Tuesday, January 16, 2007

How Calderon will drive more Mexicans to the U.S.

Felipe Calderon, the former energy minister who was sworn in last month as Mexico's new president, has a plan:
Mexican president launches jobs program

MEXICO CITY - President Felipe Calderon launched a program Monday to create jobs for young Mexicans and curb the flow of millions of migrants to the United States.

The program will give cash incentives to companies for hiring first-time job holders. Calderon, who took office in December, campaigned on promises to boost employment opportunities in Mexico, vowing to be the "Jobs President."

A conservative who narrowly won the July election, Calderon is under pressure from a strong leftist opposition to alleviate poverty affecting half the country's citizens.

While he has criticized U.S. immigration policies, such as a proposed border fence, he says Mexico must stem the tide of immigration by increasing opportunities at home.

"Employment is the biggest door to get out of poverty. It is the only path to substantially raise a family's quality of life," Calderon said as he signed a decree for the "National First Job Program" in the presidential palace. "To move Mexico forward, we have to create more and better jobs."

The government will also pay into social security for first-time job holders for one year. Calderon said some $300 million has been set aside for the initiative and that it will help millions of women who have never worked and struggle to support their families.

"Work is the only thing that guarantees women true liberty," he said.
Shades of FDR! So much for Calderon being an advocate of the free market. He's just a Nixon-in-Friedman's clothing, nothing more than a Keynesian who gives lip service during the campaign. Like any good interventionist, he's confused himself that economic progress means creating more jobs. That is as far from the truth as you can get: economic progress is based on creating real wealth, not giving everybody a job. As Caroline Baum of Bloomberg once reminded us so long ago: if you want 100% employment, institute a hunter-gatherer society, in which everyone struggles to make a living.

Good lord. What his plan will actually do, apart from any true stimuli like desperately needed foreign investment in Pemco, is encourage more Mexicans to leave for El Norte as employment prospects at home grow worse! Keynesians never seem to have understood that, though their central banking gods may inflate the money supply at will, money is still finite at any given time. If you recall from Bastiat's "What Is Seen and What Is Not Seen," because government cannot spend a dollar without depriving a taxpayer of that dollar, there is no net economic gain. The same applies to "creating work."

Calderon will necessarily use tax money to create jobs, but if the taxpayers still had their money, it would have supported jobs anyway. They would have bought goods and services, or saved it, with no need for government to tell them how, but now here cometh Santo Felipe with his unholy gospel. Under his guidance, the Mexican government will soon start spending x to create a job paying y pesos a year, but in the end, the economy will lose x as deadweight loss. Before, the job would have come into being on its own. After, a job based upon artificial need will be created for someone, but at a cost to everyone else.

You might be thinking, "Deadweight loss, yadda yadda, so what?" Because that x is lost, because that x was money taken via taxes, there will be less x for the taxpayers to spend on goods and services. When that happens, the economy will necessarily suffer, which will encourage more and more Mexicans to head north for greener pastures. In a perfect universe, Calderon's plan would merely shift employment. Most likely, however, money will be lost from disincentives, and especially from bureaucracy. Like Harry Hopkins and Frances Perkins benefited from the New Deal, Calderon's Trato Nuevo will certainly create new work for "employment administrators." It amounts to a community earning $1000 but effectively having $990, because someone takes 1% to tell them what to do with it. I call that "economic friction," on the same principle that energy transfer always suffers some loss in the form of heat, not in the way that competing economic actors will bear certain emotions towards each other.

But, the interventionists argue, the job would never have existed without government "priming the pump." Nonsense! The argument is a hollow one, once we examine the circumstances and realize that it is Mexico's government that creates economic barriers in the first place. What will the graduated tax system do but drive more and more savings out of the country, depriving the domestic economy of investment capital and jobs? The barriers are also in no small part from the rampant corruption, which does not stem from any "disparity" in wealth, but rather from government's failure to enforce the rule of law.

The problem is not the mere fact that some people have more wealth than others, but that certain people use wealth and other influence to sway police, judges, bureaucrats and politicians, and that the rest of the people have no means of obtaining justice. I don't say "justice" as in the socialists' conception of economic equality, but to mean that the law is applied equally to everyone, and that crimes are suitably punished. Instead of promising to create jobs, Calderon should focus on the decades-old problem of corruption, and then the jobs will come. I suggest he start by executing bribed police officers and judges to put the fear of God in the rest.

Corruption need not be completely vanquished to have an effect. All it will take for Mexico to keep its investment capital (the fuel for job creation) is for wealthier Mexicans to become less quick to hide their money overseas. Also, some may have paid bribes out of extortion, and that money will instead be spent on honest jobs, or be saved so it can be invested in creating honest employment. At worst, with only the latter occurring, there will be a perfect transfer of employment. More likely, the total effect will be that wealthier Mexicans grow encouraged to keep more money at home, and more will be produced for the rest of Mexico.

Keep in mind, though, that even the best real stimulus for Mexican employment will not completely curb Mexican emigration. As long as the United States is doing better economically and politically, Mexicans will keep coming here.

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2 Comments:

Blogger jk said...

I agree with everything you say, yet I think you forget whom the other choice was. I'll take a Mexican FDR to a Mexican Hugo Chavez any day of the week,

Tuesday, January 16, 2007 1:34:00 PM  
Blogger Perry Eidelbus said...

I suppose, but I'm getting tired of having to pick between the lesser of two evils. Look at our own Congress: we exorcised demons only to invite in worse ones.

Tuesday, January 16, 2007 8:12:00 PM  

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