Huddled Masses

Yesterday we talked about the immigration issue from a rule of law point of view, today I would like to describe the economic functioning of the ideal scenario.  Before the American people can accept the idea of open borders and free immigration a couple of changes need to be manifested in the government.

First, the government needs to cease competition against private firms.  The government has absolutely no Constitutional authority to compete in such markets as housing, education and healthcare.  The presence of government regulations and entities within these markets has caused distortions which artificially reduce prices by way of taxpayer subsidy.  Free housing, free education and free healthcare attracts those with little available unallocated money.  For many people, with good reason, the idea of subsidizing the housing, education and healthcare of immigrants who enter the country illegally is distasteful.  With these programs eliminated, all immigrants – regardless of legality – would be responsible for their own welfare.

Second, private contract needs to be recognized as supreme to social contract.  Specifically, minimum wage laws, affirmative action and similar regulations need to be repealed.  An in-depth exploration of these harmful regulations could take up entire books so we will leave them as a given for the moment.  Suffice it to say, true liberty requires a person the ability to enter into any contracts he deems beneficial to himself regardless of what society may seem to think.  The fact that a three dollars and hour wage may be too small for one person does not confer the right to prohibit others from agreeing to these wages.  I have just pissed off the entire union labor crowd.  They will doubtlessly be howling about how these unskilled workers would be able to come into our country and underbid jobs from the good American working class and put them out of work.  This theory will be dealt with shortly but in sum it is a fallacy.

Third, the Federal Reserve needs to be eliminated.  It’s only function is to meddle with the economy and eliminate the wealth of American citizens.  For a deeper explanation see my previous discussion on this topic.

The final change needed before nullifying any effects of illegal immigration regards barriers to entry.  At times the government seems preoccupied with a perceived responsibility to prevent the formation of monopolies.  Truth be told, monopolies would not exist for any significant span of time were it not for the actions of government in the first place.  Through the use of barriers to entry (licensing, regulations, fees, patents, etc.) the government itself gives large companies the ability to create monopolies or oligopolies.  If the government ceases to meddle in the affairs of the economy and allow businesses to merge, grow, or fold as the tides of consumer demand requires, true competition will virtually eliminate the possibility of oligopolies let alone monopolies in the market.

Should these four changes be effected in our government, the borders could be opened wide and allow the tide of immigrants to equalize naturally.  Would we see rampant lawlessness and chaos?  Would American citizens suddenly be displaced and experience mass unemployment?  The following is my suggestion of how this scenario would pan out.

America, the suddenly authentic “Land of the Free,” would most likely experience a sharp increase in immigration.  A mass influx of poor immigrants would require a sufficient amount of low-income housing.  Since the government would no longer be competing with Americans in this field, the housing market would see a boom driven by demand rather than the artificial government boom which popped recently.  Needing a source of income, these immigrants would generally begin finding jobs in low-skilled manual labor jobs such as agriculture.  Since the supply would generally outpace demand, wage rates would be correspondingly low.  The lower wage rates paid by employers would gradually work their way into reduced product and service prices.  An entire community of low-income workers would likely crop up in various places around America.  These locales would need low cost products and services.  In turn, these businesses would require low wage employees in order to meet the demand for low cost products and services, thus giving more employment opportunities to the immigrants.

“But what about the displaced American jobs?” you are probably screaming.  A rather accurate measure of the modernization and advancement of an economy can be made by referencing the percentage of manufacturing jobs.  A big complaint of many unions and protectionists is the departure of manufacturing jobs from the American economy.  However, it can be shown that manufacturing jobs tend to migrate to the lower paying, lower skilled areas common in second- and third-world countries.  When the standard-of-living increases and disposable income becomes a larger percentage of a person’s wealth there is an increase in the service sector of the economy and a corresponding decrease in manufacturing.  Unions just have a hard time letting go of these jobs because then they will cease to have a function.  With an influx of low-skilled immigrants there would come a reemergence of manufacturing jobs in America.  These new manufacturing companies would need supervisory and managerial positions which would be easily filled by former manufacturing union members.

As more of the labor intensive jobs began to be filled by lower paid immigrants, the price of goods and services would begin to decline.  This is the dreaded deflation which the Federal Reserve claims is so terribly scary.  However, a different way of looking at this would be an increase in the purchasing power of the dollar (which is good).  As all price levels slowly decreased to the new market equilibrium, wages would adjust accordingly and most people would be just as well off as they were prior to the mass entry of immigrants.

Fast forward a few generations down the line and you will find that the previous American citizens have been going about their lives in an attempt to leave the world a better place for their children.  True to the founding of America, it would also be the home of countless new Americans who had immigrated in order to provide a better life for their own children.  With open borders Libertas, Roman goddess of liberty (and coincidentally the Statue of Liberty), would not be lying when she says, “Give me your tired, your poor, your huddled masses yearning to breathe free.”

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