A Mendacious Triangular Trade (Part X)
Before addressing the economic impact of America's "immigration policy" I need to add a couple of things to my remarks of yesterday, particularly those relating to China's policy of lending money to its customers. I'll do that and then get back as quickly as I can to the "Mexican problem."
Unlike a capitalist government, the Chinese cannot lend large sums to its local entrepreneurs, primarily because there are so few of them, and secondarily because China seeks to limit the growth of privately owned industry. What better way than to dribble capital to them by measured degrees. China is thus forced to distribute its considerable profits elsewhere. Three distinct "consumers" come to mind: (1) increased wages to its industrial workforce; (2) improvements to its industrial infrastructure; and (3) loans to foreign governments.
As I briefly mentioned yesterday, China's overall economic policy would be disrupted by increasing wages to those working in "the trade," so that avenue, though receiving dribs and drabs, consumes a very small proportion of China's surplus. Infrastructure investments were front and center for the first three decades of Red China's industrial growth, but after the break with the USSR was patched, and after rapproachment with the U.S. (in Nixon's and Carter's years), the Chinese gradually shifted toward investing in foreign debt. China recently replaced Japan as the holder of more reserves denominated in foreign currencies than any nation in the world.
So, why would China become a major league lender -- apart from, as I said yesterday, keeping its customer base solvent? One of the reasons is implied above. As the outright owner of the industrial base, no profit -- of the interest on money sort -- could be made by lending to itself. A second reason lies in the very practical fact that a creditor is not likely to do great harm to its debtors. By holding the paper of its near neighbors, China lessens any perception of itself as a likely invader. Even the Taiwanese, as much in debt to China as anyone, do not seem to fear an outright takeover, though there are probably other reasons, hidden from view, that lead to that confidence. I suspect that the rate of interest China charges Taiwan busnesses is high enough for China to refrain from disturbing what may be a major source of income. Similar reasons underlie China's very liberal relationship with Hong Kong, which it now owns and could expropriate with impunity if it chose.
This same line of reasoning does not, however, explain China's proclivity to lend money to the U. S. The restraint that creditors show toward their debtors does not work the other way around. Some historians have even suggested that one of the primary reasons for the American revolution was the size of the debts owed by American land owners to British banks. China must certainly fear the military might of the U.S. and the warlike nature of its leadership. The Americans have certainly never demonstrated a reluctance to take dramatic action in the face of "the yellow peril," though Mr. Eisenhower did so in his denial of a nuclear solution to France's empasse at Dien Bin Phu. I suspect that China's neutral position on our Iraq and Vietnamese wars is explained by China's desire to see America expend its belligerant energies. Certainly, the current conflict must please the Chinese. America's resources are wearing altogether too thin to imagine that any American administration within the next decade ot two could seriously expect success in a war against a major power. China's similar distancing of itself from Israel and its Arab opponents speaks to the same "let's you and him fight" motive. The Chinese have no doubt read the Tao Teh Ching more carefully than we have, with its advice to rulers that they should watch as others fight.
Well, that's about all I wanted to add to yesterday's "China thing." Now to get to the promised topic.
From an economic point of view, the large influx of Mexican labor is a win-win affair for both nations. The Mexican people obviously benefit; back home they would live off a subsistance economy, trying to beg and barter a living off the wealthy families that rule that oligarchic land. In America, though the wages paid to immigrant labor are not all that great, they exceed the zero the Mexicans were earning at home. So accustomed are the Mexican people to living off virtually nothing, some of the illegals are able to send a part of their wages to their relatives in Mexico. That pittance, small as it is, represents the only conceivable economic drawback to the situation as it might be seen from the American point of view.
The benefits far outweigh that deficit. The approximately two-and-a-half million undocumented immigrants in this country earn about $2.30 less per hour than would Americans doing the same work. Given a 40 hour work week, that amount represents almost 12 billion dollars in saved labor costs per year. [(40 X 52) X 2.30 X 2,500,000] And given that nearly all the earmings of immigrant labor are spent in the U.S. that amount is practically all scored to the profit side of the national ledger.
