Investigation into Immigration

Going by the political rhetoric, if there is one word that has shaped the current elections around the globe, it is Immigration. Be it Syrian Refugee Crisis, East-European Immigrant Rejection (also known as Brexit), or the well documented Mexican-American Friendship Memorial (known as Border Wall), Xenophobia has never been more influential in shaping global politics. Trump’s travel ban and Brexit are just some of the headliners that make up the front page, but there has also been many more examples like Austria, Poland and Hungary which prove that open borders and immigration has been a moving force in shaping the political movement across the globe. And with this has once again started a debate on “Should a country really share its resources and opportunities to the foreigners over its own citizens?” But before that, is the question: Is it really helpful to the country or its citizens to have restrictive policies? Or is it mere crass populist approach to gaining political power? It would be interesting to get some case studies and analysis before making an opinion.

Consider Japan. While it may sound unusual but by comparison to the top Developed Nations, Japan has by far the lowest immigration rate and conclusively, the lowest foreign-born population (1.75% Approx.). Despite having very protective immigration policies, Japan has long managed to steer off of the liberals’ radars. Now, this is not a testament to Japan’s other policies. I do have great respect for the country and feel that it has no relation to any other policy and this is mere the study of a flaw in an otherwise liberal society. Just that this makes it a perfect example for what it means to live in a country free of immigrants.

Japan has always been known as the land of innovation and technology- It is home to Leaders in electronics like Sony and Toshiba, Ranks 17th on the Human Development Index and is the third largest economy in the world. Clearly Japan is an example of success and a living proof that we can definitely prosper without immigration. But is Japan really prospering? Because if you look at the facts mentioned, they do mention that Japan’s economy is big, however it does not state whether it is bigger than it previously was or just bigger than other developing and underdeveloped nations? A critical view would rather stare at the latter as the possibility.

The Innovation

Surely, Japan is the 3rd largest economy, and it definitely used to be a world leader in innovation and technology, but that may not be true for the last decade, in fact Japan has seen 20 years go past without any economic growth at all. After much ambitious reforms set by PM Shinzo Abe it has a GDP growth of only 4% in 10 years. To put this into perspective, a slowing China grows approx. 6% in 1 year and even mature economies like US, UK or France manage 2% growth every year. This is what experts have called “The Lost Decade”. This is because the land of innovation has lately ceased to innovate at all. Surely Japan contains some big players nonetheless, these players are old. Nintendo was found in 1889, Sony in 1946 and Toyota in 1937. It’s a challenge in itself to name any big company that was found in the 21st century. On the other hand, it is easy to name American giants that were mere start-ups a decade ago. Also, fun fact: Immigrant founders started 52 percent of all new Silicon Valley companies between 1995 and 2005.

nikkei-monthly

The entrepreneurial rate among the immigrant populations is between two and three times higher than natives. And this is a trend you find in every country. Google co-founder Sergey Brin, WhatsApp co-founder Jan Coum, Tesla founder Elon Musk- all are immigrants; and this is just the tip of the iceberg in fact any busy street in an immigrant based nation is full of Chinese stores, Mexican restaurants any many more small businesses created and run by immigrants. This is because inherently immigrants have a natural entrepreneurial spirit. It makes perfect sense, after all leaving your nation and settling into a new place is a risk-taking ability in itself. Also, being from a foreign-land and foreign culture naturally brings out a divergent view into any situation. It’s a simple principle- when cultures mix, new perspectives are viewed, new ideas are born, And This Is Called INNOVATION. A stagnant society has everyone looking with the same perspective and same biases, thus an out-of-the-box thinking requires a lot of conscious effort. Same with Japan, the Japanese dream is not to start a business, but to get hired by one that already exists, so even though innovation in technology may be argued but definitely an entrepreneurial spirit is avidly missing. Moreover, existing giants like Sony and Toshiba continue to have the same work structure they had in the 80s thus failing to keep up with the world and incurring heavy losses. Sony has already sold its laptop division and is suffering in the mobile department, except for PlayStation almost all of its divisions are bleeding cash every day. Nintendo is nowhere near to where it was in terms of market share, Sharp is shedding workforce year by year. No matter which sector – mobile, internet, automobile or any other – Japanese companies continue to be outpaced and the reason is none other than lack of innovation. Now, it may be extrapolating to say that no immigration is the root cause for lack of innovation or a stagnant economy, surely correlation doesn’t mean causation, but there is also no denying the fact that some outside help would have added a substantial and desperately needed stimulus to the economy.

The Balance Sheet

Japan is the oldest country in the world. Not because of their long history but because of the average age of their population. One-Third of its population had crossed 60 by 2014 and the numbers are expected to keep increasing till 2050 at least. This stresses banking system of Japan. But how? Simple Answer- Social Security. As you know, the pension system in most countries is such that the people who are working today pay the pension of those who are retired, in form of taxes or other contributions. So more working people, less burden on the government. As the workforce gets smaller, there are fewer people paying the pensions…And more retired citizens drawing social security.

Screen_Shot_2015-05-22_at_10.33.44_AM.0

Same (if not worse) has happened in Japan, due to compressed workforce, the social security contributions cover only 60% of the social benefits while the remaining 40% comes from public deficits. Now even if the contributions are increased, a country cannot pay the pensions effectively as the workforce is even lesser the next year while the pensioners, even more. Take this situation for a decade and you’ll get Japan, a country with the highest public debt IN THE WORLD. And this debt is more than double their GDP (234% of GDP). How could this be avoided? Same way Canada did: get more tax-paying workforce.

