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.

 

 

 

18 thoughts on “Chile: undermining the NBR editor’s own argument

  1. Michael, you are overtly exaggerating to get NZ to the top of the migrant list. It is closer to 26% rather than 28%. Australia with 6.7 million migrants would have to take the top spot with perhaps closer to 29%.

    “Just over 25 percent of New Zealand’s population at the 2013 Census was born overseas, up from 23 percent in 2006 and 20 percent in 2001.” https://en.wikipedia.org/wiki/Demographics_of_New_Zealand

    Australia would top the list at perhaps closer to 29% rather than NZ at 26%.

    “At 30 June 2015, 28.2% of Australia’s estimated resident population (ERP) (6.7 million people) was born overseas.” http://www.abs.gov.au/ausstats/abs@.nsf/mf/3412.0/

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  2. Chile has a population of 18 million in 2015 and year in year out has been showing negative GDP from 2011 even with population growing by 700k from 2011 to 2015. I can guarantee that no one living in NZ will want to go and live in Chile and hope to find work and believe they would be better off in Chile than in NZ. Lets try and get past some of this nonsense numbers and face reality.

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    • I’m not sure where you are getting your numbers from, and whether perhaps you are using USD figures. THe IMF’s WEO database shows real GDP in national currency terms – the conventional basis for such measures – having grown by 14.1% from 2011 to 2015.

      I’m also quite sure few people would want to move from NZ to Chile – after all, Chile has a lower level of income than NZ, as I noted in the post. It would be as odd as if there were large scale flows from Australia to NZ. But the simple point is that Chile is achieving faster growth than we are, despite the very limited immigration.

      And recall that it wasn’t me who introduced Chile to the debate – Gibson was the one who argued it was an example of a country without immigration where things had gone of the rails (“stagnated” was, I think, his word).

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  3. Chile(pop 17.3m to 18m)
    GDP(USD)
    2011 – $253 billion
    2015 – $242 billion

    http://www.focus-economics.com/countries/chile

    NZ (pop 4.4m to 4.6m)
    GDP(USD)
    2011 – $167 billion
    2015 – $172 billion

    http://www.focus-economics.com/countries/new-zealand

    Michael, clearly economically, Chile is declining and NZ is on the up from 2011 to 2015. NZ continues to grow strongly in 2016. Chile’s population is exploding but with an economy in decline. They have no need for immigration. NZ population is declining but with a strong and growing economy. Without immigration we will have old folk drooling on floors and no one to care for them. NZ has huge underutilised resources because of the tiny population.

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    • those are meaningless comparisons, as the USD numbers are dramatically affected by market exchange rate movements. See the real national currency numbers I mentioned in my earlier reply.

      But in any case, the point is not whether Chile or NZ is having a few good years. Gibson’s argument – which he seesm to have walked back in light of the data – is that Chile showed how a country would stagnate without immigration. Chile hasn’t.

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  4. Perhaps it’s time for a geographer’s input – a reality check! Why might Chile’s GDP decline between 2011 and 2015? With the world still in recession, what has happened to copper prices? Just might be a factor. And so what is causing NZ’s economy to “grow”? New technology? Booming manufacturing exports? Great agricultural prices? When do I laugh? Yes, of course there are dribbles of some things in these categories. But the only expansion is in the sectors needed to service the demands of the exploding population. This is bubble land, and destined to burst.

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