deals gonna go to. I want in that deal, go to bind the aftermarket Africans problem. and then from W and my see this is free, mix radio, the pot cats that explores the hidden side of everything. Here's your host, Stephen Governor
so now that this will happen, but what, if the? U S and Mexico were to merge, the of course, some relevant history to examine you may call them Mexican American WAR and the eighteen forties the one and under the terms of the treaty of Guadeloupe, a doll go echo turned over more than half its territory. This includes what is now California, Nevada, Utah as well. Parts of New Mexico, Wyoming Arizona, Colorado in Texas, which itself that earlier seceded from Mexico parts of Texas we're still disputed at the time of the war. The treaty called for best compensate Mexico, fifteen million dollars for all this property, adjusted for inflation? That's roughly four hundred million current dollars, which means a? U S, got all that land for less money than it cost to make the movie avatar granted Mexico, dynamic bargaining power had just lost a war
This wasn't such a merger as a hostile takeover. But what about this idea? a more modern, more win win merger between the? U S and Mexico, Jim Kramer some property there. Someone Fantaisie were hey, I'm gonna go by houses in Mexico. You might think that little crazy Ok! Well, I did a real estate daily ass. I have some property in Mexico the same in the olden days, semi girls- I owe you one of the nicest places have ever been Kremer love San Miguel. So much that when you opened a mexican restaurant in Brooklyn gets what he named it here and Mars, San Miguel, the latest mexican restaurant, hit Carol Gardens of Brooklyn, also known as the latest investment. By dim framework gently am I for me. I'm here I read your book. Jeers sincere doom Kremer is pretty much Mexico fan boy which you already know. If you watchman CNBC leading global, you write things
but there are still some white spots out there and believe it or not. One of the brightest is naturally girl. That's right cosmic get its act together and I will move on to another country. Let's kick in part in the World CUP, a great land of. and the mexican auto business well, it is all think Corona Mandela, Pacific vote, which is by the way my favorite gown, I'm always easy. I can suspend guacamole exaggerated, there's a lot of life. There are still These are in great shame and Mexico, despite all our publicity about the gangs and deter days on measures better that almost every time you ok, you get the picture, that's why we went to Kremer with our proposal
That's pretend for a minute that you, Jim Kramer, are representing the Eu S in this. Take over merger effort whenever you want to call it and that you, sitting down talk to mexican President NATO and maybe Mexican Congress let's are your pitch on why this could be a good idea. I mean the basic rule of economic transactions are transactions happen when they're good for all parties involved. So let's hear it describe why this merger could really lift all boats mexican, an American I will first I'd start. I was bonafide he's I own a lot of land in semi Yell Diane Day, which is in the centre of the country into the groundwater state? I also,
on a mexican restaurant, where I'm trying to make a deal right now to import mess gal into keel. So I regard myself as a friend of Mexico, not as an imperialist that once very much to take the country over my experiences next code, twofold one. It's got the best health care system. I've come across because it's not tied in to worker employment. Of that would be something it we could import. Second, workforce is remarkable and too many of our cars in the toy, Yoda Andy Bmw are being made there. I like to bring that manufacturing back United States. The way you would do that is to incorporate with Mexico in interim Mexico's phenomenal Vietnam resources have not been able to be exploited because the government has been dealing with entrenched interests. We can come in and change that politically, because suddenly axons a mexican company natural resources by the way have always been linked with great powers, our natural resources,
so would be so bountiful if Mexico and United States were joined that I think you'll be nice. If we are once again going to be a continental powerhouse, we can learn a lot from Mexico Gees. I think it's a great country talk to him in about what a merger would do for the american immigration issue and how much of that issue is really Mexico will, I think, actually them Skin immigration has died down. I think there are a lot of the other countries in Latin America that abuse Mexico is a bit of a cut through, but I just think Otto may, because impartial does I go to Mexico so many times during the year. I think that what would happen is that we would have an inn. Box of workers who worked so hard that it would actually dry Dan? U S wages. So I think that what people would be afraid of in our country is the importing of the deflation of the labour force, but at the same time, of course, I believe the Labour force in Mexico they be paid more given. The fact
there is a minimum wage that is certainly in our country, double what I see many Mexicans make, that would be a boon for Mexico. So Jim Kramer likes the idea, some kind of Mexico. U S, murder! which makes sense as he's an American who happens to be huge train of Mexico now, if only we could find a Mexican who is a huge fan of the? U S, someone with connections with, maybe the political heft, everybody hello, this is presented Box from Mexico, be sent a fax k saga is a former president of Mexico, his election in the year two thousand ended,
The seventy one year run of the institutional, Revolutionary Party or pre on most dimensions. Fox was considered reformer. These days he and his wife Marta tend to his presidential library, which has programmes dedicated to education, leadership and expanding opportunities to the poor. In Mexico. You were, president of Mexican two thousand to two thousand six talk to me for a moment about what you tried to accomplish during that time, especially as it relates to the United States and its relationship with Mexico, ok number one purpose of my turn was to stop the frequent in Every other year crisis.
