Immigrants – The Ultimate Entrepreneurs
2013-08-17 · Guest: Alex Nowrasteh (Immigration policy analyst at Cato Institute) · 82:37
Economic and moral arguments for open borders
Bob Zadek and Alex Nowrasteh discuss the economic and moral arguments for open borders, highlighting immigrants as the ultimate entrepreneurs who drive innovation and economic growth. The conversation debunks common myths regarding job displacement and welfare use while also exploring how regulatory capture and rent-seeking behavior stifle competition in industries like transportation and healthcare.
Topics: Immigration, Open Borders, Entrepreneurship, Welfare, Taxi Cartels, Uber, Occupational Licensing, Regulatory Capture, Rent Seeking
Speakers: Bob Zadek, Alex Nowrasteh, Caller (Ed), Caller (Joel)
The Moral and Intellectual Case for Open Borders [00:00]
Bob Zadek: Hello, everyone. Welcome to The Bob Zadek Show, every Sunday at noon on News Talk 910. I’m your host, Bob Zadek, here at noon as always. Thanks so much for listening. We are the only live libertarian talk radio show on the air all weekend. We appreciate your tuning in to share with us an hour and a half of liberty. We are the show of ideas, not attitude; of stuff, not fluff. 800-345-5639 to join the conversation.
I cover lots of topics on this show—a new topic each week, a new discussion, maybe more than one topic. There are a few topics that I must come back to from time to time because they touch both my mind and my heart, two of my, I dare say, favorite organs. I care about these topics intensely. And at the top of that already short list is the topic of immigration—immigration in America. I don’t know why it is exactly; I just find that in most conversations on public policy and political issues, I can understand and appreciate the other point of view. I often learn from the other point of view, which makes the conversation even more pleasant and beneficial to me.
On the subject of immigration, try as I might, I find it almost impossible—perhaps impossible—to understand the intellectual position of the other side. The other side being those who oppose basically open borders, which is my position. I find that even before I gave so much thought to policy issues, even before I was sharing my thoughts with you on this show, I always believed that there was something so wrong with pulling up the drawbridge, as it were—building a wall, making it difficult for humans who want to share in the benefits of my country and contribute to its success to deny them access to this country. I can’t stand it.
The subject of immigration is now very much in the news. There is a bill, an active bill or bills, in both houses of Congress. The President is trying to deal with immigration. The Tea Party-type Republicans, or some of them, are aggressively seeking to hold legalization of those who are here and opening up the borders a tiny bit—to hold those issues hostage to the area of “border security,” whatever that means. Even Rand Paul talks about the wall, the fence, protecting our borders. I don’t get it.
Perhaps I’ll be able to, and you will be able to, understand the issues of the other side more an hour from now when I happily welcome back to my show Alex Nowrasteh. Alex is an immigration policy analyst at Cato—Cato’s Institute for Global Liberty and Prosperity. He was an immigration policy analyst at the Competitive Enterprise Institute. He’s appeared on mainstream media quite a bit, has written extensively. Nobody knows more about immigration than Alex. Alex has been on my show before. I had the pleasure of spending a weekend with Alex at a Cato benefactor summit earlier this year. Alex, thanks for giving us some time on this Sunday afternoon and welcome back to the show.
Alex Nowrasteh: Well, thank you so much for having me and thank you for your kind words. I really appreciate it.
Debunking Economic Myths of Immigration [05:24]
Bob Zadek: Now, Alex, those who oppose immigration—and I should mention at the outset that the phrase, it is almost a hyphenated phrase, is “illegal immigrants.” Everybody opposes “illegal immigrants,” as if those two words cannot be separated, as if an immigrant is per se illegal. So the concept, the public debate, is always on “illegal immigration.” And I should mention that when I find myself having a conversation on this subject with somebody who opposes “illegal immigrants”—who says “I am against illegal immigration” or “I oppose illegal immigrants”—I have a rhetorical technique that I use. I will ask them, “Okay, you oppose illegal immigrants. Which part of that do you oppose: the ‘illegal’ or the ‘immigrant’?” And they quickly say, “Well, I oppose the ‘illegal’ part.” And then I ask them, “Well, what if a law was passed by Congress which made immigration legal? Everybody is allowed in. So now they are, and amnesty is granted—and we’ll talk about amnesty this afternoon, Alex—and amnesty is granted to those who are here. So now we have just legislated away the ‘illegal.’ So now those words get separated forever. Now the only immigrants are legal immigrants. Now, Mr. Opposer of Illegal Immigration, are you content?” And does the conversation move on? And then, of course, they always say, “Well, no, no, no,” and they go on to explain. And then I end the conversation by saying, “Aha! So it’s the ‘immigrant’ part you oppose, not the ‘illegal’ part.” And then the conversation gets unpleasant and we go our merry ways.
Now, Alex, the arguments against immigration, against open borders, are often founded in some strange economic issues: that “they”—and I hate the phrase “they,” I hate it—“they take away jobs” and “they are a drain on the economy.” Indeed, there was a widely debunked, if I’m not mistaken, Heritage study which you and others at Cato have discussed, dealing with the adverse economic effects on our country which stem from open borders or allowing in too many—which often means one—too many immigrants. Now, tell us about the economics of immigration, and you’re, Alex, one who has studied this perhaps more than anybody else.
Alex Nowrasteh: Well, this is an area where the anti-immigration people literally have no intellectual leg to stand on. There are three broad areas where I think economists broadly agree in the entire economics profession: one is that free trade is good, the other is that price controls are bad, and the third is that immigration is good for the economy. The only disagreement is how good and who benefits the most. So when you hear these people talk about immigrants taking American jobs, lowering wages for Americans, everything like that, the economics profession—economists who have spent decades studying this stuff—have found no evidence of this occurring, except for some very small minor exceptions that affect very few people.
So the notion that immigrants come here and make us poor is just not true. You really have to believe some things that are wrong—things like, for instance, that there’s a fixed number of jobs in the economy, which is absolutely not true. Immigrants come here when Americans want to hire them, and they use their money that they earn here working, making things and services that we want, to buy other goods and services, oftentimes made by Americans. So they increase supply and they increase demand. And we also see that they buy things from Americans, like they rent real estate, they buy houses, they rent houses. And imagine how much worse the housing market would have been after the housing market collapsed if, in addition to the situation caused by interference from the Fed and Fannie Mae and Freddie, you also took tens of millions of consumers of housing and kicked them out of the country at the same time. So there just is no economic evidence that immigrants are bad for the United States or lower wages, and they really just don’t have a leg to stand on when they say otherwise.
