On Wednesday’s NYTimes op-ed page Tom Friedman forwarded on a novel solution to our financial mess and housing crisis:
Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.
“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.” [Link]
Once you get past the model minority stereotyping in the first paragraph, he does have a good point. In all the talk of bailouts, stimulus, bad banks, etc., the one thing nobody is talking about (not even the Obama administration) is immigration policy. Now may be the best time to swing the doors open so highly skilled immigrants can enter the U.S. and help stimulate the economy:
… the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas.
Bad signal. In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower — anywhere? That’s called “Old Europe.” That’s spelled: S-T-U-P-I-D…
p>If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.
We live in a technological age where every study shows that the more knowledge you have as a worker and the more knowledge workers you have as an economy, the faster your incomes will rise. Therefore, the centerpiece of our stimulus, the core driving principle, should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs. [Link]
p>Vinod quoted Greenspan in an earlier postwhere he offered the same advice. I know it may not be a good idea to quote Greenspan since he had a large hand it getting us in to this mess in the first place, but the logic here makes sense to me.
[Greenspan] estimates the number of new households in the U.S. currently is increasing at an annual rate of about 800,000, of whom about one third are immigrants. “Perhaps 150,000 of those are loosely classified as skilled,” he said. “A double or tripling of this number would markedly accelerate the absorption of unsold housing inventory for sale — and hence help stabilize prices.” [Link]
The counter argument to this strategy however, is that if every wealthy country followed it, it might result in an exodus of talent from the developing countries that most need to keep that talent. One commenter in Friedman’s op-ed even pointed out that this strategy would be terrible for India since it might lose some of it best upper-middle class to the U.S. (a trend that has slowed greatly in recent years due to India’s economic boom). As much as we want our economic problems solved, encouraging a bipolar world of talented and depleted populations will have a destabilizing effect which will ultimately end up hurting as well, argue the critics of Friedman and Gupta.