The evaluation is mammals, inflation that we suffer the Mexico as well as Latin America, so my purpose was to bring in stability and took on burs on fundamental variables, with U S economy. All of that did happen with deficits of well over two digits. I brought it down to zero. My term, which was one of the great accomplishments. No, my jewel. My dedication, together with mother, was to the poor and number three yes to build up, a very special relationship with North America, given those accomplishments and given the state of the world now, both on a political level and on a corporate level, corporations keep concerned the data that is the nature of capitalism countries, sometimes murder, Sometimes split, I'm wondering if you could
engine, a scenario President Fox, whereby the U S and Mexico oh could in some way join to become a single nation. As you go, was impossible, is not their wish either of United States in his wonderful people. Nor is the desire of Mexicans and our great culture, but, apart from what we do have to commit more and more every day is to work together to work together for a better world, and that's where we working on through NAFTA. I think that the type relationship, the excellent relationship between the people in the United States and the people in Mexico is not yet met at the level of governments in the level of government. We seem to have differences, for instance, on migration. I think
There is a lot of miss leading positions allowed in short sighted positions Beijing to migration, lately the United States, the President Fox, isn't nearly as Gung HO is Jim Kramer about a more intense relationship between the? U S and Mexico. But years ago things were different in early September of two thousand one fox was invited to address a joint Congress, Mr Spanker, the president of the United Nations. states. Members of your studies be political currently under way in Mexico is the most for a reason why we are now able. We establish new forms of friendship
in cooperation with the United States were ready to. This change to receive a better future for both of our countries years ago the United States Congress phased a difficult decision and chose to ball. in favour of a graded integration with Mexico North American Free trade agreement. Initially, between Mexico and the United States is still incomplete. Fox called on Congress to update its immigration policy there is one crucial, We must not lose sight of my group John flows respond to these underlying economic incentives at all impossible to stop. It must instead be regulated, makes
it was therefore seeking an agreement and we lend greater security, orderliness to the Mai, patient flows between our two countries, but five days after that speech, President foxes agenda was back Bernard The breaking news story to tell you about. Apparently, a plain has just crashed into the World trade Center here in New York City had happened. Priorities change immigration, reform into closer integration of the two countries set aside. We all understand that threat. Does a vivid delivered impose on People in the nation of United States enough cause fear became priority. the issue within that relationship, but it is true that there will not solve our problems,
There is not a good advisory now relationship a few months before his speech to Congress. President Fox didn't interview with PBS. He made the point that Mexico has. what the? U S, really needed? A young and vibrant workforce american boomer is starting to retire in huge numbers. The- U S, we'd need help funding their retirement Fox argued that the young VI mexican workforce was the answer he said quote. That generation is clear. For jobs for housing and for schools and universities, so we have what the United States economy needs most. So, president, Fox, assuming that you still see things This way it sound, like the? U S would be foolish to not entertain if not a merger, then at least a radically different immigration policy. Yes, Well, yeah. I think that was a great statement at that time. It is today the same. I think that
The world is moving dollars blocks, or worse alliances and partnership from different nations, look at the African Union at this point in time. They have replica in the process of the European Union in their doing fantastic, the planet. number one is shared, is strong infrastructure programme. For all this is highways. This is railroads this is a report that they're going to share in the tunnel of the continent of the african continent. That's what the United States at the beginning of the last century, As you know, these days, reinforce by getting together in partner through NAFTA saw. Coming back to your point, I think I still hold my statement.
