August 18, 2017 Spencer P Morrison Analysis 5
Why I Cancelled My Subscription to The Economist: the Case Against Open Borders
As a teenager I was enamored by The Economist—the logic of classical (liberal) economics was elegant, almost beautiful in its simplicity. I was a student. I valued parsimony. The Economist provided this, boiling macroeconomic events down to their core components and causal mechanisms—it made economics digestible.
I also valued objectivity, or at least its pretense. The newspaper’s lack of authorial attribution flavored it with the bland spice of impartiality—it was consistent, both ideologically and rhetorically. It gave me what my young mind craved.
Twelve years on and I’ve finally cancelled my subscription. Why? Because I hate The Economist.
In fact, I hate The Economist so much that I’ve written three books debunking the ‘axioms’ its authors (read: charlatans) hold most dear, and created this website to bring some balance back to the popular debate. How did I get here? I failed, and thankfully learned, a lot.the Land of (Rancid) Milk and Honey: a book against economic globalism and America’s economy, by Spencer P Morrison
In addition to eight years wasted in university, and a few others working, I’ve spent the better part of a decade playing the stocks, trading on Canada’s notoriously volatile venture (alternatively ‘vulture’) exchange.
For those who don’t know, Canada is the Wild West of venture capital: it is where the world’s most eclectic, foolhardy, and occasionally stupendous small cap companies raise capital. I have seen stocks quintuple in value in the space of an hour, and others lose 99.9 percent of their value—curiously such stocks can remain listed for years after their fall from grace.
It was at the mercy of the market that I learned the most valuable lesson money can buy: economists know jack.
In fact, they know less than jack: everyone I’ve met who has followed conventional economic wisdom has failed miserably, and lost a small fortune (they always refuse to admit it). This got me thinking: if economists don’t understand stock markets—and they don’t, as Benoit Mandelbrot has shown—which are logically the most profitable location for them to ply their trade, what other blind spots might they have? Many, it turns out.
Most economists are still operating under a set of Enlightenment Age assumptions inherited from the English philosopher, and founder of utilitarianism, Jeremy Bentham. Often these assumptions bear little resemblance to reality.
For example, economic models are inevitably predicated upon the myth of the rational consumer, a man who weighs his choices logically, and is sensitive to fluctuations in price and quality.
Unfortunately such a man, dubbed homo economicus by Nobel Prize-winning economist Daniel Kahneman, does not exist—he never has and never will. Instead, people make most of their decisions, economic or otherwise, according to subconscious emotional prompts (gut feelings) and biologically-hardwired heuristics.
Marketers know this: it’s why they can get you to buy a relatively bad, expensive candy bar rather than a tasty, cheap candy bar—provided the wrapping is shiny enough and it has a bright yellow ‘sale’ sticker.
Indeed, some people will buy things they dislike for their entire lives simply because of the product’s packaging, or its proximity to the checkout at the supermarket—does anyone really like Tic-Tacs?
I didn’t think so.
Bottom line: people are not perfectly rational, and this is the real reason why economics is the dismal science.
Of course, economists subscribe to many other fallacies, but chief among them is a disdain for empiricism, for reality. Economists like clear-cut math, they like simple models. But reality doesn’t work like that: the real economy is an infinitely complex system that cannot, fundamentally, be understood. We only see the broad strokes.
Furthermore, economic changes are driven by the exceptional, by the unpredictable, as the former quantitative analyst, now philosopher Nassim Taleb has pointed out.
Many economists are willfully blind to these facts. The Economist is no different.
But the publication is not only blind, it also cloaks its ignorance with the air of objectivity. This makes it especially pernicious. It accomplishes this primarily by adopting the academic “we” and eschewing authorship. This gives the pretense of both ideological neutrality and factual consensus—neither of which could be further from the truth.
Case-in-point is their recent article entitled: If borders were open: A world of free movement would be $78 trillion richer—a grandiose claim if I’ve ever heard one. This article exemplifies everything wrong with The Economist, from its simplistic understanding of complex economic systems to its dedication to manifesting the ever-impending, but never-realized, liberal utopia.
Debunking The Economist: The Case Against Open Borders
the european union finally admits the refugees are actually economic migrants
To make my point, I think it best to dissect the article in detail, exposing its major flaws and biases.
