Wednesday, July 5, 2006

A de-facto USA enlargement

When we read that in the greater Washington metropolitan area alone, there already are 550.000 persons who come from El Salvador, there can be no doubt whatsoever that the Central American countries are already a de-facto part of an extended USA Commonwealth. Put another way, the USA—surreptitiously perhaps—has gone through its own European-style enlargement. 

This demographic fact shows that the current debate in the USA on immigration reform could benefit by being split into two parts: immigration reform as such; and a debate about some laws and regulations affecting cohabitation in a commonwealth. Doing so would allow urgent reforms to proceed more constructively and keep the debates from being taken hostage by extreme proposals like building new Maginot Lines or Berlin Walls.

Not long ago, some enemies of the recently negotiated CAFTA agreement started spreading rumors that, through it, the United States had accepted conditions that in effect bypassed current immigration laws. This is not true, far from it. However, perhaps the CAFTA negotiations were indeed the perfect opportunity to start open and transparent discussions about what I call the de-facto enlargement of the USA. As it is, trying to look for solutions to some huge but still quite particular problems through a general immigration law is really picking the wrong instrument of change.

By the way, if I were a truly desperate builder of a wall to surround the United States, looking at the map, I would perhaps have to settle with some water barriers such as the Bering Strait and the Panama Canal.

Extracted from my Voice and Noise 2006. 

Sunday, July 2, 2006

Are we truly a World Bank?

Dear Colleagues (at the World Bank Executive Board)

Recently I attended a seminar in Berlin on the financing of houses in poor and middle-income countries. Most of the seminar came down to a very interesting duel between the extreme rationality of the Danish Mortgage System (with its almost magically low 0.5% margin of intermediation) and the very gung-ho attractiveness of the cooperative type Bausparkasse system of Germany.

Close to the end I, daringly, made the following comment:

”The final purpose for building a house for a poor person is not to have him starve now under a roof. So, before we build, we need to be certain that there is a reason for him to live there, since otherwise, with the house, we might just be shackling him down to misery.

In this respect and in relation to your interesting mortgage systems, I would like to know whether a Danish or a German citizen could finance through his own financial system the purchase of a second home for vacation or retirement, for instance in Central America. If your answer is yes, then we might be able to sell you some houses and not only find thereby the reason to build for our citizens, but also generate the sources of income they need to pay for it.

Many of the immigrants in your countries frequently want to buy a house back in their own homeland, which is great. This, unfortunately, puts a lot of pressure on the very scarce financing resources available in these poor countries from which they emigrated. If they could access your credit markets for this purpose, this should bring benefits for everyone. I know it’s not easy but, tell me, what do you need? Expropriation-risk insurance, for instance … We could get you that!

As you can suspect, my intervention did not produce any immediate response, but I believe that at least I got some interested head-scratching going.

(Jim, my editor observes: “Suppose a crooked Mexican gets a mortgage from a German bank to buy land and build a house in Mexico. He takes the money, buys the land, builds the house, and sends the bank a letter saying he’s not paying them a cent, and what can they do about it? Would the Mexican government have the sheriff evict the guy who cheated the German bank on his mortgage?”
I: “Jim, if there are thousands of Mexicans whose chances of buying their houses depend on how this Mexican services his loan with the Germans, you will see them all putting some pressure on fellow Mexicans and their own government to behave better.”)

Back in Washington, I found a brochure from our Bank Fund Staff Federal Credit Union titled “DREAMING of a second home for vacation or retirement?” Great! However, further down we can read, in bold italics, “anywhere in the U.S.” Well, colleagues, shame on us! Are we not just being a very a local World Bank?

Per

Saturday, July 1, 2006

Scaling up imagination about immigration

A short while ago, A. T. Kearney/Foreign Policy published their Globalization Index (Foreign Policy, March/April 2004), which assigns points to countries by measuring the number of Internet users, hosts, and secure servers—without even considering the contents transmitted online or through other media. In July of 2004, one of the many lists of favorite Web hits ranked Paris Hilton as No. 1, Howard Stern as No. 50,, and in between—besides the Bible, diets, marihuana, and beheadings in Iraq—nothing that could be even remotely related to any type of useful learning.

Who is more global, a family in a rich country with 10 televisions for 10 local sitcoms or a family in a poor country with only one TV on which they watch foreign programming? Who is more global, a family from a rich country that visits Paris or a family from a poor country with loved ones working abroad on whose remittances they depend for survival? Clearly, the index developers need to go back to the drawing board.

Just like the cause cel├ębre blamed in the 9/11 report for the failure to prevent those horrendous events, the current debate on immigration suffers clearly also from failure of imagination.

