Fantastically entertaining and well-written…[I] couldn't put it down.
Borderless Economics: Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalismby Robert Guest
A century ago, migrants often crossed an ocean and never saw their homelands again. Today, they call—or Skype—home the moment their flight has landed, and that’s just the beginning. Thanks to cheap travel and easy communication, immigrants everywhere stay in intimate contact with their native countries, creating powerful cross-border networks
A century ago, migrants often crossed an ocean and never saw their homelands again. Today, they call—or Skype—home the moment their flight has landed, and that’s just the beginning. Thanks to cheap travel and easy communication, immigrants everywhere stay in intimate contact with their native countries, creating powerful cross-border networks. In Borderless Economics, Robert Guest, The Economist’s global business editor, travels through dozens of countries and 44 American states, observing how these networks create wealth, spread ideas, and foster innovation. Covering phenomena such as how young Chinese studying in the West are infecting China with democratic ideals, to why the so-called “brain drain”—the flow of educated migrants from poor countries to rich ones—actually reduces global poverty, this is a fascinating look at how migration makes the world wealthier and happier.
Fantastically entertaining and well-written…[I] couldn't put it down.
A wonderful antidote to the tired and vague clichés about ‘globalization'. Drawing on a breadth of research and decades of reporting from 70 countries, Robert Guest makes the case for why global migration is (mostly) an extraordinary force for good.
“An informative, engaging survey of the beneficial consequences of globalization.” Kirkus Reviews
“Robert Guest has discovered the quantum mechanics of economic growth and political liberty. It turns out the wave-particle duality of economic matter and political energy is us. We the people of the world-- moving where we want and doing what we will -- create the universe of progress. Governments of Earth, say goodbye to the Newtonian concepts of nation and state. The apple of Borderless Economics has hit you on the head and knocked you out.” P. J. O'Rourke
“For most, globalization has been about the movement of goods, services, technology and capital. As Robert Guest succinctly explains in this eminently readable book, globalization is actually about people - their migration, the networks they form and the ideas that they transmit through their mobility. In a world grappling with rising protectionist fever, this book is a warning that those nations who want to batten down the hatches and shut the free flow of people and ideas do so at their own risk.” Nandan Nilekani, Chairman, Unique Identification Authority of India
“Too much of economic and political analysis is about countries. Robert Guest shows us the myriad ways in which countries are connected by people who move around to learn, to work and to live. These networks are increasingly central both to the nature of opportunity and to public policy issues in the United States. The book is persuasive: America will stay prosperous and strong only so long as we remain the Hub of the World.” Simon Johnson, co-author, 13 Bankers, and professor at MIT Sloan
“Guest has produced a book that is witty, rigorous, humane, provocative and dazzlingly well-reported. Everyone should read it. Bravo!” Tim Harford, author of Adapt and The Undercover Economist
“Fantastically entertaining and well-written…[I] couldn't put it down.” Chris Anderson, Editor-in-Chief of Wired and author of The Long Tail and Free.
“This is a thoughtful, entertaining and above all inspiring hymn of praise to the cultural, social and economic benefits of freer migration. Its conclusion should be noted by every politician running for office: immigration is an opportunity, not a threat.” Bill Emmott, author of 20:21 Vision and Rivals
“A wonderful antidote to the tired and vague clichés about ‘globalization'. Drawing on a breadth of research and decades of reporting from 70 countries, Robert Guest makes the case for why global migration is (mostly) an extraordinary force for good.” Charles Wheelan, author of Naked Economics: Undressing the Dismal Science
“Amusing, intelligent, and full of statistics, Borderless Economics is the perfect starting point for exploring new diasporas and international networks.” Economics and the Financial Crisis, Global Politics
A wide-ranging survey of the global impact of the 215 million people who live outside their countries of origin.
Economist global business editor Guest (The Shackled Continent: Power, Corruption, and African Lives,2004) contends that the three percent (and growing) part of the world's population that is migrating is disproportionately contributing to the creation of international wealth, both in the sense of financial assets and the development of new technological and economic capabilities. Of the total number, China contributes about 60 million and India 25 million. In the United States, immigrants make up about eight percent of the total population but formed 25 percent of the engineering and technological startups launched between 1995 and 2005. Guest shows how technological pioneers like Jack Ma, the founder of China's Internet search company Alibaba, and Pramod Bhasin of the Indian health-service provider Genpact, are not only making a lot of money for themselves but transforming their countries and the global economy. The author also highlights the work of Nandan Nilekani, a billionaire software engineer who created a universal ID system for India using biometric identifiers to help organize the government's health and labor programs. Guest is a firm believer in the transformative power of digital technology. Beyond the work of individuals, he also shows that the total volume of remittances sent home by overseas workers grew tenfold between 1990 and 2009; at $316 billion, it now makes up one of the largest sources of global liquidity. Guest locates the U.S. as the center of the activity he profiles, and he emphasizes the mutually beneficial natures of the inflow of immigrants and their interaction with the U.S. economy and culture. The author hopes that the U.S. government will reform its immigration system to maintain the inflow, and he cites one claim that worldwide freedom of movement would produce a $40 trillion gain.