Thinking that there is not one winner magical but there's jaw, winners, which is makes it go, and United States in really three, including Canada, and release for including what North America together can contribute to the work. ok, let me ask you this: if you want to strengthen that union, not only between the? U S and Mexico, but between the? U S, Mexico, in Canada, to me an even stronger North America. putting aside all the obvious barriers to a merger lake tradition like political. Institution that want to maintain their own independence and so on. If you are thinking of this purely as a mechanism to help more people lead, better lives. If that was the only goal- and it sounds like in your foundational work, That is really your goal. If that's your goal Why not one country? Why not?
North America, the nation, think of the economies of scale. Think of I mean just the vacation possibilities country from all of the South and Mexico all away to the arctic circle. Do you like that idea that, as GB, that can be done in accomplished without renouncing, without sacrificing our culture our origin, because New Mexico, we like in July that fact We like interlarded, lower figures in head dogs saw. There is a fundamental difference in that way. We nations all over the world each one has its own characteristics and has its own
Similarly, the budgets we didn't have a union and North America Union, which will be much more than a trade partnership. A union goes much further than a trade partnership that can be built for instance, we should have a Customs union because right now we see products that are coming from shine. The United States, and they come to Mexico, taking advantage of the no duty, a programme that we have through now. And I saw that would be one about this. If we could lend Meeks get our financial systems that will be again another age into our economies. I dont see one nation, I see one
Union. Let me read something: you said at the time in two thousand one again April, two thousand one I've been talking with President Bush and, fortunately he seeing it the same way in the long term. What we are looking for is convergence of our two economies. Convergence on the basic and fundamental. Very the goals of the economy, rates of interest on income of people, convergence on salaries. Of course, this is a ten or twenty year programme you said, but when we reach that level. Then we can just a race that border open up that border for the free flow of products, merchandise and capital, as well as people. Can you talk to me about how those too progressed, and then what happened to turn that around her was labels. I don't know who made at that time. But let me tell you it's working.
today's reality is on the path that was set ten years ago, because, let me tell you some recent number one economic fundamentals of the economy have already converged. We have the same interest rate level. We have the same inflation level. We have ordered variables that have already converged Mexico used to cut interest rates of a hundred maybe pursuing a year twelve percent a month today makes because interest rates are one digit impairs right, but you're, the one who mentioned salaries in wages when NAFTA started the library
seen salaries in wages in the border between the United States in Mexico was ten to one. You would make one dollar Mexico when you were making ten dollars in United, dates. She day the ratio is five to one. We have time to go, maybe another ten years, maybe twenty years, but they will be on a one to one racial. This is gonna United States. You can see today that region, Canada, the United States, is no problem in the borders, because you make the same money working on the canadian side Working in the: U S, side, that it's coming in Mexico because of their reforms in oil, but just happen on the constitution, because
makes you got becoming din number one manufacturing Gloucester your bottom reveals in the world. So, as you can see yes, this this alliance, this agreement of North Amerika is working pretty well and as weaken witness. Europe? Would they don't have passports to move from one country to another, one from his bed to break down from Britain Germany, from Germany to France or from France to Poland. You don't need a passport you're a citizen of the Euro a union that brought my forecast then he was happy in among ourselves. But what I want to be very clear I dont see- I don't think you can ever happen is that we become one nation with one culture we start will kill both of Us
Diversity is a very strong ass. If to people I undressed, and what you're saying, but on the other hand, just to be the devil's advocate, couldn't you say? Well one country, contains many many much diversity, the U S is very diverse. Mexico is very diverse. Candidates, very diverse, just think of the advantages think of the game, from trade and think of the economies of scale. I mean come on together you and us we could. We could be a jug. Think of our national football team would that be nice, Malta, man, football is soccer. We played with envy. now about your blended with a hand, and you call a football. No, I'm talking about soccer. Think of our national soccer team. If we back, if we got together now, cannon It would be no help, but between the? U S, Mexico. Next world cup we'd be something