The article’s thesis is that by allowing the free movement of people worldwide, we could double global economic output. This would make everyone significantly richer, and therefore better off.
In fact, the gains are so significant that the article presumes that it would be possible to “bribe” those against open borders with the prospect of near-limitless wealth.
To put it bluntly: open borders is economic paradise.
The article begins by taking a radical Benthamite position:
Labour is the world’s most valuable commodity—yet thanks to strict immigration regulation, most of it goes to waste… Mexican labourers who migrate to the United States can expect to earn 150% more. Unskilled Nigerians make 1,000% more. Making Nigerians stay in Nigeria is as economically senseless as making farmers plant in Antarctica…
Essentially, The Economist presumes that it is rational to maximize global wealth (utility). While economists do not like to admit it, this presumption is not always true. Rationality depends on your perspective. Take America’s illegal immigration crisis for example. There is no question that illegal aliens are better-off in America than they were in their homeland—it was rational for them to migrate.
But the converse is not true: illegal immigration has hurt America’s citizens economically by depressing wages, increasing the demand for government services (and therefore taxes), and reducing the need for automation. It was not rational for America to leave the border undefended—even though doing so may have increased global wealth in the aggregate.
My point: two things can be rational, and yet mutually exclusive. The Economist ignores this fact.
The article continues:
If borders were open, how many people would up sticks? Gallup, a pollster, estimated in 2013 that 630m people—about 13% of the world’s population—would migrate permanently if they could…
Bizarrely The Economist did not use Gallup’s latest poll (published 2017) on global migration. The newer poll states that just over 700 million people, or 14 percent of the world’s population, would like to migrate if they could. Of these people, some 147 million would move to the USA, while 168 million would choose Western Europe.
I bring this up because specifics matter. Economists like abstract concepts and numbers—the more dissociated from reality the better. This makes the math easy, elegant.
But it has a downside: the more abstract the number, the less we understand what it looks like locally. The less we care. Antifa’s favorite mass murderer Joseph Stalin was right when he said “one death is a tragedy; one million, a statistic.”
So let’s reframe Gallup’s findings in terms of natural frequencies, which are the easiest for the human mind to digest. The Economist thinks it is rational to usher in 157 million immigrants into America—particularly those from the poorest countries. This is one immigrant for every two Americans.
Take a moment to think through the consequences of such a high level of migrant-saturation, then continue.
The Economist Lies About the Link Between Open Borders and Crime & Terrorismradical islamic extremists are proliferating in multicultural, politically correct Sweden
The Economist then goes on to summarily dismiss the problems you likely considered, calling them “irrational” or at best conceding that they are ‘open questions.’ Of course, they are anything but open, but like all good economists, the publication relies primarily on theoretical justifications for its propositions, rather than hard evidence.
The problems identified and rebutted are as follows.
If lots of people migrated from war-torn Syria, gangster-plagued Guatemala or chaotic Congo, would they bring mayhem with them? It is an understandable fear (and one that anti-immigrant politicians play on), but there is little besides conjecture and anecdotal evidence to support it…
A study of migration flows among 145 countries between 1970 and 2000 by researchers at the University of Warwick found that migration was more likely to reduce terrorism than increase it, largely because migration fosters economic growth.
Basically, The Economist argues the worn-out progressive talking-point that immigration makes the host nation safer by (i) decreasing crime levels and (ii) decreasing the likelihood of terrorism. Neither of these claims are necessarily true.
The Link Between Open Borders & Crime Rates
As with everything, the Devil’s in the details.
Were America to open up its borders to foreign labor as The Economist recommends, where would the bulk of immigrants arrive from? Presumably from the same destinations they have been arriving from illegally: Mexico, Central America etc. If this is the case, we could expect to see crime rates rise dramatically following such a large influx of people.
Why? Because illegal immigrants commit crimes at a much higher frequency. I will not bore you to tears with statistics (although I could), nor will I enter into a long digression as to why this may be the case. There are many reasons. Suffice it to say that crime tends to increase in communities with high levels of illegal immigration, and these are the sort of people who would flow in were the borders to open.
