A Conservative Contradiction: Immigration & Free Markets
In at least two Republican presidential debates now, Donald Trump has lambasted American companies for moving their business to other countries. Namely, the real estate mogul points to Ford Motor Company and Nabisco for moving manufacturing facilities to Mexico. In his own words, Trump wants to "make them pay" for abandoning the United States. This coming from the same man who first rose to political prominence for promising a 10-foot wall along the Mexican border (which will somehow be paid for by the Mexican government). But, Trump and everyone else on those debate stages fail to ask why those companies are relocating manufacturing to Mexico.
The answer is simple: profit. It is more profitable for some companies to take their manufacturing facilities to other countries. Politicians, mostly conservative ones, like to blame "high corporate tax rates" as the culprit for the exodus of American companies. This might be the case for companies undergoing inversions, incorporating their corporation overseas to gain tax advantages. But, in cases such as Ford and Nabisco, the companies remain American while the manufacturing becomes outsourced. So how does relocating manufacturing translate into higher profits?
Another simple answer: labor. In economics terms, labor is one of the factors of production, along with land, capital, and entrepreneurship. Cheaper or more abundant labor leads to increased productivity—the ability to produce goods more cheaply. Although the international flow of capital and entrepreneurial investment has been encouraged in our modern economy, the international flow of labor remains stilted.
The U.S. Republican Party often prides itself on espousing the virtues of capitalism and free markets. Indeed, in the most recent televised town hall discussion, Ted Cruz espoused his "passionate commitment to free market economics and the Constitution." However, the GOP's typically strict stance on immigration is at odds with its economic ideology. Research has shown:
- Increased immigration increases capital investment;
- Increased immigration reduces unemployment by a one-to-one ratio; and
- Each measure restricting entry into a country reduces immigration by 6% to 10%.
In other words, "immigration simply increases the size of the economy, with no negative impact on average wages or labor productivity." Jobs are not "stolen" from Americans by immigrants. In fact, immigrants perform jobs that "complement" U.S. workers and even "slightly raise the average wages of all U.S.-born workers."
Regardless of immigration's effect on crime—which is itself the subject of much debate—its effect on the overall economy is largely positive. So, Donald Trump and like-minded conservatives contradict themselves when they denounce companies for moving manufacturing jobs out of the United States and also demand much stricter immigration laws. Trump can try to "keep Mexicans out" of the United States as much as he wants, but he can't prevent U.S. companies from moving to Mexico to take advantage of the cheaper, more-plentiful labor. And if he tries, well, imagine a nation where the government is allowed to control the business decisions of its citizens...