An informative, engaging survey of the beneficial consequences of globalization.
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Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalism
By Robert Guest
Palgrave MacmillanCopyright © 2011 Robert Guest
All rights reserved.
HOW MOVING MAKES US RICHER
When Cheung Yan moved to America from China in 1990, she noticed two things. First, that Americans threw away mountains of waste paper: heaps of junk mail, stacks of unread instruction manuals for barbecue sets and mountains of the Sunday edition of the New York Times.
Second, she noticed that fleets of container ships sail from China to America stuffed to the brim but go back half empty. The things China makes take up space: toys, televisions, steel girders and so forth. The things America exports to China, however, are often weightless: movies, patents, IOU s from the government.
Cheung Yan turned these two observations into a multibillion-dollar business. With her husband and brother, she set up a firm in Los Angeles to gather up American waste paper and ship it to China for recycling, where it could be done more cheaply than in America. Later, she set up her own factories in China to do the recycling.
She now turns American newspapers into cardboard boxes. These are then packed with Chinese electronic goods and shipped to America. When her firm, Nine Dragons Paper, went public in Hong Kong in 2006, she became rich. In 2011 her net worth was estimated at $1.6 billion, making her one of the wealthiest self-made women in the world. Her business is part American, part Chinese: in other words, part of what financial historian Niall Ferguson calls "Chimerica." She came to the United States with an outsider's eye, and both countries benefited from what she saw.
The American dream has changed. The traditional immigrant success story went something like this. A plucky citizen of some foreign hellhole—Cuba, say, or Britain—decided to head for America. He braved stormy waters in a leaky boat to get there. He studied hard, worked hard, saved hard and ended up rich. His children went to Stanford or Cornell. By the third generation, his family was so thoroughly assimilated that his grandchildren had only the vaguest notion of what life was like back in the old country.
For most of American history, this stereotype was not far from the truth. Today it is in desperate need of an update. Immigrants still flee foreign hellholes, and they still flock to rich countries. They typically still find a good life once they arrive, and their children still thrive: think of Sergey Brin, the son of a Russian immigrant, who cofounded Google and is now worth $20 billion. Or of Barack Obama, the son of a Kenyan goatherd, who has also done quite well in his chosen profession.
But for many migrants, moving from one country to another is no longer a simple, one-off event. Millions of people like Cheung Yan keep a foot in more than one place. Thanks to the Internet and cheap phone calls, it is much easier for a migrant to stay in touch with friends and relatives back home than it was a generation ago. Thanks to lower airfares, it is much easier to visit them.
It is also much easier to communicate with business partners back in the old country, which means it is easier to set up ocean-straddling businesses. The days when you had to be big to run a multinational enterprise are gone. These days, a "micro-multinational" might consist of one man in Virginia, his cousin in Hong Kong and a sheaf of contracts to supply American shops with fireworks made in mainland China.
Two big changes have made migration less likely to be one-off and one-way. One is the drastic drop in the cost of staying in touch. When AT&&&;T's first transatlantic phone service opened in 1927, only one person could use it at a time, and it cost $75 for a three-minute call. That was about a month's wages for a typical worker at the time. Today, anyone can call anywhere via the Internet-based chat service Skype for free. If the connection is good enough, you can even see your loved ones on the screen as you talk to them. The cost of air travel has not fallen quite as dramatically, but it has fallen. In the 1950s flying was a luxury reserved for the superrich. In 2009 scheduled airlines sold 1.6 billion tickets.
The other big change is the spectacular rise of emerging economies such as India, China and Brazil. Some of the poverty-stricken hellholes whose brightest citizens used to flee in large numbers are no longer hellholes. They still have lots of poor people, but they are getting richer at an astounding pace. And that creates opportunities for their citizens, especially the brainy ones, which did not exist a generation ago.
China's economy has been growing at or near double digits for three decades. India's growth rate is only slightly slower. When an economy grows at 10 percent a year, it doubles in size roughly every seven years. Many of its businesses grow even faster—a well-run firm in China or India can easily grow by 20 to 30 percent a year. Such growth rates are incredibly hard to sustain in a mature economy. Small wonder so many smart young Chinese figure they can get rich quicker at home than in America.
