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Immigration and Inevitability

Monday, September 10, 2012

It was the shot heard around the world – at least in academic and economic circles.

In August, Northwestern economist Robert J. Gordon published a controversial paper titled “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds” and ignited a firestorm of discussion over the future prospects of America. The central thrust of Professor Gordon’s paper is that the remarkable growth the U.S. has experienced since 1750 is unlikely to be repeated in the coming centuries because of several obstacles to future innovation.

Gordon notes that since 1750, the U.S. has essentially benefited from three unique Industrial Revolutions that dramatically impacted living and working conditions. The first period, from 1750 to 1830, saw the emergence of the steam engine, cotton spinning and the railroads. The second Industrial Revolution, from 1870 to 1900, brought electricity, the internal combustion engine, and running water with indoor plumbing (Gordon contends this period had the most profound impact in changing our standard of living). The final Industrial Revolution, ushering in computers and the Internet, began around 1960 and continues to this day, albeit with diminishing returns.

These three periods of remarkable growth were fueled by many one-time innovations that Gordon insists will never be duplicated. He argues that while further innovations will continue to support our standard of living, significant growth from innovation will be held back by six headwinds. These six hurdles include 1) demographic decline (i.e., the retiring of baby-boomers), 2) a plateau in Americans completing higher education, 3) economic inequality, 4) globalization (i.e., cheap foreign labor and cheap imports), 5) energy and the environment (i.e., higher costs imposed by both), and 6) household and government debt.

So what does all this have to do with immigration? Gordon asserts there is one way to soften the impact of the demographic headwind: open up America’s borders to unlimited immigration of high-skilled workers. He cites the success of Canada in adopting this approach and reminds us of the story of Steve Jobs telling President Obama shortly before he died that “…we should staple a green card to the diploma of every foreign worker who attains a graduate degree in science or engineering.” This point is further reinforced by the disproportionate role that immigrants play in American innovation ( is the Father of Invention).

And what about those immigrants lacking education and experience? On this point, Gordon offers:

“Much more controversial is the question of unskilled immigration, which suggests a provocative question. Why was unlimited immigration into the U.S. so successful throughout the 19th century, until it was stopped by restrictive legislation in the 1920s, yet could not be considered as a plausible public policy today? Unlimited immigration before 1913 did not cause mass unemployment. Immigrants were extremely well informed about the availability of employment in the U.S. economy. They arrived when the economy was strong and postponed their arrival (or returned to their home countries) when the economy was weak.”

Are we inevitably entering a new period of stagnant growth with flattening standards of living? Not necessarily. If the last century was the age of computers and electronics, one could make a case that this one will be the age of biology and medicine. Advances in the treatment of disease, genetic engineering, stem cell applications, and longevity seem well within our reach and may postpone Gordon’s dispiriting future for America’s economy. And if such life-changing developments are just around the corner, you can be certain immigrants will be at the forefront of these discoveries and innovations.

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