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Trump’s Foreign Admirers

CAMBRIDGE – Donald Trump doesn’t like Latin Americans and advocates building a wall to separate them from the United States. As usual with such snubs, Latin Americans tend to reciprocate the sentiment, as do Muslims and others who feel affronted by the Republican Party’s presidential nominee. But many of those who dislike Trump share his passion for restrictive immigration policies.

There are probably few areas of public policy where something that is so good for society is portrayed as being so bad. Of course, projecting a society’s problems onto foreign scapegoats is an old political tactic. But the extent to which hostility to immigration goes against the evidence of its salutary effects is surprising.

Recent research on immigration shows very large positive effects on the welfare of locals. Bill and Sari Kerr have shown that, while immigrants represent about 13% of the US population, they account for 26% of all entrepreneurs, and about 36% of new firms have at least one immigrant in the leadership team. This suggests that immigration is a large part of the story behind American economic vitality and job creation.

This is not a uniquely American phenomenon. On the contrary, it’s pretty universal. In Chile, immigrants from non-neighboring countries are four times more likely to be entrepreneurs than natives. In Venezuela, Italian, Spanish, and Portuguese immigrants, who moved there mostly in the 1950s and 1960s, and whose level of formal schooling was lower than that of the natives, were ten times more likely to be entrepreneurs. Today, Albanians returning to their country from Greece after the 2010 crisis there became entrepreneurs and increased the employment and wages of those who never left, as shown by Harvard’s Ljubica Nedelkoska.

In ongoing research with Juan José Obach, we found that Panamanians who work in industries and regions with more foreigners earn significantly more than those who work where foreigners are less prevalent. This indicates that it is in the interest of the locals to have more foreigners around. Dany Bahar of the Brookings Institution and Hillel Rapoport of the Paris School of Economics have found that countries’ comparative advantage evolves toward that of their migrants’ countries of origin: the new country becomes good at producing what the old country successfully makes.

The difference is that, in general, many developing countries have more restrictive immigration and foreign employment policies than the US does. Such policies also have larger negative effects on migration, because these countries are not the most attractive destinations to begin with.

Consider Chile, one of Latin America’s richest and arguably most successful countries, which likes to compare itself to Australia, New Zealand, and Canada, well-run countries that are rich in natural resources. But now Chile is in a rut: it is not catching up with richer countries, and it is having trouble diversifying its economy.

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As it ponders why, it would benefit from comparing itself to its role models in terms of the proportion of the population that is foreign-born. In Chile, it is less than 2%. In Australia, New Zealand, and Canada, it is 27%, 28%, and 20%, respectively, a consequence in part of these countries’ activist immigration policies.

Activist policies were also behind the almost one million Soviet Jews that Israel attracted in the early 1990s, representing 12% of the Israeli population. Studies have shown that this huge experiment had very large positive effects on the economy and on skilled locals.

The missing immigrants in Chile can help explain the dearth of entrepreneurship, innovation, and diversification. The few Koreans that Chile let in helped revive its textile industry. Colombia is much worse than Chile in this regard. There, foreigners represent less than 0.3% of the population; indeed, there are more than 15 Colombians living abroad for every foreigner living in the country.

Are the extremely low levels of immigration in Chile and Colombia a problem of low foreign demand or high domestic barriers? This question can be answered by studying a very sad ongoing natural experiment: the massive emigration from Venezuela, owing to the country’s catastrophic economic and social implosion.

Venezuelans, including the most talented, have been trying to find places to go. You would be mistaken if you imagined that bureaucrats in Chile and Colombia had more important things to do than restricting immigration. Both countries have been letting very few Venezuelans enter, proportionally fewer than Costa Rica, Panama, Canada, Spain, Australia, and the United States, countries that are at both ends of Chile and Colombia in terms of income or skill level.

Colombia, for example, has suspended a Mercosur-based visa mechanism for Venezuelans on the grounds that Venezuela does not reciprocate. This decision is not just heartless; it is patently self-destructive, for it assumes that Colombia is exchanging Venezuela’s access to its country for access by Colombians to Venezuela. But the benefits to Colombia come from the skills, entrepreneurship, and diversity it attracts, not from the ones it lets go. And who would want to go to Venezuela these days, anyway? Invoking reciprocity is nonsense worthy of Trump.

The problem of bad immigration policies is not limited to Latin America. South Africa, for example, would benefit enormously from relaxing its skills and entrepreneurship constraints through more liberal immigration policies. But the country has instead moved in exactly the opposite direction.

The immigration policies that Trump wants for the US bear an eerie resemblance to the policies adopted in the countries he dislikes and that dislike him. If adopted, Trump would most likely seek new scapegoats. But the current scapegoats should learn to dislike their own immigration policies as much as they appear to dislike Trump.

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is Professor of the Practice of Economic Development at Harvard University, where he is also Director of the Center for International Development.

By Ricardo Hausmann

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