A second example worth mentioning is the case of the migrant crisis in Sweden, as this probably best reflects what a large-scale, legal open borders policy would look like. Sweden has accepted over 320,000 migrants since 2014. During this period crime exploded.
For example, the number of sexual assaults and violent crimes committed by Swedes of immigrant background (including asylees) has tripled, while the number of robberies and other petty crimes has doubled.
The preponderance of evidence suggests that The Economist’s claim that open borders would not lead to an increase in crime is, in a word, absurd.
The Link Between Open Borders & Terrorism
The newspaper’s second point is that terrorism and immigration are not linked. This is untrue. The evidence is readily observable: there have been no terrorist attacks in low-immigration countries like Poland and Japan, while there have been many in high-immigration countries like France and Germany. I will not bother defending this point any further.
However, I would like to address the study from the University of Warwick that they cite. My first issue is that they did not link the study, which is frustrating for skeptics. My second issue is that The Economist completely misrepresented the study’s findings—which is why citations are so important.
The study does not show that ‘migration was more likely to reduce terrorism than increase it.’ Far from it.
The study actually argued that the overall level of immigration is not strongly correlated with terrorism—what matters is the country of origin. Specifically, countries with high levels of immigration from places like Iraq face high risks of terrorism, whereas those with high levels of immigration from China do not.
Basically, the study proves the common sense assumption. I quote (emphasis mine):
[The researchers] found that migration can under some specific circumstances be a vehicle for and driver of terrorism. The researchers detected that there was an increase in terrorism in a country that accepted migrants from another where terrorism is rife. However, countries, which accepted immigrants from countries where there is no or a low level of activism, did not suffer exposure to terrorism.
The Economist is not only factually wrong when it comes to the link between open borders, crime, and terrorism, but they are also quite content to misrepresent research to prove their point.
The Economist is fake news.
The Economic Impact of Open Borders—Poverty, Not Wealth
h1-b visa workers wages have risen five times faster than those of american workers
Finally we arrive at the most important section: the crux of the entire debate. The Economist asserts that large-scale immigration enriches the citizens of the host country. That is, it is good for everyone. In their own words:
Would large-scale immigration make locals worse off economically? So far, it has not. Immigrants are more likely than the native-born to bring new ideas and start their own businesses, many of which hire locals. Overall, migrants are less likely than the native-born to be a drain on public finances.
Much of this is incorrect. Why? Because the macroeconomic ideas espoused are based on a faulty understanding of how economic growth works and an ignorance of time-horizons.
Cheap labor reduces the need for productivity-boosting technology, which can be a significant detriment to long-run economic growth (due to compounding). It is no surprise that economies predicated upon cheap labor, like in Ancient Rome or the Antebellum South, failed to meaningfully advance their technology, or industrialize.
There is wisdom in Plato’s aphorism ‘necessity is the mother of invention.’
Economic stressors (from competition to costly labor) have the hormetic effect of causing growth—this explains why the Industrial Revolution occurred in Great Britain, and not France or China (where labor was plentiful). This is one of nature’s laws. It applies to all sorts of complex systems, from the economy down to the human body (body builders use this principle to get buff).
Would Open Borders Grow The Economy & Make America Richer?
Aside from this, the preponderance of evidence refutes The Economist’s claim: immigration does not grow the economy, and therefore open borders would not release mountains of untapped wealth.
The most recent, and comprehensive study that looked at the economic impact of immigration was a 642 page report conducted by the National Academies of Sciences, Engineering, and Medicine. The study is interesting for two reasons. First, it found that immigration has negatively impacted the wages and employment prospects of American citizens, especially for the working class.
This is unsurprising, since more workers means more competition, and therefore lower prices (wages)—it is basic supply and demand.
Second, the study found that although immigration provided a (minor) net economic benefit to America’s citizen population, nearly half of all immigrants were a net drain on the economy—they were balanced out by the other half.
Specifically, the majority of the 40 percent of immigrants who arrived via the process of chain migration, as well as a number of other non-economic immigrants (like asylum seekers), cost a negative net present value of $170,000. Net present value simply means how much money the government would need to invest today, at a yield of inflation plus three percent, to pay for said immigrant’s tax deficit over the course of their lifetime.
