Open Borders, Open Policy

According to one historical economist border control for nation-states has less than a 200 year history. Some analysis shows that until the last 40 years, when the US ‘militarized’ its southern border, there wasn’t a large illegal immigration problem. We went from 1 million Latin-country-born immigrants in 1960 to over 21 million in the last census (and not all are undocumented or illegal). Many of the people who crossed the southern border went home after earning relatively substantial amount of money. With stricter border control, it’s harder to return to Mexico.

It was a similar effect—albeit not crossing national borders—to the employee turnover problem in maquiladoras—those factories along the border on the Mexican side for the benefit of US corporations. People would migrate from the interior part of the country to the border, work for a year, earn the equivalent of several years’ worth of hometown wages, and then move home, abandoning their jobs in the maquiladora. One company owner I was familiar with called it the Christmas problem because the government dictated bonuses at that time of year. With the larger wage, they moved home. He had created various incentives over the years to attract them back to the work after the Christmas/New Year break. One of his incentives was scaled bonuses for returning to the job: largest on the first day of production in the new year; slightly smaller bonus on the 2nd day...and so on.

[Can you imagine what our economy would look like with 20 million+ fewer workers, which might happen with the retirement of the baby boomer generation? You think the “Help Wanted signs” are ubiquitous now!]

Within our corporations, we have a similar problem in that we create a policy to solve one problem and end up with another because we’ve closed off an option to solve other problems. Suppose you have a policy that limits the front-line employees from authorizing an expenditure more than $50. Now think about some of the wonderful customer service stories you’ve heard—maybe even read in this blog. How many of them violate the expenditure policy? If your policies have integrity and consistency, you’ve cut off many options to expend an inordinate number of hours to solve a problem—like Trader Joe’s allows—or to offer free breakfast for a family when they’ve had a slight problem with their accommodations—like the Ritz Carlton does. You would have to escalate a simple product return to supervisory/managerial levels.

So let’s be careful about what policies we put in place that might create bigger problems.

Bad Timing for Tariffs

China has to import more chicken and pork due to some domestic problems with porcine herds—a loss of 30 percent of swine herds alone and thus a greater need to import animal protein. However, because of the trade war between it and the US, American livestock exporters aren’t sharing in the opportunity. Overall, exports are down roughly 5 percent. If President Trump wants to do something good for Americans in the agricultural business, it seems he’d pay attention to this lost opportunity.

Overall agricultural exports to China are down 30 percent ($2.5B decrease on $8B exported the year before).

August 1, 2019 update: Now Bloomberg news reports that 10% of farm organizations have received more than 50% of the government’s aid to farmers hurt by the retaliatory tariffs. The government’s assistance seems to be helping big farms get bigger and not helping small farms survive the Trump Trade War—which the president offered was easy to win.