Global Trade: The Destruction of Flint, Michigan and Eastern Kentucky

Abstract

This paper discusses globalization and the effects on communities, people, and business in Flint, Michigan, and Eastern Kentucky. A grocery store owner who has worked in a family-owned chain of grocery stores in Flint, Michigan for nearly seventy years and a medical doctor that has operated a medical practice in Eastern Kentucky for forty-two years were interviewed during research for this paper. The grocer discusses the effects that global trade has on the automotive manufacturing industry, particularly within Flint, Michigan. Several auto manufacturing plants relocated to Mexico as a direct result of global trade resulting in harmful effects on the Flint community, the people of Flint, and the local businesses that operate in Flint. Global trade caused many coal companies in Eastern Kentucky to close. Coal is critical for the production of electricity in coal-fired power plants. Energy companies discovered that importing coal from China was cheaper than purchasing fuel from Eastern Kentucky coal companies. The purchasing of Chinese coal decimated local coal companies resulting in many Eastern Kentucky communities collapsing. Coal jobs were essential for the survival of businesses that catered to coal miners in Eastern Kentucky. The grocer and the doctor indicated that global trade had destroyed their businesses, their communities, and the lives of the people that they serve.

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Additionally, both agree that some components of global trade can be beneficial, but the totality of global trade is more harmful than helpful. The responses that are discussed in this paper only include the opinions of two individuals in two separate locations within the United States. Two views do not contain enough information to definitively prove that global trade, as a whole, is beneficial or harmful to the broader population. A larger sample is required to make that determination.

Introduction

Global Trade: The Destruction of Flint, Michigan and Eastern Kentucky

Globalization has aided many companies to expand and grow while causing other organizations to fail. Some communities build around particular industries. Included within these communities are people and small independently owned businesses. Local businesses and citizens are the foundation of many communities. Retail stores require products to be brought into the community while production companies have to move products out of a town; the basic idea of globalization. The costs associated with producing and distributing products is a component of global trade that has destroyed communities and negatively affected people. International organizations can produce products cheaper than local organizations. The lower productions costs result in lower sale prices. Businesses can purchase products cheaper and sell them at higher prices leading to increased profits. Purchasing more affordable products from the international market has hurt American companies. Some companies have moved their production facilities to locations outside the United States because of the lower costs of production provided by foreign countries. The auto manufacturing industry has benefited greatly, at least from a profit standpoint, from globalization while the coal industry is harmed by globalization. Coal imported from China can be purchased cheaper than coal from the United States. Globalization can be beneficial and harmful on the same token. Global trade and its benefits are industry-specific, while the unfortunate aspect is also industry specific.

Globalization Impacts on Local Communities

Flint, Michigan, a once thriving community that caters to the automotive industry, has shaken to its foundation by global trade. The grocer, as he will be known, became visibly upset when asked how globalization has impacted his community. He began by describing what his hometown was like when auto manufacturing was at its peak. “Flint was a beautiful city. We had beautiful parks, our schools were good, public services were good, and the auto plants had more available positions than they had applicants, and local businesses were flourishing. Local businesses grew because the auto workers spent their money locally.”(Kirk, B., personal communication, July 15, 2019). The small town doctor indicated that before global trade affected the coal industry, his community was active because the coal workers paid taxes that were used to strengthen the local economy, and they spent their money locally. The coal industry offered health insurance benefits to its workers. Health insurance coverage benefited the medical community. “The amount of bad debt that medical providers had to write off was relatively low because the insurance provided to the coal workers was good, it covered almost all of our fees.”(Adams, C., personal communication, July 16, 2019).

Global trade began to affect the auto industry when foreign countries started offering incentives to auto manufacturers to move their operation outside the United States. Foreign countries offer lower minimum wages to auto companies, which in turn reduced the costs associated with producing automobiles. General motors began relocating their product plants from areas such as Flint, Michigan. The relocation of plants, “Destroyed Flint,” said the grocer. The grocer said plant closures caused people to lose their jobs. Loss of employment reduced the amount of money that people spent, thus, reducing the profits of local businesses. Our profits were nearly cut in half a year after the plants closed(Kirk. B., personal communication, July 15, 2019) The taxes that were paid to the local community all but dried up and the services that the local government began to suffer.(Kirk, B., personal communication, July 15, 2019) Flint began laying police officers and firefighters off as a direct result of reduced tax revenues. The reduction in police and fire protection lead to an increase in crime and an increase in property losses from fire(Fernandez, C., Audiroc., Fol, S., Sabot, E., 2012). Flint attempted to offer tax incentives to other industries if they would relocate to Flint, but that was unsuccessful. The loss of industrial tax revenues potentially resulted in the water crisis that Flint experienced recently. The aging water pipes, in combination with an aging and inefficient water treatment system could not be maintained or replaced because the city could not afford to maintain it. (Fernandez et al. 2012)

