Once past the headlines about the hurricane in the U.S. there is another interesting article in this morning's Le Monde about Google's effort to "optimiser leur fiscalité" (optimize their tax burden) and the French tax authorities' attempts to do something about it.
Le Monde picked up the story from another French weekly called Le Canard enchaîné. Google's sales in France, according to estimates, were on the order of 1.25 to 1.4 billion Euros but Google only ended up paying about 5 million Euros in taxes to the French government. Now how did they manage that? Looks like it was a combination of fancy accounting and shipping the money out of the country to a place that was a bit more fiscally friendly. That doesn't seem to have sat well with the French government.
Le Canard enchaîné claimed that the French now want 1 billion Euros from Google for a series of transactions they identified where the company took money allegedly earned in France, declared that revenue in Ireland and then transferred it to Bermuda, a "paradis fiscal."
It's headlines like these that fuel public anger over "tax evaders" be they companies or individuals. The average French citizen reading that article is going to find that grossly unfair and his/her feelings will only be exacerbated by the fact that it's an American company doing the dodging. (Hell, I'm only a resident of France and my visceral reaction was pretty negative too).
It's worth, however, taking a step back and widening the lens through we we see and judge Google's actions. There are actually three actors here: France, the U.S. and the countries that facilitated the transactions. All three have very different interests. France wants her tax money and that doesn't seem an unreasonable demand. The U.S. also has an interest here because it is a U.S. company and there are a lot of Americans who think the money earned abroad by companies like Google ought to be brought back to the United States to create jobs and fill the American government's coffers in a time of fiscal crisis. As for the countries that serve as intermediaries, well, they want revenue too and have every interest in encouraging businesses to move money to their jurisdictions where they can take a slice before it's invested locally or ends up in the Caymans or any other fiscal paradise. One international company doing cross-border business and three sets of interests to either satisfy, work around or work with in accordance with its interests.
Is this kind of competition between different countries for foreign investment, and the use of tax regimes to encourage it, a good or a bad thing? It kind of depends on where you sit, doesn't it? If you live in a country that is eager for foreign investment, the tax code is one way to encourage it and that is something that benefits everyone in that country, citizens and government alike. The U.S. has done this for years with very favorable terms for foreigners who place their money in U.S. banks. France certainly doesn't complain when foreigners decided to place substantial amounts of money in French banks or businesses. According to the France Diplomatie website France was "the third-leading recipient of foreign direct investment in the world in 2009, according to UNCTAD, receiving US $65 billion in foreign investment flows, second only the United States (US $136 billion)." For a country that is relatively small compared to the United States that's a lot of foreign money coming in.
Do the French use their tax code to encourage this? You bet they do. This article entitled The French Tax System: Promoting Competitiveness and Investment describes a system of tax credits and exemptions that make France a very warm and welcoming environment for outside investors. That money didn't come out of thin air - it came from other countries who were probably not terribly happy about the outbound flow of capital since it reduces the amount available for local investment and is no longer around to be taxed in the country of origin.
The point I want to make here is that one country's welcome foreign investors are quite often another country's evil "tax evaders" - highly sought after job creators and entrepreneurs in one jurisdiction, unpatriotic villains in another.
Does this mean that I think Google should get away with paying only 5 million Euros in French taxes? Not at all. If the French authorities think that Google did something shady to wiggle out of the cost of doing business in France, then of course Google has to face the music. Le Monde implies that there will be a negotiation between Google and the French government and I'm sure they will work it out. As for the US and its interests in Google's revenue, Americans would do well to recognize that the company (which is not really an American company anymore) is already paying taxes locally (though perhaps not enough according to the local tax authorities) in the countries where it operates which means that if the US really wants a piece of that action, it's going to have to stand in line.
But it is a bit hypocritical for either country to complain too loudly about other countries using their tax codes to promote a positive incoming flow of capital. If it's good for France and good for the U.S. why shouldn't countries like Ireland or Bermuda play the same game? If you don't want other countries doing this to you, mes amis, then perhaps you need to stop doing it to them.
Or, and here's a radical idea, perhaps tax competition and the chase for foreign investment among nations is actually a good thing. Some people do make that argument and clearly both the US and France have been beneficiaries of this competition. The citizens of both just might want to take that into account before getting too enthusiastic about tax harmonization or worldwide taxation schemes.
Wednesday, October 31, 2012
Tuesday, October 30, 2012
House Works
The signing for our house went off without a hitch. Only casualties were my left hand (every page of the deal had to have my and my spouse's initials and there were a lot of pages) and my peace of mind (oh my goodness my bank is going to own me for the next 13 years - what was I thinking?)
Do I still love the house? Absolutely. But with legal ownership comes responsibilities (real or imagined). For an example of the latter, I went over to the house yesterday, looked at the state of the garden and almost immediately started channeling my long-deceased American grandmother who liked to say, "No one is ever too destitute to pick up his yard and mow the lawn." I then proceeded to weed the front garden until it was a bit better and I was weak, sick and completely exhausted. After the fact it did occur to me that Grandma probably would have given me a pass - coming out of five months of chemotherapy is after all a perfectly legitimate excuse for having an untended yard. But such is the insanity of the new homeowner.
After having regained my mental stability, I went down this afternoon to drop off the key and talk to the contractor who will be doing the work inside the house. Let's face it, maybe in a few weeks I will be able to work on the garden but I'm simply incompetent when it comes to rewiring the house, fixing the roof or redoing the hardwood floors. Here are a few pictures of some of the basic stuff that needs to be done before we move some time in mid-December.
Heat was the first priority. The house is set up for gas but it was never switched over from the original oil burning system. This meant having to contact someone to check the oil tank, the water tank and all the radiators and then turn it on (and show us how to turn it on).
We were in luck - all the radiators except one work and boy do they give off a lot of heat. These ones are old but I think they are kind of pretty myself. The marble slabs on top will be the favored places for the cats to sleep.
For me the heating system is positively luxurious. You see, in our apartment building the heat is central and we don't have any control over when it is turned on or off. The idea that I can turn on my own heat whenever I like is going to change my life.
Next up is the roof and what is just under the roof There is water damage in two rooms so there must have been leaks at one point. We were also concerned about the state of the insulation. We were warned that this house is expensive to heat. Since most of the heat escapes via the roof it seemed wise to see what we can do right away to make it better. EDF (Electricité de France) gave us a company to call and they had a look. Roof is basically fine but it needs to be cleaned up and sealed. As for the insulation, well, we need some.
Finally, the electrical system has to be completely redone. It's not bad enough to actually prevent us from moving in but it's not to code and we will have problems with the insurance company if we don't get it fixed.
One wonderful things the former owners did for us was to leave us the old light fixtures: the little chandelier in the living room and the old-fashioned hanging light fixtures in the hallway and kitchen. They will come down during the renovation and then they are going right back up.