Bob Zadek: Now, you are even more charitable than I am, Alex, because you said that immigrants don’t take away American jobs. I would say there is no such thing as an “American job.” There is simply an employer or somebody who wants to buy an hour or a week or a year of labor. And that employer, who probably is going to be somebody listening to this show—whether you hire somebody to do your landscaping or fix your house or whatever—but you are in the market of hiring somebody. And you, being the employer, are entitled to look for the most competent person who will do the job for the lowest price. What’s wrong with that? That’s the free market.
Alex Nowrasteh: That’s the essence of capitalism right there. I mean, for people who say that they are pro-free market but oppose immigration, that’s like saying that you oppose capitalism in what is the biggest market in the United States, which is the market for labor. It’s the market that everybody is involved in at one time or another, and it’s gargantuan. And to say that you oppose capitalism there is really to sort of wave the white flag and surrender all of your free market credentials and arguments. Because if you don’t think that free markets work for labor, then how can you make an argument that free markets work for everything else? I don’t think you can.
Tribalism and the History of Anti-Immigrant Sentiment [12:13]
Bob Zadek: Precisely. Either you’re a free marketeer or you are not. But those who say “allowing them into the country will take away my job”—how would you, the speaker of those words, would you support legislation that says nobody can take away your job, American or a newcomer to this country? Do you want to just protect your job from all competition? And how would your employer feel about that? You’ve just become a…
Alex Nowrasteh: And I just want to add, I think that gets to how non-intellectual the opposition to immigration really is. It’s all founded on trying to appeal to the primitive and tribal elements of our psyches, of our minds. It’s not an intellectual argument. It’s fear of the outsider, it’s fear of the person from the other tribe coming in and doing unspeakably bad things to us. If we were talking about immigration 10,000 years ago while you and I were hunter-gatherers in Africa, it wouldn’t be about taking our jobs, quote-unquote; it would be them killing the mastodon before we could get a chance to slaughter it. It’s just that they’ve updated the rhetoric, but it still appeals to that primitive part of our brains that no longer deals with—that is sadly divorced from the economic reality of the modern world. I mean, having more people is good for the economy, and I’ve never seen an economic model, I’ve never heard a theory that makes sense, that says otherwise. Ever.
Bob Zadek: This is Bob Zadek. I’m talking to Alex Nowrasteh. Alex is an immigration specialist. We are talking about opening American borders—Mr. Obama, tear down that wall, if you will. 800-345-5639 is the way to join the conversation. We are talking about immigration in America. And what’s really interesting, Alex, if others would have studied the history of immigration in America as you have, there are these two parallel lines which are so clear. Number one is that for most of America’s history, we had the most open borders on the planet, and we benefited tremendously. So America had, probably until the 1880s when we first started to regulate immigration, we had totally open borders and we benefited. At the same time, going back to the days before the Republic, we hated immigrants. And there were these dual, both equally purely American events going on. Number one is fear and loathing of immigrants. Number two, desperate for the labors the immigrants would perform and for the money they will spend. It’s very strange that it’s as if the phrase “love-hate relationship” was invented to describe Americans’ relationship to immigration.
Alex Nowrasteh: I think that’s absolutely right. I mean, to put it this way, it’s hard to hate immigrants unless you actually have immigrants around. So America has always had large numbers of immigrants coming here and settling. So it’s imaginable how that hate could spring up. It’s not logical, it doesn’t make sense, but it’s how it comes up. And you see it. Benjamin Franklin wrote a number of essays and op-eds complaining about the Germans, saying that Germans with their “swarthy complexions”—his words, not mine—their alien ways, their barbaric ways, were going to take over Pennsylvania and the United States and turn it into a German colony.
Bob Zadek: Actually, Alex, it’s interesting you say that. For this show, I found a Benjamin Franklin quote talking about German immigrants to Pennsylvania in the 1750s. Listen to what Benjamin Franklin said, and I quote, 1750, Pennsylvania. He said, quote, “Few of their children in the country learn English. The signs in our streets have inscriptions in both languages. Unless the stream of their importation could be turned, they will soon so outnumber us that all the advantage we have will not be able to preserve our language, and even our government will become precarious.” Benjamin Franklin, 1750. It could have been written yesterday.
Alex Nowrasteh: Yes, it could have. And Thomas Jefferson said some of the same things from his perch down in Virginia at the time. But you fast forward 250 years from now, after decades and decades of massive German immigration—over a century of massive German immigration—and what we find is Germans are the largest ethnic group in the United States. About 17% of people have German ancestors who are in the United States right now. But German is not a language that is spoken by more than a handful of people. They’ve fully become American in every sense of the word. They’ve taken up the language. And Germans did not tear apart the Republic. They did not create anarchy. They became Americans, they became productive, they started numerous farms, they settled the West. I mean, if you take a look at the counties in the United States where the number one last name is of German origin, it basically has a huge swath from Montana south to Texas and east to Arkansas. You see nothing but German-dominated people whose ancestors came here as immigrants, but who eventually learned English, became Americans, and contributed in terms of German culture contributing to American culture. I mean, the whole notion of the university as we commonly understand it today, the notion of doctoral degrees, in terms of science, in terms of scientific management of farms, in terms of the economics profession, in terms of so many things—newspapers, for instance, becoming very popular—we can thank a lot of Germans for that. And they’ve become Americans in every sense of the word. They’ve transformed our culture and have also transformed themselves into what we understand.
