Foreigners from poorer countries working in unglamorous low-skilled industries in Malaysia have it tough. Stereotyped, some Malaysians associate them with the worst.
They are blamed for various problems — from the high crime rate to stagnating wages — while their contributions to the local economy are ignored. Seeing low-skilled foreigners as a source of trouble, there are Malaysians who want to limit the number of these foreigners in the country.
In times when economic growth is an obsession, that protectionist sentiment needs to be kept in check. It needs to be kept in check because immigration can be a key to economic growth.
More generally, population growth can lead to economic growth. High population growth rate enlarges the size of an economy in absolute terms. In this respect, immigration is the easiest route to take.
That is not the main reason why immigration is a powerful tool for long-term economic growth, however. Instead, it is the potential of their children along with ours.
The larger a particular society is, the likelier it would organically host inherently exceptionally talented individuals. Creation of talents does depend on multiple factors such as quality education quality but it is impossible to deny that some people are exceptionally brilliant compared to others. In a perfectly level-playing field stripped of other effects, these individuals would distinguish themselves from the masses, regardless of environmental factors.
Economist Robert Lucas once explained this to demonstrate the link between population growth, technical progress and economic growth. He wrote: ”If I could re-do the history of the world, halving population size each year from the beginning of time on some random basis, I would not do it for fear of losing Mozart in the process.”
These highly talented individuals would contribute to society and make it richer. By richer, it is not only in terms of material wealth but also other aspects that make life worth living.
If Malaysia is to enjoy the benefits of a larger population in the long run, it has to adopt a relatively open immigration policy. This can easily be done by granting productive foreigners who have spent considerable time in the country a pathway to citizenship, or at least a shot at permanent residency.
Some may consider this as an overly liberal policy. It is not and in fact, it is a realistic policy. Consider for a moment that there are more or less two million foreigners in Malaysia. That figure is before accounting for illegal aliens. One surely cannot believe that the government can reduce the number by a significant margin, much less boot of all of them out without hurting the economy.
Many of them have lived in Malaysia for some time. Many do speak Malay. They are acclimatized to Malaysian culture. In other words, the cost of accommodation and integration for them and for Malaysian society would not be too great.
At the same time, Malaysia does not have a comprehensive welfare system, which is a typical barrier to open immigration policy. As new citizens, they will have to work their way through. They have the necessary motivation to work and to contribute to society. This reduces the short-term cost of such liberal policy.
Implementation of the liberal policy may even give a short run boost to the local economy. Foreign workers face radical changes in their future given that they have to return to their home country once their stay permit expires.
It is reasonable to speculate that that places a limit on their spending within the local economy. If one has no future in the country, one has little reason to spend too much in that country — little incentive for them to undertake large, long-term purchases or investments at individual levels.
If they are given the chance to pursue Malaysian citizenship or permanent residency status, and if such speculation is a fact, then that limit could be removed. This could boost private demand in Malaysia.
In fact, some of these foreigners have proven to be entrepreneurial sorts. Citizenship will grant them security. That encourages them to establish private enterprises, which can only enhance the vigor of the free market and reduces the need for government involvement in business, if there is ever a need for such statist involvement in the first place.
This cannot be bad for the local economy in both the short and long run.
First published in The Malaysian Insider on October 1 2010.
21 replies on “[2259] Of more open immigration as a source of growth”
Hafiz I’m not sure if you followed any of my arguments (no offense).
The point about Bangladesh is – here is a country with 162 million people. And then you have a small country, like say Sweden, who is much much more successful, yet has a population of a bit over 9 million. Do we want to emulate Bangladesh, or do we want to emulate Sweden?
If you look at the list of the most populous countries, you will notice a very negative correlation with number of creative people and population size. So this leads us to suspect very strongly that the relationship between population and progress is not linear as you put it. If you increase population 10-fold, maybe McDonalds will sell 10x as many burgers which will lead to growth, but this is not progress. Progress and growth are 2 different things. Perhaps that’s the source of our confusion.
On US immigration – I think immigrants such as Einstein and von Neumann (among many others) are much ‘better’ (in a sense) than your average immigrant. If these kinds of people want to immigrate to Australia, I doubt anyone would object. In general if people with 1st-world education come, not many will complain. These people bring with them more than just skills, but culture as well (as you explained).
PS. Did you just seriously compare Howard Shore and John Williams with Mozart and Wagner?
Howard Shore. John Williams. The point is, there are people. Then again, it depends on taste. Members of the Beatles produced some of the most successful work in history. Just because these composers are not in the same genre doesn’t mean they are less great. And I think this discussion on music composers is really missing the point. When Lucas mentioned Mozart, he meant talent in any field, be it music, physics, math, etc. Mozart is just an example of how population growth might affect the possibilities of having a Mozart.
