A Rare Expose’ Regarding Globalization

Those of us who grew up with Samuelson’s ubiquitous economics textbook “learned” that trade between two nations benefits both. Unfortunately, everyone took it for granted that the “benefit,” an increase in GDP, accrues to all. Even Samuelson rather recanted on this toward the end of his life, but many of those who never went beyond his book are believers. They are then easy marks for those with vested interests in promoting the globalist philosophy.

Hence the constant drumbeat in the mainstream media: Globalism is good for you, Trump missed a great opportunity by not participating in TPP, and so on.

I’m still in China as I write this. Recently on the train from Shanghai to Ningbo, I happened to be sitting next to a friendly, talkative man who is the general manager of a Chinese electronics company. Apparently the Trump administration had blocked his firm from doing business with the U.S., and the GM gave me the same line, that Trump is fighting against the natural world order in which everyone benefits from trade.

In light of all this, I was pleased to be tipped off by a reader concerning this article. This passage is refreshing, to say the least:

Take, for instance, Caterpillar. The United States’ 74th largest company has long been a symbol of domestic advanced manufacturing prowess, a firm that leverages American ingenuity to take capitalize on growth around the globe. Since announcing a big bet on the China market in 2010, Caterpillar’s stock has soared 178%. But that success hasn’t translated in to more American jobs, as the firm employs fewer Americans today than eight years ago, according to its latest annual report.

Interesting in that I read this the same day I went past a large Caterpillar building in Shanghai. But how can this seemingly contradictory situation arise? Over the years of writing on these topics, I’ve proposed some thought experiments that explain why.

This was during the time NYT journalist Tom Friedman was telling us that “the world is flat,” his symbol for the benefits of globalism. Yes, Friedman told us, some IT work is being shipped from the U.S. to India, but those Indian coding shops are cooled by Carrier air conditioners, thus creating jobs for American engineers. I countered that engineers are basically a fixed cost for Carrier; selling extra AC units in India is not likely to require the firm to hire many more engineers, if any. And as to U.S. factory workers, well, where is Carrier likely to manufacture those AC units to be sold in India? Roy Beck’s old quip about U.S. firms preferring to do their IT in India instead of Indiana probably applies here.

Ironically, years later Carrier was the first firm that Trump tried to strongarm/sweet talk into keeping jobs in the U.S. The results have been mixed so far, but thank you, Tom Friedman, for the suggestion. 🙂



Gaming the Zero-Sum Game

I am in China currently, and the other day I gave a talk at a Chinese university. The hospitality was wonderful, and we had a great exchange on the topic of my talk (neural networks, and why I believe these modern things are actually equivalent to some very old-fashioned ones).

We were joined at a delicious lunch by a pleasant young professor who is the local Party Secretary. Though that may sound ominous to some in the U.S., it is basically analogous to the role of a shop steward in a unionized U.S. company. But yes, she is representing the government, and when the topic of politics came up, she politely expressed concern about Trump administration policies. Were they worried about tariffs? Of course not. No, their fear was that Trump would reduce the number of foreign students from China allowed to come to the U.S. for study.

Knowing from past experience not to get into politics in these situations, I replied, “Well, this is a highly complex issue,” and left it at that. I could have stated (as they may have already known) that I have my own concerns about the foreign student program. Policy really should be tightened up, though of course not specific to China and possibly not directly involving the F-1 student visa. Reducing the H-1B and employer-based green card programs would reduce the number of foreign students, though not necessarily surgically.

One of the problems to be fixed is the “two fer” regulation set by the Obama administration that granted work rights to certain H-1B spouses, which the Trump administration is now considering reversing. A former H-1B spouse, who became a U.S. citizen years ago, recently wrote a New York Times op-ed in which she describes the Trump people as being misinformed if not downright xenophobic demagogues.

The author of course brings in the obligatory “It’s not a zero-sum game” argument.

