The challenges of change: Globalization, Immigration, and Technology

“Future shock is the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”  Alvin Toffler 1970

Some people welcome change as a challenge and embrace the adventures it provides, while others resist it as threatening and disruptive. In addition to differences in temperament, some people gain from specific changes while others lose. Starting with the industrial revolution in the mid eighteenth century, the worlds’ economic life has undergone dramatic changes that continue to this day. As a result the average family’s material well-being has sky rocketed to unbelievable heights. But in the process equally troublesome changes were imposed on almost everyone. To maintain (or regain) public support for the policies that allow these beneficial but disruptive changes, we need to carefully consider what policies would ease or compensate for the costs that often accompany them.

Across the world the standard of living saw virtually no change for thousands of years. Starting with the industrial revolution 250 years ago incomes and individual welfare have exploded. From $712 in 1820, world annual GDP per person shot up to $7,814 by 2010 (in 1990 dollars). The number of people living in extreme poverty, which peaked at 2.2 billion in 1970, has been cut in half since then. The percent of the world’s population living on less than $2 a day has plunged from 61% in 1980 to 13% in 2012.[1]

These dramatic gains are the result of increases in what each person was able to produce. Individual output has dramatically increased in the last several centuries because trade has allowed more specialized and productive ways of organizing work to serve larger markets (factories, etc) supported by new technologies (including improvements in public health and medicine) and better transportation infrastructure. We might summarize these factors as expansions of product markets because of cheaper and freer trade, improved labor output from freer labor mobility to move to the best paying jobs and better tools from investments in technical innovation. If we extend these factors across national boundaries we call these “globalization,” “immigration” and “technical innovation.”

On average, the world’s population has benefited enormously from each of these, i.e., from “globalization,” “immigration” and “technology.” But each of these has also disrupted the status quo, imposing sometimes-painful adjustments on business owners and workers whose products or skills are no longer wanted or needed, not to mention many misstarts and failure along the way.

Those who have lost jobs to technical innovations, cheaper imports, or immigrants are understandably unhappy at the changes, though in the longer run better, higher paying jobs may have been created in the process. Donald Trump’s promise of a Mexican wall and high tariffs on Chinese imports seem to resonate with many of these people. Given the enormous, widely shared benefits from globalization, immigration and technology, it is very desirable to adopt policies and approaches to promoting these activities that minimize and mitigate their damage to specific individuals. I will lightly touch on this need with regard to globalization and technology as a prelude to the particularly challenging issue of immigration.

Technology: While displaced workers have long complained about the hardships imposed on them by improved technology (though manufacturing output in the U.S. is at an all time high, improved productivity has resulted in a continual decline in manufacturing employment), the benefits to society as a whole are so obvious that few would propose freezing or slowing technological progress in order to protect their jobs. Of course, the adoption of new technologies concerns more than its impact on employment (e.g. public safety) but the case for allowing such progress basically makes itself. Instead we attempt to ease the transition to the skills needed for newer jobs through adapting educational programs and adopting retraining programs to the changing employment needs (though firms tend to do a better job providing such training themselves than does the government) while providing temporary unemployment compensation.

Globalization: The impact of freer and more extensive cross border trade on employment is similar to the impact of technology and the policy approaches are similar. The freer mobility of capital aspect of globalization will not be discussed here while the freer mobility of labor is discussed under the heading of immigration. While the benefits from trade are enormous and those from further liberalization of trade are still worth the effort, these benefits are less obvious to the general public than are the costs to a limited number of individuals. While strengthening those programs that help displaced workers find and qualify for the new jobs created (essentially the same programs needed for adjusting to technical improvements) is desirable, we also need to make a more convincing case for the benefits of trade. All studies of the Trans-Pacific Partnership (TPP) agreement forecast increases in American income from its adoption (and obviously in the incomes of our trading partners as well), but such projections are more abstract and thus carry less emotional and political impact than would examples of the specific industries and firms that would benefit from increased exports (though it is not always possible to anticipate what these will be).