Now, it is already known that integrating a foreign citizen into your country costs a lot, but that figure is nothing compared to the education, healthcare and numerous subsidies, a government spends on its natives. America spends an average of $15,000 on a native while France spent a mere €1000 per asylum seeker. Also both investments grow up to be a tax paying individual so it is simple maths to see where the reward is higher. Now there is a possibility that this immigrant may get a low-paying job hence lower taxes, but still the investment made into him is almost nothing. His healthcare and education have already been taken care of. The immigrant is not paying back for his healthcare or education but just paying rent to live in that country. From a financial point, he is just free cash that Japan is losing out, and simultaneously losing out on its debt crisis.

Surging Desperation as the Answer to all Problems

US, UK and the pioneer countries who crafted the refugee crisis – who are recently turning inwards – need to understand that the reasons for why globalisation has been beneficial for the last 5 decades still stands strong. But the search for a desperate economic stimulus coupled with years of anti-incumbency against liberals has led to leaders that are uninformed and just mundane. A recent example on Theresa May’s stance could not be better put into perspective but by The Economists’ extensive article “Theresa Maybe” which stated, “Her enthusiasm for trade often sits uncomfortably with her scepticism for migration”. Consider her recent trip to India, where her unwillingness to give way on immigration blocked progress on the free trade agreement. Also, to put things into a better perspective, let’s assess some of the current protectionist policies being used by the US and UK.

Cause: Aim to boost employment by bringing in manufacturing jobs. Effect: Less Mexicans (US) or Greeks (UK) will get in so those jobs will go to natives. Reality: Developed economies have less than 10% people employed in manufacturing and contribute with similar weakness to the economy too. This means that stimulating manufacturing will not address the mass unemployment. Meanwhile, retail sector -one of the mass employers- will continue to leak jobs to technology. Also, keep in mind that factories invest in labour only when it is cheaper than a robot, so with expensive workers, factories will start investing in automation thereby packing an even bigger punch in the already swollen unemployment scene. This may very well be the worst scenario ever as the economy will improve but the perks may not reach to the intended people. (This is also why many companies are optimistic of these policies)

Cause: Renegotiate trade rules with other countries, only this time, with higher import tariffs and lower exports’. Effect: Lower trade deficits ensuring better economy and growth. Reality: There are International Organizations for trade policing such as WTO that contain water tariffs (difference between bound and applied duties) beyond which one cannot increase its import duty. Most developed countries have already touched this ceiling rate, leaving no room for further increase. So, while it is an option for  a developing nation with high cushion for water tariffs, but not so much for a developed country. It has no scope of implementation and is mostly a politician’s rhetoric that has minimal or no substance whatsoever.

The problem is that no matter what people say it’s a fact that just a sudden right-wing insurgence or even economic de-stability will not motivate people to buy US made products. It’s a simple economic phenomenon: If there is a cheaper alternative to the goods and services brought to the people, then they will definitely choose the cheaper one. You (“you” being the first world nations) have to accept the fact that there is cut-throat competition with the developing markets who have access to cheap labour and (thanks to the globalisation) same technology to make as reliable and state-of-the-art products. On the other hand a developed nation with highly specific environmental laws coupled with minimum wages and maximum labour laws going on has expensive labour that rather borders on being a liability. The outcome of such a situation can even be contemplated by the most novice analysts. Until now the these nations had a cushion of hard-working and talented people pouring into them to not just fill the gap but also make sure that the developed economies always have an upper hand. These people were the best of their worlds, continuously innovating and risking their fortunes just to get a chance to live a better life. If they succeed, this new nation gets his spending, wealth, enterprise and what not. If he fails, he goes back to his motherland being a liability there. It was an invisible filtering mechanism, just like the invisible hand, bringing only the worthy and priced talents to the country. (Search most Patents in US filed by immigrants)

Now Mr. Trump or Boris Johnson would say (there may be a view) that the new us immigration laws planned will weed out only the illegals and deporting them is protection of sovereignty rights. Now, I am as much against illegal immigration as any other concerned citizen, but you can either work towards removing structural problems in that area or you can just spread xenophobia for your political advantage. The difference between illegal Mexican and a Mexican should never fade out. Also, we need to understand that this system of immigrant influx and willingness depends a lot on the perceptions- What is the general opinion about the country. This is in fact the reason migration rate is still high in US compared to other developed countries especially Scandinavian nations, US is the land of opportunities, it has the American dream, it has the melting pot of cultures, it has most rags to riches stories. No other country is the land of opportunity. European countries are not the melting pot of cultures. So less people want to bet their worth on a life in Europe.(Hindsight: this of course is not taking into account the Syrian refugee crisis as that was a refugee influx and not a formal immigrant influx). So, a positive and friendly image is very important in deciding whether the better talents or the lesser talents come to your land, and it has been very much evident in the recent estimated drop in number of students applying to the US universities and an apparent increase in the Canadian schools. Simple reason, US is increasingly being perceived as conservative and anti-immigrant, while Canada is increasingly being viewed as a liberal society and welcoming towards the outsiders. Just to put this picture into perspective, as per the US based consulting firm DrEducation, even a 10% decline in the number of International Applicants can result in a loss of $498.60 million in revenues. A number carrying serious implications for US and this revenue will eventually be shared by Canada, Germany, and now France too.

The laws of globalisation, liberalism and free-trade are time-tested and to be fair, even xenophobia and populism are time tested: to not reap anything good, both ethically and rationally. There is no doubt that it is definitely not the best time for the developed world and the recent on goings like ISIS and Global Slowdown do not make it any better, but we need to realise that today, more than ever we need to keep our heads cool and work towards choosing better policies and on our parts- choosing better governments.

References & Citations

Advertisements

5 thoughts on “Investigation into Immigration

  1. Bravo for writing an informative and well-rounded piece, where you have considered multiple perspectives, both directly and in the form of parenthesized excerpts.

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s