Already there are developing countries where up to 40 percent of the work force has migrated to work in developed countries instead of staying to become a burden on society. Through their remittances, emigrants now constitute the main source of their homelands’ foreign-currency earnings. Against this backdrop, it is amazing to hear relatively little discussion about how to exploit these opportunities further—“scale them up,” as they say—especially when compared to the immense attention given to marginal issues such as the transfer cost of remittances … or the very negative spin given to the debate with the argument of “brain drain.”

There are also developed countries that for many reasons—demographics just one of them—have gotten themselves into fiscally unsustainable welfare systems. The question politicians should be asking constituents is whether they wish to have foreigners assist in the upkeep of their systems or whether they prefer to fade away in splendid isolation. If in favor of getting help, they might as well start early, and so that their future nurses will at least understand them ... when they need to go.

From the perspective of the donor country—in this case, the country supplying the workforce—a brain drain should not pose any problems, unless it were to be accompanied by a heart drain. That could cut the ties with home and stop the remittances as well.

From the perspective of the recipient country, immigration should help citizens raise their quality of living to a standard fitting their level of income. A rich country where people with high incomes can afford to pay four dollars for a latte but cannot afford to pay someone to help them with the housekeeping has not begun to optimize its economy yet.

Donor countries should also consider how to prepare their workers before their landing, teaching them foreign languages and providing them with an understanding about how the work they are supposed to do is normally done. This will help ensure that they get off to a flying start and will be saved from some of the hardships of life in a new land. Of course, this will also accelerate and increase their remittances.

Recipient countries should be contemplating how to maximize the economic return of an imported workforce by ensuring that it really complements its own workforce or, when it doesn’t, that it at least generates important fiscal savings that allow some benefits to trickle down to everyone.

Both types of countries should be thinking urgently about how to get the programs going. In this respect, one must remember that just as it is extremely difficult to guarantee the behavior of any individual it is fairly easy to establish some measurable parameters for an entire group. This, by the way, is exactly how the insurance industry works.

I do not intend to preempt the imagination of willing and inspired immigration-program designers but, for them to have a real chance of success, no stones should be left unturned.

The complete identification and real-time knowledge of the whereabouts of all immigrants in a formal program is something that could be discussed, no matter how much some libertarians scream. If a future English king can accept having a tracking device implanted for safety reasons, why should an immigrant object to it, if that is what his host requires to give him a chance? I am sure most immigrants would consider this somewhat exaggerated concern about their persona blissful when compared to how they frequently are ignored by their own countrymen.

If the program is temporary, perhaps it would gain a lot by forcing workers to deposit a percentage of their earnings in a savings account that will be released only if they comply with the program and return when time is up. Insurance companies will be able to provide any individual worker with protection against losing his savings, if destiny decrees that he (or she) fall in love, for instance, and never return.

Both donor and recipient countries should also have the direct costs of the programs reimbursed, but this should not be hard to achieve. Just consider the savings an immigrant will realize by going legal. The financial consequences for donor countries of educating its people and then losing them in the brain drain could also be taken care of, for example, by ensuring that education programs are duly repaid by the immigrants, with their new formal employer withholding part of their salaries for this purpose.

Program designers should consider how to maximize their economic efficiency. Although nurses might be what a recipient country needs, it should not allow these slots to be filled up by doctors, as currently happens when Filipino doctors find it easier to get into the United States as nurses.

The programs need to be credible, and both donor and recipient countries should make compliance with the agreed rules an absolute must. Clearly, an immigrant who misbehaves should be named and shamed and made aware that he is hijacking the opportunity of one of his countrymen.

The days when a Swedish mother[1] felt that watching her son board a schooner to America was like burying him alive, are—thank God—gone forever. Nevertheless, many current illegal immigrants do not dare go home, as they cannot afford the risk, cost, or logistics of another illegal entry. They are living in a de facto prison. The programs, although welcoming video conferencing and Messenger technology, need to stimulate frequent home visits, in order to keep the hearts warm.

The world should also not ignore the tremendous capacity building which immigrants can bring to their own homeland—for instance, by the way they direct remittances or by the way they convey to their countrymen some know-how about current best practices for good governance.

Traditional economic analysis about how to produce something for which a market needs exist starts by looking for the best mix of labor and capital. Aligned with such thinking, the world wisely decided that it would benefit from free trade and proceeded to open up markets and mobilize capital resources on the belief that the whole world is our playing field. Unfortunately the payoff, although great for some big winners, has not been distributed equitably—perhaps exactly because the world has not investigated new means to mobilize labor.

One does not have to be an economist to perceive the economic growth potential of massive legal temporary immigration plans. Travel, language laboratories, employment agencies, restaurants (where the wealthy could find more time to dine, thanks to their new housemaid) and, of course, all those remittances that—one should never forget—are immediately recycled into the world’s economy.