Again, regarding population, I’m not saying it’s the only factor, but it is one of the factor. Consider a Bangladesh of 1,000 people vs. 1 billion people. The latter Bangladesh will be more successful. You have to control of effect. If you don’t, you’ll mistake the causal relationship. A Greece of 1 million would be more successful than a Greece of 1,000.
On US immigration, not really. There were many more ‘unskilled’ migrants went into the US than talented individuals. A majority of them are just normal people. Yet, their offspring contributed to human civilization. Sons of farmers, mechanics, labor became professors, inventors, discovers. Stories like these are aplenty in the US.
And immigration in Australia is much more controlled that what happened in the US in the past. Australia had skilled migration program and one of the tightest in the world. US immigration then was much looser. It’s different, yes but note that Australian program is more about importing skills rather than just people.
On solar cell, the point is that there is still improvement needs to be made.
So name me a modern composer, Hafiz, that can compare to Mozart, Bach, Wagner etc. Our population now is 100 times what it was in the 17th century, and yet where are all the great composers? Britney Spears?
I agree 100 people can do more great things than 10.. but it seems clear this relationship is not linear. Once you get to a population of around 1-million, further increasing it does little good. Consider for eg. the ancient Greeks, who contributed I think by far more than any other people to modern civilization, and yet their population never exceeded 1-million. Then consider for eg Bangladesh (or any other large population country), who today number over 162-million, but imo don’t really compare to the ancient Greeks in terms of progress.
Somebody gave the example of the influx of immigrants into the US. In fact, a lot of these immigrants were highly educated people from Europe (Jews and others) who brought with them a lot of culture. Especially during WW2 scientists and engineers from all over the world escaped to USA and established it as a world center for science and technology. This kind of immigration is rather different to the one being discussed in Australia..
Also from an engineering point of view, I think your solar cell argument is not great. In 100 years we managed to improve solar cells by 20%? And yet nobody uses them anyway. Way to top inventing human flight he he.
Also this CERN accelerator hasn’t given us anything yet. But OK I concede this point.. Most of these huge projects are requiring collaborative efforts between countries anyway.
He’s referring to endogenous models, not exogenous. In exogenous models, technical progress doesn’t come from population growth.
Exogenous growth model doesn’t seem to contribute the production function solely on the population growth rate variable.
In another words, it has to be equated with capital per capita, depreciation rate, labor force, and saving rate.
Maybe I don’t completely understand this model, but I think the equation will be complete if we add economic freedom as one of its variables (provided that if we can correctly measure economic freedom )
The point that huge populations have little to do with humanity’s progress is also flawed, ignoring the success stories of American immigrants who contributed to the betterment of the world.
Look at the conservative society today like French who view immigrants as the causes of the jobs losings and crimes , they remain stagnated and rotted.
You said almost everyone has it in them to do great things. If so, then certainly 100 people have more great things they can do that 10 people.
Besides, culture won’t change if the population doesn’t change. Population growth is one of few things that change culture.
Population density which is typical with big population tend to gather resources. These resources can be used for research and development. This brings me to the ‘low hanging fruits argument’. If it is harder to discover new things, don’t we need more resources? Population growth that bring about these resources helps in that direction. Small countries for instance wouldn’t be able to fund the large particle accelerator because they won’t have the resources.
On recent discovery, I’m sure there are still a lot advancement going on. Solar cell efficiency have gone up tremendously. In early 2000, it was about 25%. If I’m not mistaken now, it’s close to 50%. 100 years ago, it was about 1%. Internet speed has been increasing. And both you and I know some really hard math problems were only recently solved after centuries of puzzle. The bottom line is that there have been progress.
In any case, again, I’m not denying culture is not important. Like I said, population growth is not the only factor for growth but it is one.
On Mozart but Bach, Strauss, Vivaldi? Or maybe Einstein? Keynes? Curie? Mozart is not the only one that is valuable. Although Mozart wasn’t exactly replaced, there are others whose contributions are as great or as good as them. Even if the contributions are not as great, they’re contributions nonetheless.
On homogenized culture, Paris, New York, London, all of them have big population that are also cultural centers.
Also by homogenized, I didn’t mean the population itself, but rather the culture. Consider what Ben said about Melbourne night-life vs Sydney; in Sydney the liquor license is $100k or something, meaning only large establishments can afford it, where the target has to be the masses. In Melbourne it’s something like $5k, so you get lots of little intimate places (including some beatnik or god-forbid semi-intellectual places).
