Although the "progressive left" fetishizes open
borders for its own sake, they nevertheless festoon their arguments with
economic ornamentation in an attempt to convince fiscally-minded fence-sitters.
Usually, their ploy fails.
But
every once in a while a seemingly convincing argument is made. Ruchir
Sharma's piece in the New York Times, entitled "To
Be Great Again, America Needs Immigrants," is one such piece.
Not only does Sharma rely on uncontested data, but his logic seems
solid. But looks can be deceiving. Sharma's argument
suffers from two main problems: Sharma misunderstands how economies grow, and
he conflates gross domestic product (GDP) with prosperity.
Machines, not men
Sharma
claims economic growth depends primarily upon extra population, not
productivity:
The
underlying growth potential of any economy is shaped not only by productivity,
or output per worker, but also by the number of workers entering the labor
force. . .What makes America great is, therefore, less about productivity than
about population, less about Google and Stanford than about babies and
immigrants.
This
is wrong. Technology, not population, drives
long-run economic growth. Consider: economic growth occurs when
either more stuff or better stuff is
made. For example, America's economy grows when it produces more cars or (all
else remaining equal) more luxurious or fuel-efficient cars. This applies to
all economic output, whether goods or services.
There
are two ways to make more stuff. First, work more. Working
60 hours a week will necessarily generate more wealth than working 40;
likewise, 110 workers will make more stuff than 100 otherwise equivalent
workers. More input, more output.
This
maxim neatly sums up the archaic growth paradigm, a model of
economic growth linking population and production. Importantly, growth under
this model is linear – there is a one-to-one relationship between each
additional worker and each additional unit of output. Thus, countries only get
richer if they get bigger via natural births, immigration, or conquest. Sharma
thinks this is the best way to grow the economy.
The
second way to make more stuff is to increase productivity – make more stuff in
the same amount of time. This is done by inventing and using better technology.
For example, in 1785 an Englishman named Edmund Cartwright invented the power
loom. The power loom transformed the textile industry by making English
weavers forty-times
more productive, and ushered in the Industrial Revolution. By the 1820s
Britain wove as much cloth as the rest of Europe combined and British workers
were among the richest on earth. Productivity-driven, exponential economic
growth falls under the appropriately-named industrial growth paradigm.
Technology
is the key to economic growth not only because it makes us more productive, but
because it is also the key to making better stuff. Consider
how much more useful a steel knife is compared to a copper one, or how much
better a 4K UHD television is compared to an old-school cathode ray tube
idiot-box. Technology unlocks real wealth. Technology grows the economy.
While
Sharma does not deny this, he claims population growth is more important. This
is obviously false.
Bigger pies, or bigger slices?
Sharma's
main point is that because immigration boosts GDP it is good. True,
populous countries often have large economies, and adding people will grow
them. But bigger is not always better.
Most
people would rather live in Monaco than India. Why? Although Monaco
is tiny, the average Monégasque citizen is wealthy. Conversely,
although India's economy is (relatively) large, most Indians are poor.
GDP does not matter: GDP per person does. Sharma misses this nuance,
and so his argument falls flat.
Now
to answer the question Sharma should have asked: does immigration make
Americans (not America) richer?
In
2017 the National
Academies of Sciences, Engineering, and Medicine released the most
detailed study on the economics of immigration to date. It is over 600
pages long, and was authored by an interdisciplinary team – it is the gold
standard of academic papers on the subject. The report found a number of
interesting data. For example, the researchers found that nearly 100
percent of immigration-driven economic growth accrued to the immigrants
themselves –not to American citizens. Immigration enriched
America, but not Americans.
On
top of that, the researchers also found that immigration contributes to wage
stagnation for American workers. This point should be obvious to anyone
familiar with the law of supply and demand: more workers means lower wages,
just as more apples means cheaper apples. This is consistent with another
study conducted by the Center for Immigration Studies, which found that mass
immigration is one of the primary reasons wages
for black Americans have stagnated over the last few decades.
Most
importantly, the Academies' research shows that the economic impact of
immigrants follows a non-linear
distribution. That is, a few hyper-productive immigrants generate
most of the economic growth, while the majority of immigrants break-even, or
are actually a net drain on America's economy. In fact, roughly 47 percent of
immigrants are a net drain on public revenue – they consume more in government
services than they contribute in taxes. The study pegs their net
present value cost at $170,000.
Net
present value (NPV) is a metric that actually underestimates the real costs of
non-economic immigrants. This is because NPV is a measure of how much
money the government would need to invest today, at a yield of inflation plus a
certain percent (the cost of capital), to pay for said immigrant's tax deficit
over the course of their lifetime. According to an analysis done by
the Heritage
Foundation, each non-economic immigrant more realistically costs a net of
$476,000 in welfare payouts. As such, the true cost of immigration is
higher than even the Academies' research leads us to believe.
In
any event, half of all immigrants are actually a drain on America's
economy. As for the other half, most of them give only as much as they
take. In total, only about 15 percent of immigrants to America contribute
to the economy in a meaningful way – this small minority of people constitutes
the economic engine of immigration.
When
Sharma states that immigration grows the economy he is correct – but the
statement is misleading. Immigration grows the economy, but it does not enrich
the average American citizen. In fact, most Americans have
seen their incomes stagnate due to additional labor competition. Only the
rich truly benefit.
A means to an end. . .
Although
liberals gleefully sacrifice America's economic growth to protect the
environment, promote diversity, or build
a social safety net, they all turn into Milton Friedman bobbleheads when it
comes to immigration. This is not only dishonest, it is profoundly unhelpful.
How can America have a genuine debate over immigration when one side refuses to
tip its hand? Until the left admits their immigration obsession, everyone
is wasting their breath.
Spencer P Morrison J.D. B.A. is a writer and independent
intellectual with a focus on applied philosophy, empirical history, and
practical economics. He is the author of Bobbins, Not Gold and the Editor-In-Chief of
the National
Economics Editorial.
https://www.americanthinker.com/articles/2018/08/immigration_will_not_make_america_great_again.html