The benefits of trade and globalization are not just economic. Countries that trade with each other and companies that operate around the globe are less likely to go to war with each other. Robert Samuelson noted that “If there was an organizing principle to U.S. foreign policy after the Cold War, it was globalization.” Balancing China’s growing influence in Asia is clearly an important motivation for TPP. /us-presidential-candidates-shouldnt-put-globalization-in-retreat/2016/06/05/

Immigration: The issues raised by immigration are much more complex and challenging. Capital and labor mobility are necessary for maximizing the output of existing labor and capital resources (deploying each where its marginal product is highest). But along with the immigration of hard working people looking for better opportunities and greater freedom, the United States has enjoyed the extra benefit of attracting to its shores the world’s “best and brightest.” This has been true from its founding to this very day. Nonetheless, immigrants sometimes displace existing workers from their jobs, who most often (but not always) move to better ones.

The flaws of the U.S. immigration laws (preference for extended family is crowding out the quotas for badly needed skilled workers, the status of the undocumented MUST be resolved, etc.) are well known. The bill passed by the U.S. Senate in 2013 (S-744), which was drafted by the bipartisan gang of eight (which included Marco Rubio back when he cared about legislating in the American interest) deserves serious consideration.

The economic/jobs aspect of immigration is only part of the challenges it raises, however. Our genetic clannishness, which arouses our fear and hostility toward “others” can be softened and overcome by our genetic curiosity. Exposure to other peoples and cultures can be exciting and enriching. Deriving the economic as well as the cultural benefits of immigration both depend on the success with which immigrants are assimilated into the economy and culture of their new home. The host population needs to be confident that new arrivals embrace its laws and culture. With its more liberal labor laws and active civil society support, the United States has been more successful at assimilating immigrants than have most other countries. British complaints a few years back about a flood of Polish plumbers have largely faded away. In fact, the hard working Polish plumbers proved to be very advantageous for Britain.

The flood of war refugees into Europe and fear of terrorism are adding a new element to the fears of immigrants. The Western world, especially Europe, faces serious challenges to accommodate the rapid inflows of refugees, which we all have a moral and legal obligation to house and protect, and immigrants seeking a better life from the predominantly Muslim Middle East and North Africa at a time when a fringe of the Muslim world (ISIS, Al-Qaeda, Boko Haram, etc.) has declared war on the rest of us. Thus the fear of terrorist attacks, especially following the 9/11 attacks in the U.S., has become a real factor in public attitudes toward immigrants. Donald Trump and right wing nationalist parties across Europe have attracted growing support exploiting these fears.

Western fears of Muslim immigrants are not limited to the fear of admitting terrorist. Donald Trump’s recommendation to stop all Muslim’s at the border “until we figure out what is going on” either reflects ignorance of the exhaustive process such visitors must go through to get visas and the much easier ways for terrorist to enter the country if they are not here already, or deliberate exploitation of public fears. With Trump it is probably both of these. These fears also concern whether the prescriptions and doctrine of Islam are compatible with liberal, western, democratic values. /2016/03/24/fighting-terrorists-part-ii/

Some statements in the Koran seem to be incompatible with “Western Values” just as are some statements in the Christian bible. Muslims, like Christians, have developed different interpretations of the meaning and requirements of their faith in today’s world. Some American’s and Europeans worry that the Salafi (Wahhabi), fundamentalist interpretations of Muhammad’s teachings and some of the provisions of one or the other versions of Sharia (Islamic law) that are incompatible with the American constitution, laws and traditions, will come to dominate Muslim beliefs and that they will attempt to impose them on the rest of us. These are serious concerns and are shared by many Muslims as well. Immigrants and residence of any faith should only be welcomed if they accept the laws of their host country. Mainstream Christians are not generally blamed for the fanatical and racist beliefs of the Ku Klux Klan. Quoting from Wikipedia: “Although members of the KKK swear to uphold Christian morality, virtually every Christian denomination has officially denounced the KKK.” The same should be true for Muslims, though they need to make a bigger effort to distance themselves from their minority of radical jihadists than they seem to have so far.

The growing fear of Islam has begun to take on a form and tone reminiscent of the anti-Semitism of Nazi Germany: /trump-like-opposition-to-islam-is-growing-in-europe/2016/06/06/. The key question is what to do about it. Just as the overwhelming benefits of globalization and technical progress were not enough by themselves to win broad public support without addressing the accompanying costs, the benefits of immigration and the moral obligations to house and protect refugees, will not be enough by themselves to over come the growing public fear of immigrants (especially of Muslims). Attempting to push immigration on a reluctant public seems to be creating the backlash that we are now seeing in America and Europe.