From this huge savings must be subtracted the costs associated with schooling the children of immigrant families. I do not know the exact number of children involved, but I do know that roughly three-fourths of the laborers are here alone, their families, if they have them, remaining in Mexico. If those roughly 600,000 married workers, some of whom, husband and wife both work, have two school-age children each, the total cost of schooling the 1.2 million children (@$5000/each) would be about three-billion. As can be seen, the savings exceeds the costs by more than nine-billion dollars.
The U.S. does spend a large amount of money patrolling its borders, but most of those amounts would be spent even if the number of illegal immigrants were much smaller. If the numbers cited above are anywhere nere correct, every would-be migrant worker apprehended and sent back to Mexico costs the U.S. economy about $4800 in labor cost savings. It nevertheless does not follow that the U.S. should open its borders to anyone who wishes to immigrate. Even if in a perfect world the job market might be the best way to control immigration, the turmoil created by fruitless migration would certainly place a burden on America's social services and on the unemployable immigrants. Still, a guest worker program opened to a great number of people, would probably result in a more rational form of control than the current system, which is essentially no system at all.
But of course, economic values are not the only values involved. Unenforced laws, however foolish some laws may be, detract from the civility of all laws. The status quo, in which immigration laws are applied on a catch-as-catch-can basis, claws at the foundation of lawful society. A documented guest worker program would at least restore a modicum of respect for the law, and more importantly perhaps, remove "illegal immigration" from the political arena where both the demagogues and the "bleeding hearts" are wasting much of their time and energy.
In the meanwhile, the American people might want to see it this way: Mexico is "exporting" a commodity to us, free of charge, a commodity worth approximately nine-billion dollars per annum. It would be nice if they would continue to make that gift to us, but alas, I fear that if the immigration northward continues at the current rate, the supply of exportable Mexican labor will be exhausted before the end of the next decade. But then, as they say, all good things must come to an end.
Unlike a capitalist government, the Chinese cannot lend large sums to its local entrepreneurs, primarily because there are so few of them, and secondarily because China seeks to limit the growth of privately owned industry. What better way than to dribble capital to them by measured degrees. China is thus forced to distribute its considerable profits elsewhere. Three distinct "consumers" come to mind: (1) increased wages to its industrial workforce; (2) improvements to its industrial infrastructure; and (3) loans to foreign governments.
As I briefly mentioned yesterday, China's overall economic policy would be disrupted by increasing wages to those working in "the trade," so that avenue, though receiving dribs and drabs, consumes a very small proportion of China's surplus. Infrastructure investments were front and center for the first three decades of Red China's industrial growth, but after the break with the USSR was patched, and after rapproachment with the U.S. (in Nixon's and Carter's years), the Chinese gradually shifted toward investing in foreign debt. China recently replaced Japan as the holder of more reserves denominated in foreign currencies than any nation in the world.
So, why would China become a major league lender -- apart from, as I said yesterday, keeping its customer base solvent? One of the reasons is implied above. As the outright owner of the industrial base, no profit -- of the interest on money sort -- could be made by lending to itself. A second reason lies in the very practical fact that a creditor is not likely to do great harm to its debtors. By holding the paper of its near neighbors, China lessens any perception of itself as a likely invader. Even the Taiwanese, as much in debt to China as anyone, do not seem to fear an outright takeover, though there are probably other reasons, hidden from view, that lead to that confidence. I suspect that the rate of interest China charges Taiwan busnesses is high enough for China to refrain from disturbing what may be a major source of income. Similar reasons underlie China's very liberal relationship with Hong Kong, which it now owns and could expropriate with impunity if it chose.
