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I think there’s a perception that undocumented immigrants are somehow a burden on the economy, and that they take jobs for which Americans would have received higher wages. The former doesn’t seem to be true at all, if you look at the fiscal calculation. The latter may be true in some cases; hiring illegally is frequently – but not always – a way around the minimum wage. But go back a few years. Our economy had unemployment below 5% even with all the undocumented workers. Surely we could afford to incorporate many of them into the legal economy if we did a better job managing our other economic policies.

I never said rich countries should keep the unskilled out. I’d say the US immigration policy is devoid of economic content from top to bottom, whether it’s six-figure-earning PhDs or undocumented construction workers. We need a complete overhaul to rationalize it. I don’t think the US has ever suffered from allowing hardworking people who want to make a better life for their children to put down roots here… but we don’t test for that in our visa interviews.

Your Lordship, I couldn’t agree more. My time eloquence and time for typing are somewhat limited, however!

Good point, Kurt. I usually say that to Yaw, too. Sending money home doesn’t improve the competitiveness of local industries much. If you can’t improve the productive capacity of an economy, then that extra money will either be spent on imports or just create inflation. Not such a great boost.

Poor countries can hold onto their top-achieving people by giving them real opportunities to capitalize on their talents, ideas, and hard work. That means making it easier to start businesses, opening up financial markets, and ending government franchises and other monopolies. Many migrants would stay in their home countries if they could earn a decent living – perhaps not as much as they could earn abroad, but enough to live comfortably – without fear of expropriation or persecution. It looks like there are more countries that can offer them this deal today then there were a few weeks ago… but the number is still far too few.

I would add that the UK makes it much easier for high-skilled, highly educated, high-earning people to migrate permanently than the US does. Compare our puny H1-B visa program to the UK’s Tier 1 visa program. You can get a Tier 1 permit in a couple of weeks regardless of whether there’s a job waiting for you in the UK. Not so on either count with H1-B.

I think it is a problem for the world as a whole.

Yes, the exodus of doctors, engineers, scientists, and other professionals from poor countries will initially help economic growth in the countries to which they migrate. And, as my colleague Yaw Nyarko at NYU points out, in some cases these professionals will send a lot of money home – perhaps more than they could have earned if they had stayed. But overall, I think this trend is a long-term problem for poor countries; they’ll lose the professional middle class they need as an anchor for stable growth.

If the poor countries fall further behind rich countries, then we face a much harder battle against poverty, with its attendant global risks in the form of disease, conflict, etc. We can also expect to see fewer and smaller markets for our exports. Both of these trends will hurt us in the long term, perhaps canceling out the benefits of the brain drain.

Hi Drew,

The new governments in Egypt, Tunisia and perhaps other countries have a great opportunity to re-choose their institutions like the post-Soviet states did. Since people power gave them their positions, they’ll be under pressure to make their societies more meritocratic. This can only be a good thing for global growth; think of the thousands of talented people who were denied opportunities under the old regimes – activating their economic potential will make a big difference. Of course, I’m assuming that the armies and other elites won’t derail the process.

That’s exactly right. Investors need to reward corporate executives for doing things that will help companies in the future, not just today. If I were chairman of a corporate board, I would make a large part of the CEO’s compensation come due in ten or twenty years, based on long-term performance, whether or not he/she was still with the company then.

I am familiar with the book. I can’t predict the things Donald Rumsfeld called the “unknown unknowns”, like an alien invasion or perhaps the whole universe folding up into a Chinese takeout container. No one can. So I do the best I can within the parameters of the world we know so far. Hopefully it’s better than nothing….

Hi Glenn, I certainly don’t want several of my predictions to come true! It would be great if China could keep growing, the European Union could stay together and grow in synch, and climate change made no difference to anyone at all. I work every day at Dalberg (www.dalberg.com) to raise living standards around the world, and my main concern is fighting poverty. The global economy is so interconnected now, and it’s by no means a zero-sum game. More wealth abroad means more people who can buy our products. More wealth here means more purchasing power for exports from developing countries. These are good things for the whole world.

Hi Kurt – why shouldn’t private companies look further ahead? Surely they need to know the risks and opportunities that await years down the road, just as governments do. I agree that governments can take a longer time horizon; their main source of revenue (taxpayers) will most likely be the same fifty years from now. But companies that focus on quarterly earnings may be going through a lot of wasteful financial gymnastics – time, effort, and money that could be better directed to investing in the long term.

I see two threads coming together here….

Our politicians are on a two-year electoral cycle, and when there’s a presidential election coming up the campaign season can last for twenty-two months. How can we get them to focus on the long term? We could if we made our votes contingent on their long-term economic policies. But we’ve been trained to focus on the short term. I think the media is partly at fault here. If the media didn’t write a story about every data point that came out of our economy, a lot of business reporters would be out of work. Yet the long-term fortunes of our economy are much more important, and they change much more slowly. We need an educated electorate with a long time horizon, and the media isn’t always helping.

What do you say to that (said the former journalist to the journalist)?

My answer is also no. In the book, however, I do make some suggestions for changing that answer to yes. And we don’t have to change our institutions to make it happen (though that might help). We simply need to take the long view ourself, and then set incentives for our political leaders based on that view. For example, “You think my vote depends on my income in the coming election year. But I take the long view, so I won’t vote for you unless you promise to vote for investments in infrastructure over the next twenty years, even long after you leave office.”

According to the Census Bureau, most of the gains in household income (adjusted for inflation) since 1968 have gone to the top 5%. Some has gone to the rest of the top 20%. The lower 80% has lost out pretty steadily, though the second 20% flattened out in the past decade or so.

If you gave me the federal budget and a pair of scissors, I could probably get spending down without harming economic growth. I’m not sure our politicians can. They seem make cuts with zero correlation to the effects on the economy’s long-term potential to grow. A valuable (if slow to pay off) investment in scientific research is just as likely to get the axe as a pork-barrel bridge to nowhere.

Our system is still far from meritocratic. Kids with wealthy parents (and legacies) have a big advantage when applying to college. Money plays more of a role in politics than ever before. Corporate boardrooms are staffed by musical chairs. And social mobility has decreased dramatically since the baby boom generation; you can see it in the figures.

Hmm, why can’t Americans make cars that feel like German cars? I’d like to see a double-blind study if you think we can. The best people to purvey American commercial culture to the world are the ones who experience it from birth. It’s not a bulletproof advantage, but I think it’s real.

Taxes will have to go up sooner or later. The question is only whether we have to have a credit crisis before they do. The American taxpayer certainly could, in principle, shoulder the burden of another $10 trillion in debt (it’s about $30,000 per person stretched over many years). But the ongoing changes in our political system are making a George H. W. Bush kind of readjustment look harder and harder. I’m a little bit worried, at any rate.