Migrant Workers, Having Been One

November 18, 2010 at 6:09 AM | Posted in Economics | Leave a comment
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It is difficult not to be aware of the stress around migrant workers and the perceived effects they have on the US economy. In some quarters it’s become a rallying cry to keep the illegals out and let fewer legals in. It seems to make sense that if we have high unemployment, we should put our own people to work first.

While I was not illegal, I once went to work in Germany as a “Gastarbeiter“, guest worker, in a factory in Germany. I did so because I was broke and needed money. I found the work difficult but an incredibly valuable experience. I learned more about Germans but also had my first experiences with other Gastarbeiters, men and women who were from Turkey and what was then Czechoslovakia. They had left their homelands to earn a living — and likely to send money back to family there who needed it.

So, given our problems as a country and my personal experience I was interested in the thoughts of Professor Timothy Taylor on migrant workers and listened to his lecture on the subject avidly. If I was allowed two conclusions from his lecture I would venture these:

  • Migration has a relatively small (10 Billion) but positive effect on the US Economy on a yearly basis.
  • Migration has a positive effect on the sending (think Mexico) country’s economy.

There is one additional fact that is striking: migrants generally pay in more taxes than they get in services. There is one caveat here: the Federal Government makes out better than local governments in the hauling in and paying out.

Taylor’s lectures came out in 2008 and so things may have changed in the last two years. Still, it seems that we are making the migrant workers, who it is fair to say work harder than we do and under far greater stress, the scapegoats for our own lack of productivity.

Rooting for Latin America

November 11, 2010 at 7:17 AM | Posted in Economics | Leave a comment
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A gift from my friend Eugenio

I will never forget nor ever get over the warm friendship that I received from my teammates in Mexico, Chile and Brazil back when we worked together from 2002 – 2006. They had some great successes then but what I remember most were my meals with the great leader Eugenio Riveroll and with Luis Garcia and Oscar Alvarez and their teams in Mexico and with Ed Rodriguez and Isabel Farincho in Brazil. These were meals of fellowship and great spirit. I will never forget, as well, the way they treat each other, with complete courtesy.

So, while I wish economic well-being to all regions of the world, I have a special rooting interest in Latin America. And so it was with anticipation that  I listened to Professor Timothy Taylor’s two  lessons on the region from his course, America and the New Global Economy.

There were two policies that held sway for many years in Latin America: Populism and Import Substitution. The former is not difficult to understand as governments supported the lower and middle classes and attacked the rich and  large-scale industry. We can think of Fidel Castro and other similar governments. Import Substitution was new to me. It stands for a group of policies that sought to minimize outside influence and they shut out imports, instituted price controls and gave government subsidies to favored companies.

These policies, of course, did not work out and led to both high (sometimes phenomenally high) inflation and to the most unequal distribution of income in the world. It is interesting that in America many want the country to turn inward — it is one of those obvious ideas that just don’t work.

In order to get inflation under control and to get growth going, a number policy changes were attempted that are now referred to as the “Washington Consensus.” These included common sense ideas like inflation control, fiscal discipline, tax reform and liberalization of trade. These had all had some positive effect but still Latin America does not grow significantly.

There is one problem that Professor Taylor does not delve into and perhaps it is because it seems like more of a social problem than an economic one. But crime, the amount and the violence of it, the palpable sense that it is around the corner is the number one thing that is holding back this region — in my opinion.

It may be a chicken or an egg deal: with the greatest disparity between the poor and the rich than any other place, crime is more inevitable. But with every revolver to the head, it gets harder and harder to get investments into the area. Safety is like infrastructure: a must have.

Oil Poor

November 5, 2010 at 6:44 AM | Posted in Economics | Leave a comment
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Lawrence of Arabia (from Wikipedia)

One of the most intriguing lessons in Timothy Taylor’s America and the New Global Economy series of lectures is The Curse of Oil Wealth in the Middle East. One would think that swimming in oil would be great but in fact it is not, at least not for everyone.

“For example, Saudi Arabia had a per capita GDP of around $20,000. in 1985, and after adjusting for inflation and all the rest, by 2006 they had a GDP of $21,000… Similar patterns of very modest economic growth have occurred across other countries in the Middle East in other decades, as well.” Timothy Taylor

To pile on: low life expectancy, high infant mortality, very high illiteracy, low school enrollments — you name it, things are bad.

Taylor makes another interesting point: Venezuela has a lot of oil and is not setting any economic records. What gives? Well, economists refer to the problem as “Dutch Disease.”

Holland discovered it had reserves of natural gas back in the fifties and when all the shouting was over they had high inflation, contraction in manufacturing and slow growth. This began to happen in Norway as well but both governments realized what was happening and straighted things out. The good Sheiks have not done the same.

Oil, having a lot of it, does not lead to an increase in democracy. A government with oil doesn’t need democracy as it is easy to sell oil and easy to borrow money. It is a snap for the rich to get richer without the annoyances of legislation, transparency and an uncontrolled media. You could say that their government is “business-friendly.”

Red Holzman (from Wikipedia)

Red Holzman, the wise old coach of the NY Knick basketball team was once notified that the great John Havlicek was injured but would still play in a big upcoming game. Red took that as bad news and he said that Havlicek would be even more dangerous injured. The opposite is true as well: when you can seemingly print money, just around the corner people are starving.

My Economic Virgil

October 28, 2010 at 6:00 AM | Posted in Business, Economics | 2 Comments
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microeconomics

I chose as my first guide, my Virgil, Professor Timothy Taylor to educate me in things economic. He teaches at Macalester College in Minnesota but I know him from his many lectures from The Teaching Company and their Great Courses Series.

I began with Taylor in 1994 with his first series of lectures on Macro and Micro Economics. I listened to the courses for my amusement but without a particular goal. I had no idea how the macro was different from the micro and by the end of the course I had a good idea. Of greatest value to me was learning how economists thought. As time went by I forgot specifics but I always remembered that they thought differently than I did.

In his first lecture he discusses the following things that economists believe that most people don’t (and I quote):

  • Take tradeoffs seriously
  • Believe in statistical people, not real people
  • Selfishness can be an effective principle of social organization
  • Don’t believe that individual or businesses set prices
  • Incentives matter
  • Exchange creates wealth
  • Don’t use prices to redistribute
  • Remember opportunity costs
  • Markets are a powerful force of nature.

Prior to listening to the good professor I had only the vaguest idea as to one or two of the above and blank as to the rest. I want to note also that Taylor takes no political stance but if I had to guess I’d say he was conservative if not a Conservative. This is good as I don’t want to hear what I may already think but to learn and then think again.

America and the New Global Economy

Subsequent to these first two courses I listened to several others and then lost the thread. But now I have the bit in my mouth and I’m interested in wealth distribution, what the hope is for my friends in Latin America, the effects of an aging population and many other aspects of economics. So, now I’m listening to America and The New Global Economy.

I look forward in an upcoming post to discuss the Mideast: so much oil and still broke.

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