Chapter 3, You Have Become Mexican, is about the relationship between Mexico and the United States, specifically about the poverty in Mexico and its causes. Most American's would think that it is the Mexican's own fault that they are poor, with their corruption problems in government, drug lords, and lack of America's natural business savvy. Raj Patel makes a strong case that the real problems with Mexico actually lie in America, even in some of our attempts to help Mexico.
When we entered into the North American Free Trade Agreement (NAFTA)
with Mexico and Canada, we did so claiming that a free market between these countries would increase the trade between all three countries, thereby increasing their wealth. While I cannot speak for consumer goods, Mexico's corn market and probably their entire agricultural sector is much worse off because of this treaty.
His first major insight is that the free market under the new system seems to favor consumers over producers, reducing the prices but forcing the weakest producers out of the market. This isn't entirely true, but fits well enough in this case. Certainly, the free market will cause the price to fall, allowing the same population to live off of a smaller set of farmers and focus on more knowledge / skill related jobs. In order to maintain profitability, the producers now need to expand their markets and sell to more people. The more people that a producer can sell to, the lower their price can go, being pushed lower by competition. In the case of the corn market, this means that the producers who have the best and widest distribution channels have the most customers and therefore the lowest prices.
If this were the case, the American corn farmers and distributors would sparingly leave markets where the profit margins are too low to make it worth the effort. Meanwhile, they would eventually exhaust their ability to expand into new markets. Without any room to move upmarket, they would go out of business, forced out by more competitive businesses able to compete in the markets that our big businesses had left.
Unfortunately, that is not the case. The American government has stubbornly supported its farmers from going out of business, largely out of the same concerns that Raj Patel has for the farmers of Mexico, Korea, and India. By offering special privileges to corn farmers, the American Government is able to keep them from going out of business so that they out-compete Mexico's farmers, even at rather low levels of the Mexican economy. This behavior of supporting American farmers is unsustainable and does so at the expense of other areas of the American economy. Nevertheless, for the moment, it will give American farmers an enormous advantage over Mexican ones and destroy Mexico's economy.
Where then is NAFTA in all this? Under a free-market, libertarian model, a country would not sign treaties, even free trade ones. People are supposed to be "self-governing", meaning that most of the decisions over their daily lives are pushed to the lowest levels of government. A treaty adds another level of government above even the national government, stretching the principle of self government even farther from the local communities where it belongs. The people become unable to protect themselves as the national government signs away their rights and control over their own lives to the treaty and therefore, to another country.
Instead of NAFTA, the US should open up its trade to all nations, without sanctions, without protective tariffs, and without distinguishing between nations. These tools have proved poor bargaining tools and are often detrimental to the US' own economy. Rather, by opening up our own economy, our own goods and services become cheaper to produce because the cost to produce them are not propped up by tariffs. Similarly, our goods become more naturally appealing to other nations because of their low price, not because of their low subsidized price.
If you listen to Ron Paul, one of our strongest free market advocates in public office, talk about NAFTA, he talks about opposing it
because of all the problems it causes and how it is not real free trade. The biggest difference between Ron Paul and the people supporting the treaty (and most of the other horrible policies) is that he is part of the Austrian Economics school of economics while they are part of the Chicago School of economics. Raj Patel rightly criticizes the Chicago School of economics in the book. Note that these are not literal universities or colleges I am referring to, but schools of thought.
In conclusion, America uses its substantial economic and political power to bully Mexico in the name of the free market, as well as other countries. Some of these problems, such as people going out of business, business methods becoming unprofitable, and people committing suicide because of incredible debt, will probably still occur, even in a true free market. But Raj Patel and I seem to agree on the reforms needed, removing US subsidies and protections for agriculture, especially corn, and removing NAFTA. I would argue for reducing immigration restrictions as well.