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On Immigrants, Power, and Prosperity

January 26, 2014
the Economy: Home and the World
18 Comments

No tiger mom would have let her daughter publish this piece for a fifth grade project, let alone in the New York Times. Amy Chua, in a little under 3000 words, explains her theory of power and prosperity in modern America. Absent from this essay, however, is a single reference to any scientific study. Not only does the article exclude any hyperlinks – appalling for any serious journalism in the 21st Century – it refers to several anonymous “studies” without providing any information about the authors, making it well-nigh impossible for a reader to track it down. 

The form is bad, but the message is worse. Chua and Rubenfeld (who, surprise surprise, extol Asians and Jews) argue that Asian success is largely a function of a superiority complex tempered by deep insecurity and a low discount rate, that is delayed gratification. They argue that initial wealth disparity is largely irrelevant:

The most comforting explanation of these facts is that they are mere artifacts of class — rich parents passing on advantages to their children — or of immigrants arriving in this country with high skill and education levels. Important as these factors are, they explain only a small part of the picture.

In fact, it would be comforting if the propensity towards prosperity could be captured in three, wishy-washy traits shared by a large group of people. Reality is much more complicated, as the authors surely understand, and a host of other factors do matter. Responsible journalism would demand that Chua and Rubenfeld at least acknowledge the limitation of this argument in this form, but readers are not made aware of any competing explanations.

The facts are also pretty shaky. The authors contend:

Today’s wealthy Mormon businessmen often started from humble origins. Although India and China send the most immigrants to the United States through employment-based channels, almost half of all Indian immigrants and over half of Chinese immigrants do not enter the country under those criteria. Many are poor and poorly educated. Comprehensive data published by the Russell Sage Foundation in 2013 showed that the children of Chinese, Korean and Vietnamese immigrants experienced exceptional upward mobility regardless of their parents’ socioeconomic or educational background.

The words here quietly pull wool over the eyes of a casual reader. Half of Indian immigrants do not enter the country under the intense criteria of employment-based channels. That means half do. I wonder what percent of caucasian, black, or latino children have parents that work in jobs important enough to qualify for such visas. The figure is certainly well below 50%.

While some Indian emigre are definitely “poor and poorly educated”, even the immigrants who enter without a Bachelor’s degree face the hard climb out of India to begin with. The initial culture and characteristic of Indians who have the wherewithal to pay for a ticket to the United States and the gumption to take that risk sets this group far apart from the immigrant culture. An observer need only walk through London – to which the entry barriers for an Indian are (or at least used to be) substantially lower – to see that the rich Indians of America are a lucky exception, not the rule.

It is interesting to compare the fate of Indians – who are by far the richest ethnicity in the United States, earning on average more than $85,000 annually – with their Sri Lankan, Pakistani, and Bangladeshi compatriots who earn $65,000, $61,000, and $46,000 respectively. Cultural differences are a natural explanation, but Indians are closer to all of these groups than they are with caucasians suggesting that there is something else going on. Of course, if one is inclined to think that this story is about Indians in general (as opposed to Indian-Americans) he need only see that Sri Lanka is twice as prosperous as India, Pakistan is not all that much poorer, and Bangladesh, while a little poorer, fares better on many social indicators.

This tells us that there’s something special about the type of Indians that make it to America. Whether it be education, intelligence, or an entrepreneurial spirit, it would be ridiculous – in the words of Chua and Rubenfeld – to compare this attribute to this group’s some stereotypically-selected characteristics not shared by caucasians.

It would be remiss to discuss Indian-American success without considering medical professionals, an oddly protected class. Wikipedia tells me that 35,000 Indians are physicians which is fivefold larger than what would be expected from a random distribution. However, the American Medical Association (approximately a cartel) and inefficiently strong health-related regulation prevent the equilibrium rate inflow of medical professionals keeping the wage rate of doctors artificially high, suggesting that many Indians benefit from an artifact of the law rather than some cultural force.

Groups rise and fall over time, and that may even be for the reasons suggested in the article. But by the authors’ own logic, the United States should be scared shitless of Japanese and Korean prosperity – surely these countries, with their laborious education and work ethic, must be more prosperous? New York Times readers may be interested to learn that the average American earns a whole $20,000 more than the Koreans, despite our “failing” school systems and complacence. Some may be tempted to argue that this is largely due to affluent immigrants, but remember that Caucasians earn at or above the national average.

