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Borderless Economics

The New Fruits of Global Capitalism

Robert Guest

Internet supposed to break down barriers of race and culture but it mostly strengthens existing bonds. If analyse Twitter or Facebook groups, typically Israelis will have 99% Israeli contacts and just 1% Palestinian - extreme example, but all work that way. Even when ties are international, they still mostly within same cultural groups - ie ethnic Greeks or Nigerians. Tribes still matter immensely.

During 1870's when crossing Atlantic was 10 day ordeal, American wages were twice Irish wages, and that was enough to pull large scale migration. Today, American wages are 10 times higher than those in supplying countries.

Migration changes the way people think. Migrants have to become familiar with at least two cultures, so they see opportunities that are invisible to their monocultural neighbours.

Hyper-connectivity of today's migrants. They are connected continuously and dynamically to their communities of origin, and to other parts of their diaspora. There is always someone in the network who knows the answer, or who can find someone else who knows the answer.

'Migration' is probably not even the right word: many are really circulating - migrate to Australia or NZ as a stepping stone to getting into US, moving back to China or India to set up an export business or while children very young, then back to host country to exploit growing contacts etc etc.

Foreign-educated returned Chinese called haigui, or 'sea-turtles', because of a pun which doesn't work in English.

The license Raj kept India poor and gave the most enterprising a reason to emigrate. But also unusual effect of democracy. Universal suffrage gave political power to lower class politicians who made sure that lots of civil service jobs reserved for lower castes. In other countries where the privileges of the elite threatened like this, they fought back, using their wealth to subvert democracy. This was case in Pakistan, where wealth of upper classes based on landholdings. They couldn't move. But in India the upper classes had skills rather than land - they were the educated minority. And skills were transportable.

Then there came a question, posed to Indira Gandhi in the 1970's: "Why do Indians thrive economically under every govt of the world except hers?" Ethnic Indians in USA are not just richer than the average Indian, they are richer than the average American.

Basic insight that, in India, there is a lot of money to be made servicing the poor, because there is so many of them. So, 'frugal innovation' for people who are extremely price-sensitive but would still like the things they see in richer households. Like a tiny fridge using laptop chip and fan technology. Americans like huge fridges, but might be amenable to a mini one for camping trips.

We are completely dependent on a vast global network. It is impossible to be self-sufficient - even the simplest things you use require the efforts of many. To make a pencil requires the labour and expertise of millions - not only the loggers and graphite miners who provide the wood and lead, but also the people who make the parts that go into the loggers' chainsaws or pour the concrete to build the dam that supplies the power for the pencil factory's machines. Not a single person on earth knows how to make one.

Ford tried to supply a cheap car to India. As an economy measure, front seat windows powered, but back seat ones manual. failing to realize that most people who can afford a car have a driver, so the boss got the crap windows. It didn't sell.

In US, surgeons do lot of ancillary stuff like paperwork. In India, a small army of helpers do everything, so the surgeon is free to operate, often. And clerical workers who do nothing but fill in forms learn to do that very well.

Western countries import nurses and medical personnel from developing countries. On the surface, looks like rich countries exploiting the poor ones. But counter-intuitive facts. Prospect of earning big wages abroad spurs many to train, and most stay at home. The Philippines is the world's largest exporter of nurses, but because so many train, it ends up with more nurses per head than most European countries. The ones who do migrate send remittances home. Common for an engineer who earns $5000 a year in his home country, migrates to the West and earns $30,000. He sends $5000 back home, which is even better, because before he would have spent most of that maintaining his own needs; now it is spent on others. Twice as much money from remittances as from aid. And remittances don't get stolen - if grandma doesn't get her monthly cash, or if there is even a dollar missing, she tells her son straight away, and he gets onto Western Union, who find the money quick smart. And the migrants tend to shuttle back and forth, exchanging ideas each way.

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People are increasingly mobile. There are about 215 million first generation migrants, one and a half times what the number was just 20 years ago. When rich countries open their borders even a little, they do far more good for the world's poor than they ever do by giving aid. According to a World bank study, if rich nations allowed for a 3% rise in their labor force through easier immigration, it would deliver $300 billion worth of benefits to the have-nots. The cost to the rich nations would be zero, since the immigrants pay more in taxes than they collect in benefits. Whereas the money given in foreign aid is beset with problems of corruption and waste.

Creative benefits to new country. The visa process selects for the smartest; you need to be optimistic and flexible to even consider migrating; and just the process of having to adapt to a new culture seems to make people more innovative. Culture shock makes you think.

At least 60 million Chinese live outside China (incl 23m in Taiwan). There are 10m ethnic Chinese in Indonesia, 7m in Thailand, 6m in Malaysia and 4m in the US.

Ethnic Indians in US are not only richer than the average Indian back home, they are richer than the average American. Chinese website which links millions of small traders in China with potential buyers all over world.

Cultural misunderstandings: Ford produced a car for Indian market and to save money just had electric windows in front. But anyone in India who can afford a new Ford probably has a driver, so they were giving the better windows to the servant rather than his boss.