The Supreme Court’s Roe vs. Wade abortion decision short-circuited the state-by-state process of liberalization that was already moving in the same direction. Forcing a mother’s legal right to an abortion on states that had not yet come to that view has been counter productive and created a protracted debate that most likely would have faded away long ago. The partisan forcing of Obama Care on Americans without a broad consensus on its new directions provides another example of ill-advised legislation lacking broad support. The Court’s decisions striking down restrictions on interracial marriages (Loving vs. Virginia) and more recently extending equal protection of the law to same sex marriages (United States vs. Windsor and Obergefell vs. Hodges), were only taken after a much wider public acceptance of these freedoms had developed. They have been accepted with far less controversy. What are the lessons for our immigration policies?

The previous waves of immigrants in the U.S., generally concentrated from particular geographical areas, have always complained about the next one, generally concentrated from a different geographical area, and there have often been religious tensions and concerns. What is new this time (in addition to terrorist concerns) is the fear that Muslim immigrants seek to overturn our laws and customs with those of a radical fundamentalist understanding of Islam that is incompatible with liberal Western values. To address these concerns the United States (it will be more difficult in Europe) needs to update its immigration laws (as in the Senate bill already passed) and continue to build on its previous successes in assimilating immigrants, and Muslim communities need to more clearly differentiate and separate themselves and their beliefs from those of the radical jihadist. The U.S. and Europe need to undertake a frank and reasoned discussion of the rules for immigration that best serve the needs and interests of each country. It will not do to force more immigrants on an unwilling public even if it is to their benefit in the long run.

The bottom line here is that the clear benefits to society at large of globalization, immigration and technology are not sufficient to insure their continued support. Though the flow of economic immigrants have been responsive to economic needs, open borders are unfortunately not likely to be acceptable to the general public yet. Despite the racist comments of Donald Trump, between 2009 to 2014, 140,000 more Mexicans left the U.S. than came, largely to reunite with their families in the face of a drop in the demand for their labor in the U.S. There has been no net immigration from Mexico between 2007 and 2014. Most immigration in recent years has been from south of Mexico, East and South Asia and to a lesser extent from Africa and the Middle East. Important public policy decisions should be openly, frankly and thoughtfully discussed with the goal of gaining broad public support. The costs that fall on some in the course of broad gains for the many should be minimized, and fears should be honestly addressed. It is critically important in this regard that mainline Muslims distance themselves from the radical Islamists.


Berlin: Then and Now

The first time I saw Berlin was in 1960, just 15 years after the end of World War II in Europe. I came for a week of exploring with the other participants in the International Christian Youth Exchange living in Germany for the school year of 1959 – 60, during which I lived with a German family in the small village of Rasdorf near the somewhat larger village of Hünfeld, near the small city of Fulda. Though Rasdorf was on the border between East and West Germany, we had to fly to Berlin, as it was an island of West Germany within the Deutsche Democratic Republic (DDR), commonly referred to as East Germany. While Berlin was technically divided into four zones (American, British, French and Russian), it was administratively divided into the Western Zone, which was part of the Federal Republic of Germany, and the Eastern Zone controlled by a puppet government installed by the Soviet Union. The wall that separated the two had not yet been built nor even thought of at the time.

By then I had lived for the better part of a year within walking distance of a ten meter wide strip of plowed earth that separated East and West Germany – the communist world from the free world – and our village from the next one to the east. The physical scars of the Great Patriotic War, as the Russians called it, were little in evidence in Germany’s villages such as Rasdorf. Berlin, however, was a very different matter.

According to Wikipedia: “Up to the end of March 1945 there had been a total of 314 air raids on Berlin, with 85 of those coming in the last twelve months. Half of all houses were damaged and around a third uninhabitable, as much as 16 km² of the city was simply rubble.” Estimates of the total number of dead in Berlin from air raids range from 20,000 to 30,000. To put it into perspective, the total U.S. causalities in Iraq from March 19, 2003 to May 26, 2015 were 4493.

By 1960 West Berlin had enjoyed considerable rebuilding. But vast areas remained flattened and uninhabitable, though generally cleared of rubble. The now thriving hot spot of Potsdamer Platz, just west of what was about to become the Berlin Wall, was a large vacant space. The Kurfürstendamm, on the other hand, was largely rebuilt and thriving with the steeple of the bombed out Kaiser Wilhelm memorial church still standing, as it is today, as a memorial to the horrors of war.