all what you say is happening. You have makes again football players play football, yours, football teams, magic and players are playing in Spain's football I saw that happens, but when I don't see happening is that we become one measure. You'll, never convinced me of one nation is visually. Even when we have checked, as was makes it go no makes it go. Was Mexico he soon I wasn't energy go part of California was metrical and we lost it. we were getting back very soon, because you who will see he's Paddy governors in California spotted governors in Texas
yeah, we took half of Mexico in the Treaty of Guadeloupe Hidalgo, wouldn't it be nice to have that back California in New Mexico in Texas, wouldn't it be nice to make that part of Mexico again in a merger, almost ambitious, badges one which makes it go with opportunities wall makes it go that equals come with the United States, which is a man, be we really envy, but we have to work hard to get that we have to be smart. We ve got to go to school You have to shed opportunities with everybody here. Maybe we're doing that we're doing a great job ok, so President Fox, once a more United North America, if not a proper merger, grim Kramer's, I would be happy if the USA, Mexico, that hitched tomorrow coming up on freakin I'm trivial. What would an economist think this idea? Maybe really prominent economists
some used to work at the White House, it's worth contemplating as counterfactual, but I think if you start can beyond the first stage there a whole the costs associated with it? So it's much more like the old mega girls in western conglomerate amalgamation and those of you who subscribe to for economics, radio thanks recently five million downloads a month you are in good company and to those of you who don't yet subscribe via Itunes or whatever podcast. That use when you waiting for. Thanks to Pennsylvania, lottery, scratch offs, pennsylvanians or scratching their way to find and with new.
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are in charge of hiring for your business. These pivots have made your even more challenging, thankfully theirs. One place that you can count on to make hiring easier, zip, recruiter, dot, com, flash freak, zip, recruiters technology finds the right people for your job and invite them to apply its. No wonder that four out of five employers who post Unzip recruiter, get a quality candidate within the first. And right now you can try zip recruiter for free at zip, recruiter, dot com, slash freak, that's zip, recruiter, dot, com, slash freak, from W and Y see. This is for economics, radio, here's your host, Stephen no, you can't go around proposing an idea like a merger between the. U S and Mexico without consulting the big Economists are single is being rather how you do it yet that is on the goals. We
professor of economics, at the University of Chicago Booze School, a business used to a job at a little something something called the White House to yeah yeah, I used to be the chairman of the Council of Economic advisers in the White House, That's pretty much who I am I'm guessing is a lot of time, Austin at the seat, yea and in addition to trying to avoid another great depression. I'm guessing you spend a lot of time talking about how cool it would be. If the- U S could take over me go on my right. You and well now day and an old friend of mine who was who was on the sea a many years ago, gave me the advice when I took the job. He said the good C h, air, like a good Gardiner, is ninety percent pulling weeds and ten percent planting seethe. So where does
if this is in the week category or they find out whether its we'd or seed, I asked rules, be a basic question. Given the strong trend in corporate consolidation have to assume that such mergers are in the economic interests of the company's getting tied up. Why, therefore, would it not be in the economic interests of two countries like Mexico, in the? U S? Ok, why did these corporate mergers take place? Basically, you can think of two styles of reason. One is because we can merge these two things: together, we can save costs or we can mercies two things together and we can increase demand which the cynics would say there trying to join
up, so that they can better collude or they'll be more concentration. They can raise prices, if not that at the least you know these two companies merge because they think they can get access to new customers or something like that. So if that's the reasoning for a corporate merger then apply that to a country, merger and try to you're out what it is. Is it so We're going to try to save costs, how I mean the first thing to Note- is that medium family income in Mexico, that is fifty percent of the country income below five thousand dollars a year. So given the fiscal set up of the? U S, If you're gonna add sixty million people make less than five thousand dollars a year under our current system, I have massive transfer payments and subsidies
from what are now the United States to the new states that our formerly of Mexico and in a way you could have cost saving the same way if you merge to companies, but most of the people in the UK you're gonna say: wait a minute! Wait! A minute cost. Saving in this context means every body in the: U S, gonna be paid less. Is that really what what we're? Looking for well, ok, let's talk, ok, so that low that low incomes- a U S, gdp per capita, is about fifty three thousand hours out of you, that metric or your median family income more. But let me just put that went out there. Fifty three thousand Mexico about a fifth of that a little over thousand dollars. So one way to look at this is that in Mexico you ve got a big, cheap labour force. It is also hunger than ours and with elderly based entitlements swelling in this country.