When energy producers began buying Chinese coal, the coal companies closed or consolidated almost overnight, it seemed. (Adams, C., personal communication, July 16, 2019) Some rural communities are dependent on a single industry for tax revenues, which is dangerous. When an industry relocates the tax revenues that a community relies on for support leave as well. Healthy communities are attractive to people. If a society is active people will move into the city, but if the community is weak people will not. The medical doctors indicated that when the coal companies left the number of healthcare provider left alongside the coal companies. A lack of healthcare providers puts enormous pressure on those providers that remain to serve those in need. We could not keep up with the demands placed upon us, and we were not getting paid by our patients.(Adams, C., personal communication, July 16, 2019).

Trade Impact on Local Businesses

Global trade has a positive impact on some companies and a negative impact on others. The lower prices of foreign products cost help local businesses to buy cheap and increase their profits. However, domestic production companies experience harm as businesses purchase products from more affordable markets. The grocer indicated that his business was harmed and almost destroyed by global trade. He said, “We had to tighten our belts, close few stores, and reduce our workforce to stay profitable.” We also had to seek suppliers that sold cheaper products. Our customers could not afford the name brand products, so we had to sell off-brand items. In doing this, we were buying things from foreign countries. ‘This killed my soul as I was contributing to the problem of global trade.”(Kirk, B., personal communication, July 15, 2019). International companies flood local markets with cheap products that local companies cannot compete.

Coal is an example of a product that foreign companies flood the American market. Chinese coal is extracted by Chinese laborers that are paid almost nothing in terms of a wage. The coal is then “dumped” into the US market and sold for a fraction of what American coal companies charge. Foreign coal drives down the prices while driving the profits up. American coal companies cannot sell their product as cheaply as international companies can. American companies have to pay a minimum wage, maintain a safe working environment, and comply with strict government regulations, while foreign companies do not have to pay minimum wages or provide a safe working environment. The strict workplace guidelines in American companies prevent companies from lowering their prices to compete with foreign coal.

Personal Impacts of Globalization

Free trade impacts people negatively in terms of the potential loss of employment. The grocery store owner indicated that when the auto plants moved to Mexico, he was forced to reduce his workforce thus, forcing his former employees to seek public assistance or seek employment in an already competitive market. Free trade, according to the grocer, is like a snowball effect. Trade effects businesses first, then roll down to the community, and finally to the customers. The doctor indicated that many of his patients stopped seeking medical care because they could not afford the fees. Some patients, according to the doctor, only south emergency care when their medical condition was life-threatening. Emergency medical care is expensive, and when the patient cannot pay for the care, the medical facility that provides the attention will have to recoup the money from unpaid medical bills by increasing their fees for those patients that can pay. Some hospitals, by law, are required to provide basic medical care to patients even if they cannot afford to pay. The loss of patients impacted the incomes of local doctors and ultimately led them to relocate their practices to areas where they could maintain an income.

Conclusion

The concept of free trade has some beneficial components; however, there have been some unintended consequences associated with the trade. Communities fail, families separate, and businesses are closing because of trade. Trade, as it is designed in the United States, is managed by politicians. Corporations often drive political influence. Trade regulations, as is experienced in the political realm, increases and decreases with each administration. Politicians do not always consider the impact that trade will have at the local level. Cities that have been negatively impacting by global trade are attempting to develop alternative methods of securing revenue to offset the damage caused by trade. The global trade model fits perfectly into a negative feedback loop. Each component of the model affects the other parts negatively on one side of the circle while effecting each other positively on the other side of the loop. The trade war has been fought for many years and will be for the foreseeable future. Local communities, businesses, and people must be afforded consideration before far-reaching global trade decisions are made. Our governmental leaders owe it to the citizens to do what is best for everyone, not just what is best for those that finance political careers.

Works Cited

Adams, C. (2019, July 16). Doctor. (T. Wilson, Interviewer)

Docquier, F. R. (2012. 50(3). Globalization, Brain Drain, and Developement. Journal of Economic Literature, 681-730.

Fernandez, C. A. (2012). Shrinking Cities: Urban Challenges of Globalization. International Journal of Urban and Regional Research, 213-225.

Kirk, B. (2019, July 15). Owner. (T. Wilson, Interviewer)