Right there is enough to keep us busy for the next month or so. After that comes the more cosmetic stuff: floors, walls and the fireplace. And then there's also little matter of the chimney we want to bump up and, of course, the kitchen. I'll post a few more pictures of the state of things - I like the idea of having "before" pictures - and I'll also post a few of the work as it advances.
The whole business may have me a bit giddy but, hey, it's exactly what I need right now: a future-oriented project.
Do I still love the house? Absolutely. But with legal ownership comes responsibilities (real or imagined). For an example of the latter, I went over to the house yesterday, looked at the state of the garden and almost immediately started channeling my long-deceased American grandmother who liked to say, "No one is ever too destitute to pick up his yard and mow the lawn." I then proceeded to weed the front garden until it was a bit better and I was weak, sick and completely exhausted. After the fact it did occur to me that Grandma probably would have given me a pass - coming out of five months of chemotherapy is after all a perfectly legitimate excuse for having an untended yard. But such is the insanity of the new homeowner.
After having regained my mental stability, I went down this afternoon to drop off the key and talk to the contractor who will be doing the work inside the house. Let's face it, maybe in a few weeks I will be able to work on the garden but I'm simply incompetent when it comes to rewiring the house, fixing the roof or redoing the hardwood floors. Here are a few pictures of some of the basic stuff that needs to be done before we move some time in mid-December.
We were in luck - all the radiators except one work and boy do they give off a lot of heat. These ones are old but I think they are kind of pretty myself. The marble slabs on top will be the favored places for the cats to sleep.
For me the heating system is positively luxurious. You see, in our apartment building the heat is central and we don't have any control over when it is turned on or off. The idea that I can turn on my own heat whenever I like is going to change my life.
One wonderful things the former owners did for us was to leave us the old light fixtures: the little chandelier in the living room and the old-fashioned hanging light fixtures in the hallway and kitchen. They will come down during the renovation and then they are going right back up.
Right there is enough to keep us busy for the next month or so. After that comes the more cosmetic stuff: floors, walls and the fireplace. And then there's also little matter of the chimney we want to bump up and, of course, the kitchen. I'll post a few more pictures of the state of things - I like the idea of having "before" pictures - and I'll also post a few of the work as it advances.
The whole business may have me a bit giddy but, hey, it's exactly what I need right now: a future-oriented project.
Sunday, October 28, 2012
The Economics of Citizenship
Citizenship is a very emotional topic. It defines one's membership in a political community and one's relationship to a nation-state. It's not surprising that people feel very strongly about it - everyone has an opinion.
I came across this paper recently while researching another topic. It's called The Economics of Citizenship and it came out of a workshop on citizenship acquisition held in Sweden in 2004. I found it interesting because most of what I have read about citizenship models comes from social scientists, folks like Patrick Weil and Peter Spiro, and focuses on issues of identity, law and globalization. The essays here take a different approach - they are an effort to apply the principles of economics to explain why migrants do or not choose to become citizens. Their analyses start with these questions:
What are the economic determinants animating an immigrant’s choice to acquire citizenship?
What are the economic consequences of choosing citizenship for the foreign-born worker?
I came across this paper recently while researching another topic. It's called The Economics of Citizenship and it came out of a workshop on citizenship acquisition held in Sweden in 2004. I found it interesting because most of what I have read about citizenship models comes from social scientists, folks like Patrick Weil and Peter Spiro, and focuses on issues of identity, law and globalization. The essays here take a different approach - they are an effort to apply the principles of economics to explain why migrants do or not choose to become citizens. Their analyses start with these questions:
What are the economic determinants animating an immigrant’s choice to acquire citizenship?
What are the economic consequences of choosing citizenship for the foreign-born worker?
Each essay in the paper takes these questions and then looks at the state of citizenship acquisition in a country: Canada, Sweden, The United States, The Netherlands, Norway. Africa, Asia and South America are noticeably absent here. Each essay is prefaced with a short narrative by an immigrant explaining where he/she came from, why he chose a particular destination country and why he stayed and decided to become a citizen.
Since I am not an economist, I can't vouch for the models the authors used but I did find some of their conclusions interesting. I'll let you read the paper for yourself but here are my comments on their data and conclusions:
Home Country, Host Country, and the Rest of the World: There is the original citizenship, the second citizenship and the pull of the wider world and other citizenships. Sometimes it make all kinds of sense for a migrant to move on to yet another country. Just because a migrant has come to one and become a citizen, there is nothing stopping him from packing up and moving to a Third Place. In fact it may make a lot of sense for a migrant to seek citizenship in one host country as a prelude to moving on or moving back to the home country. And many do. It's a kind of insurance that he/she can always go back to that country no matter what happens.
It can also be a stepping-stone to other countries. Becoming a Canadian means access to North America. Becoming Belgian gives access to the European Union. Becoming Spanish can ease entry into certain Latin American countries. These citizenships confer an important economic advantage (access to multiple job markets) that may have very little to do with the country where it is acquired and everything to do with access to other countries.
Dual Citizenship: There is no limit really on the number of citizenships an individual can acquire provided that all the countries involved accept dual citizenship or they don't try to enforce their own laws against it. Most countries these days do rather grudgingly allow it. No reason, for example that someone cannot be British, French, and Canadian.
Does the acceptance of dual citizenship by the home country have an important impact on the decision to acquire citizenship in that state? Clearly, it does have an impact. In the essay on Canada the model is described this way:
Both the acquisition of subsidized human capital and the prospect of receiving public goods (citizenship and a passport) now increase the probability that this immigrant will ascend to citizenship, if the expected earnings stream in country B net of costs of citizenship acquisition exceeds the option of returning home. However, if country A does not recognize dual citizenship, this will raise the cost of possible return migration and reduce the probability of ascending to citizenship in country B.
However, it doesn't seem to be a determining factor in all cases. What might cause a migrant to decide to become a citizen of another country in spite of the fact that he/she will lose his original citizenship?
The Type of Migrant: One answer is who that migrant is and where he or she came from. Refugees tend to become citizens as soon as possible and when you think about it that makes a lot of sense. Economic migrants from poorer countries also have high rates of naturalization though not as high as refugees.
But, and I found this very interesting, the migrants from relatively rich countries (OECD versus non-OECD) with good qualifications who move to another country have much lower naturalization rates.
If a German leaves Europe for the United States, the difference in living conditions, and the attractiveness of return, will be quite different compared to a Burmese refugee fleeing political persecution and economic misery in her homeland. All the chapters in this volume suggest that the citizenship calculations of migrants from highly developed countries differ from others.
This has important implications for immigration and citizenship law in developed countries competing for the small pool of highly-qualified migrants. If the intention of these states is to get those migrants to come and stay then two sets of incentives have to be designed: the first to draw them in and the second to keep them around. This means that "stapling a Green Card to a diploma" is only half the battle and even then a path to citizenship is no guarantee at all that they will remain. In fact their most judicious strategy may be to stay long enough to acquire a second citizenship in order to increase their options while looking at maximizing their economic potential by moving on to another state that likes their skills and offers interesting opportunities. As for nation-states, the editors of this paper suggest that the most successful strategy for rich countries who want skilled people who stay is to target the entrepreneurs, university graduates and skilled labor from developing countries.