Children of successful immigrants, like myself, are in many ways as privileged as blue-blooded protestants. And, similarly, many of us feel every bit as entitled (we work hard, but I doubt many of us think that we’ll actually ever earn $46,000 a year by the time we have kids). While at an archetypical level it may appeal to speak of certain traits – superiority, insecurity, and self control – shared by many successful immigrants, this is informed by neither theory nor evidence, but rather someone’s wish to project her idea of success onto a group as a whole.

Ultimately, some parts of this article are unimpeachably accurate. No doubt that attaining power and prosperity demands hard work, patience, and confidence. This is common sense, and not in any significant way restricted to immigrants. The authors further a sad misconception among liberal elites – that immigrants work hard while complacent Americans watch TV. This couldn’t be farther from the truth. Americans – particularly the stagnant middle – are among the most hard working (even overworked) in the world. Moreover, these workers are also incredibly productive by international standards, bringing in over $60 per hour on average.

I conclude by agreeing with Chua’s conclusion. It is crucial for America as a political entity to rekindle a sense of urgency and insecurity vis-a-vis China, but this is not at all a mirror of similar conclusions they draw to Americans as a cultural group. China’s ascendence is almost irrelevant on a per capita basis, where even the 80th percentile of urban workers hardly hold a candle to the 20th percentile of all American workers. China’s relevance is predicated on the control this one political entity has on such large a group of people.

More importantly, America’s glory to which the authors allude, while supervised by a sense of insecurity, was almost entirely political. Bipartisan consensus let America fight, and indeed win, the Cold War by putting a man on the moon, passing landmark civil and social legislation, and overseeing the most rapid rise in living standards in the country’s history. But, if anything, Americans work harder today while politicians flounder. This is a story of politics, not people.

I am open to disagreement on this issue, and a piece with actual references may be a nice start.

A Very Silly Person’s Lament on American Democracy (Rantish)

August 21, 2013
the Economy: Home and the World
9 Comments

This might be the most positive and hopeful post about the Republican Party I ever write. Paul Krugman’s pet insult – “Very Serious Person” – is more important to understanding America’s policy failures than most people realize, and goes well beyond economic illiteracy. More than anything, without understanding VSPness (henceforth “vispy”) – one can never comprehend how the Democratic Party screwed up so much in the past five years.

When I say “screwed up”, I’m not talking about Larry Summers or Bob Rubin, easily the most visible anathema of the Party’s left wing. The Democrats are vertically infected with vispiness in a way the Republican party is not. While many often talk about the GOP as a more “hierarchal” party (considering the nature of their primary selection process) – Republicans are freer and more iconoclastic.

What the neoliberal wing of Rubin is to Democrats, the neoconservative wing of Wolfowitz is to Republicans. But the establishment neocons are dead. Or will be dead soon (have you seen Dick Cheney or John McCain recently?) They inspire no one within the Republican ranks and reek of responsibility for America’s most embarrassing decade.

Let me be clear, I’m not (necessarily) a radical left-wing critic of the Democrat party. I want Summers at the Fed and I think Rubin has suffered far more blame than he deserves. But I worry about what it takes to get to the top. Not for the clearly brilliant young hotshots like Summers (one of Harvard’s youngest tenured faculty) but for the dumber tools in the shed. The guys who went to all the top schools, did all the right things, are smarter than the average guy, but are still kind of dumb. These are the people that have no original ideas of their own, but move the party forward in their own minuscule way. They are the people reporting to the guy reporting to the guy (reporting to the guy) reporting to Tim Geithner. Maybe they held a policy job at a think tank or made it through lower positions at Goldman. Or something.

The only way for this bland hero to advance in the Democratic Party, is to tow the Very Serious Party line. This will never bring them to the top, but it will secure their position as a kinda-sorta-maybe top official within the Democratic Party. There is no room for iconoclastic ideas. Not if you want a safe path to the top. You can’t ever become an iconoclastic insider.