Restrictionists assume a zero-sum math for workers: A job gain for a foreigner  is a job loss for an American. By that logic every college graduate who enters the job market would be cause for mourning. But that’s backward, given that skilled individuals create, not take away, jobs, and no economy succeeds by shackling qualified people.      

The fact is that if a profession has a labor surplus, producing lots of new graduates in that profession IS a problem. In fact, occasionally a responsible university will indeed reduce the size of such a program.

And if that profession suffers from rampant age discrimination, as in the computer fields, it is especially not a zero-sum game situation, Young new graduates are hired in lieu of older (35+) professionals. In fact, the author’s statement,

[The H-1B spouses] also happen to be between the ages of 26 and 35 — peak productive years

actually is the root of the PROBLEM, rather than the virtue she views it as. Sadly, the REASON those are now viewed as “peak productive years” — which wasn’t the case in pre-H-1B times — is in fact the overproduction of new graduates. That excess is largely due to the foreign student program. And granting work permission to some H-1B spouses makes that even worse.

My stance is yes, one can sympathize with the forced unemployment of those spouses, so they SHOULD be allowed to work. But, for the reasons given above, they should count toward the H-1B cap. Otherwise it is indeed gaming the system.

Note carefully that China really does have a “Best and Brightest only” technical immigration policy. They welcome (only) those who are prominent in their field to come work in China, and pay them a pretty penny, quite a contrast to America’s discount-rate policy.

The Matloff Hamburger Theory of Immigration — Updated

Is it true that “immigrants do jobs Americans won’t do”, as immigrant advocates (including pro-immigration researchers) claim? Or do immigrants “steal” jobs of those already here (native or not), to use the unbecoming language of some who advocate for lesser levels of immigration?

I’ve often mentioned my Hamburger Theory. I’ll review Parts A and B of the theory below, and then add a new one, Part C.

Please note before continuing: I am using “white” and “black” as a proxy for “native” and “Latino” for “immigrant.”That of course is a simplification. And of course, it doesn’t mean one race is preferred to another, just a mechanism for analyzing the impact of immigration on the labor market.

Part A:

Some years ago, I suggested a drive along I-5 from San Diego to Seattle, checking out the local McDonald’s in various spots along the way. You would find, give or take some shades of gray:

  • In California, the workers, both in the kitchen and at the counter, would be all Latino.
  • In Oregon, the counter people would be white, with Latinos in the kitchen.
  • In Seattle, McDonald’s would be all white.

In all these cases, the whites would be mainly teenagers, learning the value of money, and retired people on a limited income, who knew the value of money only too well.

The theme, of course, is that the smaller the size of the local Latino population, the more whites are hired. (What about blacks?  See below.)

Again, it would be a gross oversimplification to say that the whites are natives and the Latinos are immigrants, but my point should be clear: If immigrants aren’t available, somehow natives can be found.

Part B:

Instead of varying region, now vary level of the product. Specifically, within a given region, say the Bay Area, compare McDonald’s and In ‘N Out. The latter is a bit more upscale, and pays higher wages. And the contrast is stark: Almost all the workers at In ‘N Out are either white or black teenagers, or older whites. McDonald’s is all Latino.

Conclusion: Even if immigrants are available, Americans can be hired as long as the wage is somewhat higher.

Part C, 2018:

In the last few months, the demographics of workers at McDonald’s, Jack in the Box, Chipotle and so on in my region have “In ‘N Out-ized,” i.e. they are now white and black teenagers and some older whites. And most such stores have prominent “Now Hiring” signs, such as in the picture enclosed below.

Conclusion: Well, it’s too early to tell, but a tentative explanation is that the sudden change is due in signficant part to the ending of DACA.

I must note: 

With this change in the last few months, frankly, the quality of service has gone down a lot. Teenagers in their first job are not only new to procedures but also may not yet understand issues like “People are waiting” and “What you do matters to the customers.” (When I was a kid, there was often a sign in kitchens of such stores, “If you wouldn’t eat it, don’t serve it.)

