US Immigration: a Primer

President Trump was elected for a variety of reasons but any observant person knows that the general topic of immigration played a significant role. Mr Trump appears unfamiliar with the current American immigration system and he is ignorant of the economic benefits of immigration, or he downplays them. Below I address modest parts of both topics. I aim for sensationalism rather than for completeness.

First a little bit about the American immigration system such as it is in January 2017. There are two main bizarre ideas among Trump supporters about the real system: One regards who is allowed to come into this country (legally, I mean); the other strange misconception has to do with how aliens become US citizens.

The system by which the US admits immigrants is a little complicated and its description relies on a specialized legal jargon. In my considerable experience, few people have the patience to sit through a lecture on American immigration policy. So, let me cut to the chase:


There is no way, zero way, the average married Mexican can legally immigrate into this country.

This is worth mentioning because many are under the impression that illegal immigrants are cheats who cut through the line instead of patiently waiting their turn.

The “average Mexican” does not have American-born children, children who are US citizens by birth. Mexicans who do have such children and the children are minors go to the head of the line. There is no (zero) line for those who don’t have close relatives who are Americans or legal immigrants. This example illustrates the US immigration policy that accounts for most legal immigrants in most years: Family re-unification.  

Sophisticated people noticed long ago that there is an instantaneous way to acquire an American relative. It’s to marry an American. Doing so for the purpose of gaining admission to the US is illegal for both parties involved. I don’t know if anyone ever goes to jail for it but it’s ground for immediate deportation. Nevertheless, I am told by some of my immigrant friends that there is a thriving little cottage industry of visa brides and grooms for a fee in some parts of the country. I cannot verify this rumor but I believe it.

Similarly, there is only one way the average married Irish man or woman may immigrate into this country: Winning a lottery. (You read this right: a lottery which one may play as often as one wishes; it has not entry fee.) In 2015, only about 49,000 people, all from Europe and Africa, gained admission on the basis of winning that lottery.

Some legal immigrants gain admission under the broad category of “employment related reasons.”  This category includes high-level programmers as well as farriers. (Look it up.) It’s a small number. In 2015 they made up about 15% of all one million-plus legal admissions. Our average Mexican and our average Irishman does not qualify here either.

You may have heard of an “investor’s visa” accorded to foreigners who will create employment in the US. That’s always a tiny number, about 10,000 in 2015.  It’s not always open. Congress decides about if every so often.

There is a third main, amorphous way by which foreigners are admitted, “asylum” broadly defined. I call it “amorphous” because the definition of who is a refugee or an asylum seeker can be changed by Congress in a very short time. The President decides how many can be admitted in either category. The number admitted under this category is accordingly highly variable. It was about 150,000 in 2015. It could have become 500,000 in 2016 because of a new crisis anywhere in the world. (It didn’t.) The current, Trump figure of  50,000 seems just about normal historically. Yet, there is wide variation about the average.

There is thus no orderly queue that Felipe or Ahmed could join on their own if they wanted to avoid becoming illegal aliens.

That’s it, folks. If you want to know more about the raw numbers, study the relevant pages in the Statistical Abstract of the US.

So, contrary to what I suspect is a widespread idea among conservatives, it is not the case that there is an orderly, wide-open legal way to immigrate into this country that illegal immigrants perversely ignore. Illegal immigrants are not rudely jumping to the head of the line; they come in through a side-door the US does not seem able to close.

One more thing, a programmatic idea: Instead of the present admission policies (plural)  based on viciously absurd selection we have, we could take a page from the Australian and from the Canadian playbooks. That is, we could coolly decide what kind of immigrants we want and try and tailor a door to those precise dimensions. Presently, we are doing very little of this, however unbelievable it may sound. Such a rational procedure would not not need to eliminate refugee and asylum seekers admissions.

I am personally in favor of such a reform . I also think special policies  should apply  to our proximate neighbors to the north and to the south. I developed this idea with Sergey Nikiforov in an article [pdf] published in the Independent Review several years ago.

Incidentally, I am a product of a rational immigration policy myself. I was admitted on merit alone. I rest my case! Thank you for asking. OK, truth be told, I tried to come in as a spouse of an American citizen but she dumped me.


On to the next misconstrued idea. I keep hearing (on talk radio, I confess) irate citizens affirming that foreigners who don’t want to take American citizenship should not be admitted. The case hardly arises.

