Dear Friends,
It seems to me, if Trump does indeed crackdown and deport a large percentage of illegal aliens to their home countries, Mexico stands to gain the most. It is a matter of basic economics. The importation of thousands of highly trained carpenters, bricklayers, steel workers, stucco, plumbing, electrical, concrete, etc… laborers, that know the language, understand the culture and therefore don’t have to acclimate, is an instant increase in the quality and knowledge base of the labor stock. The biggest benefit however is the capitalist mindset they will bring back with them from the US. With their connections to the US, they will have access to capital no one else in Mexico does, which will enable them to start businesses, build infrastructure, etc…. To put it in Keynesian fashion, the returning citizens will increase aggregate demand as well as aggregate supply, leading to a large increase in the economic output, productivity and therefore the lot of the average Mexican. The fly in the ointment is the epidemic of corruption infesting all of Mexican government.
If the Mexican government can manage to allow the returning citizens to start businesses and create jobs, there will be an economic boom, the likes of which Mexico has never seen. Sadly, the government of Mexico is corrupt from top to bottom. From the Bureaucrats in Mexico City to the local cops in Tijuana, graft is rampant. Regulations in Mexico are designed to be cash cows for the elite, and only the elite or the violent, are allowed to get ahead. That is the fundamental problem with the Mexican economy. In fact corruption is the primary reason any nation is impoverished. Since corruption flows from the top down, as does virtue, the answer is to clean up corruption at the top. A NUMA would work to clean up the corruption if it were implemented.
Keynesian economics is demand based thinking. Basically, if the total demand for goods and services in a country, (aggregate demand), exceeds the total supply of goods and services in that country, (aggregate supply) the economy will be in a growth period. If the total demand for goods and services falls short of the total supply of goods and services, the country will be in recession. With the incoming relatively wealthy Mexican citizens returning they will both increase demand and supply. Since much of what they got used to in the US will be missing, they will set themselves to replicating it in Mexico. The resulting increase in aggregate supply and aggregate demand will, in Keynesian fashion, drive economic growth.
Keynesian economics however, while simple to understand, falls far short of actually explaining the subtleties of why an economy grows or shrinks. To Austrians it is capital stock and labor stock. In both categories we see that returning Mexicans will improve both to a huge extent. The returning knowledge alone is worth trillions in economic aid. Couple the magnificent increase in the quality of labor with the money and access to capital the returnees will have, is an Austrian economist’s dream. The increase in capital will allow people to start businesses, which will both employ people and add to the supply of goods and services that are available in Mexico. Many goods and services that will become available hasn’t been available before, which Says law says leads to more consumption, because some people will demand the new products, which is in fact new demand.
Returning Mexican citizens will also be more entrepreneurial as well. Schumpeter’s “creative destruction,” explained that the boom bust cycle of any and all economies, as a function of the entrepreneurial ethos. Someone comes up with an idea for a disrupting product or service, creates that product, way of doing business or service, capital is pulled in to expand and facilitate that new idea, making the economy grows at a rapid pace. Once that new idea is in place the economy sheds it’s now redundant infrastructure and goes into recession. The recession triggers the opportunity for a new entrepreneur to implement his or her idea and the cycle starts anew. In Mexico this paradigm would be on steroids for all the reasons I have pointed out above. Returning Mexicans wouldn’t have to come up with ideas on their own, they will be returning with them already fleshed out, having seen them in the US.
Under every theory of economic growth the returning Mexicans will drive huge economic expansion in Mexico. That economic expansion will lift all boats, by driving up demand for labor, and thus wages as well. The Mexican government will be forced to clean up, at least a little, since the thousands of returnees will be used to far less government corruption and will demand it be reduced. If they are successful, and government corruption in Mexico is reduced, the economic boom similar to the US in the Roaring Twenties, will be just as historical. Yes indeed, Mexico has a great deal to gain from Trump’s immigration policies… if they embrace their returning citizens as the resource they are.
Sincerely,
John Pepin