And this fear is so striking because it’s been wrong so many times. I mean, the same things were said about the Irish, about the Scottish, about the Huguenots, about the Chinese, about the Italians, and the Jews. The vitriol that was given to Jewish immigrants to the United States was vicious, something we often forget. And then the Chinese, who were actually the victims of some of the first laws against immigration to the United States that began in California, in the Bay Area actually, in the San Francisco Bay Area, and spread across the country. The Japanese. And then nowadays it’s continuing with Mexicans and Central Americans. And I have no doubt that in the coming decades it will be directed against new immigrant groups like Indian Americans and a lot of Africans who decide to come to the US in the near future. So it’s just this constant cycle. And then we look back, and the silliest thing is we look back and we say, “Oh, well, that immigration in the past, that worked out fine. But the immigrants today are different.” And what you see is over time, the only consistency in this argument is that that argument is made the same every time. So in 50 years, people who are going to be saying anti-immigrant things in the United States, they’re going to say, “Well, the Mexicans worked out fine. They’re going to say the Chinese worked out fine. But this new group is different for every single way.” And the argument will repeat itself again and again, and it will be wrong every time.
The Welfare State Argument [20:42]
Bob Zadek: An important argument, a very important argument, both economic and emotional, is the complaint, Alex, that immigrants will disproportionately consume welfare benefits and therefore they will be a net economic drain. Indeed, no one of lesser stature than Milton Friedman worried profoundly about how we could have a welfare state, which of course we do, and open borders. And he felt the two could not exist. And Friedman despaired that the only way to have open borders was to eliminate the welfare state, which was politically impossible, of course. Therefore, Friedman said the only way to allow open borders is to deny immigrants any of the welfare programs. I think Friedman was A) wrong, B) proven wrong, and C) in our country today, illegal immigrants—and remember, I would propose every illegal immigrant be instantly be made statutorily legal—but all newcomers, I’ll use that more neutral phrase, simply in America today are denied almost all welfare benefits for a period of time. So that argument, I think, doesn’t have merit. Now, we’re going to be going to a break in a second. We have a caller who wants to discuss welfare, and we’ll take Ed after the break. So Ed, hang in there. We’ll discuss your issue about welfare. But Alex, in anticipation of taking Ed’s call, which we’ll do after the break, give us a couple of minutes of the interaction of welfare and immigration.
Alex Nowrasteh: Sure. So what we’ve seen historically, just to give a historical backdrop, a lot of countries in the world had relatively open immigration in the late 19th and early 20th century. And what we saw is as they created welfare states—Germany in 1890, England in 1905—one of the first things they did afterwards was they closed off their country to most immigration. And the political sort of reaction that occurs is voters support welfare, at least some welfare for citizens, but all of a sudden once you spend some money or some immigrant gets welfare, or at least the public believes that immigrants get welfare, then they suddenly get a lot more angry and upset about it than if a native-born person of their country got it. So you see this political reaction where instead of trying to scale back the welfare state or trying to make it more restrictive, you see it in the opposite direction where they try to close off who can come into the country in the first place. And that’s a history you see around the world. It’s part of the history you see here in the United States with welfare as well. But the problem is this is mostly based just on myths and stereotypes.
Bob Zadek: And it’s not based on data. This is Bob Zadek. I’m talking with Alex Nowrasteh. We are talking about legal immigration in America, opening the borders. We are talking specifically about welfare and immigration. 800-345-5639 is the way to join the conversation. We’ll take a caller when we come back. Please stay tuned. Also when we come back, the hot-button issue of amnesty. Oh, how some Americans hate that word. Back in 90 seconds.
[Commercial Break]
Bob Zadek: Welcome back, everyone. This is Bob Zadek, host of The Bob Zadek Show, Sundays at noon, News Talk 910. Thanks so much for listening. I am talking this afternoon with Alex Nowrasteh. Alex is with Cato. He is an immigration specialist. We are talking about immigration in America—facts, not fiction. Before the break, we were talking about the effect of our welfare state on immigration and whether or not immigrants coming to this country sap our economic blood dry by consuming welfare benefits. And we have a caller from San Francisco, Ed. Welcome to the show. How are you this afternoon and what’s on your mind?
Caller (Ed): Good, Bob. And first of all, thanks for consistently having the most interesting show on the radio. It’s the highlight of my weekend. You do such a great job.
Bob Zadek: Oh, thank you so much.
Caller (Ed): And you talked about my question before the break, but essentially, you know, you’ve talked about things that Milton Friedman said about immigration. And I think what he was saying, as you mentioned before, is that open borders or open immigration is only good when it’s illegal, because when it’s illegal, it’s much more difficult for immigrants to abuse the welfare system. And my question is, and you talked about this again a little bit before the break, is how do you deal with the problem of immigrants coming here and abusing the system, taking advantage of welfare? You know, there have been cases where I’ve heard of where hospitals have had to go out of business because of the problem with immigrants coming in and using medical services and not being able to pay for them.
Bob Zadek: I’ll give you a quick answer, then Alex will give you, I think, a more in-depth answer. My quick answer is: isn’t the problem the welfare system? And you don’t have to look at immigrants to look for abuse. The welfare system itself invites abuse. The system is misguided. Now, that’s my general libertarian response. Alex will give a more in-depth response insofar as the effect of illegal immigration and the abuse of the welfare system. Alex?
Alex Nowrasteh: Thanks, Bob. Just to give a little bit of background, legal background on this: if you are an illegal immigrant to the United States, you have no recourse to public benefits at all, with the only exception being emergency medical care. So like the caller said, if you show up at an emergency room, you can get care right there. That’s a relatively recent law passed in 1986 that allowed that. So that’s the only issue where you could get that if you’re currently an illegal or unauthorized immigrant. But if you’re a legal immigrant to the US with a green card, you can’t get hardly any welfare benefits for the first five years that you are here in the United States. And what’s more interesting is if you take a look at when poor immigrants are eligible to actually receive these programs—so when they’re eligible for things like TANF, Medicaid, CHIP, SNAP, SSI, and other programs—they are much less likely to use those programs when they’re eligible than native-born poor Americans are when they are eligible. To give you an example, and when they do use them, the cash value of the benefits they receive is typically much lower than what native-born poor Americans use. To such a degree that if poor Americans used Medicaid to the same extent that poor immigrants did and used the same level of benefits, they would use 42% less than they currently do. That is, immigrants use a tremendous amount less of these welfare programs designed for the poor than the native-born Americans do.
