Letters on Immigration and Growth Jude Wanniski July 16, 1997

Memo To: Website browsers, supply-side students, and clients
From: Jude Wanniski
Re: Immigration and Growth

[On June 27, we posted a lecture by Prof. Reuven Brenner on the subject of economic growth. It produced an immediate, negative response on immigration from a website browser, R.K., whose family migrated here from India in 1968. The response from Reuven Brenner follows. My own comments on the exchange will be posted as tomorrow’s Memo on the Margin.]

Date: Tue, 01 Jul 1997 14:54:39
To: k@* * * * *.edu
From: Reuven Brenner <brenner@management.mcgill.ca>
Subject: reply

Dear Mr. K.:

Thanks for your reaction. Here then are the answers to some specific points in your letter:

You consider the U.S. a “nation.” It is, but it is entirely different from any other because in spite of occasional legal closure of frontiers, the U.S. “tribe” remembers its origins: “Give me your poor etc....” that it has been built through migration.  I have no idea what is the “common American culture” that you may be referring to.  What is today American culture (including the most stirring patriotic songs, and even White Christmas) are the output of Jewish immigrants from Eastern Europe. And look at TV and movies, not to mention literature, which define American culture, well, there was much truth in the Hollywood saying that if you wanted to make it there, it was not enough to be Hungarian and Jew, you also had to have some talent.  Just read the entertainment business history, and you`ll discover that Hollywood became what it is (like it or not) when most of the prominent artistic community from Hungary, Austria and Berlin moved to the U.S.

By the way, you may not be aware of other facts: that many universities in the U.S. became what they are because of all the scientists expelled (or who departed) from Europe before, during and after WWII.  In fact, the reason that the University of Chicago had such a disproportionate number of Nobel Prize winners is because at the time few other universities wanted to hire Jews -- and Chicago took in the best of them. (Milton Friedman came to Chicago in the fifties because even then Northwestern did not want Jewish faculty.)

You can look over the list of people who have created new industries in the U.S., be it entertainment, finance, in scientific endeavors etc., and count first or second generation immigrants.  So the U.S. is for the moment a very different tribe from any other. You should get acquainted with the evidence for two reasons: First, to avoid making the big mistake you do, when you refer to Smith and Ricardo, and you write “High immigration simply keeps wages down relative to the land ...” Where is your evidence?  In fact, of all the places built on the idea of migration, and giving immigrants the opportunity to succeed,  just the contrary happened. The U.S. over the last two centuries, Canada, Australia -- and I shall not repeat the historical examples of Amsterdam, Hong Kong that so upset you -- high migration came together with significant increases in wages.

The mistake you make is that these places did not attract “labor” but CAPITAL -- human capital, that is.  And by human capital I do not refer only to the highly skilled, but also to the ambitious, who are ready to work hard, and who are denied opportunities in their own countries.  Take Andy Grove, CEO of Intel, an immigrant from Hungary, arriving penniless to the U.S. Suppose he wanted to go back to Hungary.  According to your argument, poor Hungarians would lose.  In fact Hong Kong became what it became in shipping and textiles, when China threw out entrepreneurs specialized in this field from Shanghai.  But the knowledge was in their head, and they reorganized everything quickly.  And they RAISED wages as a result, not diminished them.

Your second big mistake is in the statement “What is particularly galling about Mr. Brenner is his failure to understand that the nation-state -- the aggregation of people of common culture into a sovereign state ...?” What are you talking about beats me.  As I pointed out above: What common culture did the immigrants arriving to U.S. shores have before new layers of immigrants invented culture for them?  They had may be one “political culture:” they did not want as much government as they had in their native lands.  That idea united them.  But this is something completely different from what you are implying.

From your letter I infer that you do not know much history.  Do you know from where the 17-year patent law is coming?  When England wanted to leapfrog the Dutch in the 17th century, they knew that they needed IMMIGRANTS.  Yes, they wanted to attract the Dutch republic`s best artisans, and train their people.  To do so they promised them monopoly powers until they trained 2-3 generation of English apprentices.  Since apprenticeship at the time was 7 years --  14 + 21, divided by two and rounding up, gives you 17.  Now if you want to know more why and how the Dutch declined and England moved up, you have to read my books.

I think you have confused two things: one, when people can move from one place to another, and there are no welfare and other benefits in place, then self-selection would lead the most entrepreneurial and ambitious to move.  Once there are many government programs in place, the story becomes somewhat different.  Although, if you have read the recent studies on the Mexican immigrants (summarized in a recent cover story in U.S.News and World Report), by the second generation even these immigrants (20 million) who did not arrive in the U.S. with much formal human capital, are doing quite well -- much better than the politically motivated mythologies, to which you have succumbed, suggests.

I hope that together with the broader, historical piece, giving you a background, you will no longer be dumbfounded.  In fact your opening paragraph puzzled me exceedingly: After all, in that Wall Street Journal piece of June 5, my conclusion was that in the future the U.S. cannot count on the  ambitious, qualified immigrants (by the way, since you mention that you are of Indian background _ did you ever visit Silicon Valley and count how many of Indian of Indian origins are there, fulfilling the top scientific jobs?), once other countries shape up.  So you should have been happy?  No?

My statement about immigration referred to the simple observation that, at times, it takes a generation of very hard working parents to produce the success of the next generation.  Nevertheless, without immigration they would not be here.

A final point: when you say how difficult it is for you to get along now, you seem to attribute your troubles to immigration. I do not know what is your profession, but I see the reasons for the relative declines in some “middle class” family incomes differently.  One is that until ten years ago many people in the dozen or so politically stable Western-type democracies could have relatively high incomes only because tens of millions of much better qualified were kept behind Iron Curtains, isolated by coups, wars, revolutions. That world is over, and these people lost.  There are other reasons, but this is already too long a letter, and far more than your emotional outbursts justifies.

So I’ll be happy to discuss our disagreements.  But only if you do your homework and do it in a civil manner.

Sincerely,
Reuven Brenner   
McGill University Faculty of Management
tel: 514 398-7327