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In 1014 A.D. the Byzantine Emperor Basil II defeated the Bulgar hordes at the Battle of Kleidion. To ensure the Bulgars would never rise up again, Basil blinded the survivors—leaving every hundredth man with a single eye. The one-eyed led their brothers home, but mostly the blind led the blind.
How many Bulgars were separated from their kin on their anabasis? How many died in the Thracian wilderness—food for worms and wolves? A hand slick with blood loses its grip, and in the frantic search for fingertips a dozen followers are led astray. Those behind don’t panic. They don’t know—East or West all steps are the same. Only when it’s too late do they realize they’re lost.
The blinding at Kleidion serves as a powerful allegory. It reminds us that when the blind lead the blind, most are blissfully unaware of this fact. Nowhere is this truer than when it comes to economics. People instinctively follow the expert: “because Milton Friedman said so” is a powerful argument in any economic debate, despite being an overt logical fallacy (appeal to authority).
Who cares what Friedman thinks? What do the data say? Where does the logic lead?
We have eyes to see. Why don’t we use them?
Nevertheless, the sycophantic worship of credentials is the lifeblood of liberal publications like the New York Times. The Times recently published a commentary by Ruchir Sharma called “To Be Great Again, America Needs Immigrants.” Although the article is deeply flawed, Sharma’s opinion is held up as persuasive because he is Morgan Stanley Investment Management’s chief global strategist—an “expert,” in other words. But he’s also blind. In truth, mass immigration is the chief cause of America’s economic malaise.
Sharma’s argument has two main problems: first, it misunderstands how economies grow and second it confuses 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. The growth of the labor force is in turn determined mainly by the number of native-born and immigrant working-age people. . .
What makes America great is, therefore, less about productivity than about population, less about Google and Stanford than about babies and immigrants.
Wrong. Advancing technology, not expanding populations, drives economic growth. As I’ve noted more than once in these pages, economic growth occurs when people either make more stuff or better stuff. 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. Essentially: more input, more output. This maxim neatly sums up the archaic growth paradigm, a model of economic growth which links 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. This means that 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: that is, make more stuff in the same amount of time. This is done by inventing and using better technology. In 1785 an Englishman named Edmund Cartwright invented the power loom. The power loom transformed the textile industry by making English weavers 45 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’s 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 UHD television is compared to an old-school idiot-box with a cathode-ray tube. Technology unlocks real wealth. Technology grows the economy.
While Sharma does not deny that productivity, and therefore technology, grows the economy, he claims population growth is more important. This is clearly false.
Bigger Pies or Bigger Slices?
Sharma argues that immigration is justified because it increases GDP:
In the past decade, American population growth has averaged 0.8 percent a year, eight times faster than Europe’s, and Japan’s population has not grown at all. Increasingly, then, the underlying difference between the fast- and slow-growing economies is explained more by the differences in population growth than by productivity. . . In the past decade, population growth, including immigration, has accounted for roughly half of the potential economic growth rate in the United States, compared with just one-sixth in Europe, and none in Japan.
Sharma is right about this much: countries with big populations often have big economies, and adding people will grow them. But who cares? Bigger isn’t always better.
Answer the following question honestly: would you rather live in Monaco or India? Monaco has a tiny economy, but the average Monacan is wealthy. Conversely, India’s economy is large, but most Indians are poor. You probably picked Monaco. Why? Because although India’s economic pie is bigger, the slices are bigger in Monaco. The lesson: big pies don’t always mean big slices, and it’s the slice that matters to the individual getting it.
Sharma misses the nuance of this point, and so his argument falls flat. But while we’re on the subject, let’s answer the question Sharma should have asked: does immigration make Americans as opposed to America richer?
In 2017, the National Academies of Sciences, Engineering, and Medicine released the most detailed study on the economics of immigration in America to date. It runs more than 600 pages, 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 around 100 percent of immigration-driven economic growth accrued to the immigrants themselves—not to American citizens. Immigration grew the economic pie, but did nothing to grow the slices served up to Americans. That answers that, but there’s more.
The researchers also found immigration contributes to wage stagnation for American workers. This point should be obvious to anyone familiar with the law of supply and demand: a relatively bigger labor supply means lower wages, just as a relatively large supply of 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 found that the economic impact of immigrants follows a non-linear distribution. 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 the U.S. economy. Roughly 47 percent of immigrants, in fact, 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 bizarre metric that actually underestimates the real costs of non-economic immigrants. NPV measures how much money the government would need to invest today, at a yield of inflation plus 3 percent, to pay for an immigrant’s tax deficit over the course of his lifetime. Of course, the government does not do this—it spends only as it receives. According to an analysis 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 is the economic engine of immigration.
When Sharma says immigration expands the economy he is quite correct—but the statement is misleading. Immigration expands the economy, but it doesn’t enrich the average American citizen. In fact, most Americans have seen their incomes stagnate due to additional labor competition. The only people who benefit are the rich.
Economic Growth is a Means to an End—Not the End Itself
Liberals are more than willing to sacrifice America’s economic growth if it means protecting the environment, promoting diversity, or building a social safety net—and yet they all seem to transform into laissez-faire economists when it comes to immigration. For this reason, it makes sense to be skeptical that the Left’s incessant economic justifications for immigration are genuine: instead, they are either post hoc rationalizations for prior beliefs or tools of persuasion levied against economically-inclined people.
Conservatives are also guilty of this dissimulation: they harp on economics because all other criticisms of mass or illegal immigration are deemed racist. But let’s be honest: if immigration did make Americans richer, would you open the borders to 100 million immigrants per year? How about 10 million? Five million?
It’s not about the money, is it? No. Those who think clearly want to preserve the American way of life. We want to ensure that our culture, language, laws, religion, and children have a future in this land.
Until we can discuss these deeper issues openly, I fear that we are all wasting our breath.
Photo credit: iStock/Getty Images
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