But even if you take a look at programs like Social Security and Medicare—now, Bob and I will agree that we should get rid of these programs, at the very least privatize, and I think it would be best to eliminate these programs altogether as fast as possible—but the only reason why Medicare is not in worse financial situation right now is because immigrants into the United States are paying in about $13 billion more a year than what they’re getting out in benefits in terms of Medicare. Meanwhile, every year native-born American citizens are taking out $30 billion more from the system than what they’re paying into it. Now, Medicare Part A is going to go bankrupt in 2024 if nothing else changes—that’s an optimistic sort of estimate—and what immigration does is give us some breathing room so that we can reform these programs. But the notion that there’s like immigrant welfare queens that are sapping the system—I mean, there are probably some individuals out there, some bad individuals who are doing it, but overall immigrants are quite a welfare bargain when it comes to how much they use.
Bob Zadek: And Ed, we’ll give you the last word. But Ed, before we come back to you, one more observation which I think Alex can confirm is that if it is the case that immigrants are drawn to our country for welfare benefits, then what would explain the fact that when our economy took a downturn and there were no more jobs, we had a net outflow of immigrants rather than inflow? That proves pretty conclusively that immigrants come here to work, not for welfare. Because if that was not the case, then the flow of immigrants would continue because the welfare is here but the jobs ain’t. Ed, any last thoughts?
Caller (Ed): Yeah, the only thing I would say in that, Bob, why don’t we get even more strict? I mean, you’re saying that, or I guess we’re saying that there’s a five-year limit—I mean, you have to be here five years before you can get welfare. Why not just say anybody can come here, you just can never get welfare for the rest of your life? And if you’re in need, then just go back to your own country and have your own country take care of you. Why aren’t we even more strict? And wouldn’t you have a lot more support for open immigration if you just said, “Look, any immigrant can come here from any country, but you cannot get welfare for your life. And if you’re really in need of assistance, go back to your home country.”
Bob Zadek: What if they became citizens? Would you still deny them welfare benefits?
Caller (Ed): I would. I would make that—I would have open borders but just say, “Look, you cannot get welfare for your entire life.”
Bob Zadek: In other words, somebody who becomes a citizen, has a job, is as American as we are except for the accident of birth, they somehow remain second-class citizens for the rest of their lives. Ed, I just say emotionally, I say ouch.
Caller (Ed): Well, but I think that’s a way that you could attract people that really want to come to this country to contribute and to work, and then you discourage people from coming to this country to work the system. And I think you would gain a lot of support for open immigration if you did that.
Bob Zadek: Alex?
Alex Nowrasteh: Yeah, I think the scenario that he outlined is far better than what the current law is right now, which says that almost nobody can come here under any circumstances at all. So I think that that situation is an improvement. I actually wrote a very long paper recently that’s on Cato’s website called “Build a Wall Around the Welfare State Instead of Around the Country,” proposing that all public benefit programs be denied to all non-citizens for as long as they’re non-citizens in the US. Now, if they naturalize, there’s nothing you can do about it. You’d have to do a constitutional amendment to say that they couldn’t get any kind of benefits if they become citizens. But the way around that is to just say that you have to live here for a very long time before you can even naturalize. So that’s sort of—allow them to live, allow people to come here and work and live and do all the other things, but if you push off that date of naturalization where they can actually become a citizen and vote and everything else like that, then that sort of takes care of that issue a little bit and is a way to get, I believe the caller is right, it is the way to get more political support for more legal immigration going forward.
Bob Zadek: Ed, thank you so much for your thoughts. They were very well thought out and I appreciate your nice comments and thank you for listening to the show.
Immigrants as the Ultimate Entrepreneurs [33:48]
Bob Zadek: You know, Alex, when I introduced the show on my website, this show, my invitation to listeners was that immigrants were, in my view, the ultimate entrepreneurs. That entrepreneurs are somebody who risks their own capital, their own life, betting on their ability to succeed. Entrepreneurs are, in my opinion, to use a sports metaphor, sort of like a cornerback in professional football. They’re out there by themselves with very little support—maybe there’s a deep safety, maybe not—but when they mess up, they go down. And when they succeed, they get the benefit. And all of us may have had an idea, or many of us had an idea for a business and invested a few dollars of our own money and a lot of our own sweat equity and time, and we have succeeded or we have failed. But we bet the ranch, we bet ourselves on it.
Now, how can one bet more than leaving your home, speaking the language you were born to speak, going to a foreign country with no support whatsoever, knowing full well you will succeed or fail, you will feed your children or not, based only on your own guile and skill and commitment to work? You know, when I speak these words, Alex, I get goosebumps. These are—if we had more of these people, the fiber, the economic health of our country would be so much better. These are people we desperately want and need. We should not be denying them access. Wanting to improve—the people who come here, it’s not a lottery, it’s not random. There is a self-selection process. The people who make the decision to leave poverty or inability to move up the economic ladder and come here, they do so because they want their kids and their grandkids to have more than they have. That is as human a value as there can possibly be. Why in the world would we want to deny those people access? They’re not coming here to take; they’re coming here to give.
Alex Nowrasteh: Absolutely. And when you take a look at the entrepreneurship statistics for immigrants who come to the United States, it’s mind-blowing. They are more than twice as likely as a native-born American to start a job in every month. More than twice as likely, which is a phenomenal rate. And that’s compared to Americans, who are on average some of the most entrepreneurial people around the world. Immigrants are more than twice as entrepreneurial when they come here. And I think one of the best examples we can see this is in the San Francisco Bay Area. You see it in Silicon Valley. Over half of the startups in Silicon Valley as late as just a few years ago were started by immigrants, with Indians dominating that sort of trend. You see it in terms of a third of semiconductor startups were founded by immigrants, 32% of computers and communications, and 28% of all software firms.
But then you also gotta take a look on the lower end of things. I mean, if you go to a place like New York City, where 36% of the population in New York City is immigrant, is foreign-born, 48% of all the small businesses in the city are started and owned by immigrants. You have everything from restaurants to dry cleaners to construction contractors to everything imaginable—transportation, jitneys, all different types of businesses all over the city of New York and all over every other city owned by immigrants who came here, who risked everything to come to this country, to come to a different culture, speak a different language, be away from their families and their religion and their culture and everything else, and to try it. It’s really a filtering mechanism. Immigration is a great filtering mechanism for finding the people who really want to make it, who want to come here and who want to make something with the opportunities that are here in the United States. And that’s always been the case. It’s always been the case.