Maybe it's not such a terrible thing to inherit a young, cheap workforce. What's wrong with that idea? Well, what happened to the elderly in Mexico, would they not qualify once they were part of the United States would the social security system, which, if you work your whole life an you earn relatively low income, you get a subsidy from the. U S social security system. Would that not apply to the people in Mexico I mean that the root of the difficulty here is going to be. As I say, we ve got a system set up in the: U S which is at least moderately politically palatable that people could have gotten used to
idea of here's, how much subsidy is going to take place, implicit subsidy, let's call it and that subsidy takes multiple forms, some as geographic so view. Take a poor state like Mississippi. Mississippi, gets up by ten percent of its GDP back from the federal government more than what it puts in every single year. So that's a very large unpleasant subsidy to the poorest. and a rich state like Connecticut, pays about ten percent of its gdp more into the federal government that it gets out now now, just vision, adding some states that are all years of magnitude poorer than Mississippi and you see what's gonna happen with this merger. Now you you, you would some advantages like we're, gonna, probably in
he's the amount of trade and that there be a beggar potential market, but I gotta think merging the? U S and Mexico is, if anything going in the opposite direction. If Russia were rest, a the world is figuring out. So if you look at Europe, you God poor and rich countries, locked in a monetary union and everybody's trying to divide the Scots gonna vote to get out of there. The flemish wanna get other everybody's trying to devolve down to it. Let's call it a defensible unit. What's a sustainable economic unit and the sentiment for these big Mouth mergers. I guess what I'd described this as there was a time in the seventies, winning corporate Amerika, all the rage was for building these giant conglomerates, most of those conglomerates, basically flopped, by the Eightys and Ninetys?
Nobody wanna do conglomerates anymore, merging the: U S and Mexico to humongous population countries whose economies are hugely different strikes me as being in the tradition of the forming a major conglomerate that combines a whole bunch of businesses that have nothing to do with so often you're saying if I'd come to you twenty five thirty years ago, this idea, you made a loved it because it is it was the same guys saying you know plastics, that's where you re, they get it plastics. You know, and the thing is there's one school of thought that so as well. You know the: U S, has an immigration problem. An illegal immigration problem wont to solve that problem, but it all for that kind of money. We have my dad is a very big Chinese, Annie's, not very flexible, so one near the dagger dull
You should really go. Do yoga to get more flexible, so my dad goes over to the yoga tell the guises, you know, I'm I'm not against stretch very well. I have, I think this is gonna hurt and the Yoke instructor said. No, always
I could have heard there is no pain in yoga and my dad said. Well, that's great! So they begin my dad says all this definitely hurts and instructor says no. It doesn't. There is no pain in yoga. This caused the immigration problem only by redefining it as not being an immigration problem. This still, the basic problem of here are a hundred and twenty million people whose average income is one slash, five or one slash six. What the other three hundred million people's income is. You know that that's going to be an issue. If you would look at examples of country mergers like EAST Germany, West Germany, there was more than a trillion dollars of subsidy from the West, Germany to the EAST, Germany, when they joined up
they did it damages. There was a big political and national clamour. They wanted to do it, but it was very expensive for the West, german F and there's mass of labour mobility. Where east Germans look around and say what jeez I get. The job over here, I'm gonna go move over there, and that would certainly happen. If you merge the: U S and Mexico, you know at the time of german unification, about ten million people working in the EAST, Germany and to date, as about five million people working in what used to be Germany, so that you would envision some