This same line of reasoning does not, however, explain China's proclivity to lend money to the U. S. The restraint that creditors show toward their debtors does not work the other way around. Some historians have even suggested that one of the primary reasons for the American revolution was the size of the debts owed by American land owners to British banks. China must certainly fear the military might of the U.S. and the warlike nature of its leadership. The Americans have certainly never demonstrated a reluctance to take dramatic action in the face of "the yellow peril," though Mr. Eisenhower did so in his denial of a nuclear solution to France's empasse at Dien Bin Phu. I suspect that China's neutral position on our Iraq and Vietnamese wars is explained by China's desire to see America expend its belligerant energies. Certainly, the current conflict must please the Chinese. America's resources are wearing altogether too thin to imagine that any American administration within the next decade ot two could seriously expect success in a war against a major power. China's similar distancing of itself from Israel and its Arab opponents speaks to the same "let's you and him fight" motive. The Chinese have no doubt read the Tao Teh Ching more carefully than we have, with its advice to rulers that they should watch as others fight.
Well, that's about all I wanted to add to yesterday's "China thing." Now to get to the promised topic.
From an economic point of view, the large influx of Mexican labor is a win-win affair for both nations. The Mexican people obviously benefit; back home they would live off a subsistance economy, trying to beg and barter a living off the wealthy families that rule that oligarchic land. In America, though the wages paid to immigrant labor are not all that great, they exceed the zero the Mexicans were earning at home. So accustomed are the Mexican people to living off virtually nothing, some of the illegals are able to send a part of their wages to their relatives in Mexico. That pittance, small as it is, represents the only conceivable economic drawback to the situation as it might be seen from the American point of view.
The benefits far outweigh that deficit. The approximately two-and-a-half million undocumented immigrants in this country earn about $2.30 less per hour than would Americans doing the same work. Given a 40 hour work week, that amount represents almost 12 billion dollars in saved labor costs per year. [(40 X 52) X 2.30 X 2,500,000] And given that nearly all the earmings of immigrant labor are spent in the U.S. that amount is practically all scored to the profit side of the national ledger.
From this huge savings must be subtracted the costs associated with schooling the children of immigrant families. I do not know the exact number of children involved, but I do know that roughly three-fourths of the laborers are here alone, their families, if they have them, remaining in Mexico. If those roughly 600,000 married workers, some of whom, husband and wife both work, have two school-age children each, the total cost of schooling the 1.2 million children (@$5000/each) would be about three-billion. As can be seen, the savings exceeds the costs by more than nine-billion dollars.
The U.S. does spend a large amount of money patrolling its borders, but most of those amounts would be spent even if the number of illegal immigrants were much smaller. If the numbers cited above are anywhere nere correct, every would-be migrant worker apprehended and sent back to Mexico costs the U.S. economy about $4800 in labor cost savings. It nevertheless does not follow that the U.S. should open its borders to anyone who wishes to immigrate. Even if in a perfect world the job market might be the best way to control immigration, the turmoil created by fruitless migration would certainly place a burden on America's social services and on the unemployable immigrants. Still, a guest worker program opened to a great number of people, would probably result in a more rational form of control than the current system, which is essentially no system at all.
But of course, economic values are not the only values involved. Unenforced laws, however foolish some laws may be, detract from the civility of all laws. The status quo, in which immigration laws are applied on a catch-as-catch-can basis, claws at the foundation of lawful society. A documented guest worker program would at least restore a modicum of respect for the law, and more importantly perhaps, remove "illegal immigration" from the political arena where both the demagogues and the "bleeding hearts" are wasting much of their time and energy.
In the meanwhile, the American people might want to see it this way: Mexico is "exporting" a commodity to us, free of charge, a commodity worth approximately nine-billion dollars per annum. It would be nice if they would continue to make that gift to us, but alas, I fear that if the immigration northward continues at the current rate, the supply of exportable Mexican labor will be exhausted before the end of the next decade. But then, as they say, all good things must come to an end.
posted by Benedict S. at 10:00 PM
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