Immigration: The double-edged sword for America

Lately, this blog has been focusing on all Europe, all the time. I wanted to step back and write about something else.

With an election year coming up in the United States, immigration is one of those hot-button issues that has been dividing people. But the electorate has to remember that the immigrant experience is part of the American Dream of rags to riches. The trend toward rising barriers to immigration, legal and otherwise, is also raising barriers to job creation and, longer term, barriers to the nurturing of human capital in America.

Consider this story about the blowback in Alabama's tough stance on illegal aliens without proper documentation:

[T]wo foreign workers with the Mercedes-Benz and Honda auto assembly plants in Alabama have run into problems.

To wit, they were caught without proper drivers' licenses and arrested under Alabama's anti-immigration laws:

On Nov. 16, a German manager with Mercedes-Benz was arrested under the law in Tuscaloosa for not having a driver's license with him while driving a rental car.

First Mercedes, then Honda:

Last week, a Honda employee from Japan was detained under the law in Leeds.

Police at a roadblock found him carrying an international driver's license and passport, but not an Alabama license or Japanese license as required by the law.

Great way to attract employers to locate in your state, guys! Auto assembly plants produce jobs - good paying jobs. Stunts like that give locales a reputation for being difficult to do business.


Where does "American" brain power come from?
One of the sources of American competitiveness has been its human capital, but increasing barriers against immigration is drying up foreign sources of human capital to migrate to its shores. Richard Florida recently wrote:

Since September 11, America’s increased concern with security has threatened to undermine its ability to attract global talent. Foreign-born scientists and engineers provide a critical element of America’s talent base: in the last decade, more than half of all Silicon Valley start-ups were launched by immigrants. In 2007, I warned that by making itself less hospitable to immigrant students, scientists, and entrepreneurs, the United States was undermining its own interests. "What if," I asked, "Vinod Khosla, the co-founder of Sun Microsystems and venture-capital luminary who has backed so many blockbuster companies, had stayed in India? Or if Google’s Sergey Brin had decided to apply his entrepreneurial talents in Europe?"

Many startups, such as Intel and Sun Microsystems, were co-founded by foreigners. True, universities like Stanford and Harvard are still the envy of the world, but as top students find it difficult to go to America to study and to work afterwards, how long before their rankings start to slip. Florida wrote that things are getting so bad that some entrpreneurs are trying to find ways around the system by building a "floating offshore Silicon Valley":

Blueseed, a Silicon Valley start-up, is trying to do an end run around the broken immigration systems by dreaming up a "floating startup incubator." It would circumvent immigration laws the same way that gaming businesses once avoided gambling restrictions, by parking their clients on a ship in international waters.

Has it come to this? Trying to figure out ways to game regulations is not a path to long-term sustainable competitiveness. The New York Times recently reported that Despite Economic Slump, Europe Gets More Tech Start-Ups (h/t FT Alphaville). Is this a tipping point?

Is the American electorate being penny wise and pound foolish when it comes to immigration? Is this another American step towards being Argentina? We shall find out after this electoral cycle.
 
 
 
Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
 
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