Ron Wyden is a great example (except he’s by no means dumb). He is hugely influential, if only by forcing the Party a tiny-weeny bit to the left, but will never ever play a role at the top echelons of the Democratic Party. Wyden’s influence starts and ends with his status as an elected representative of the State of Oregon. Elizabeth Warren: ditto. They influence ideas, and perhaps even inspire the left-leaning youngsters in the party, but will never emerge as serious players in the Executive Branch.

Republicans are nothing like that. There is no party line to tow. Sure they have profoundly idiotic ideas and their constituents have a donkey’s understanding of economics. (Not that Democrats are that much better). But the kicker is the only way to become a Republican champion is iconoclastic flair. Rand Paul, Ted Cruz, and even Sarah Palin are hardly “establishment” in the sense of representing prestigious ideas. Not good ideas, prestigious ideas. That is the definition of establishment.

John McCain was never the “maverick”. The Tea Party and Sarah Palin are. The Republican party demands a level of fresh thinking absent from the upper-middle ranking Democrats. A great example is the budget passed by the Senate Democrats (boring: a laughing matter, really) and the imaginatively forceful one passed by the House Progressives, which is comparable in magnitude to the Ryan Budget. The only difference is the House Progressives are a joke to Whig Democrats. The Ryan Budget is taken seriously among the Republicans.

A lot of people – liberals, wonks, “reformist” conservatives, whatever – treat the Ryan kind of nonsense as just a radical idea that has no hope. That is true, but only one side of the coin. On the other is proof that Republicans can pursue fresh and different ideas: ranging all the way from Chris Christie’s loud personality to Paul Ryan’s nutty-nutty budget.

That’s not to say any of the ideas are good, or that we’d be better off with a Ryan Budget than the not-here-not-there-blah Senate Budget (we wouldn’t). However, the Seriousness that plagues the Democrats has handcuffed them from embracing a single idea that the wonkish left deems to be smart. Land taxes. Single-payer healthcare (do you even hear them talk about it). Immigration permit markets. Oil nationalization. ENDING THE DRUG WAR. (Oh, no, let’s just wait seven years and when our approval ratings fall we should make some funny noises about those mandated minimums. Is there any reason the joker of a half-man that is Eric Holder still has a job).

Rather, the biggest debate of the day is whether a handful of people pay 35% or 39%. As if that matters. The Democrats are engaged in a hopeless match of maintaining the ’90s status-quo (which, granted, was quite good) not of policy, but of intellectual climate. At least the Republicans are redefining the debate.

My argument is hardly a call for more leftism in the party. I was hopeful about Elizabeth Warren but she’s been a real disappointment on monetary policy, which she clearly misunderstands. I want more rightism and leftism. The Democrats have poisoned themselves into believing compromise is the arithmetic mean of two dipshit ideas.

Paul Krugman, to my knowledge, has not said any of this, but has insinuated its implications in a way few other commenters acknowledge. His qualms go – almost 25 years after he won the John Bates Clark award – well beyond the economic. They are cultural and political.

I have never been inside the back rooms of Democratic policy action. But I can only imagine a few ex-think tank dudes sucking up to whatever they think Obama or Sperling or Geithner or Summers wants to hear.

In Rand Paul or Ted Cruz I see silliness. Mutated, confused, idiotic silliness. And that the Republican Party is tolerant to such makes me fearful for my own.

There’s a Version of “Libertarian Populism” That Might Work: It’s Called “Libertarian Elitism”

July 23, 2013
the Economy: Home and the World
1 Comment

Nick Gillespie from Reason.com recently thrashed Paul Krugman’s remarks on the hot topic among the Republican intelligentsia – “Libertarian Populism”. As described by Krugman:

The idea here is that there exists a pool of disaffected working-class white voters who failed to turn out last year but can be mobilized again with the right kind of conservative economic program — and that this remobilization can restore the Republican Party’s electoral fortunes.

Gillespie cites a rather excellent column from Tim Carney suggesting that libertarian populism is not only viable, but also necessary. Unfortunately there’s a big problem with this theory. By the time intellectuals like Carney chip away at the idiotic kind of populism they dislike – known to some as “social conservatism” – we have a whole different beast altogether. It’s called libertarian elitism.

Here’s the rub. People like Carney and Gillespie, both of which write in publications frequented by decidedly elitist characters – can get all riled up about those awful farm subsidies and that are pumping corn oil through our stomachs. Or about corporate welfare which is basically a fancy term for legalized corruption. Or about bad immigration laws. In fact, they can even enlist support from liberals like myself about the excesses of wasteful government.