like that would happen and in a way, that's that's a more pure economic system. That's what should happen, but I do think that would generate a lot of conflict and a lot of via a lot a push back from the. U S, side that can interest you in Mexico. What about Canada says: you're you're envisaged a visa like that nightmares of all of these countries like the? U S trying to take us over and then you know, there's an old joke about Canada. What is the difference between a canadian and american? The canadian cares? You know that it's in Canada, their question is what do the people in the? U S think about Canada and the answer is the people of the Eu S our thinking about
you know. That's, that's just not are not our thank. You may remember that former President Fox of Mexico was in favour of extending the Union between Canada and the Eu S annex no really likes Canada almost as much as he He likes Mexico. Jim Kramer. in dollars very low. The canadian people. I think very good nationalistic They should be because they ve got a great country as they should be in Mexico. What I just think the idea of an EU of an EU with no borders, one currency would be dramatic. It would be exciting. We get the best cars from Mexico. We haven't ridable partner to the north. It very much wants to put a lot of people to work
I find jobs more fantastic and we're not embracing Canada, and I gotta take a lecture space. It are our president should be in Mexico. They at least six times a year, because the mexican account I mean is our economy in so many different ways we are so together. I would love to see a continent of one Austin ghouls be, as you might have guessed by now, does not agree. You got the same issues with closer incomes. There would be a lot less of the redistribution problems. We didn't even get into If you emerged with Mexico, you gotta make some decisions about basic infrastructure. Okay, so are we gonna go reprint to all the signs in english and spanish in both trees. You know the water system in the. U S is far better. Cleaner, water, then what is in Mexico are we gonna do have a massive infrastructure investment programme just in Mexico and you're gonna get the same thing. You know with Canada, not dimension.
boss of reprinting every kid school map and global, and all that I have to say you ve, really sound and will be like a Debbie down or today Austin near I'm, the I was expecting a little bit more optimism from year to year. I've now you go visit and all for immigration and increased economic ties between them countries, but you make it sound like all we, after the oh, my god, we have to repay the signs that we can't do. I took us from the highest levels of the day, be went low, but look at it. This way we have already take. Over half of Mexico once when we took on California in New Mexico and so on right we one that in a war we got that so, You know we had a repeat some signs, then too, if the. If the point is
there look at that time. There one the whole agenda to my people or are from over there, you know and in in Texas they fought their own war. They were a separate country and then they merged into the? U S, but a there were a whole lot fewer people. Then It was all a very low population density and the federal government's roles in these in the economy. At that time was so small. It certainly easier to conceive of a buying Alaska from from the Russians and getting the Louisiana emerges from the french and fight a war and take over some Mexico. We're gonna stick, although things together and call it a country now pretty much every inch of ground is accounted for by some body, and if you want to take it, you gotta figure had emerged these things into the existing systems. Now we seen from the Germany side, it can be done, but it is expand
and we ve seen from the break up side like the Czech Republic and Slovakia? If you want to break up the country, you can do it. You know you sit down avail gay, look you you, If the armory and we're gonna keep that government movie theater and yet oh here's, how will change sides if you want to do it? If there is political will to do it, you can, but if there is now political will to unify or or what the opposite Unified DE unify countries boy than it really is a complicated and Anne, and it's tough thing: don't ok, I'd like you to display for a minute about potential upsides for the? U S, Eve already shown, there's a lot of potential downsides for the: U S and potential upsides for Mexico, but let us think about this we have a lot of oil now, but Mexico has a lot of oil to an they ve had it for a long time you and then their unnatural.
