Econopocalypse Bringing an End to the Immigration Boom

Immigration is a sensitive issue, and passions run high, often bringing out the worst in people: and racism surely is a part of it. An Indian immigrant named Navtej Singh Sidhu was set on fire while sleeping on a park bench in Italy recently. Racist violence against Roma (or Gypsies) is increasing -- although they have lived in Europe for centuries, they are discriminated against as outsiders and non-whites. Russian skinheads were convicted of killing 20 migrants – mostly non-whites.

Migration is cyclical: in the good times, people want to have outsiders come in and do the dirty, dangerous and difficult jobs they themselves disdain, but then they expect these gastarbeiter to disappear quietly when times get rough. That is easier said than done, as they have set down roots and their children have grown up in the host countries. Europeans, for instance, have had long-standing problems with immigrants from former colonies who live as an alienated underclass.

The Americans hit upon a perfect solution in the nineteenth century. They wanted Chinese labor for their drive westwards towards the pacific, in particular for building the continent-spanning railroads. But they didn’t want these people ‘polluting’ their societies. So they were forced into ghetto Chinatowns. They were not allowed to own property, marry white women, or bring Asian wives. In other words, simple: come, toil, and die. The Asian Exclusion Act was law. Indians too suffered – some found their hard-won US citizenship revoked, and in the Komagata Maru incident, a shipful of immigrants from the Punjab was turned away by the US and Canada. Even more notorious was the shipful of Jewish refugees from Nazi Germany that was also turned back. After immigration reform in 1962, though, Americans have been far more liberal.

Immigration has become a world-wide phenomenon in the last few decades. Some 200 million people – that is, 3% of the world’s population, are now migrants. There are 20 million overseas Chinese, and a comparable number of overseas Indians. In several western countries, immigrants account for more than 10% of the population. And they send a lot of money home. According to the World Bank, remittances to home countries was around $283 billion in 2007. Both India and China get around $30 billion each, and for some like the Philippines, Tajikistan, etc. remittances account for a large fraction of national GDP, according to the Economist.

No wonder people still migrate. The saga of Latin American immigration to the US – as in the tragic film El Norte – is well known. Despite the perils of dealing with brutal ‘coyotes’ (smugglers who have been known to rob, rape and murder), sadistic border patrol agents, and the constant fear of being deported, or worse, they still keep coming, wading across the Rio Grande. Or at least they used to, until recently. The Economist reports that emigration to the US from Mexico has slumped by 42% in 2008 as compared to 2006. News of the recession has spread.

Historical data shows that previous recessions have dramatically reduced immigration into the US. After decades of high immigration (from Eastern Europe and Ireland, for instance), post-Depression America allowed practically nobody to migrate legally. There was a notable spike in legal immigration in the 1990s, and levels have continued to be high in the 2000s. But this is likely to change. The welcome mat is getting a little frayed, and, with Democrats in power, protectionism is definitely in the air.

There are at least a couple of provisions in America’s $900 billion stimulus package that are protectionist – one deals with H1-B visa holders, another was the now-diluted ‘buy American’ provision in the Senate version of the bill. The H1-B provisions, which were also diluted, mandate that companies that use such workers will be under far more scrutiny than before. In effect, and coupled with the noises being made in the wake of the Satyam scandal, this means that outsourcing itself is under attack, and that there should be ‘American jobs for American citizens’. In other words, the H1-B techie can take it to mean “welcome to America, now go home”.

Well-paid technology workers will be forced to return to India. This is in conjunction with significant problems in West Asia, specifically Dubai, which doesn’t have any oil. Construction, finance, trade – they are all taking a beating. Kerala is full of stories of people returning under economic duress. Apparently 40 Indian international schools have shut down; it is said that families are driving to the airport with all they can carry, abandoning their cars (and their car and home loans) and flying back to India. There are reports that 10,000 people have already left for India, and 55,000 construction-related jobs are in jeopardy. The Harvard Business Review said in September that 4 million Keralites are in the Persian Gulf, and in 2007, their remittances accounted for 20% of state GDP.

The story of Kerala migrants been lionized in certain circles as the alleged ‘Kerala model’ of development, but that is an exaggeration. It is just a money-order economy. It may even be a ‘cargo-cult’ where the loss of the remittances and also the security of knowing that, as it were, money would be dropping from the heavens. Will we show severe withdrawal symptom? Furthermore, whatever will the Kerala economy – notoriously lax in creating jobs – do with all these able-bodied returnees?