Joerg of course doesn't miss a trick, or waste a moment, so he's back with a bag of comments that I'll let trickle through. First, some stuff on Germany which relates to the last two posts. To my throwaway question "How many of my readers have the ambition for their children to work in construction, or in domestic cleaning?" he rejoins the following:
"But isn't this in part what our labour market, flexibility, reforms are supposed to be all about. Reducing costs to foment economic expansion. This is the good kind of dis-inflation. This is supply stimulus... It also adds to the demand side stimulus, since immigrants are predominantly young and liable to borrow against their futures (normally they
borrow even to arrive)..."
There is a difference between the flexibility argument and the timespan-of-payments-to-the-pension-fund argument. The flexibility argument is nonsense. (E.g., 97% of all medical assistants to doctors in Munich are from Eastern Germany: I guess that shows how "inflexible" we all are.) Also, in the balance you either have an effect on the supply- or the
demand-side. The supply-side effect is the predominant one. Its result is quite simply contraction on the demand side of the domestic economy - due to worker displacement. Free trade works toward the same end, but if you fast-forward its effects - and do not give an economy the breathing-room to adjust that the slower timescale of globalisation allows for -
by introducing "proxy globalisation" before trade globalisation arrives at its peak level, you are heading towards the severest trouble imaginable............................
Remember my example concerning medical assistants in Munich? Only 3% of them do not come from Eastern Germany. Being a medical assistant to a doctor is certainly more desirable than doing domestic cleaning - yet just about any teen in Munich that has barely learned to read and write seems to look down upon that kind of job. I remember reading a story in the "Economist" - in the late eighties, I believe - about a married American housewife who wanted to earn some cash of her own. So she started out doing domestic cleaning. She did it thoroughly, was recommended by her customers, soon ran a company, wrote a training manual on how not to break the Chinese vase, expanded madly, got a sportscar and a divorce and ended up owning one of the largest businesses of this type in the U.S. - no doubt having become a millionaire some time along the way... The world as will and idea of middle-class moms and dads just does not seem to be a promising point of departure for economic reasoning.
Going back to my last post, I do think that timing and velocity are important here. These are precisely the kind of structural points which seem to get lost somewhere in a lot of the more formal treatments. I think Joerg's argument above, when taken with his point about the 'labour buffer' as the modern gold standard yesterday, need serious consideration. What he is saying I think is that if we drive the supply side expansion too fast, and imagine that the demand side will inevitably follow (yes, but when?? and are there not cultural factors at work, think SE Asia) we will run into problems (as in fact we are).
Good, I like it. My 'immigration as temporary solution' idea was only a beta 1.0 release, we may be working towards a beta1.1, but it still needs more work.
On the US woman who got rich, this does remind me of something I saw in the 70's. When I was doing my doctoral studies, I did some teaching work on the side to supplement my income (probably to feed my voracious appetite for books, and days in the country). I found some work teaching English to Chilean refugees (incidentally I see some comparisons here with the Bulgarians I am meeting, very different from the traditional 'immigrant'). Now the majority were displaced professionals, academics, teachers etc, and they found the stress provoked by the drop in social status unbearable. However there were one or two who didn't fit the picture at all, including one woman who seemed to have no political opinions whatsoever. So while everyone else was sitting round feeling sorry for themselves and feeling 'unsupportable' naustalgia for La Patria, what did she do, she got a job doing industrial cleaning. I met her one year later, she was well dressed, had a nice car, and was to all appearances living well. The reason, she had set up her own cleaning agency (certainly using immigrants, probably employing other 'more intellectual' chileans) and was making money. I have no idea where she is now, but I imagine she too is probably extremely rich. I think part of the lesson is knowing how to value, and take advantage of, networks of information.
And of course, don't miss this. I'm in the local locutorio, full of immigrants, and the boss is an Armenian immigrant. Yesterday, in the Yuppie version, the owner is a UK based company. I don't think I've seen any Spanish entrepreneur, big or small, making a success out of this.
PPS. In the centre of Barcelona there's a district which has been one of the traditional centres of wholesale textile distribution for Spain (think Steve Johnson's 'Emergence' here). Now guess who runs this whole area these days? Chinese immigrants, who mainly arrived illegally in the early 90's to work long hours for little money in those notorious Chinese restaurants. Work and entrepreneurship is all about culture and attitudes.