The 17 Juni strasse in the West becomes the Unter der Linden strasse as it passes through the Brandenburg Tor to the East. Its buildings also had been fully restored to their prewar appearance. But not more than one or two blocks on either side was nothing but gutted buildings and ruble. It was a shocking sight. Coming from America, I had never seen such massive devastation before in my life. Of course, today no evidence of the war exists anymore except in memorials and museums. And even the Berlin Wall, which existed from 1961 to 1989, is gone; a small portion of the Wall still remains as a historical reminder for visitors but mainly it has been broken up into inch-size fragments for sale to tourists or used as decorations in hotel lobbies, one of which sits on my office bookshelf.

The apartment building Ito and I are now staying in on Behrenstrasse is just one block south of Unter der Linden strasse and has replaced the gutted buildings I had seen 55 years earlier. As far as I can see in every direction now the area has been fully rebuilt, as very little was restorable. The exceptions are the grand buildings of Berlin’s original and once again city center (Humboldt University, several concert halls, Museums, the Berliner Dom and some other churches).

During our day trip to East Berlin during that first visit in 1960 our group went to the Opera House, which had survived the war, and saw a performance of a portion of opera. I remember the concert very well. They performed the Polovtsian Dances from Alexander Borodin’s Prince Igor. It was very familiar to me from the American musical Kismet. Being the naive and skeptical 18 year old that I was at the time, I complained to my companions that those damn Russian’s had stolen these songs. They will steal anything, I said. Learning that the reverse was true soon there after was eye opening.

I returned to Berlin, now divided by the Berlin Wall, in 1976 or so to visit my former wife’s sister Jean and her husband Tom, and then again for the Mont Pelerin Society meetings in 1982 with Milton Friedman and other economists in attendance. By then I was in my mid 30s. Reconstruction continued in the West but little had changed in the East. During the first of these two visits I saw, with Jean and Tom, my first ever full opera, this time in the Western Zone. The opera was Madam Butterfly, a nice introduction to the world of opera. I marveled at the music, of course, but also found it fascinating that I was watching an opera sung in Italian about a geisha who had fallen in love with an American Captain in Japan and I was watching it in Germany.

I returned to a reunited Berlin (and a reunited Germany) after the fall of the Berlin Wall in 1989 and the subsequent collapse of the USSR several times again for one reason or another. Once was to visit my German friend Moritz Schularick, with whom I will meet again here for dinner on Monday. The burst of construction and development in the newly freed Eastern Zone was amazing. The transformation with each of my subsequence visits was quite pronounced. Younger people no longer refer to the Eastern Zone. The hotel where we are now staying is in what was once part of the Eastern Zone, and is now called Mid Town (Mitte).

We are now vacationing in Berlin because Ito has been reading a lot about Winston Churchill and the Germans in the Nazi government such as Albert Speer, Joseph Goebbels, Rudolf Hess, and Hermann Göring, and WWII in general and he wanted to see the places he has read about. So here I am 55 years after my first visit in 1959 astonished at the city’s history of glory, infamy, courage and pain, destruction and eventual reconstruction and rebirth. Hitler’s famous bunker here where he ended his life together with his new wife Eva Braun and his dog Blondi has been filled in and covered over, but the Germans have gone out of their way not to cover up their treatment of the Jews in what came to be called the holocaust. Still, it feels a bid odd walking and riding around this historic city with its many Nazi ghosts. It is also the city in which brave Germans sought freedom in the West by jumping out of windows over the Wall, digging tunnels under it, and by risking their lives in order to escape the Eastern Zone to live in the West.

The story of Berlin, from then until now, is an example how a people can succumb to inhumane beliefs and behavior, recover their humanity and respect for freedom, and once again flourish. Germany’s long history includes both great and horrendous acts. Within my lifetime the Nazi’s rose to power and threatened the world in WWII, Berlin was completely and utterly destroyed by allied bombing near the end of that war, then occupied by the Red Army in 1945, the city butchered into four quadrants as part of the Allies’ Cold War with the USSR, the Berlin Wall was constructed in 1961 and torn down in 1989, and Germany was reunified in 1990, subsequently prospering as a free and democratic state. I am grateful to have been able to witness what seems to be a positive outcome to this complicated story.