Americans don't worry much about cost of health insurance because they think their employer pays for it. In fact, although it doesn't show on your pay slip, the cost of corporate health insurance comes out of the pool of money for compensating employees. When premiums rise, there is less left over for wages. The insurance cost comes 100% from the employee's pocket, not from the company's profits.

Seems self-evident that the 'brain drain' of skilled migrants must hurt the source country. In fact, the counter-intuitive finding is that it actually reduces global poverty. A number of reasons: 1) The prospect of earning good money overseas spurs more people to gain marketable skills, and not all of them leave. The remittances make up a big source of revenue. The migrants shuttle back and forth, transferring new ideas.

Microcredit loans often seen as way to lift countries out of poverty. Yet the average gain from a lifetime of microcredit in bangladesh is about the same as the gain from working for eight weeks in the US.

America is unique in way it welcomes foreigners. Doesn't matter where you come from or what your sexual/cultural/social expectations are, you can find a community of similar people. Wide range of climate and business choices. The one place in the world where it is possible to recreate a familiar lifestyle, or experiment with a new one.

How desirable is the US? The Nordic countries are nice places - polite, prosperous and orderly. But they are cold and boring. America has huge social problems. It is more violent than other rich countries, it jails more of its citizens and its worst schools are appalling. But these problems are concentrated in a narrow swathe of the populace. If you are a young black male who has dropped out of high school you have a 60% chance of doing jail time. If you deal in drugs, you are staggeringly likely to be murdered. But if you are middle class, your local public school is likely pretty good and you are less likely to be mugged than you would be if you lived in London.

America's social problems have little impact on new immigrants. First generation immigrants may run stores in tough neighborhoods, but their children go to college and become dentists. And first generation immigrants who arrive with marketable skills can skip the first stage entirely.

America assimilates fast, but prejudices take a while to go. Benjamin Franklin doubted that the Germans migrating to US would ever "adopt our language and customs." Today there are 50 million Americans of German descent, few of whom speak anything but English. America has changed them, they have changed America - adopted some agreeable habits such as clear lager beer and watching sport on the weekend. When surveyed as to how long it ha taken them to feel comfortable and part of the community. 77% of migrants said "less than 5 years". Only 5% said they felt that they never fitted in. Contrast that with the 58% of people of Turkish descent in Germany who say they feel unwelcome.

US trying to close border simply does not work. The likelihood of a Mexican who keeps trying to sneak into US is approximately 100%. The workers claim that Mexicans are taking their jobs, but in practice it turns out that they are taking the jobs that Americans don't want to do. And on balance that creates jobs for locals, because mothers who can find cheap nannies can go to work themselves. Firms that can find people to do the basic cleaning and fixing, don't need to go offshore. Can't keep the unskilled out, but can, and do, make it difficult for the skilled to get in.

Author visited a family near New Orleans. Father was a mechanic, the mother a librarian. The house they lived in was bigger than the home of a VP for a software company in Tokyo that he used to work for. The Japanese home was more elegant, and had tasteful woodcuts on the wall rather than big photos of teenage children riding quad bikes, but they had 2 cars, an RV, a huge backyard and an above-ground swimming pool. And such homes are unremarkable in US.

America has major social ills - run down suburbs, gangs, shootings, prisons. But such problems are concentrated in narrow parts of the population. They have surprisingly little effect on most of society.

Masayoshi Son is an ethnic Korean, born in Japan, lived there most of his life, and married to a Japanese woman. He is self-made billionaire via his software firm Softbank, which employs thousands of Japanese. But when he applied to become a Japanese citizen, he was told that he had to adopt a Japanese surname because no Japanese was called Son, and they weren't going to set a precedent. So his wife changed her name to Son. He went back to officials, they again refused, so he told them to check their records. They found one Son - his wife - and so they were forced to relent.

Immigrants to US don't riot, like those of France or Germany - they are too busy working.

In C17th Massachusetts, one group of English Protestants (the Puritans), banished another group of English Protestants (the Quakers), and even hanged a few who returned. Benjamin Franklin thought German immigrants would never integrate: "Why should the Palatine Boors be suffered to swarm into our settlements? They will never adopt our language or customs."

Wild idea that just might work - a tiny laser gun to kill mosquitoes. Lasers are cheap, thanks to Blu-ray tech. Image censors also cheap due to digital cameras. Mobile phone chips supply cheap processors. Laser printers already have tech to spot tiny targets. Put all these together and might be feasible.

Indian push to find a way to reserve food without using chemicals. Discovered that low intensity red lasers could prolong shelf life of both food and vaccines. Then realized could use lasers to preserve unpasteurized milk. In India they bring cow to your door to provide really fresh milk, but obviously not practical in cities. But supply chain unreliable - can't be sure that milk has been kept refrigerated all the way from farm to shop. Indians dislike taste of pasteurized milk so a market for cheap effective preserving method.

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