The Economic Advantage: Does citizenship confer a real direct advantage in terms of increased wages and better employment opportunities? Again, it depends on the migrant. Destination country, country of origin, skill level and even gender are important variables. The essay on Canada reports:
For our general sample of employed immigrants, we detected a wage differential of 15% between citizens and non-citizens. Moreover, as shown in table 4, human capital endowments are relatively more important for males than females. In general, immigrant citizens from non-OECD countries enjoyed a greater wage advantage than non-citizens from OECD countries (28.9% vs. 9.8%)
On the other hand look at the data on employment for Swedish immigrants who become citizens:
...those immigrants who have been naturalized tended to see a modest increase in the probability of having full-time employment in 1990. Some nationalities, particularly the Scandinavians, Chileans and Germans, saw almost no difference between the naturalized and non-naturalized groups. The Czechoslovakian men saw the greatest increase in probability of almost 24 percentage points, while American men and Greek women experienced considerable negative effects of citizenship.
And for the U.S.?
...citizenship acquisition alone does not have a statistically-significant effect on the log of annual wages of developed country immigrants. however, a larger and statistically significant effect of citizenship acquisition on the log of annual wages is found in case of immigrants arriving from developing countries.
So there is an impact on wages and employment but it ranges from a negative or nearly no effect (how interesting) to a big positive. It looks like (and that makes sense) the biggest effect will consistently come when the migrant is from a developing country. It also demonstrates that migrants that move from one developing country to another are probably seeking more intangible benefits - it's much less likely that they will see a direct economic advantage to migrating in the first place much less bothering to become a citizen. This means that countries that seek to encourage migration from one developed country to another need to put the emphasis on the intangibles as they "market" their nation's advantages over the competition. Positive things like "quality of life," good government services, support for families, and safety.
These are certainly reasons to go live in another country but they don't necessarily translate to a desire to seek citizenship. They can usually be had without it. The question I have (assuming that countries are interested in having those highly-qualified migrants from developed countries become citizens as often as other classes of migrants) is this: what would developed countries have to offer to tip the scales in favor of citizenship acquisition for this class of migrant?
These are certainly reasons to go live in another country but they don't necessarily translate to a desire to seek citizenship. They can usually be had without it. The question I have (assuming that countries are interested in having those highly-qualified migrants from developed countries become citizens as often as other classes of migrants) is this: what would developed countries have to offer to tip the scales in favor of citizenship acquisition for this class of migrant?
For an example of an interesting "offer" have a look at the Working in Sweden site. Their pitch is a combination of tangible and intangible benefits: a high standard of living, vacation, child care, pensions, universal healthcare and security. "Despite relatively little spending on prison systems and law enforcement, life in Sweden is very safe."
Friday, October 26, 2012
The Tax Implications of a Life Lived Abroad
Another extraordinary resource passed along by Just Me. The Life of An American Abroad is a twenty minute video that was filmed during a tax seminar earlier this year.
An actor plays the role of a very naive American who moves to the UK to study and work and who ends up falling in love, getting a permanent residency permit, buying a house, getting married, having children, saving for retirement, and ultimately passing away in his host country.
Now if this person were from any other country in the world (i.e. not the U.S.) you know what we'd call him? An emigrant/immigrant. I find it very amusing that, for the most part, we don't and I think that's a problem. As Camus once said, "Mal nommer les choses, c'est ajouter au malheur du monde." (Calling things by incorrect names is adding to the misery in the world.)
As this American tells his life story, a panel of tax advisors is there to explain to him what he has to do to stay compliant with the U.S. worldwide tax and reporting regime (citizenship-based taxation). To his horror (and mine) not one thing that he does in that life remains untouched by the IRS. Well, perhaps that is an overstatement since he is allowed to eat, breathe, and eliminate waste without the U.S. government looking over his shoulder. How generous of them.
I personally know many Americans who have experienced all the life events talked about this video and I think I'm on very firm ground here when I say that even the folks I know who think they are compliant, probably aren't.
So I strongly urge everyone to watch this video and I mean everyone.
For those of you reading this blog who are not U.S. citizens or Green Card holders and who think this does not concern them, please think again. You are indirectly concerned because many of your governments find the American system rather admirable (the French, for example). Members of other diasporas ( French, German, Mexican, Brazilians and so on) would do well to be aware of how U.S. worldwide taxation works so they can fight efforts to have something similar imposed on them. As for those of you who are married or contemplating marriage to a U.S. citizen, best to know what you're getting into (or the merde you are already in).
For Flophouse readers who live in the U.S. and who are still under the impression that Americans abroad are making a big deal out of nothing, watch the video and ask yourself: would you be willing to live like this? And what about your children who may one day wish to live and work abroad? Do you want them to be captive citizens shut out from all the goodies associated with globalization, unable to take that great job in Shanghai or London because no one will hire Americans anymore or because the cost of compliance with all the U.S. requirements is simply too high?
And finally for my fellow Americans abroad, I'd like you to do something for me before you click "start." Find a quiet place, take a deep breathe, and relax. You have options. Not all of them will make you happy and some will require effort on your part. What you do with this information is entirely up to you. I fully understand and empathize with those who are renouncing. There are others who are fighting like demons: joining American Citizens Abroad and the Association of American Residents Overseas, writing letters, putting pressure on politicians, voting this year against those lawmakers who are refusing to listen, and pestering the homeland media to get the story out. And, yes, there are folks who are doing a Deep Dive and cutting all ties to the U.S., avoiding the U.S. embassy like plague-infested territory, not renewing their passports and so on. I'm not sure the last is viable given the arrival of FATCA, and I wouldn't do it, but it's a big big world out there and surely some of them will succeed.
Wherever you are in this mess, the important thing is that you do the next right thing and I honestly think that the only wrong answer here is to kick back and pretend it isn't happening at all.
Just my .02.
An actor plays the role of a very naive American who moves to the UK to study and work and who ends up falling in love, getting a permanent residency permit, buying a house, getting married, having children, saving for retirement, and ultimately passing away in his host country.
Now if this person were from any other country in the world (i.e. not the U.S.) you know what we'd call him? An emigrant/immigrant. I find it very amusing that, for the most part, we don't and I think that's a problem. As Camus once said, "Mal nommer les choses, c'est ajouter au malheur du monde." (Calling things by incorrect names is adding to the misery in the world.)
As this American tells his life story, a panel of tax advisors is there to explain to him what he has to do to stay compliant with the U.S. worldwide tax and reporting regime (citizenship-based taxation). To his horror (and mine) not one thing that he does in that life remains untouched by the IRS. Well, perhaps that is an overstatement since he is allowed to eat, breathe, and eliminate waste without the U.S. government looking over his shoulder. How generous of them.