Eyes in DE nationalizing, whatever you want to call it their oil, their agricultural output, is pretty good, considering that there Us, in other words, that they dont have our resources and capabilities intact. algerian and so on. Nl Mexico on the negative side? Mexico is a highway for drugs into the? U S, Mexico likes to say that they produce very few the drugs I get to the? U S, but they get. You know. Exploded belong along the way from South America. South America has big markets that are growing that we perhaps could have. lot more access to relationship to? If we were Mexico, can you can you blew? Guy and tell me if any of those potential upsides appeal to you all of those are upsides. I think those are all correct in some of those would probably be pretty large. You know if you say the: U S is got very advanced technology dead kin.
what resources, mining oil exploration, et, Cetera and and Mexico does have a great deal of natural resource wealth. So both sides in that case would benefit for having the best technology applied to the resources they have, and then you say well, why is in the best technology applied now? Probably because Countries are nervous about getting national laws and I want to make these kinds of investments in De Vigo to Venice bela there did not do in all bunch of advanced oil exploration, precise because they're nervous about that. I think if they were one, I agree that be worth a fair amount. Normal gains from trade, for whatever trade benefits came from NAFTA. There would be far greater if there no tariffs of any kind on any product. We could trade things between each other and there are upset It's too. The labour mobility that I was describing would be unpopular, but you know it would
it would allow for the people of Mexico, far more opportunities to go to places where the pay is much higher than where they are now and in those places there be a bunch of different jobs that would likely be filled by people have lower skilled in what they have in the? U S. All of those are pause From an economic perspective, all I'm saying is those positives, I've gotta be weighed off against pretty substantial transition cause and pretty substantial political sustainability cause that I just add on a chair. I it's worth contemplating as counterfactual, but I think if you start thinkin beyond the first stage a whole bunch of costs associated with it. So it's much more like the old Mega gulf. in western conglomerate amalgamation,
ok one last question, I'm sure you, you know drone Asimov glue in his work. Yes, yeah very well right, ok, so the. Dear, that you know nation succeed or fail largely on the strength of their political institutions, not their natural resources etc. So, when we put this question to him about Mexico, U S murder, he he brought up to historic. Examples of mergers of sorts with very different outcomes. There are examples. in history where when you have to different parts of a single country have evolved differently institutionally, sometimes the extractive part dominates and poisons the inclusive part. Sometimes the inclusive part dominates and ultimately takes over extractive part. So the example I would give for the former United, not the most sharp example. But let me stick to it is ITALY where the south of ITALY has had the has to
large extent made the north of ITALY politically more inefficient, and then you know the need. The example that you would give for this ladder is the United States, where, after a period of the extractive part, the south dominating so the political equilibrium through the onto Bellum period, the misery compromise period, ultimately after The civil war actually sort of the Northern Institute. more and more became dominant in the south, but with it with some sort of peculiar details and differences, but when makes declined, the United States were to merge, which part would dominate. You know it's one cannot say it with certainty, but you know I think, given that you know U S. Institutions are themselves shaky at times you know you could go either way. I guess so, given what You often know about modern American Political Institute.
which is quite a lot and the institutions of Modern Mexico, which I assume you know a fair amount about how you think, this merger, this impossible merger that won't happen, but if it were to happen, how do you think that would work out one set of all institutions coming up against another and intermingling which would succeed R. U S political institutions necessary much stronger than Mexican. I assume they are though you ve been in one, so you would know better than you were a boy of that's the strongest institution in the world. Is God help us by, but look I would count some economic slash. Political institutions is as being important do here, the first being the FED. The currency, the Central Bank, Mexico, has had many international problems with the pay, so
dead crises, etc that the? U S has not had so for sure. I believe the mark that would largely interpret that the central bank would would remain the FED. and so that would be a dramatic improvement for Mexico, the equivalent of firms banks. What have you in Mexico being able to borrow, they would get much lower interest rates because they would be coming under the Bela of going to the? U S, economic institutions, but that's a double edged sword This is exactly what I'm saying is that this merger kind of would go against like what happened in the Euro zone, because countries like Greece and even ITALY, Spain, Portugal, that previously faced