Of course, the government does not do this, and spends only as it receives—net present value gives us an artificially low estimate.
According to the Heritage Foundation, each non-economic immigrant more realistically costs a net of $476,000. Over the last few decades the immigration of low-skilled people has cost America, quite literally, trillions of dollars. Open borders would only add fuel to the fire.
Other studies concluded the same thing. For example, a recent study by Denmark’s Ministry of Finance found that immigrants, particularly those from beyond Europe, were a net drain on the nation’s economy. In fact, non-European immigrants and their descendants consumed 59 percent of the tax surplus collected from native Danes. This is not surprising, since some 84 percent of all welfare recipients in Denmark were immigrants, or their descendants.
Another thorough study by the Fraser Institute found that immigration costs Canadian taxpayers some $24 billion per year—and this was using data from nearly a decade ago. The number has since increased significantly, as Canada has one of the highest immigration rates, adjusted for population, of any Western nation. The details are not worth delving into, but suffice it to say that this simply adds more evidence atop the mounting heap.
A final study worth mentioning comes out of the UK, and was conducted by the University College of London. The report found the value of immigration to the economy was contingent upon the immigrants’ country of origin. This may not be politically correct (no fact is), but it conforms to the data from Denmark.
The study looked at the labor government’s mass immigration push between 1995 and 2011. Researchers found that immigrants from the European Economic Area made a small, but positive net contribution to the British economy of £4.4 billion (roughly $5.7 billion) during the period. However, during the same period non-European immigrants (primarily from South Asia, the Middle East, and Africa) cost the British economy a net £120 billion (around $157.6 billion).
The bottom line: open borders will likely not make America rich; if anything, it will make most Americans poorer.
Another major problem that the unknown author dismisses too-easily is the issue of crowding. Today, shelter is more expensive, in real terms, than at any point since 1973.
Summing up my previous research on US historical housing prices: in 1973 the median household income was $9,265, while the median sales price of a new home in January, 1973, was $29,900—3.2 times the median household income. Compare this to today’s prices: in January 2017 the median sales price for a new home was $317,400, which is 5.6 times the median household income of $56,516. This means that houses are 73% more expensive today, in real terms, than they were in 1973.
Furthermore, the average square-footage of new lots has decreased from 10,125 square feet in 1976 to 8,600 today.
And what is the driver of increasing housing prices? Mostly immigration, although zoning restrictions and organic clustering also have a part to play. Either way, open borders would compound this problem—especially on the proposed scale.
Putting Open Borders Back in the Old Curiosity Shop
despite taking in 3 million refugees, economic migrants, and asylum seekers, European governments still don’t know how much refugees cost
The Economist concludes its piece with the kind of naive faith in humanity, and unabashed hope for the future that is typical for those of the liberal ilk:
Open borders would make foreigners trillions of dollars richer… A thoughtful voter, even if he does not care about the welfare of foreigners, “should not say…‘So what?’ Instead, he should say, ‘Trillions of dollars of wealth are on the table. How can my countrymen get a hefty piece of the action?’
Perhaps open borders would make humanity as a whole richer. And perhaps the flow of one hundred million mouths into America would enrich our nation, and our people—despite the mountains of contrary evidence. But even if we buy these conclusions hook, line, and sinker, it still does not follow that we should open the borders.
Economics is an intellectual tool that can help us make better decisions, but it should not make these decisions for us. There are many rational reasons to sacrifice economic expediency for principles of far greater value—things like family, freedom, art, science, nature, or God.
One of the reasons Singapore is so rich is because political dissent, and the uncertainty it creates, is extirpated. Likewise, China’s economic rise was made possible, in part, due to its ability to bulldoze villages, pollute rivers, and silence critics—all in the name of “progress.”
Economically justified? Certainly. Rational? Perhaps—for Bentham’s most ardent acolytes.
But for those who, like Edmund Burke, see the nation not as an assorted collection of atomized individuals, seeking pleasure at the expense of their fellow man, but as a people inseparably bonded to one another through culture and language, and to the past and future through art and blood, sacrifices laid at the altar of economics are of little value. Far more important is the preservation of our nation, be it wilderness or artifice, duty or liberty.
The Economist would be wise to remember this.