I personally know many Americans who have experienced all the life events talked about this video and I think I'm on very firm ground here when I say that even the folks I know who think they are compliant, probably aren't.
So I strongly urge everyone to watch this video and I mean everyone.
For those of you reading this blog who are not U.S. citizens or Green Card holders and who think this does not concern them, please think again. You are indirectly concerned because many of your governments find the American system rather admirable (the French, for example). Members of other diasporas ( French, German, Mexican, Brazilians and so on) would do well to be aware of how U.S. worldwide taxation works so they can fight efforts to have something similar imposed on them. As for those of you who are married or contemplating marriage to a U.S. citizen, best to know what you're getting into (or the merde you are already in).
For Flophouse readers who live in the U.S. and who are still under the impression that Americans abroad are making a big deal out of nothing, watch the video and ask yourself: would you be willing to live like this? And what about your children who may one day wish to live and work abroad? Do you want them to be captive citizens shut out from all the goodies associated with globalization, unable to take that great job in Shanghai or London because no one will hire Americans anymore or because the cost of compliance with all the U.S. requirements is simply too high?
And finally for my fellow Americans abroad, I'd like you to do something for me before you click "start." Find a quiet place, take a deep breathe, and relax. You have options. Not all of them will make you happy and some will require effort on your part. What you do with this information is entirely up to you. I fully understand and empathize with those who are renouncing. There are others who are fighting like demons: joining American Citizens Abroad and the Association of American Residents Overseas, writing letters, putting pressure on politicians, voting this year against those lawmakers who are refusing to listen, and pestering the homeland media to get the story out. And, yes, there are folks who are doing a Deep Dive and cutting all ties to the U.S., avoiding the U.S. embassy like plague-infested territory, not renewing their passports and so on. I'm not sure the last is viable given the arrival of FATCA, and I wouldn't do it, but it's a big big world out there and surely some of them will succeed.
Wherever you are in this mess, the important thing is that you do the next right thing and I honestly think that the only wrong answer here is to kick back and pretend it isn't happening at all.
Just my .02.
Thursday, October 25, 2012
A Guided Discovery of the Moral Questions Raised by Immigration
This BBC podcast was recommended by a Flophouse reader and it's absolutely brilliant. It's part of a series called The Public Philosopher and in this episode Harvard philosopher Michael Sandel led what I would call a "guided discovery" about the moral principles that lie under the surface of immigration policy. Sandel is a philosopher but the people talking aren't - these are regular people answering as honestly as they can why they believe as they do. Sandel and company are Americans and that I think that is reflected in some of their answers but the questions and the moral issues would be the same anywhere. Here are a few of my comments about what I heard.
It's the Law: This is the point of departure for many Americans and it was one of the first points made. Americans have a reverence for the law that you don't find everywhere in the world. This is not necessarily to their credit - it's just different and something I always notice when I go back to the U.S. Debates about immigration that talk about people coming to the U.S. and staying illegally always include this dimension which says that the law is the law and people should never be rewarded for breaking it. An interesting attitude since the U.S. has an awful lot of people in prison and most of them are native born.
If you go to other countries that are facing the same questions, the legality of it is necessarily one of their top reasons for being against informal immigration and a path to citizenship for the "sans papiers." This is not to say that people in other countries have contempt for the law (just try it in France and see how far that gets you) but the fact that something is or isn't legal does not translate to "must be obeyed at all times under all circumstances until the law is changed." In fact, in some places the law may on the books but there may be a tacit agreement among all parties (public and police) that breaking this or that one is tolerated. In other places the law is clearly secondary to things like social harmony and relationships. The law is obeyed when it reinforces these things and ignored when it doesn't. Interestingly enough some of these countries have far fewer people in prison compared to the U.S. so clearly strong feelings about the rule of law do not necessarily translate into fewer people breaking it.
Emigration: Completely absent from the debate. The few immigrants who spoke did not even once invoke their status as emigrants from somewhere else. Some of the native born did and pointed out that their ancestors were once immigrants as well. But not one person talked about how immigration and emigration policy are intertwined - two sides of the same coin. I don't think it occurred to one person in that room that they or one of their children might emigrate from the U.S. to another country making them or their children immigrants somewhere else. Clearly Americans like French or Chinese or Brazilians do emigrate - the American diaspora is 6 million strong these days - but emigration is not even on the radar of the average American. And I can't help but think that's a pity. The immigration debate in the U.S. and in other places would be so much richer if people everywhere could contemplate the issues from the perspective of a potential migrant.
One of the points I wish someone had made is the fact that emigration and the right to leave one's country is enshrined in international law. If you asked the average French person or American or German or Australian if he or she has that right, I'm sure they would reply with a strong affirmative. However, the right to emigrate is limited because almost every country places controls on immigration and to my knowledge not one recognizes an absolute right to immigrate and enter their country. And that's pretty strange when you think about it.
Citizenship: Sandel makes a clear statement about this at the end - immigration/emigration policy is touchy because it raises some very fundamental questions about what it means to be a citizen and a member of a community. One way to clarify things is to take whatever controls people wish to place on immigration and then apply them to citizens.
For example, one person argued that the U.S. has limited space and resources and thus cannot allow large uncontrolled numbers of people into the country. Sandel had a very interesting question in response to this. Assuming that this is correct and that resources and living space are limited, why then do countries allowed citizens to freely procreate? If there really is a danger of there not being enough healthcare, living space, jobs and so on, then shouldn't we be restricting people's right to have as many children as they want? Whether it's through immigration or births the result is the same - more people and if you really think that there are too many (or just the right amount) people already in a territory then it would make a lot of sense to control both immigration and the number of births.
For countries in demographic decline that don't want immigration the question is a little different. If what people in those countries want is to preserve the population they already have then isn't there an argument in there for forcing or strongly encouraging citizens to have children? I actually made this argument in response to a Frenchwoman who was going on and on at a party about how there were too many immigrants in France who couldn't integrate and were diluting the native French population. I made the observation that it was certainly within her and her fellow citizens power to fix this - just have three or more kids each, I said. Every one of you. Consider it your patriotic duty. Needless to say, she got really mad at me. :-)
Another argument that is used in support of controlling immigration is the idea that a country needs to have certain entry standards and should only allow in those people a country needs or finds desirable. The sick, the lame, the criminal, the poorly educated need not apply. Fair enough but that does raise the question of what to do with citizens who are already in these undesirable categories. Just by having these standards a country has set a definition of who are the best, the most desirable, the first-class citizens. This has important implications for the existing citizenry. Is France, for example, sending a message through her selective immigration standards that the nation really needs and wants that French-speaking computer programmer from Canada? Okay. So what about that unemployed laborer in Brittany? Is he an unwanted second-class citizen to be tolerated only because he's a French citizen by birth and under international law they can't throw him out or strongly encourage him to leave?