The Rule of Law and Unjust Laws [38:26]
Bob Zadek: And the concept of “illegal” in the phrase “illegal immigrants.” Let’s talk about the law itself. A very, very well-respected South American economist and philosopher, Hernando de Soto—he wrote a very influential book on property rights, and he wrote, quote, “The law must be compatible with how people actually arrange their lives. A law cannot try to prevent people from behaving how they would otherwise naturally behave.” Think prohibition, to take another example. You cannot pass laws and repeal core human values, like the desire to succeed and to feed your family. And if we have a law that tries to affect that behavior, the law is wrong.
Alex Nowrasteh: Yeah, and one of my favorite—another South American intellectual named Alvaro Vargas Llosa, I think put it more succinctly than de Soto did. He said, “When law and reality are in conflict, reality always wins.” And that’s exactly what we see right here with the problem with unauthorized and illegal immigration in the United States. We put up an artificial government barrier to say to people that they cannot come to economic opportunity legally. And what we see is some of them have decided to break the law—an unjust law, by the way—decided to break it and come to the United States and to work and are flouting the law every day that they are here, over 10 million of them doing it every day. So this law is not working. It’s causing capricious harm to some Americans and to some immigrants because it’s randomly enforced. And what we see is a situation that the American forefathers warned about when they were talking about in their main complaints against the Crown of England when they rebelled. One of the main complaints is that the rule of law was destroyed because the enforcement of the law was unpredictable prior to it being enforced. That was one of the main complaints against King George. And what we see right here right now is that the immigration laws, the way that they’re enforced, it’s unpredictable prior to it happening. We can’t tell which businesses are going to get raided. We can’t tell which immigrants are going to get arrested. We can’t tell even if you apply legally and you’re able to come here technically legally, you can’t even try to figure out or anticipate whether you will be able to navigate the complex bureaucracy to do so. So we took a great natural system of people, of filtering, where people who come here are energetic and hardworking, and we’ve sort of interrupted that system by putting in an element of bureaucratic randomness and law enforcement capriciousness, which has really made this system just a monstrosity and I must say just an example of what happens when liberty decays.
Bob Zadek: And there’s another—we’ll take another caller, which we’ll take in a moment—but another comment, more global than that, is that in my view, a sign of sickness in society is when there are laws that are not respected by an overwhelming percentage of the population, and therefore a large percentage of the population becomes lawbreakers, not because they are criminals inherently, but because the law made them into criminals. Take our tax laws, take our narcotics laws, take prohibition. It made otherwise lawful people into crimes for doing what is not bad, not malum in se behavior. And immigration laws are another example of that. Now we have another caller, I’d like to hear from as many callers as we can. Joel in San Leandro. Good afternoon, how are you this afternoon?
Caller (Joel): Hey, I got a question for you. The United States has over a million people every year become citizens. Sounds like we’re pretty open to immigration now.
Bob Zadek: Alex?
Alex Nowrasteh: That’s—the United States does have over a million people a year become citizens or come to the United States every year, but compared to the historical trends of the people who came here in the early 20th—that’s the same numbers as came here in 1910, for instance, when the country was one-third the size that it is now. And compared to a lot of other countries, for instance, America’s foreign-born population is 13%. Canada is more open to immigration than the United States is; their foreign-born population is about 20%. Australia’s is 20%. Switzerland is 25%. Even a country like Germany has about the same percentage of foreign-born people as the United States does. So Americans, we uniquely pat ourselves on the back for being a country of immigrants, but statistics compared to other countries reveal that there are a lot of other countries in the world that can claim the same thing. Now, you also have to compare it to the number of people who actually want to come to the United States versus those who are able to come. So if you’re a low-skilled foreigner without an American citizen relative who’s in the United States right now, there is no green card path for you to go on. And that is the way whereby most of our ancestors came to the United States: as a low-skilled foreigner without an American relative who is here. And there is no way right now for those people to come here—there is no green card category for them.
Bob Zadek: So Joel, Alex’s point is: look at the number of people who aren’t getting in, not the number of people who are. Any thoughts on that, Joel?
Caller (Joel): Yes, sure. Well, Germany and Switzerland are much smaller than the United States. And yeah, you can cherry-pick some data from whatever time you want to. What’s important is, is it effective now? And I actually agree with you, it’s not effective right now.
Bob Zadek: And would you say—are you content that a million people becoming citizens is the magic number, that’s the right number, and any more than that would be excessive?
Caller (Joel): There is no magic number, of course not. But what I hope for is that it be legal. I don’t assume—Lord knows I hope it’s not true at all—that everyone that wants legal immigration is automatically evil or racist. But I think it should be definitely organized.
Bob Zadek: Joel, thanks so much for the call. We appreciate your being a listener, Joel. Thank you so much.
Alex Nowrasteh: Yeah, thank you, Joel. And I just think the main problem is, we hope for it to be more legal. Well, the way to make it more legal is to change the laws and make it more legal. I mean, we have an example of American history, you know, in the relatively recent past, whereby people could come to this country legally and live and work so long as they didn’t harm other people. And that was a much more orderly system than the massive bureaucratized immigration enforcement-heavy system that we have right now. I mean, the United States is not the most anti-immigrant country in the world—I hope that impression did not come across to the listeners on the radio—but in terms of our traditions, we’ve turned back on our traditional pro-immigration stance more so, I think, than any country in the world. And that’s what’s truly embarrassing because we have such a good history of it.
Amnesty and Deferred Action [46:42]
Bob Zadek: Alex, there are two points we are regretfully running out of time on. Two points I want to cover is, first of all, very briefly, the issue that gets opponents of open borders the most worked up is amnesty. The number usually bandied about is 11 million—there are 11 million, by some estimates, people who are here in this country right now illegally, 11 million. And the question is, what do we do with those 11 million? Some of us, myself, would say easy: just give them all a path to citizenship. But path to citizenship is opposed by many others. What about the issue of amnesty? What’s the big deal about just granting them amnesty and a path to citizenship?