Consider the story of Robin Li. Born in 1968 in Shanxi, China, the son of two factory workers, he spent the first 31 years of his life following the traditional path of an upwardly mobile migrant. He did splendidly at school and won a place at the State University of New York at Buffalo to study computer science.
After completing his master of science degree, he started work as a software engineer. He was good at it. By the late 1990s, he was a staff engineer at Infoseek, an American search-engine firm that was hot at the time. He was not rich, but he was well paid. By any reasonable standard, he had achieved the American dream.
But he was not satisfied with being what journalists Brad Stone and Bruce Einhorn call "a Silicon Valley cubicle jockey." He met another ambitious young Chinese man, Eric Xu, a sales rep for a biotech firm. Mr. Xu decided to make a documentary about American innovation, and invited Mr. Li along to one of the interviews. The subject was Jerry Yang, the Taiwanese cofounder of Yahoo. Both men were impressed. "I got inspired," Mr. Xu later told Bloomberg BusinessWeek. "I'm sure Robin got inspired, too, seeing an ethnic Chinese who created such a powerful company."
Li and Xu went back to China. In January 2000, with backing from American venture capitalists, they founded Baidu, a firm that aimed to do for China what Google had done for the rest of the world. They succeeded. A decade later, Baidu was China's most popular search engine and Mr. Li was the richest man on the mainland, with a net worth estimated at $9.4 billion. Not bad for a former cubicle jockey.
Thanks to his years living and working in America, Mr. Li is effortlessly cosmopolitan. His English is flawless, he shuttles to Internet conferences around the world, his American investors love him and he is on first-name terms with Mark Zuckerberg, the founder of Facebook.
Yet Mr. Li has accommodated himself wholly to the Chinese way of doing things. This is not just a matter of switching back to his old name, Li Yanhong. He takes the ruthlessly pragmatic view that the Communist Party calls the shots in China and that his firm must cooperate with its edicts, no matter how odious. If China's rulers want a search term blocked, Baidu blocks it. People in China who use Baidu to search for forbidden terms such as "democracy" or "free Tibet" find an error message on their screen. Mr. Li justifies such collaboration with censors by protesting that if Baidu did not obey Chinese law, it would be shut down. Unfortunately, he is right.
Cheung Yan and Robin Li are prominent examples of an increasingly common phenomenon. Many migrants commute, literally or virtually, between two or more countries, taking advantage of what each has to offer. All this to-ing, fro-ing and circulating helps them create networks of contacts. And these networks are the central nervous system of the global economy.
Communication within diaspora networks is not new. Mayer Rothschild, the eighteenth-century founder of the Rothschild banking dynasty, sent each of his five sons to a different European financial center: Frankfurt, Vienna, London, Naples and Paris. This spread the family's risks—useful in an age of anti-Jewish pogroms—and gave it eyes and ears across the continent. The Rothschilds built a network of agents and couriers to keep themselves ahead of the news. When the Duke of Wellington defeated Napoleon at the Battle of Waterloo in 1815, the head of the London arm of the Rothschild family heard of the British victory a whole day before the British government did, and made a fortune buying up British government bonds.
Information remains as valuable today as it was 200 years ago. What has changed is that you no longer need an army of private couriers to deliver it. Today, a Pakistani immigrant in London can chat with his brother in Lahore every day, if he has time. He can stay in touch with the culture he left behind, by watching Urdu soaps on his laptop or reading blogs from Islamabad. He can sign an online petition complaining about the Pakistani government, or about some purely local issue, such as the noise pollution outside his mother's house. He can wire money to a business partner in Karachi or to his favorite mosque. He can fly home in a few hours, perhaps to meet a wife his family has chosen for him.
Via Facebook and other social-networking websites, he can keep up with old friends and new friends alike. Many people assume that the borderless Internet breaks down barriers of race and ethnicity. Sometimes it does, but mostly it serves to strengthen traditional bonds. A study by Ethan Zuckerman, a blogger and activist, of the top 50 online news sites in 30 countries found that most people get 95 percent or more of their news from domestic sources. On Twitter, the ten most popular groups are joined almost exclusively by whites or exclusively by blacks, according to a study by Martin Wattenberg and Fernanda Viegas. On Facebook, according to Mr. Zuckerman, only 1 percent of Israeli friendships are with Palestinians; for Greeks and Turks the figure is less than one-tenth of a percent.
John Kelly, who makes a living analyzing electronic social networks for Morningside Analytics, told The Economist that even when the Internet links people who live in different countries, the links are usually between people who share ancient cultural ties—that is, ethnic Greeks in Greece use it to communicate with ethnic Greeks in other countries.