I was in fact at a local Jack in the Box today, and the scene was rather touching. The Latina manager was patiently explaining procedures to the earnest young black kid working the counter — “OK, now you call out, ‘Number 462 is ready'” — with her manner being downright motherly.

I’m sure the kid will be fine after a few more days on the job. And more to the point: Whatever one thinks of immigration in general and the DACA program in particular, the fundamental truth remains, no matter how many slogans like “Immigration is not a zero-sum game” the immigrant advocacy groups bandy about:

High levels of immigration do indeed reduce opportunities — jobs, education, political influence — for the black underclass.

None of this means that Congress should come up with a draconian policy on DACA. But were we ever to have a sincere national conversation on immigration policy, this must be one of the major aspects to be considered.


Trump Administration Opts Out in OPT Case

Those of you who follow foreign tech workers issues closely will recall the lawsuit by the Immigration Reform Law Institute regarding Optional Practical Training. The OPT program, part of the F-1 foreign student visa, allows foreign students to work in the U.S. for a certain period of time after graduation, ostensibly to get practical internship experience before returning to help their home country rise out of poverty.

What it has become, though, is a holding pattern, a way for foreign students to work while waiting to secure a visa in the vastly oversubscribed H-1B program. In 2016, the Obama administration extended OPT to a 3-year period for STEM students. (Earlier the GW Bush administration has extended it from 1 year to 29 months.) As Professor Ron Hira has pointed out, the notion that a foreign student graduate needs a three-year internship is absurd.

It matters — a LOT. The adverse impact on U.S. citizens and permanent residents is major. I strongly support this lawsuit, and have (via this blog) urged the Trump administration to roll back OPT to its original 12-month duration, or eliminate it entirely (in concert with other reforms).

On the other hand, as I have pointed out repeatedly since 2015, there is one issue on which President Trump — notorious for his sudden policy shifts — has been 100% consistent: Support for international students in STEM. Though he has railed against the H-1B program, his target has been the “Infosyses,” the large, mainly Indian, rent-a-programmer firms that hire H-1Bs directly from abroad and then rent them to U.S. firms. Trump has consistently supported hiring of foreign students by the “Intels” (not just the big household name tech firms, but banks, startups etc.).

One can of course still hold out some hope that someone who understands the culpability of the Intels will somehow reach Trump’s ear. But the latest development confirms that there is little hope of this occurring. Administration lawyers handling the suit are trying to squirm out by claiming that the plaintiffs lack standing to bring the complaint.

I’ve been warning H-1B critics for years that their buying into the false “Intels Good, Infosyses Bad” dichotomy would come back to haunt them. Here is a striking example.

Sen. Rubio, Chris Ray and Chinese Foreign Students

I often pose policy questions here to which I do not have good answers. This evening’s posting falls into this category.

Though most people following last Tuesday’s Senate hearing on “spies within us” focused on the testimony involving Russia, several primarily Chinese-American activist groups and members of Congress are protesting an exchange between Senator Marco Rubio and FBI Directory Chris Wray concerning “the counterintelligence risk posed to U.S. national security from Chinese students.”

The activists are accusing Rubio and Wray of claiming that all or most Chinese students are spies. Of course, Rubio and Wray said no such thing, but this is now the norm in U.S. politics. In 2016 the Democrats cried that Trump had said all Mexican immigrants are murderers etc. but of course he never said such a thing. I will return to this point later in the post.

One of those objecting to Rubio and Wray’s comments was Rep. Judy Chu, whose LA-area district is one of the most, if not THE most, heavily-Chinese in the nation. Valley Blvd., stretching 20 miles through umpteen San Gabriel Valley suburbs, is a Chinese foodie’s dream, a seemingly unending string of Chinese restaurants, Chinese cafe’s, Chinese grocery stores and Chinese malls. Chu, speaking for the Congressional Asian Pacific American Caucus (CAPAC)  wrote (emphasis added),

There is no doubt that we must take espionage threats from foreign countries seriously. However, Senator Rubio’s leading question and FBI Director Wray’s sweepingly broad response were completely irresponsible generalizations that attempt to paint all Chinese students and scholars as spies for China. I condemn these remarks entirely and reject these dangerous attempts to build a case that Chinese students, professors, and scholars should be viewed with more suspicion than others.