This is something that citizens need to think about. Especially if they themselves do not meet the standards that they themselves think should be met by potential citizens. If countries could rid themselves of undesirable unproductive citizens, would they? The answer is "yes." This has happened in the past when countries used emigration to rid themselves of the unemployed, the criminal and others who were considered to be a burden on society. The UK used to take orphans (minors) who ended up in the poorhouse and shipped them to families in Canada to get rid of them. Australia and the U.S. were originally places where countries could empty their prisons and clear the streets and welfare rolls of the indigent. You don't see that anymore but the fact remains that by setting standards for immigrants (future citizens), a country is also saying something about what it thinks of its existing citizenry.
A sincere "thank you" to the Flophouse reader who passed along this link. I'll stop talking now and let you have a listen. If you are so inspired I would love to hear what you think in the comments section. Here's the link again: The Public Philosopher - Immigration.
It's the Law: This is the point of departure for many Americans and it was one of the first points made. Americans have a reverence for the law that you don't find everywhere in the world. This is not necessarily to their credit - it's just different and something I always notice when I go back to the U.S. Debates about immigration that talk about people coming to the U.S. and staying illegally always include this dimension which says that the law is the law and people should never be rewarded for breaking it. An interesting attitude since the U.S. has an awful lot of people in prison and most of them are native born.
If you go to other countries that are facing the same questions, the legality of it is necessarily one of their top reasons for being against informal immigration and a path to citizenship for the "sans papiers." This is not to say that people in other countries have contempt for the law (just try it in France and see how far that gets you) but the fact that something is or isn't legal does not translate to "must be obeyed at all times under all circumstances until the law is changed." In fact, in some places the law may on the books but there may be a tacit agreement among all parties (public and police) that breaking this or that one is tolerated. In other places the law is clearly secondary to things like social harmony and relationships. The law is obeyed when it reinforces these things and ignored when it doesn't. Interestingly enough some of these countries have far fewer people in prison compared to the U.S. so clearly strong feelings about the rule of law do not necessarily translate into fewer people breaking it.
Emigration: Completely absent from the debate. The few immigrants who spoke did not even once invoke their status as emigrants from somewhere else. Some of the native born did and pointed out that their ancestors were once immigrants as well. But not one person talked about how immigration and emigration policy are intertwined - two sides of the same coin. I don't think it occurred to one person in that room that they or one of their children might emigrate from the U.S. to another country making them or their children immigrants somewhere else. Clearly Americans like French or Chinese or Brazilians do emigrate - the American diaspora is 6 million strong these days - but emigration is not even on the radar of the average American. And I can't help but think that's a pity. The immigration debate in the U.S. and in other places would be so much richer if people everywhere could contemplate the issues from the perspective of a potential migrant.
One of the points I wish someone had made is the fact that emigration and the right to leave one's country is enshrined in international law. If you asked the average French person or American or German or Australian if he or she has that right, I'm sure they would reply with a strong affirmative. However, the right to emigrate is limited because almost every country places controls on immigration and to my knowledge not one recognizes an absolute right to immigrate and enter their country. And that's pretty strange when you think about it.
Citizenship: Sandel makes a clear statement about this at the end - immigration/emigration policy is touchy because it raises some very fundamental questions about what it means to be a citizen and a member of a community. One way to clarify things is to take whatever controls people wish to place on immigration and then apply them to citizens.
For example, one person argued that the U.S. has limited space and resources and thus cannot allow large uncontrolled numbers of people into the country. Sandel had a very interesting question in response to this. Assuming that this is correct and that resources and living space are limited, why then do countries allowed citizens to freely procreate? If there really is a danger of there not being enough healthcare, living space, jobs and so on, then shouldn't we be restricting people's right to have as many children as they want? Whether it's through immigration or births the result is the same - more people and if you really think that there are too many (or just the right amount) people already in a territory then it would make a lot of sense to control both immigration and the number of births.
For countries in demographic decline that don't want immigration the question is a little different. If what people in those countries want is to preserve the population they already have then isn't there an argument in there for forcing or strongly encouraging citizens to have children? I actually made this argument in response to a Frenchwoman who was going on and on at a party about how there were too many immigrants in France who couldn't integrate and were diluting the native French population. I made the observation that it was certainly within her and her fellow citizens power to fix this - just have three or more kids each, I said. Every one of you. Consider it your patriotic duty. Needless to say, she got really mad at me. :-)
Another argument that is used in support of controlling immigration is the idea that a country needs to have certain entry standards and should only allow in those people a country needs or finds desirable. The sick, the lame, the criminal, the poorly educated need not apply. Fair enough but that does raise the question of what to do with citizens who are already in these undesirable categories. Just by having these standards a country has set a definition of who are the best, the most desirable, the first-class citizens. This has important implications for the existing citizenry. Is France, for example, sending a message through her selective immigration standards that the nation really needs and wants that French-speaking computer programmer from Canada? Okay. So what about that unemployed laborer in Brittany? Is he an unwanted second-class citizen to be tolerated only because he's a French citizen by birth and under international law they can't throw him out or strongly encourage him to leave?
This is something that citizens need to think about. Especially if they themselves do not meet the standards that they themselves think should be met by potential citizens. If countries could rid themselves of undesirable unproductive citizens, would they? The answer is "yes." This has happened in the past when countries used emigration to rid themselves of the unemployed, the criminal and others who were considered to be a burden on society. The UK used to take orphans (minors) who ended up in the poorhouse and shipped them to families in Canada to get rid of them. Australia and the U.S. were originally places where countries could empty their prisons and clear the streets and welfare rolls of the indigent. You don't see that anymore but the fact remains that by setting standards for immigrants (future citizens), a country is also saying something about what it thinks of its existing citizenry.
A sincere "thank you" to the Flophouse reader who passed along this link. I'll stop talking now and let you have a listen. If you are so inspired I would love to hear what you think in the comments section. Here's the link again: The Public Philosopher - Immigration.
Wednesday, October 24, 2012
The Illusion of Self-Sufficiency
First things first. I'd like to thank all the people who read and commented on this post Perspectives on Compliance with Citizenship-Based Taxation. It's such a pleasure to read your words and your reactions and that is true whether you agree with my perspective or not. I'm deeply grateful to have readers, to be of service, and to to connect with so many interesting people around this issue and others.
One reader left a comment that I thought about all day yesterday and I re-read it this morning. He/she wrote: Throughout its very short history the USA has always reverted to isolationist policies. Due to the mere size and natural resources the USA could be self-sufficient (especially once the need for Middle East oil no longer exists).
I agree with the first statement but wasn't sure about the latter. Much depends on how one defines "self-sufficient" but if we take it in this sense - the country doesn't need to import natural resources - could the U.S. (if it were able to wean itself off foreign oil) be entirely self-sufficient?
One reader left a comment that I thought about all day yesterday and I re-read it this morning. He/she wrote: Throughout its very short history the USA has always reverted to isolationist policies. Due to the mere size and natural resources the USA could be self-sufficient (especially once the need for Middle East oil no longer exists).
