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Explaining Why Borders Matter,
This review is from: From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph over Scarcity (Hardcover)
In an era that pays homage to globalization and the supposedly "flat" world, it's an astonishing thing: Crossing the border from Latin America into the United States "appears to make the productivity of a low-skilled worker ten to twenty times higher, based on the wage differential."
So say Arnold King and Nick Schulz in their new book, which may make a lot of readers think differently about the importance of national borders.
The authors quote the director emeritus of the McKinsey Global Institute, William Lewis: "We compared the construction industry in the U.S. with construction in Brazil and found that in Houston, the U.S. industry was using Mexican agricultural workers who were illiterate and didn't speak English. They were not any different than the agricultural workers who were building similar high rises in Sao Paolo, say. And yet they were working at four times the productivity."
More differences as a result of borders: The book reproduces a chart of per capita GDP in 1997 that places North Korea at $700, South Korea at $13,590. Communist China's GDP was $3,130 per capita, while Taiwan's was $14,170.
What accounts for the differences between countries with similar populations or geographies? The authors chalk it up to a kind of "software" that encourages entrepreneurship and growth: property rights, the rule of law, a government that isn't too intrusive. A strength of this book, though, is that rather than offering exclusively their own ideas, the authors get out and do some reporting, interviewing professors who have thought about these issues, including four Nobel laureate economists: Robert Fogel, Robert Solow, Douglass North, and Edmund Phelps.
Sometimes the people the authors interview say interesting things. A fellow at Stanford University, Paul Romer points out that technological advances needn't be all advanced electronics, but can be as simple as "somebody figuring out how to design the coffee cup so that different-size coffee cups could all use the same size lid."
Other times, the people the authors interview say things that aren't particularly convincing, and that one wishes the interviewers would challenge a bit more.
Tribalism is described by the authors as a "bug" in the same category as "corruption" and "insecure property rights," overlooking the way that tribes can actually contribute to growth. In the same section on the evils of tribalism, the authors warn that "when an ethnic minority achieves economic success, the majority may choose discrimination, or even genocide, to redress the imbalance." This veers uncomfortably close to blaming the victim; even members of majority groups who are economically successful can be resented, after all.
In other areas, the authors bring a welcome appreciation of the dynamism and power of capitalism and of the threat that big government can pose. It's hard to argue with the example the authors give to support their assertion about government not fixing its problems: the mohair subsidy, established in 1955 to assure wool for uniforms, lives on, restored after being eliminated: "The mohair subsidy's beneficiaries are in a position to lobby effectively, while the taxpayers who would benefit from ending the subsidy are diffuse and unorganized." If more taxpayers read this book they'd be better prepared to vote for policies that keep America a place where workers become more, not less, productive, when they arrive here from their countries of origin.