Unfortunately, Chu’s last statement is statistically incorrect. As a group, the Chinese students ARE different.

The number of cases of industrial espionage by (typically former) Chinese foreign students has been so large that the Wall Street Journal once published a table summarizing them. And many of the Chinese students have been quite militant in the affairs of their host countries, such as their efforts to block the Dalai Lama from delivering a commencement address at the University of California, San Diego. A report of an incident in Australia is chilling. (Added, March 9: See also the long Foreign Policy article on these issues.)

I know of no other country whose foreign students are acting in this manner.

The Confucius Institutes, also mentioned by Rubio, have indeed been under attack as being used by the Chinese government as propaganda tools on U.S. campuses. Some universities have closed them down. According to Inside Higher Ed,

One U.S.-based Confucius Institute, at the University of Chicago, closed in 2014 after more than 100 faculty signed a petition that cited, among other things, concerns that Hanban’s role in the hiring and training of teachers “subjects the university’s academic program to the political constraints on free speech and belief that are specific to the People’s Republic of China.”

A February 18 column by the Washington Post‘s Josh Rogin was titled “Waking up to China’s infiltration of American colleges.” That title says it all.

So Rep. Chu is wrong; the Chinese case is indeed different.

Thus Rubio and Wray did have a valid point. But what do they propose to do about it? The vast majority of Chinese students are simply here to study (and in many cases, to eventually become Americans).

On the other hand, as I have pointed out, a “vast majority are harmless” argument is not sufficient in discussions of public and national security. Only a tiny percentage of immigrants are terrorists, murderers or gang members, but those tiny percentages, translated to absolute numbers, cause much American misery.

To be sure, Chu and the others do have a point in suggesting that  Rubio and Wray’s concern over China’s attempt to influence U.S. internal affairs might lead to overzealous investigation of the innocent. The February 15 press release of the mainly-Chinese group Asian Pacific Islander American Public Affairs Association (APAPA; unfortunately the press release seems not to be on the Web), warns,

The past glaring examples of the 1882 Chinese Exclusion Act, the 1942 Japanese Internment Act, and the recent racial profiling of Dr. Wen Ho Lee, Sherry Chen and Dr. Xiaoxing Xi were part of America’s shameful and discriminatory history – a history that should not be repeated.

This is partly true, partly not. The Xi case does seems to be a tragic instance of inept bungling on the government’s part. However, although Dr. Lee’s civil rights were indeed egregiously violated by the FBI, by his own admission he had had proactive contact with a confessed spy; that, not racial profiling, is what brought him under suspicion. One Chinese-immigrant friend who is knowledgeable on the Chen case says although she was no spy, her handling of government documents did justify her getting fired.

Though there are no clear solutions — the U.S. is not going to shut down the flow of Chinese students to the U.S., nor should it — the concerns raised by Rubio and Wray cannot be dismissed. Use by Chu and others of the magic incantation “racial profiling” is both inaccurate and counter to U.S. interests. Rubio and Wray need to hear about the concerns of CAPAC, but the latter must first admit that there indeed is a problem.

Noncitizens Are Constituents?

As some of you know, Immigration Voice, an organization of H-1Bs and other foreign workers waiting for green cards, contends that the per-country limit in employer-sponsored green card policy is unfair. Since the vast majority of such green cards applicants have in recent years been Indian and Chinese nationals, the backlog for those two countries can be quite long, especially for the EB-3 category, which is designated for the mediocre rather than “the best and brightest.”