I agree with the first statement but wasn't sure about the latter. Much depends on how one defines "self-sufficient" but if we take it in this sense - the country doesn't need to import natural resources - could the U.S. (if it were able to wean itself off foreign oil) be entirely self-sufficient?
Took me all day but I finally figured out why I'm not so sure that the U.S. really could reach this exalted state. One word: water.
I come from the American West where in so many places the only way people can live there and grow enough food to feed themselves is through irrigation - pulling water out of the ground or out of the major rivers. Even Seattle, a city known for its abundant rainfall, gets much of its water from the snowpack in the mountains. No snow, no water, and within my lifetime there have been droughts - periods where Seattleites were forced to conserve because the supply of drinking water was low enough to be a concern. If you ever go over the mountains to Eastern Washington to admire the stunning apple orchards and endless golden fields of wheat, give a thought to how settlers made the desert bloom. What made it possible are three rivers: the Columbia, the Snake and the Yakima. Lot of dams on these rivers. I found this picture of one that was built many years on the Columbia. It's the Chief Joseph Dam and I've been told that some of my recent ancestors worked on this one when it was being constructed in the late 1940's.
Americans talk constantly about oil but one could argue that water is even more precious and parts of the U.S. may simply not have enough to sustain settlement in certain areas unless they look elsewhere.
To learn more I really recommend this book called Cadillac Desert: The American West and Its Disappearing Water by Marc Reisner. While you're waiting for the book to come, you might want to check out this paper on the Net, Water 2025: Preventing Crises and Conflict in the West.
Americans talk constantly about oil but one could argue that water is even more precious and parts of the U.S. may simply not have enough to sustain settlement in certain areas unless they look elsewhere.
To learn more I really recommend this book called Cadillac Desert: The American West and Its Disappearing Water by Marc Reisner. While you're waiting for the book to come, you might want to check out this paper on the Net, Water 2025: Preventing Crises and Conflict in the West.
And where is water to be found if the American West runs dry? I've been told that Canada is the most likely source if water management efforts fail. How interesting. Now that would certainly bring a whole new dimension to the U.S. Canada relationship. Just imagine the U.S. in a position to have to beg their Canadian neighbors for sufficient water to keep Los Angeles going.
Unless, of course, you are an American like Rick Perry and you consider Canadian water (like Canadian oil) to be a domestic American resource and not a foreign one. :-)
Unless, of course, you are an American like Rick Perry and you consider Canadian water (like Canadian oil) to be a domestic American resource and not a foreign one. :-)
Tuesday, October 23, 2012
Book Review: The Immigrant Exodus
I came across this book, The Immigrant Exodus: Why America is Losing the Global Race to Capture Entrepreneurial Talent, via the ILW site. For those of you who are interested in U.S. immigration policy and law this is a good one to follow. They have an excellent round-up of articles and editorials. Being a U.S. emigrant I'm not directly concerned by the issues they write about but I find it useful to compare EU or Canadian policy to what's going on in the U.S. I also take Patrick Weil very seriously when he says that immigration and emigration policy are connected and I think it makes sense to watch how both play out in my home country.
I read the ILW review and was intrigued enough to buy the book for my kindle. The author is a fellow to watch if you are interested in immigration policy for highly-qualified/investor/entrepreneur migrants. Vivek Wadhwa is well placed to talk about this. He is an immigrant himself. He studied in Australia before coming to the U.S. to work in the high-tech industry. He started as a software developer and rose to the executive level before he left to teach and do research on innovation, entrepreneurship and globalization. What I really like about his perspective is that he does not assume that all of these topics can be considered without looking at and taking into account the wider world outside of North America. He's done some very interesting research on off-shore companies, global competitiveness, engineering education in Asia, innovation in countries like India and diversity (or lack of) in the U.S. IT industry. With a CV like that I assumed that I would enjoy his book - how could I not love all my favorite topics rolled into one? But after I finished it my feelings were mixed. There were many things I agreed with but there were also a few moments where he lost me. I would not pretend to his level of expertise in these matters but my own experience and perspective are clearly very different and so some of what he says raises some questions in my mind.
Let's start with what I liked about his book. It's a call for action and I always admire someone who clearly states a problem and provides a path to fixing it . He says (and I agree) that the U.S. immigration machine is broken. What's the evidence for that?
One Great Destination Among Many: Some of this has to do with the "rise of the rest." The U.S. is still a choice destination but just one among many other possibilities that are just as good and maybe better. I worked in the IT industry in my host country for French multi-nationals and ran teams in India, Japan, U.S., Europe. I have also been an invited speaker several years running to students in the MBA program at the French school, Ponts et chaussées. 20 years ago almost everyone I met in IT outside the U.S. was interested in going there to live and work temporarily or permanently. At that time the people I encountered simply could not believe that I left the U.S. West Coast for Europe to work in the IT industry here. That has radically changed. These days the kids I meet dream of North America (not necessarily the U.S.) AND Asia AND South America. There's a lot more choice and where they do end up if they decide to work abroad depends a a lot on what kind of deal they can get. This a complex calculation that is influenced by many things: opportunity, the attractiveness of the destination country and the ease (or lack thereof) of getting a work permit. These are very intelligent people with great qualifications and experience who are perfectly capable making rational, well-reasoned choices. Wadhwa himself says, "If the conditions were as they are today when I started my own path to citizenship, I would have been a fool to leave Australia." (Australia was his first destination country.)
What Wadhwa is basically saying is that this a global competition for talent. This is something Americans have a hard time wrapping their heads around. The U.S. can no longer assume that the highly-qualified migrants will come and stay. He points out that retention is becoming a problem as well - more and more foreign students are returning home or moving on to another country after their studies or first work experience in the U.S. He also cites the declining number of immigrant entrepreneurs and investors in places like Silicon Valley. Let's be brutally honest here. If you were a young Chinese person today why wouldn't you: Come to the U.S., get a degree, work for a few years in industry if you can get a work permit, and/or then head home to start a business or join a start-up in Shanghai. Some call it "circular migration." I call it, "making globalization work for people, not just companies."
Immigration Law and Policy: Americans in the homeland might be a bit surprised (some might even be rather pleased) to discover just how unwelcoming the U.S. has become to such talent. Wadhwa devotes an entire chapter to all the problems associated with the H1-B visa. It is the number one method by which highly-qualified migrants enter the U.S. to work. Everything he says is absolutely correct. Yes, it's still very popular but it has a number of downsides. It ties the migrant to one employer (never a good thing) which encourages abuse: low salaries and less than ideal working conditions. If the migrant is laid off and can't find another employer, he or she has to leave the U.S. immediately. Spouses can't work and for many migrants that is a deal killer right there.