Investment in globally mobile brainpower and skills is a good option for many developing countries—especially when compared to the alternative of having everyone competing against one another in the rat race of agriculture and manufacturing. To make the most out of their investment, donor countries need to consider demands, as it is clear that a certified bilingual nurse stands a much better chance of repaying her education costs than all those economists and engineers you find driving taxis in New York.

It is not only the developing countries that are affected by a kind of negativism in relation to outgoing labor mobility, as a five-minute search on the Web would confirm. Just the title of one Canadian article—“Are we losing our minds?”[2]—seemed to say more about the state of mind of the debaters than of the pros and cons of the issue itself.

Many are confused about the consequences of receiving a massive number of guest workers, and they clearly need to be better informed. Even such a highly reputed academician as Samuel Huntington (Foreign Policy, March/April 2004) gets all tangled up when on the one hand he worries about the sheer volume of Latin American immigration, but on the other begs immigrants to learn to dream in English—something that could classify only as an incurable heart drain. He forgets that if he really does not want them in his land, then they better keep on dreaming in Spanish and keep alive their hopes of going back home.

Labor unions might also be a bit confused. Unions played a vital and historic role in developing, while defending the weak, many essential safeguards that guarantee basic justice in our modern societies. But after a certain wealth plateau was reached, dynamic modern societies outgrew them, and some may have ended up doing more harm than good. Early retirement must be hard on many unions, but if I were in charge, I would see immigrants as my new market and jump at the opportunity to get back into the game.

The global implications of a shrinking world on all its common goods is changing political realities, as for example when the sovereign rights to clean air are proved incompatible with the sovereign rights of airspace. In the same vein, it might not be long before we hear from immigrants, with their power to vote with their feet and with their remittances, the cry of IMMIGRANTS OF THE WHOLE WORLD—UNITE!

Maria Full of Grace, a film about drug trafficking, illustrates how horrors surge when the supply is not allowed to satisfy demand legally. The same movie has a scene in which Carla, one immigrant woman, describes her feelings when she collected her first salary in the United States and ran to the bank to wire most of it to her family at home: Her heart felt too large for her body. We should remember these feelings when discussing remittances in order to remember their true nature. Remittances are not just cold financial cash flows to be taken for granted and securitized; they are human offerings of deep significance, for giver and receiver both. As such, they deserve a lot of respect.

Shall we keep the barriers to migration entrance impossibly high? Well, if you want to look at it from a Darwinian angle, you might make a case for allowing only the fittest and strongest to pass, like salmons going upstream. Nonetheless, the realization that the primary driver of emigration is despair—which might not be the best basis for moving the world forward—would indicate that reasonable, accessible, and equitable temporary immigration programs might be the best long-term alternative. Also we should not ignore the possibility that those who stay behind might turn out to be the truly strong, being able to make it anywhere.

Growing worries about the lack of employment opportunities are just the tip of the iceberg. To paraphrase the Bible, if “give jobs unto others and jobs will be given unto thee” is true, then the world must change its glass-is-half-empty perspective on immigration, unleash its imagination, and launch massive “Brain-Circulation-With-Hearts-Firmly-Kept-At-Home” temporary immigration programs.
[1] Attributed to Johanna, the grandmother of Vilhem Moberg (1898–1973), the author of a famous four-novel series about the emigration from Sweden to the United States.
[2] Mahmood Iqbal, “Are we losing our minds?” in Policy Options, Sep. 1999, pp.34–38.
Extracted from Voice and Noise 2006

“A letter to an another new American World Bank President”
Dear Mr. Wolfowitz:
Finding growth is not easy, but we might at least suggest two principles for those taking on the quest. The first is to look where there is a better chance of finding the source of growth. A review of global production over the last decades makes it clear that the importance of agriculture and manufacturing in the GNPs is going down while services go up. So, if development plans are developed without a priori shackling them to potential losers, some countries might stand a better chance of making it.
We already observe how the remittance flows from migrant workers in the service sector to the developing countries exceed foreign-aid flows and there are many other similar opportunities waiting to be mined, such as offering medical and old-age care at lower prices to the developed countries’ otherwise financially unsustainable social-security systems.
Second, we must not worsen the emergency by panicking and setting up unreasonable timelines. As an example, perhaps the Millennium Development Goals (MDGs) help to focus attention on truly important issues, but by introducing a deadline, 2015, they could also be inducing everyone to run towards a final goal when in fact we cannot realistically even begin to dream of completion of development and poverty reduction.
The “brain drain” in the health sectors of sub-Saharan Africa illustrates the problem, as it is frequently presented as a major obstacle for reaching the MDG in 2015 while, without the distractions of a goal-line, it might instead be recognized as an opportunity to channel developing funds into schools for nurses and doctors. Educated nurses and doctors, even working abroad, might, if “heart drain” is avoided, return to their country, sooner or later, and provide it much more capacity and long-term sustainability than the continuance of foreign aid.