Techno-utopians will find this disappointing. Surely modern mankind has moved beyond primitive tribal loyalties? Dream on. Tribes still matter immensely. It is natural for people to feel more comfortable with others who share the same culture. It is easier for people to forge friendships with those whose values are similar and who speak the same language. That is why tribal networks remain so important— they are the principal framework within which people communicate and work together. What's new is that, thanks to mass migration, most tribal networks are now global.
THE MIRACLE OF MIGRATION
People are more mobile than ever before. There are some 215 million first-generation migrants, an increase of about 50 percent since 1990.13 If first-generation migrants were a nation, they would be the world's fifth largest. Add in the descendants of recent migrants, and the number is even bigger. Yet even this figure would understate the importance of migration.
It takes energy and courage to leave the place where you grew up, where everything is familiar and grandma is always there to hold the baby when you are sick. So migrants tend to be strivers, doers and risk-takers. Everywhere they go, they are disproportionately likely to start businesses or make new discoveries.
For the migrants themselves, the benefits of migration are obvious. The gap between wages in rich and poor countries is much wider now than it was during earlier eras of mass migration. During the 1870s, when crossing the Atlantic was a ten-day ordeal, a mere twofold disparity in wages between Ireland and the United States was enough to propel a wave of Irish emigration. Today, wages in America are often ten times higher than those in the countries that send migrants to its shores. "While an American construction laborer works less than four minutes to earn enough to buy a kilogram of flour, it takes a Mexican worker more than one hour and an Indian construction worker just under two hours," observes Lant Pritchett, a Harvard economist.
Which is why, according to a 2009 Gallup poll, 700 million people—16 percent of the world's adult population—would move permanently to a different country if they could. Global inequality creates colossal pressure for people to move. And when they do move, global inequality falls (although the arrival of poor immigrants in a rich country will cause inequality to rise, at least temporarily, within that country).
When workers cross borders, their prospects are transformed. In the popular imagination, migrants from poor countries are horribly exploited when they arrive in rich countries. In reality, this is seldom the case. According to Mr. Pritchett, their wages become "almost identical to those of workers in the country they move to and almost nothing like those in the country they move from." For example, a Salvadoran man with a high-school education would make on average $2,700 a year back home in El Salvador. If he moves to the United States, he would make more than eight times that: $22,611, according to the US Census Bureau. That is indistinguishable from the average earnings for an American man with the same level of education—$22,087.17
When rich countries open their borders even a little, they do far more good for the world's poor than they ever do by giving aid. A 2005 World Bank study estimated that if rich countries allowed just a 3 percent rise in their labor forces through easier immigration, it would deliver $300 billion in benefits to the world's have-nots. The cost to the host-country taxpayers would be zero—migrants who work pay more in taxes than they receive in government benefits. They also perform useful tasks. The same study found that the current residents of rich countries would benefit, to the tune of $51 billion a year, from an influx of newcomers willing to mow lawns cheaply or cap teeth skillfully.
Contrast this with the cost-effectiveness of foreign aid. Some economists argue that foreign aid is mostly wasted or even harmful, since so much of it is stolen or used to prop up odious despots. I wouldn't go that far. Nor would Mr. Pritchett. But even if you assume that $70 billion of aid delivers $70 billion of benefits to the poor—an optimistic assumption—opening the borders a bit is still infinitely more cost-effective.
Not everyone agrees that immigrants benefit the people who live in the countries where they make their new homes. Some natives find newcomers culturally threatening. Others believe that an influx of foreigners from poor countries depresses wages for the native born. Economists are divided as to whether this is really true. There are surely some people whose wages fall because of competition for jobs from migrants, but most studies have found this effect to be small or nonexistent. This is a subject we'll revisit at greater length in Chapter 7.
Against the possible losses for a relatively small number of citizens of rich countries, we must weigh the overall gains to rich countries and the staggering benefits to the migrants themselves. If people could move completely freely around the world (which is unlikely anytime soon), the total gains, by one estimate, would be around $40 trillion—40 times the potential gain from removing all remaining barriers to the global trade in goods. As a tool for spreading the wealth, open borders make foreign aid look like a child's lemonade stand.
This chapter is about how migration makes the world a better place. But my aim is not merely to list the material benefits and costs. I also want to look at the way migration changes people; how it affects the way they think. Migrants usually have no choice but to become familiar with at least two cultures. So they see opportunities that are invisible to their monocultural neighbors, as Cheung Yan did, and they generate new ideas.
Excerpted from Borderless Economics by Robert Guest. Copyright © 2011 Robert Guest. Excerpted by permission of Palgrave Macmillan.
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Meet the Author
Robert Guest is currently the Business Editor at The Economist. Before joining The Economist, he was the Tokyo correspondent for The Daily Telegraph. The winner of numerous awards, Guest is a regular on both the BBC and CNN. He is the author of The Shackled Continent.
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