I've looked at the program through my immigrant eyes and what it really looks like is a "guest worker" program. There is nothing about it that says, "We value you and your skills and would like you to stay." No, on the contrary, everything about it screams, "We'd like to rent you for a few years and then please leave." If the U.S. were the only or best option then perhaps that might work but as we discussed above that is no longer the case.
Other countries offer a much better deal. Wadhwa talks about Canada, Chile, China, Singapore and says, "These countries are offering stipends, labor subsidies for employers, expedited visa processes and other inducements to bring in start-ups. " Just check out this program called Start-Up Chile, "a program of the Chilean Government to attract world-class early stage entrepreneurs to start their businesses in Chile." If you are accepted for this program the Chilean government will give you 40,000 USD and a 1-year visa to move there and start a business. That is one hell of an offer. Or take a look at the Austrian Red-White-Red Card Plus which offers "unlimited labour market access" which means you can work for anyone who will have you. Once you start looking at these different policies around the world, that H1-B starts to look like a really lousy deal in comparison.
Wadhwa documents all of this quite well and gives a very cogent argument for why all of the above is very bad for the U.S. For some hard information read his chapter, "Why the Future of America Depends on Skilled Immigrants". Immigrants are one of the motors of the U.S. economy - they are responsible for an astonishing number of start-ups and not just in the high-tech industry but also in the small business sector. These folks are not taking jobs away from anyone - they are creating them. And if they can't create them in the U.S. they will take their talents somewhere else. The stakes are clear - the U.S. economy depends on attracting migrants.
Right up to this point I was in total agreement with Wadhwa. So where did he lose me? Here's my perspective on a few things:
Is it really all about immigration policy? All of Wadhwa's solution have to do with with reforming immigration law and policy and all of them would certainly help matters. However, the choice of one country over another is not entirely driven by access to legal residency. It is just one factor among many and today the U.S. is becoming less attractive to migrants for reasons that have nothing to do with immigration policy. I once sat next to a charming gentleman from India on a flight to Canada and he had a whole list of reasons why he went to school in the U.S. but choose to live and work in Canada instead. Almost all of them had to do with government services and infrastructure: lack of a national healthcare program and decent unemployment benefits, poor roads to drive on, decaying bridges, and K-12 public schools that he felt were not very good compared to other countries. That was a couple of years ago. These days I'm hearing things like high unemployment rate, a huge national debt, a very confusing and sometimes frightening political arena, uncertainty about the American economy, and anti-immigrant rhetoric. People in the United States might argue that all of this doesn't really represent the reality but since many of them think the country is not moving in a good direction, it should not surprise them that people outside the U.S. have similar concerns.
What about other policies that effect immigration? I don't mean to beat a dead horse here but it should be mentioned that there are other policies that indirectly impact immigration and one of those is citizenship-based taxation. As a result of the IRS crackdown and the arrival of FATCA, more and more potential migrants are becoming aware of the tax implications of moving to the U.S. Articles are starting to appear in the North American (Canada) and Asian media (India and Japan) warning people about this. Explain to some bright technology worker that spending too many years in the U.S. or becoming a U.S. citizen means that he will be subject to taxation on his worldwide income and/or an exit tax and then kick back and watch him think very carefully about the implications of that. I've had the occasion to talk to a number of potential migrants about this and not one would take that deal. Oh some would still go the U.S. but only to attend school or work for a time before moving on. This is likely to get worse since all the media attention around FATCA is making more and more people outside the U.S. aware of what it means to be a U.S. Person and all the reasons that this might not be in one's best interests. Wadhwa doesn't talk about this at all and I think he should. The very people he thinks America should attract are also the ones most likely to be negatively impacted by the U.S. worldwide reporting and taxation regime.
So what? It occurred to me as I was reading his words that, on some level, I just couldn't get too worked up about it. So fewer highly-qualified migrants move to the U.S. and start businesses? The world will continue to turn. It might even be a better world as a result. Why does the U.S. have to be THE place for innovation? Wouldn't we all be better off if there were many such places all around the world? Are there ways, in fact, that innovation is stifled when it's only nurtured in a few places? I remember reading an article about innovation in India and some of the very creative ideas that people had based on local conditions and needs and I recall thinking that no North American or European would have ever come up with some of these things. If highly-qualified migrants started scattering themselves a bit more evenly around the globe would innovation cease or slow down? Wadha implies that this is what would happen and says this would have a terrible impact on the rest of the world.
Yes, he says, other countries are rising to challenge the U.S., "But none of these countries have come close to replicating the idea factory and entrepreneurial power of the United States." I'd like to see some hard evidence for that statement and even if it's true now there is no reason it has to be true in the future. And I really really doubt that this will cause some sort of worldwide innovation implosion. On the contrary I am positively jazzed at the idea of having many poles of innovation and brains circulating from one country to another. I agree with him 100% that the way things are going is very bad for the U.S. but I don't agree that this is bad for the rest of the world. In fact it might just be the very best thing for everyone.
So I'm not going to get too bent out of shape about this though I will admit that while we are both immigrants my perspective is not his. You see, Mr. Wadhwa, I don't live in the U.S. and my money is on the rest of the world. If I didn't believe that, I would never have left Seattle.
I read the ILW review and was intrigued enough to buy the book for my kindle. The author is a fellow to watch if you are interested in immigration policy for highly-qualified/investor/entrepreneur migrants. Vivek Wadhwa is well placed to talk about this. He is an immigrant himself. He studied in Australia before coming to the U.S. to work in the high-tech industry. He started as a software developer and rose to the executive level before he left to teach and do research on innovation, entrepreneurship and globalization. What I really like about his perspective is that he does not assume that all of these topics can be considered without looking at and taking into account the wider world outside of North America. He's done some very interesting research on off-shore companies, global competitiveness, engineering education in Asia, innovation in countries like India and diversity (or lack of) in the U.S. IT industry. With a CV like that I assumed that I would enjoy his book - how could I not love all my favorite topics rolled into one? But after I finished it my feelings were mixed. There were many things I agreed with but there were also a few moments where he lost me. I would not pretend to his level of expertise in these matters but my own experience and perspective are clearly very different and so some of what he says raises some questions in my mind.
Let's start with what I liked about his book. It's a call for action and I always admire someone who clearly states a problem and provides a path to fixing it . He says (and I agree) that the U.S. immigration machine is broken. What's the evidence for that?
One Great Destination Among Many: Some of this has to do with the "rise of the rest." The U.S. is still a choice destination but just one among many other possibilities that are just as good and maybe better. I worked in the IT industry in my host country for French multi-nationals and ran teams in India, Japan, U.S., Europe. I have also been an invited speaker several years running to students in the MBA program at the French school, Ponts et chaussées. 20 years ago almost everyone I met in IT outside the U.S. was interested in going there to live and work temporarily or permanently. At that time the people I encountered simply could not believe that I left the U.S. West Coast for Europe to work in the IT industry here. That has radically changed. These days the kids I meet dream of North America (not necessarily the U.S.) AND Asia AND South America. There's a lot more choice and where they do end up if they decide to work abroad depends a a lot on what kind of deal they can get. This a complex calculation that is influenced by many things: opportunity, the attractiveness of the destination country and the ease (or lack thereof) of getting a work permit. These are very intelligent people with great qualifications and experience who are perfectly capable making rational, well-reasoned choices. Wadhwa himself says, "If the conditions were as they are today when I started my own path to citizenship, I would have been a fool to leave Australia." (Australia was his first destination country.)