high interest rates when they Gideon under the Euro, the kind of under the umbrella of the Germans. So they too are able to have much lower interest rates than what they had before, but the devil's bargain is that they lack themselves in a currency union in the central Bank, essential lady operated, ignoring what the problems are going on in Greece and Mexico would for sure have this problem. It's kind of the problem, a problem in port Rico, support, Rico's been in recession for seven years and part of that is they ve mess things up, but part of that is they don't have monetary policy. That's geared toward Puerto Rico in the slightest way, no one at the FED. It says you may! We should be looser than we thought, because border egos been in recession for seven years, so that an institution that woods
serve Mexico, well in the immediate term, but in the long term I think that uniting in the currency would be a difficult spot because their economies are so different on political institutions. I think the only problem here is: we have only a moderately shared history. You know it's a kind of an interesting case that Torone says after the civil war the north institutions take over this. Historically, it has been episodes of war or major national events and crises that everybody goes through together have proved to be nation, forging a historical events and that political, I dont know if you call it ration,
but the fact that the people consider themselves part of one country and want to stay together is not exactly an institution, but is super super important in my world in determining what this is and if you look in ITALY, For I forget what the italian phrases, but the uniting of all the separate little kingdoms and fiefdoms of ITALY into one country, was largely imposed from the top, and I think that that kind of disorganization that people were really actively wanting to do that is part and parcel to widen, decisions ended up sort of messed up, so how you did it with the? U S and Mexico would make a huge difference if you just went down- and
hey. What we're going to do is you know we're going to just name each mexican provinces going to be a state, and you need to get a senator and you're going to come down to the capital, and here we go. I don't think that would have the positive impact, even though that's the US institution taking over. Let's say you did it in that extreme form. I kind of think you'd still have the nagging that you too have all the paper. Mexico long wait a minute day, whether that's what it's I don't wanna did. Why do I have to listen to these bozos in the Senate anyway? You know there. Is that really better than what we added and, if People want to be together. I think it's really hard to keep them together. You know for someone who is so dead set against this, dear, I think you're coming around a little bit and furthermore I would say that if this were to happen you'd be the guy that we'd ascend to start work in this house on the political institution level
they look I'll, be down their vacation whenever they got a lotta, nice beaches and all kind of theirs that do. There's that two yeah I goes. We thank you very much. Does very it's. It's always fought! Think it through some of your guises. Craziest ideas I was deeply offended by Austen Gooseberries, closing remark. This isn't even close to amber craziest ideas after talking too closely an President Fox and Jim Kramer shirts crazy at all. You know who else might not think it's crazy, the council on foreign relations. The council has an independent task:
on North America, its led by former CIA director and Army General David traced in Robert Zoellick, former had the World Bank. They just issued a report called North America time for a new here is our vision. They write three democracies. They like Canada to total population of almost half a billion people, energy self, so Chauncey and even energy exports, integrated infrastructure that fosters interconnected and highly competitive agriculture. Resource development, manufacturing services and technology industries, a shared skilled labour force that prospers through investment in human capital. common natural bounty of air water lands, biodiversity and wildlife and migrants species close security, cooperation on regional threats of all kinds and overtime, closer cooperation as North Americans on economic and political security and environmental topics
when dealing with the rest of the world, perhaps focusing first on challenges in our own. Not quite a merger their proposing, but still they get. The picture you can't you imagine the bounty of a year Mexico, Canada Union, not only U S soccer, get a lot better without from Mexico, but think about what canadian hockey would do for the? U S. Hockey team in the Olympics have all the maple syrup and a cargoes, any American could possibly want mexican cocoa. Surprised for its real cane sugar would now be american CO, privilege
mixed can media american Cook, the royal Canadian mounted police. We get them, they buck S, listeners on the next economics radio. We start with a big question about fertility. That is why do people have children? I think this is probably an open question for debate. Then a smaller question: what happens to fertility after a tragic loss of life, for instance, Two thousand for Indian Ocean sooner women who had lost it. Out in the salami were about ten percentage points more likely to have another birth after the tsunami than when
His children had survived mortality, infertility, that's next time on frequent literary freak, anomaly. Radio is produced by W and Y see and of mere productions. Our staff includes David Herman. Gregg results gave credit cone, Caroline English, Susie, electing Burke and Chris banded withheld from Joel Werner. If you are more frequent, comics radio you can subscribe to. Our part cast on Itunes. or go to for economics, dot com, real fine lots of radio, applaud the books and more.
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Transcript generated on 2021-03-12.