I have heard this argument before.. that 100 years ago there were many ‘low-hanging fruits’ and that’s why it was so ‘easy’ to invent things. In fact we are only scratching the surface of knowledge. I believe much of the science community accepts that science is more or less standing still. The only things progressing recently are computers and genetics, and even most of this foundation was laid for us 5 or so decades ago. I guess you have grounds to disagree with this, but the fact is there hasn’t been a lot of novelty. What have the last couple of generations done that can compare at all to inventing flight, splitting the atom, or flying a man to the moon? Facebook? IPods? Come on.
Again about your population argument.. of course a larger population means a greater talent pool. But IMHO almost any person has it in them to do great things.. it is just a matter of the culture surrounding them to bring this out. By increasing population we are focusing on the wrong element in the equation. Population we already have more than enough of, but culture we are severely lacking (and it is quickly disappearing as the old guys die off he he).
On the engineer example.. let’s consider replacing Mozart. Do you really think doubling the population, we will have twice as many Mozarts? Or halving the population we will have half as many? I take the view that Mozart is our gift from above, and he is irreplaceable :D Even a million ‘good’ composers won’t begin to replace him.
I disagree with your comparison of US across time. It’s easier to discover something when you have not discovered anything than to discover something when you have discover a lot of things. We have talked about this, haven’t we?
I also disagree with your concern of homogenized population. Consider the typical normal curve. Larger population means more people who are the same and more people who are different. The absolute number increases while the percentage is likely to change only slightly.
On your enginner example, would it be easier to replace a good engineer if you have more people around? More candidates for replacement. If you have only two persons where one is high quality engineer and the other is low quality, if the high quality dies, who would you replace him/her?
Look at my example of USA. The same USA of the first half of the 20th and even the 19th century was much more successful in terms of scientific and technological progress than the more recent USA, even though its population has grown manifold. In fact the problem as I see it is that the large population ruins the high culture.
With large population everything becomes homogenized and lowered to the common denominator. Look at for eg. art produced for mass audiences, it is almost all trash is it not? Also notice that most highly cultured cities and towns tend to be smaller (metropolises with their slums have lots of people but not much culture).
Finally I’d like to make another point. In engineering, you cannot replace one very good engineer or scientist with many average ones. Especially if you’re trying to do something new. In another article you give the example of a qualified fence painter being replaced by unskilled labor, but with science things are a bit different.
Ilia,
I’m not suggesting that you meant some countries or races are inferior to others.
And I’m not suggesting that population is the only factor in growth. You’re right about culture. But my point remains: population is a contributing factor to growth.
Consider two societies with the same learning/discovery/scientific/etc culture. One society has 1 million population and the other has 100 million. Which one would you think has more potential in discovering something?
The latter society would have more scientists, more engineers, more entrepreneurs more of everything in absolute terms. This would ensure the larger society progress faster.
Hafiz you misunderstood my point. I never meant that some countries or races are inferior to others. In fact, even the arabs of today were once world leaders in many fields, including mathematics and medicine.
However back in that time, they had this very atmosphere of learning and discovery that I am talking about (at least from what I gather from reading arabian nights). My only point is that huge populations have little to do with humanity’s progress. Even if you have a trillion people, if there is no high culture of learning and discovery etc, then all of those people’s talents will go to waste.
On the topic of China, it is probably relevant to note that Mao’s cultural revolution set them back quite a lot. It is pretty clear nowadays where the real innovation is coming from. Take a look at: http://en.wikipedia.org/wiki/List_of_Nobel_laureates_by_country for example.
Replace mount rushmore with founding fathers heh, and all the great polymaths of that time.
Would increasing the population really produce more Mozarts? If this is true, where are the Mozarts and Da Vincis and Isaac Newtons in populous places like China and Bangladesh? In fact, all of these people came from places with tiny populations during the renaissance.
More interestingly, all of the heads on mount rushmore lived in a time when American population was less than 4 million people. Today it is over 300 million, and will be 400 by 2050, and yet I don’t see any Benjamin Franklins around, do you?
You mention education, but I believe to produce such people, and even intellectually productive people that aren’t quite so exceptional, you need a certain social and intellectual climate (which I don’t believe we enjoy nowadays, at least not in Sydney :). Also I am not sure how increasing the population with immigrants from 3rd world countries will serve creating such a climate.
Given that gunpowder, paper and the modern numeral system came from China and India, I’m surprised you asked where are the Mozarts and everything of China and India. Indian and Chinese civilizations were more advanced than Europe for a considerable period.
There are names but these names are not famous as European pioneers. That however is no measurement of their contributions to human progress.
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