What Wadhwa is basically saying is that this a global competition for talent. This is something Americans have a hard time wrapping their heads around. The U.S. can no longer assume that the highly-qualified migrants will come and stay. He points out that retention is becoming a problem as well - more and more foreign students are returning home or moving on to another country after their studies or first work experience in the U.S. He also cites the declining number of immigrant entrepreneurs and investors in places like Silicon Valley. Let's be brutally honest here. If you were a young Chinese person today why wouldn't you: Come to the U.S., get a degree, work for a few years in industry if you can get a work permit, and/or then head home to start a business or join a start-up in Shanghai. Some call it "circular migration." I call it, "making globalization work for people, not just companies."
Immigration Law and Policy: Americans in the homeland might be a bit surprised (some might even be rather pleased) to discover just how unwelcoming the U.S. has become to such talent. Wadhwa devotes an entire chapter to all the problems associated with the H1-B visa. It is the number one method by which highly-qualified migrants enter the U.S. to work. Everything he says is absolutely correct. Yes, it's still very popular but it has a number of downsides. It ties the migrant to one employer (never a good thing) which encourages abuse: low salaries and less than ideal working conditions. If the migrant is laid off and can't find another employer, he or she has to leave the U.S. immediately. Spouses can't work and for many migrants that is a deal killer right there.
I've looked at the program through my immigrant eyes and what it really looks like is a "guest worker" program. There is nothing about it that says, "We value you and your skills and would like you to stay." No, on the contrary, everything about it screams, "We'd like to rent you for a few years and then please leave." If the U.S. were the only or best option then perhaps that might work but as we discussed above that is no longer the case.
Other countries offer a much better deal. Wadhwa talks about Canada, Chile, China, Singapore and says, "These countries are offering stipends, labor subsidies for employers, expedited visa processes and other inducements to bring in start-ups. " Just check out this program called Start-Up Chile, "a program of the Chilean Government to attract world-class early stage entrepreneurs to start their businesses in Chile." If you are accepted for this program the Chilean government will give you 40,000 USD and a 1-year visa to move there and start a business. That is one hell of an offer. Or take a look at the Austrian Red-White-Red Card Plus which offers "unlimited labour market access" which means you can work for anyone who will have you. Once you start looking at these different policies around the world, that H1-B starts to look like a really lousy deal in comparison.
Wadhwa documents all of this quite well and gives a very cogent argument for why all of the above is very bad for the U.S. For some hard information read his chapter, "Why the Future of America Depends on Skilled Immigrants". Immigrants are one of the motors of the U.S. economy - they are responsible for an astonishing number of start-ups and not just in the high-tech industry but also in the small business sector. These folks are not taking jobs away from anyone - they are creating them. And if they can't create them in the U.S. they will take their talents somewhere else. The stakes are clear - the U.S. economy depends on attracting migrants.
Right up to this point I was in total agreement with Wadhwa. So where did he lose me? Here's my perspective on a few things:
Is it really all about immigration policy? All of Wadhwa's solution have to do with with reforming immigration law and policy and all of them would certainly help matters. However, the choice of one country over another is not entirely driven by access to legal residency. It is just one factor among many and today the U.S. is becoming less attractive to migrants for reasons that have nothing to do with immigration policy. I once sat next to a charming gentleman from India on a flight to Canada and he had a whole list of reasons why he went to school in the U.S. but choose to live and work in Canada instead. Almost all of them had to do with government services and infrastructure: lack of a national healthcare program and decent unemployment benefits, poor roads to drive on, decaying bridges, and K-12 public schools that he felt were not very good compared to other countries. That was a couple of years ago. These days I'm hearing things like high unemployment rate, a huge national debt, a very confusing and sometimes frightening political arena, uncertainty about the American economy, and anti-immigrant rhetoric. People in the United States might argue that all of this doesn't really represent the reality but since many of them think the country is not moving in a good direction, it should not surprise them that people outside the U.S. have similar concerns.
What about other policies that effect immigration? I don't mean to beat a dead horse here but it should be mentioned that there are other policies that indirectly impact immigration and one of those is citizenship-based taxation. As a result of the IRS crackdown and the arrival of FATCA, more and more potential migrants are becoming aware of the tax implications of moving to the U.S. Articles are starting to appear in the North American (Canada) and Asian media (India and Japan) warning people about this. Explain to some bright technology worker that spending too many years in the U.S. or becoming a U.S. citizen means that he will be subject to taxation on his worldwide income and/or an exit tax and then kick back and watch him think very carefully about the implications of that. I've had the occasion to talk to a number of potential migrants about this and not one would take that deal. Oh some would still go the U.S. but only to attend school or work for a time before moving on. This is likely to get worse since all the media attention around FATCA is making more and more people outside the U.S. aware of what it means to be a U.S. Person and all the reasons that this might not be in one's best interests. Wadhwa doesn't talk about this at all and I think he should. The very people he thinks America should attract are also the ones most likely to be negatively impacted by the U.S. worldwide reporting and taxation regime.
So what? It occurred to me as I was reading his words that, on some level, I just couldn't get too worked up about it. So fewer highly-qualified migrants move to the U.S. and start businesses? The world will continue to turn. It might even be a better world as a result. Why does the U.S. have to be THE place for innovation? Wouldn't we all be better off if there were many such places all around the world? Are there ways, in fact, that innovation is stifled when it's only nurtured in a few places? I remember reading an article about innovation in India and some of the very creative ideas that people had based on local conditions and needs and I recall thinking that no North American or European would have ever come up with some of these things. If highly-qualified migrants started scattering themselves a bit more evenly around the globe would innovation cease or slow down? Wadha implies that this is what would happen and says this would have a terrible impact on the rest of the world.
Yes, he says, other countries are rising to challenge the U.S., "But none of these countries have come close to replicating the idea factory and entrepreneurial power of the United States." I'd like to see some hard evidence for that statement and even if it's true now there is no reason it has to be true in the future. And I really really doubt that this will cause some sort of worldwide innovation implosion. On the contrary I am positively jazzed at the idea of having many poles of innovation and brains circulating from one country to another. I agree with him 100% that the way things are going is very bad for the U.S. but I don't agree that this is bad for the rest of the world. In fact it might just be the very best thing for everyone.
So I'm not going to get too bent out of shape about this though I will admit that while we are both immigrants my perspective is not his. You see, Mr. Wadhwa, I don't live in the U.S. and my money is on the rest of the world. If I didn't believe that, I would never have left Seattle.
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