Alex Nowrasteh: Well, let me put it this way. I have another solution that I’ve written about: let’s offer two solutions for immigrants to choose for themselves. One would be a very easy-to-get permanent work permit that could not be used to get citizenship. The other one would be a longer-term, more expensive path that would lead to citizenship if they want to. I mean, I think you’d have a lot of people who are opposed to amnesty come on board with that because they know that most of these immigrants are not here because they want to become citizens and vote for one party or the other; they’re here because they want to work and they want to start businesses and they want to create a better life for their children. Virtually the only benefit they get from being a citizen on top of that is being able to vote, and I think you and I can agree that that’s not all that it’s cracked up to be, and most of them know that. But most people are against amnesty because they have this ridiculous notion that if you grant amnesty to these people, then all of a sudden you’re going to destroy the rule of law in the United States. But the immigration laws, I think, have already destroyed a lot of the rule of law in the United States. As we talked about, they’re capricious, they’re impossible to predict, they’re arbitrarily enforced, and they interfere on our inalienable rights to hire who you want, do business with whom you want, and to travel across borders as you want. So the notion that changing a bad law that doesn’t work and amnestying people who are otherwise peaceful and law-abiding who aren’t criminals is somehow going to destroy the rule of law, I think it’s totally wrongheaded.
Bob Zadek: Amnesty worked—sorry, go ahead.
Alex Nowrasteh: It’s the exact opposite. If we continue to enforce these bad laws that virtually everyone agrees does not work, then that is the true disrespect to the rule of law. And you know, amnesty is what Ronald Reagan did in 1986 with his law. And a lot of people say, “Oh, well, it didn’t work because more illegal immigrants came afterwards.” But the only reason why more illegal immigrants came after amnesty was passed is because he didn’t increase legal immigration opportunities for low-skilled immigrants. The amnesty worked, but we got more illegal immigrants afterwards because we didn’t increase legal immigration. And that is the key. If we want to halt illegal immigration going forward, as the caller did before and as most of your listeners do, then all we need to do is make it easier for people to come in the future.
Bob Zadek: We’re going to end on a high note. We have only a minute, Alex. I’m going to close by agreeing with Obama and when she was there, Janet Napolitano, on something called “deferred action.” Alex, in a word, deferred action—it’s sort of Dream Act Lite, and it’s good news.
Alex Nowrasteh: Yeah, it’s probably the one time in years that executive power has been used to increase freedom as opposed to decrease it. So what it was was it said that the children of illegal immigrants who were children, you know, young children themselves when they were brought into the United States, they can get a legal work permit for a couple of years and not have to fear deportation so long as they’re not criminals.
Bob Zadek: It’s sort of the Dream Act—it’s Dream Act Lite, but it gives some respite to people who were young children when they were brought here, so they didn’t do a bad act, and now they are here living as Americans but living in the shadows because they are illegal.
Alex Nowrasteh: And this is a group of people who in every way feel American. You know, a lot of them don’t even speak the languages that their parents do. They’ve never been outside the United States. They grew up with American television, American culture. They feel American in every way. The only thing that they lack is a piece of paper, a government piece of paper that says otherwise.
Bob Zadek: Alex, thank you so much for sharing your wisdom and your insights with us. As I said at the outset of the show, this is a subject that just gets to my heart and my mind like no other subject, and you bring such insights. I so much appreciate, as I’m sure my listeners do, your giving us an hour of your time on a Sunday afternoon to share with us. Alex Nowrasteh from Cato. Alex is an immigration specialist. I’ll be back in about 90 seconds. We are going to discuss Uber taxi, the cartel-busting event going on now in the country. Is Uber a taxi service? How does it make your life better and what does it mean to economic freedom? I’ll be back in 90 seconds. Thanks again to my friend Alex. Please stay tuned. 800-345-5639. I’ll be back shortly.
[Commercial Break]
Rent-Seeking and the Taxi Cartel [52:58]
Bob Zadek: Welcome back, my friends. Welcome back to The Bob Zadek Show. I’m your host, Bob Zadek, every Sunday at noon, News Talk 910. An hour and a half of live freedom, liberty, laissez-faire economics—we love it all. 800-345-5639 if you want to join the conversation, love to hear from you.
Adam Smith observed, in talking about laissez-faire capitalism, he observed, and I quote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” In other words, we enjoy all of the luxuries which have become necessities, we enjoy the lifestyle we have become so accustomed to, through the selfish motivation of others. Everybody up the food chain, no pun intended from us, is providing us with the gadgets and food and clothing and means of transportation—those are provided to us not out of benevolence, but out of greed, out of selfishness, out of ambition. Everybody up the chain from us wants desperately to make every penny they can from their honest labors, and it’s that desire that capitalism harnesses for the collective good of all of us. You gotta love it.
And we find ourselves up against our government, which is constantly seeking to be captured by special economic interests, called by some “rent-seekers.” Rent-seekers are those who seek to acquire wealth not by creating new wealth, but by diverting somebody else’s wealth to their pocket. They add no value; they end up making money by diverting somebody else’s wealth to themselves. They are known in economic circles as rent-seekers. Those who seek to use the government to protect their ability to make money at the expense of, or by denying somebody else the ability for them to make money. Rent-seekers are to be despised, and they permeate our society. Anybody who seeks—any of these crony capitalists who seek to use the government to shield themselves from competition, to divert somebody else’s money to their pockets—they are rent-seekers. Evil, evil people.
One of the very commonplace cartels that all of us experience every day, or almost every day in our daily lives, is the taxi cab cartels. Think of it. Driving a taxi is being an entrepreneur. You learn how to drive, you buy or rent a car, you get insurance, and off you go into the marketplace offering to sell your services to carry somebody from point A to point B. It is an entry-level entrepreneurship in that you don’t need a lot of capital, you can earn a decent living. The amount you make is a direct function of how hard you work—drive longer hours, work harder, make more. If you’re lazy, you make less and you’re left in the economic dustbin. It’s entrepreneurship pure and simple.
