Threat of the removal of NAFTA

In ITMC’s excerpt on ‘Political Economy’ Dickovick and Eastwood define political economy as the relationship between politics and economics on both a national and international level and how they affect one another. The authors describe the different ways in which the wealth of a state’s economy is operationalized using measurements such as GDP and PPP. They then go on to discuss how these measurements don’t represent the inequality or lack of wealth distribution of a state. The authors introduce the theories surrounding both market-based and state-based economies. Those who believe free markets or neoliberalism cause economic success believe that too much state involvement can be damaging to economic growth because government officials act in self interest. On the contrary, those who believe economic success is due to strong states and their interventions in the economy don’t believe that free markets lead to economic decline but instead believe that low-quality states and poor state interventions do.1

 

Mexico’s incoming president López Obrador previously criticized free-market politics and NAFTA (the North American Free Trade Agreement). However once Canada and the United States agreed to revise the twenty-four year old agreement the president elect jumped on board saying that the agreement looks to be beneficial for Mexico’s economy. Threats of the removal of the trade agreement by the Trump administration worried the Mexican government because NAFTA created a successful export economy in Mexico. On the other hand, the agreement hurt millions of farmers and other local businesses. Due to this Mexico’s poverty rates have ceased to move and economic growth is still below other Latin American countries.2

 

Is there a way to operationalize the economic conditions of a state that also represent the lack of distribution and inequality that is apparent in many modern states?

 

Both free markets and strong state interventions have led to economic growth depending on the condition of the state. For both causation theories of economic growth the ultimate factor of whether or not a state will be successful economically is the strength of the state. A failing state, no matter the role the government plays in the economy, will not show significant economic growth because the government and the country’s institution are failing to protect its citizens. Iran, which is ranked 52nd on the FSI, has negative GDP growth.


  1. J. Tyler Dickovick and Jonathan Eastwood, “Political Economy,” Comparative Politics: Integrating Theories, Methods, and Cases, (2017).
  2. Elisabeth Malkin, “Mexico’s New Leader, Once a Nafta Foe, Welcomes New Deal,” The New York Times, (October 01, 2018.) https://www.nytimes.com/2018/10/01/world/americas/nafta-mexico.html?rref=collection/sectioncollection/world&action=click&contentCollection=world®ion=rank&module=package&version=highlights&contentPlacement=2&pgtype=sectionfront. 

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