I’ve been neutral on this issue (leaning toward supporting the per-country caps), but one thing I am NOT neutral on is lobbying by noncitizens. IV has retained a fancy lobbying firm, and regularly has its members call and visit members of Congress. This is fundamentally wrong in the first place, but even worse considering the negative impact these workers have on U.S. citizens and permanent residents in the STEM areas.

I hope Congress will keep in mind that these workers, whether deserving of help or not, are NOT constituents.

Some Rare Voices of Reason in the Recent Press

Some items worth mentioning, showing that not all of the media has gone lunatic:

First, journalist Ted Koppel is visiting his alma mater, Stanford University, and gave a thoughtful interview to the Stanford Daily, including this passage:

Moreover, Koppel expressed disappointment in news reporters whose personal and political opposition to Trump, he believes, has compromised the objectivity of their reporting.

“You cannot read [The New York Times] without coming to the conclusion that almost everybody who works for the organization would like to see Donald Trump replaced,” Koppel said. “Other than on their op-ed pages, I don’t really want to know what the opinion or political outlook of the reporter.”

Hear, hear! The morning after Trump’s SOTU speech, the NYT was “reporting” — not on the editorial page — that the speech would do nothing to raise Trump’s low rating in the surveys. Yet the polls on the same day found that the populace approved of his speech at the rates of 70 to 80% (even including 43% of the Democrats, according to CBS News).

Second, the Wall Street Journal ran an op-ed by Scott Adams, creator of the Dilbert cartoon. Those on the left (a group whose views I generally share) would dismiss Adams’ column as the racist writings of a Trump surrogate, but applying the Koppel criterion, I really can’t tell whether Adams voted for The Donald or not. Instead, I see a carefully reasoned essay decrying the extreme bias of the NYT, WaPo etc. One of many excellent passages:

Charlottesville. Critics believe Mr. Trump took sides with the torch-carrying racists who were chanting anti-Semitic slogans in Charlottesville, Va., and called them “fine people.” The implication is that he publicly betrayed his Jewish daughter, son-in-law and grandchildren—while also inexplicably recognizing Jerusalem as Israel’s capital. That doesn’t make sense.

The more ordinary explanation is that Mr. Trump spoke about the protests without having all the details about who attended and why. It was reasonable for him to assume some people were there because they agreed with his position that toppling Confederate statues is more about political correctness than racism. (For the record, I regard those statues as offensive decorations we can live without.) In any event, Mr. Trump later disavowed the Charlottesville racists in clear terms.

(Actually, he immediately denounced the racists.)

Next, a NYT column by George Borjas. Granted, the NYT did run George’s piece, and has done so from time to time over the years (though it’s probably tough to ignore a Harvard professor). They even gave the piece a fitting title, “Trump Sets Up a Grand Bargain on Immigration,” and I concur. It is indeed a grand bargain, with Trump offering the Democrats much more than they have been asking for, in return for concessions that the Democrats already were supporting in 2013. (If you read that last sentence having just arrived from an extended visit to Mars, and are wondering why the Democrats are so virulently opposed to the Trump proposal, then you’ve got a lot of catching up to do.)

And finally, a column by CIS Director Mark Krikorian, who is sick and tired of claims by the Left that Trump’s proposal is aimed at, in Nancy Pelosi’s words, “Making America white again.” As Mark points out, even using the numbers of Michael Clemons, one of the most militant researchers advocating for high levels of immigration, it would still be the case that 71.7% of new immigrants would be non-white. What, 71.7% isn’t high enough for Clemons?

As I have already stated, the Trump plan is not perfect. Instead of the Wall, E-Verify would be sufficient in dealing with the border issue. And I have suggested expanding the green card diversity lottery rather than eliminating it; among other things its racial implications would thrill Clemons.

But good grief, folks.  In earlier, saner times the political pundits, noting that extremists on both sides are trashing the Trump proposal, would cite opposition by the extremes as evidence that the proposal is a sensible middle ground, indeed a Grand Bargain. The fact that George Borjas is the only major figure to say so is a sad commentary on our times.