In most American cities, the taxi industry has been captured and is now occupied by a taxi cab cartel. New York City: you cannot drive a taxi cab in New York City unless you get a medallion, this piece of tin that gets nailed to the hood of your car. You cannot go off into the road, into the street, and drive a taxi without a medallion. Well, okay, what’s the problem? Well, the problem is New York City only issues approximately, a little bit less than 12,000 taxi cab medallions—the same number that they issued in 1938. 1938. Now, taxi drivers in New York City work long hours but make a lot of money, relatively, given the skill required for the job. Therefore, it’s a desirable entry-level occupation. But you can’t do it unless you get a medallion. And a medallion, do you know what a medallion costs? About $1,300,000. A million-three for the privilege of earning an honest living. Well, why doesn’t the city just—and by the way, there are of course constant complaints in New York City there aren’t enough cabs. So you have a city that doesn’t have enough cabs and it costs a million-three to be a cab driver. Does that make economic sense for the city to limit the number of vendors of that service?
San Francisco and other major cities, it’s the same. You can’t drive a cab unless you get a medallion. The medallions are not issued; the city doesn’t issue any more medallions, so you have to buy a medallion from somebody else. Imagine if you wanted to be an electrician and you wanted to be an electrician in Chicago and you were told you cannot be—the only way to be an electrician in Chicago would be to buy an electrician’s license from a retiring electrician. All the existing holders of licenses would become instant billionaires because they could sell their license for buckets of money. And meanwhile, somebody else who’s a competent electrician would be denied the ability to earn a living. What can be more offensive than for government to say you cannot earn a living in the occupation of your choice? Nasty business, this cartel, this licensing.
Uber: The Trust Buster [61:16]
Well, into the game inexorably comes brains and technology, personified by Uber and others. Uber taxi is a very interesting concept, and it is a trust-buster more effective than perhaps Teddy Roosevelt, the last trust-buster. Uber, invented in my hometown San Francisco, is a very interesting application. What Uber does is: Uber is an app. It works off your smartphone, and it’s free. And if you download the Uber app and you register—it takes about three minutes—you are now a customer of Uber in their system. You have given Uber your credit card, they know who you are, they know your name, and you are now in the system. And Uber signs up customers like you and I who want taxis or want limo service. At the same time, Uber goes to drivers and it does some screening of these drivers. And Uber says, “Okay, who wants to be a driver?” And people sign up—maybe they’re waiters or actors or lawyers out of work and they want to earn a few extra dollars, they want to be their own boss—so they sign up with Uber. And they become drivers. And they have the app on their cell phone.
Now, now you got a bunch of drivers signed up and you got a bunch of customers signed up. Now it springs into action. You’re standing on some street corner somewhere in San Francisco or New York and there’s no cabs in sight. You take out your app and you say “I want a taxi,” you push one icon on your cell phone. That sends a message to Uber, which knows where you are from the GPS embedded in your smartphone. And Uber electronically scans for drivers in your area. And Uber will tell you, just about instantaneously, who’s in your area. And you’ll be told by name—you’ll be told that Randy, a driver, is seven minutes away. And you say, “Okay, send him.” You push “Okay.” In seven minutes, up shows Randy. Randy picks you up and takes you where you want to go. You don’t pay Randy a fee; it’s charged to your credit card by Uber. You don’t give Randy a tip; that’s taken care of by Uber. If Randy was a nice fellow, you can rate Randy. If you were an abusive customer, Randy can rate you. And all that gets collected by Uber. Uber connects people who want rides with people who want to offer rides. Sounds pretty cool, doesn’t it?
The taxi cartels hate it. And there is litigation in almost every city where Uber wants to operate. Now, I should mention, Uber is one of several—this is not an Uber infomercial, I use Uber because I happen to know them—but there is a company called Lyft (L-Y-F-T), they are those big fuzzy mustaches on the front of their cars, you may have seen them if you’re in a Lyft city. Or there’s another company called Flywheel—I’ve seen bumper stickers on cabs that say Flywheel. So there’s a bunch of systems. I am describing this growing industry generically, not Uber specifically.
So Uber sounds pretty darn perfect. Well, the taxi cartels hate it. And there is litigation in almost every city where Uber wants to operate because the cartel—what don’t they want? They don’t want competition. They’d rather you stand in the rain and get soaked to the marrow of your bones when you can’t get a cab rather than have competition. So it’s Uber the trust-buster against all of the taxi cartels around the country as Uber makes more and more inroads.
Now, the interesting issue is Uber says, “You can’t regulate us because we’re not a taxi company. We don’t own cabs, we don’t hire drivers, we’re just a big electronic switch and we connect people. It’s no different than hailing a cab by raising your hand in the rain and yelling ‘Taxi,’ except now you don’t raise your hand and yell ‘Taxi,’ but you push a button on an app. It’s the same thing.” Interesting argument. The taxi companies say, “We want Uber prevented from operating because it is a danger to the public. The public isn’t protected.” Well, I say I’ll take care of my own protection. I will make a decision if I want to hire a medallion driver who is licensed and who may not be around, or I will roll the dice and use an Uber driver. Isn’t it up to me? Why must protection be forced down my throat? Well, that is—we really don’t need protection, that is simply the regulatory class and the cartel trying to protect their monopoly.
Another argument, another complaint is Uber costs more, which it normally does. It costs more than regular cabs. And therefore cities say, “No, it’s too expensive.” To which I say, it’s my money, let me decide. You can’t protect me from a quality product because it costs too much. I’ll make that decision, thank you very much. Butt out, city regulators. And if I’m worried about insurance, I’ll either trust Uber or I lose. It’s up to me. The city doesn’t have to regulate it. There is no need for this type of regulation.
What’s also interesting is Uber, since everything is electronic like most of these online businesses, Amazon and the like, in the process of offering their service, Uber collects tons of data—data. Therefore, Uber can predict and anticipate when there’s going to be an activity that will require more cabs, like a baseball or football game in your area or an event or a rainstorm or whatever, and Uber will get more drivers on the roads to service the need. So it’s far more sensitive to the needs of the consumer than is the inflexible medallion taxi industry. The drivers, of course, hate it—the medallion drivers—of course they don’t want the competition. Duh. Nobody wants competition. Everybody wants to have the exclusive right to earn their living, and it ought to be illegal for people to mess with their customers. So this is about free market versus regulation, entrepreneurs versus rent-seekers, cartels versus free markets. The hyperbole that surrounds this fight is amazing. But the compelling argument is made by—well, I’m going to play a soundbite, Raymond. This is the head of, I believe, the Washington DC head of Uber as she explains her product. Washington DC had a brutal fight between the established taxi industry and Uber. Uber is slowly winning. Raymond, if we can play the soundbite.
