Chile: undermining the NBR editor’s own argument

Browsing on the NBR website yesterday morning, I noticed a headline: “Editor’s Insight: Migrant scaremongering will damage economy in long run”.   The headline didn’t exactly suggest fair and balanced reporting, but I don’t have an NBR subscription so didn’t pay it any more attention.

Later in the day someone showed me a copy of the text of the article.  In it, the editor of the NBR, Nevil Gibson, laments that

Hardly a day goes past when the anti-immigrant arguments aren’t being given the headlines and air time.  It has put government ministers on the backfoot as they attempt to justify New Zealand staying open for business.

Perhaps if there were evidence being produced of the benefits to New Zealanders of the large scale non-citizen immigration programme, that would be getting some air time too.  I’m sure ministers would be keen to use such evidence if it existed –  and the rest of us would be keen to see it.

Gibson singled out the interview with me in the latest North and South, noting of “the popular economic contention…that population growth has reduced per capita wealth, according to GDP figures”   that “these are quantitative but do not tell the full story of immigration benefits”.

Given that the non-citizen immigration programme is ostensibly driven by economic considerations –  recall MBIE’s phrase that it is a “critical economic enabler” –  I suspect most would settle for actually seeing evidence –  or even a compelling sense –  that per capita incomes of New Zealanders were rising over time as a result of the immigration programme.  But even Gibson seems to more or less accept that those benefits either don’t exist, or at least are hard to find.

Gibson devoted the final section of his article to a comparison between relatively high immigration countries –  New Zealand, Australia, and Canada, with passing reference to the much less open USA –  and Chile.

“Chile provides an example of an open economy like New Zealand’s but with a restrictive immigration policy.  It has fallen off the pace and Harvard-based Professor Ricardo Hausmann, a former planning minister in Venezuela, says the reason is the low proportion of foreign-born citizens”

Around 2 per cent of Chile’s population is foreign born, and the comparable figures for the other countries are New Zealand 28 per cent, Australia 27 per cent, and Canada 20 per cent.

Chile went through some pretty tough times in the 1970s and 1980s: very high inflation, military dictatorship, and severe financial crisis.  It was much more badly mismanaged than (then) heavily-protected New Zealand, even with the massive waste of resources that was Think Big, and a pretty bad financial crisis at the end of the 1980s.  And per capita incomes in New Zealand have always –  going back to first European settlement here –  been considerably higher than those in Chile.

But to read Gibson you’d expect to find that Chile was drifting ever further behind. Here is the relative productivity performance of the two countries, using the Conference Board’s estimates of real GDP per capita since the data begin in 1950.

chile and nz.png

On these estimates, 1990 was the best year for New Zealand relative to Chile.  We –  not Chile – have been in relative decline ever since.  As it happens, our current immigration programme has been in place since around 1990.

It isn’t just New Zealand.  Australia and Canada have also been losing a lot of ground relative to Chile, as has the United States.  Over the full 65 years, all those four high immigration countries have lost ground relative to Chile.

I’m not, repeat not, suggesting that the only factor explaining Chile’s pretty impressive productivity performance is the absence of a large non-citizen immigration policy.  Rather, I’d see it as an illustrative example of a point I’ve made many times previously: successful countries mostly make their own success, through the skills and talents of their people, the energy and dynamism of their firms,  the natural resource endowments they have, and the strength of their legal and cultural institutions.  Cargo cults –  “there is a better lot of people in other countries, if only we could get them here” – are not the answer.

Chile apparently hasn’t needed lots of foreign immigrants to put itself on a much better economic performance path.  And, by contrast, New Zealand –  in particular –  and Australia and Canada show few concrete signs of having benefited (and in particular of their citizens having benefited) from the large-scale non-citizen immigration programmes they’ve run for decades now.

So when Mr Gibson talks about a concern that lower non-citizen immigration might damage the economy in the long run, one has to wonder quite when he expects the tangible benefits for New Zealanders to show up.    It has been 71 years since World War Two ended and New Zealand restarted its large scale immigration programme (with an interruption between the mid 1970s and late 1980s).  We haven’t seen –  not even the advocates can’t point to –  the concrete economic benefits yet.  Perhaps I’m just an excessively cautious former bureaucrat, but I’ve rarely found the idea of just keeping on with a policy when, after several decades, there is no evidence of its benefits to New Zealanders a particularly attractive one.    It looks more like a pursuit of an “ideology”, without regard to the specific circumstances of our own country –  very remote, in an age when personal connections seem to matter more than ever, and strongly natural-resource based, suggesting little likelihood that lots more people would add much, if anything, to New Zealand’s medium-term productivity or per capita growth story.