Wednesday, June 6, 2007

undocumented riches

I came up with a little thought experiment that I would like to try out. Almost 70 years ago, Mexico nationalized its oil industry and created PEMEX. Suppose Mexico decided to give the USA sovereignty over PEMEX. Furthermore, suppose the people of Mexico overwhelmingly supported this. (I know, fat chance, but please stay with me.) The Mexican government might ask we give them back a few bucks a barrel, but otherwise the oil, refineries, pipelines, everything is ours.

Would this be a good thing for the USA?

Of course, this obviously would be a great blessing! It would increase the real wealth, specifically the natural resource wealth, of this country. Accepting the very generous gift would be a real no-brainer. Adam Smith over two hundred and thirty years ago pointed out that a country was wealthy not due to its gold or financial wealth, but rather due to its abundance of resources. He used the shorthand terms land, labor, and capital to refer to a country’s natural, human, and other physical resources.

Until about fifty years ago, the important things needed for economic growth were considered to be natural resources and physical capital (factories, machines, equipment, roads, harbors, etc.). More people just meant other limited resources were divided among more people. Therefore, output and income per person would diminish other things being equal. Fifty years ago places like Hong Kong and South Korea were considered economic basket cases with little or no growth potential. Mainland China had most of its population, hundreds of millions of people, living in abject poverty. Why? Folks thought it was because all three had no resources to speak of, just a lot of people.

Our understanding of economic growth theory is radically different today. Also Hong Kong and South Korea are now developed, industrialized countries. (Having been to Hong Kong, I tell people that it makes any large American city look absolutely Third-World by comparison.). China’s unprecedented economic growth miracle has lifted hundreds of millions of people out of immiserating conditions in just the past two decades. Of course, there is a lot more to economic growth than just having a lot of people, but we can’t go into that now.

It should not be any surprise that the Word of God already had it right:

A large population is a king’s glory,
but without subjects a prince is ruined.
~ Proverbs 14:28 (NIV)

Now back to our thought experiment. The Republic of Mexico is not about to give us their oil. However, we do have something of Mexico’s that is far more valuable: its people.

We are not about to round up 12 million undocumented aliens and send them back to Mexico. It would be, for all practical purposes, impossible. This is a good thing, a very good thing. If we could forcibly repatriate 12 million, we would drastically reduce our nation’s wealth unlike any natural or man-made disaster short of a nuclear holocaust. 12 million generally hard-working, generally socially-conservative people, as well as their children as an investment for our future, make us richer. Accepting this gift should also be a no-brainer.

We have been blessed. It is our nation’s glory.

Thank you.
RB

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