Uber DC Head (Soundbite): Nationwide, laws setting minimum fares for car services are gaining traction. Drivers can be fined and lose their operating permits for the crime of charging too little. But the government has no business picking winners and losers in the transportation industry, especially when the losers are consumers. So why can’t you get a taxi? Because the government doesn’t care. The government doesn’t work for you; it works for large, entrenched transportation companies. Over the long haul, this approach hurts consumers and enterprising drivers alike.
Bob Zadek: Government can’t regulate this industry. And what that soundbite points out is: in this debate over enterprises like Uber, who doesn’t get a seat at the table? We don’t. Us consumers standing in the rain at 10 o’clock at night, cold and unhappy, can’t find a cab because government has denied us access to reasonably priced taxi service. So the problem is we don’t get a seat at the table, we don’t get to participate in the debate. We have government looking out for us and telling us what we can and cannot buy. The whole process is pretty darn nasty. And I say to the government: let us consumers decide what we want, break up the taxi cartels. Now, the problem will be, of course, once you open up the taxi industry so that anybody can drive a cab, anybody can get a medallion, then those drivers who have paid lots of money for their medallion—as I said, a million-three in New York City—you have to deal with that, and it’s so simple. There’s such a market-oriented solution. All you have to do is simply have a buyback program where the government will, on a one-time basis, buy back the medallions from the drivers so that drivers don’t lose any money. Everybody wins and we get to have more taxis. This is an area where—what’s so interesting to me is entrepreneurship and free market capitalism is so irrepressible. For generations and generations, taxi cartels were rock solid. Now, by dint of entrepreneurship and technology, they are being busted wide open and we get the benefits. Thank heaven. So the taxi drivers out there will lose their monopoly, people will be able to earn an honest living in the occupation of their choice without government interference.
Occupational Licensing: Nurse Practitioners [73:56]
While we’re on a roll of economic liberty—one of my really important issues in free market capitalism, economic liberty—a piece in the newspaper caught my eye that I’d like to close with. We’ve been reading about Obamacare, haven’t we? And among the negative results of Obamacare, we are told, is going to be a profound shortage of physicians—general practice physicians who will take care of our everyday medical needs. The shortage of physicians is going to be profound. We are right now today, we are short about 9,000—that’s a lot—9,000 primary care physicians. That’s expected to rise to about 66,000 in 10 years. We’re going to be short 66,000 primary care physicians, with no real way to fix it.
Well, there is a way. We have, and I’ve talked a lot on this show about occupational licensing and how without a license you cannot practice the occupation or profession of your choice. There is a profession called nurse practitioner. Nurse practitioners are nurses who hold graduate degrees and they are trained to perform just about all of the functions of a frontline family doctor. But it depends on the state. This is a state-licensed occupation, not federal—most occupational licenses are state-level. And so you have these nurse practitioners. Now, there’s a bit of sexism going on here as well, interestingly enough, because nurse practitioners, who have all of the skills to do just about everything a family care doctor can do, but in many states they are prohibited from practicing other than under the supervision of a doctor. Most nurse practitioners are women, most doctors are men, although those trends are changing, but that is the situation today and it was worse earlier. So we have women cannot practice a profession without being under the supervision of a male. The same, of course, with dental hygienists, most of whom are women. But dental hygienists in almost every state cannot open up a storefront that says “I will clean teeth and do dental hygienist stuff” without being in a dentist’s office. They’re not allowed to.
Well, nurse practitioners are now seeking permission in most states or in many states to open up an office and practice on their own. Now, that will increase dramatically the amount of primary care medical people to take care of us. And nurse practitioners can do almost—underline almost—everything a doctor can do. California—I should mention there are about 18 states right now that allow nurse practitioners to practice without being under the protective umbrella of a doctor. How offensive that is. Studies indicate that nurse practitioners provide the same level of care as doctors in almost all cases. Well, California hopes to be the 19th state to allow nurse practitioners to practice on their own. And there were hearings in California on this issue. California is looking at the issue right now; it’s not been finalized.
What’s interesting is—and this was part of the point of my bringing this up—I got interested in this issue and I went and looked at all of the groups that submitted position papers opposing the expanding of nurse practitioners to allow them to carry on their profession other than in a doctor’s office. And there was a list of maybe 25 organizations who had taken positions opposing allowing nurse practitioners to operate on their own. 25 organizations, all of whom in California had an economic stake in preventing nurses from siphoning away business from doctors. There wasn’t one consumer group who said consumers have to have a seat at the table and consumers deserve the right to choose who’s going to be their professional. Not one. So talk about regulatory capture. We have California trying to hold hearings to determine whether to allow me to go to a nurse practitioner if I want in the issue on the matters of convenience or cost or safety or whatever. I am a grown-up. I can tell who ought to take care of my medical needs. I can tell whether I need some physician or whether I am content with a nurse practitioner. And for government, under the control of the American Medical Association or the California Medical Association in this case, to prohibit me from picking my healthcare provider is offensive to me. So California, I tell you, legislature, get out from under the control of these pressure groups who just want to earn money at my expense. Let me choose who I want. I am adult enough to make that decision.
And what’s really strange is: I go to my family care doctor and he will examine me and he will say, “You know, you need a specialist, and I’m going to refer you to this doctor.” So my medical doctor will constantly say, “I’d rather refer you to a specialist,” and I trust him and the state trusts him. Why doesn’t the state trust nurse practitioners to make the same referral? And if I go into a nurse practitioner, the nurse practitioner will say to me, “You know, I’m not competent, I’m going to send you to a physician.” It’s the same dynamic. And this rent-seeking, this protecting of people’s income at the expense of consumers is so offensive. And all of us, since we don’t have a representative in statehouses, we must become active and we must protect our right to choose who makes these decisions for us and who we are allowed to hire. Rent-seeking must stop.
Whew! That was an hour and a half. Thank you so much for listening. Sorry I got all worked up there. I can’t help it. These economic liberty issues are very, very important to me in a core way. Thank you so much for listening. I’ll be back next Sunday. I enjoyed the hour and a half with you. Bob Zadek saying goodbye for now.