Except corn subsidies cost an average American a mere ten dollars a year. Except every poor, working-class white guy is convinced Pedro is going to take his job. But Carney has already anticipated my comment:

Also, offer libertarian policies that have acute benefit to the working class, such as drastic cuts in the payroll taxes. Maybe let people buy whatever kind of light bulb they want. Don’t force them to buy health insurance. Allow them to buy prescription drugs from Canada.

Unfortunately, this isn’t true. Payroll tax cuts are supported by liberal Keynesian elitists like Paul Krugman and Brad DeLong to libertarian elitists like Scott Sumner or Bryan Caplan. It’s not like this is a new or uniquely populist position. And then ask yourself how much your run-of-the-mill working class white cares about the individual mandate, energy regulations, or prescription drugs? Sure, most polls say that people don’t like Obamacare. But they sure as hell doesn’t think it’s the biggest thing holding  life back. Polls tell us he’s most worried about jobs, wages, and retirement.

The libertarian populist wants to imagine the hard-working man who comes home from a job worried about electricity and gas prices from liberal environmental regulations and a Barack Obama pilfering moolah from the middle to the connected elite. You might say that this man is ideally unideal.

But actually the ironic consequence of deep inequality and political divide is most Americans – aside from those of us with our ear to the news – don’t care about corporate welfare and Obamacare. Maybe Fox News has convinced them that the individual mandate is the root of all evil on Earth. But given an Obamacare repeal or a steady retirement he would surely choose the latter. Given a choice between freeing trade and a protected labor market at home he would surely choose the latter.

You can have no libertarian without having elitist. I mean take a look at what Gillespie says:

Unsurprisingly, Carney’s libertarian-populist policy agenda has precious little to do with starving poor people to death or stoking white working-class resentment against dusky hordes (Carney is pro-immigration). Unless by dusky hordes, you mean Wall Street banksters and well-tanned pols such as Speaker John Boehner.

For better or for worse, it’s filled with prescriptions such as “cut or eliminate the payroll tax” (that’s the one that hurts low-wage earners the most); “break up the big banks and/or place stricter safety and soundness rules on them” (hmm, how does that help the Rothschilds again?); and “end corporate welfare” (Carney specifically name-checks the awful Export-Import Bank and subsidies to Big Sugar, which both receive bipartisan congressional support).

You know, there was a group of people, I recall, that made their name on “breaking up big banks”. Except they were mostly young liberal hipsters that wore Converse sneakers. Actions speak louder than words, and while the Tea Party rhetoric – especially the stray segments intellectual observers love to capture – may have said a thing or two about the fat cat bankers that isn’t near the primary message of the group. And it’s certainly not what made them popular among working class whites.

Because, as Cory Robin here notes, the populist sort of libertarian – from the mythmakers at Ludwig von Mises Institute in Auburn to the goldbugs at Paul Manor in Texas – cannot be divorced from its old, confederate memory. We are talking about a people who question the value, if not absolutely oppose, the Civil Rights Act.

Gillespie and Carney will try to ignore this line of conversation, because it is a socio-historical dynamic that is orthogonal to their economic persuasion. At the end of the day, the libertarian populist can never make it in the American South without forsaking everything that it means to be a libertarian.

Here’s what the libertarian agenda – rightly – supports:

  • Ending wasteful subsidies like the Farm Bill.
  • Reducing distortive barriers to trade that hurt, yes, the average American.
  • Freeing borders to immigrants: high skilled or not.

Except none of that appeals to the working-class white. As Carney puts it, a cunning politician might be able to coat it in attractive “campaign fodder”, but in the short run they don’t really give two hoots about trade liberalization and corporate welfare. The Ghost of Richard Nixon teamed with the Ghost of Mancur Olson spellbinds America to the point where only the ugly sort of populist can ever win the crevices of the South.

The libertarian may find his reaping ground among educated – otherwise would-be liberal – college graduates with a quiet Galtian complex. But they have no place in an America too poor to save for emergencies or retirement. After all the populist is angry that liberals are debasing the sacred American greenback harming the humble saving man. But of what savings?