In fact, in reality, to be allowed to become a US citizen, to take American citizenship, requires several years of residence in this country after being legally admitted. (See above.)

Hence, personal preference plays little role in determining which immigrant does not become a US citizen. I don’t have the numbers but I am sure that, as a rule, the vast majority of legal immigrants adopt American citizenship shortly after they are legally empowered to do so. It is true that, in theory, some hesitation or some problems may arise in connection with some countries of origin who do not wish to recognize dual citizenship. In practice, depriving anyone of his passport is low on the list of priorities of most countries from which new US citizens originate. (India may be an exception – a curious exception – as if the country were facing an unbearable burden of immigrants of all sorts.)

The consequence of this scenario is that, contrary to what I think is a widespread notion, there is no horde of legal immigrants living in this country and peevishly and disloyally refusing to take American citizenship. It also follows that there is no mass of illegal immigrants who obstinately refuse American citizenship. It’s not available to them, period.

I think it’s legitimate to be opposed to illegal immigration and even to legal immigration but it’s best to do on the basis of correct information.

Public Support for OReGO: Preliminary Results

tldr version;

Road pricing can be a useful means of addressing infrastructure fiscal issues, reducing congestion, and improving environmental quality and it has a chance of being implemented if advocates focus on mobilizing urban voters.

Thanks to all respondents.

This post is a quick detour from the NoL Foreign Policy Survey posts.

Among other projects I am working on, I am tinkering with a public opinion project aimed at the OReGO project. The OReGO is a pilot program operated by the State of Oregon to experiment with an alternative to the existing gasoline tax. Currently Oregonians pay 30 cents per gallon of gasoline, on top of the federal 18.4 cent per gallon tax. Volunteer participants of OReGO instead pay a charge of 1.5 cents per mile driven on state roads.


The primary goal of the program is to find a better way to fund the state’s infrastructure. The current system is inadequate because automobiles are becoming increasingly more fuel efficient and so, on a per mile basis, pay less for road use. Despite paying less these automobiles still rack up costs in road damage.

Advocates of OReGO, and other road pricing schemes, also hope that the program will serve as a means of combating congestion by making drivers more conscious of the marginal cost of their driving and encouraging them to avoid excess driving. The gasoline tax does this already, but very crudely in comparison.

Some advocates also hope to use road pricing as a means of improving local environmental quality and addressing climate change. Automobiles are a significant source of pollution and so reducing their use would yield environmental benefits. Even if the program kept the same number of cars on the road it could reap benefits if it reduced stop and go traffic; automobiles pollute more in stop and go traffic than free flow.

There is quite a bit of research from economists and urban planners on the issue, but public opinion research on it is relatively rare. What research exists tends to focus on either toll roads or in foreign regions. The reason for the gap in the literature is simple enough to explain – no jurisdiction in the United States has adopted road pricing. There have been a few small scale experiments, but they were largely engineering tests and surveyed only the opinion of participants. I hope to fill this gap in the literature by (eventually) conducting a large scale public opinion study of Oregonians.

The below pilot study had 220 respondents recruited through various Oregon sub-reddits (e.g. Portland, Eugene, and Salem). Respondents were obviously not representative of Oregon at large. The sample size was also small for an academic study of Oregon and there is a lot of noise. Most of the results presented are statistically insignificant. As a convenience sample though this survey was nonetheless useful. My goal in this survey was more about testing the survey before fielding it more broadly.

I thank all respondents to the survey – you’ve all helped the progress of science.

Survey Experiment Results:

The survey had a survey experiment. The purpose of survey experiments is to see how changes in phrasing, or other survey elements, influences response.

The experiment was in how OReGO was presented. Respondents were split into three sub-groups and received slightly different explanations of the program. In the base scenario they were told the program was simply a funding mechanism. In the congestion scenario they were also told about its possible congestion benefits. In the final they were additionally told about its possible environmental benefits.

OReGo is a pilot program currently being operated by the Oregon Department of Transportation. Participating drivers are being given the opportunity to pay 1.5 cents per mile they drive on public roads instead of the current 30 cent per gallon tax that the state of Oregon currently charges.

Advocates of OReGO, and similar road pricing schemes, argue that the program serves as a more dependable means of funding infrastructure than the current gasoline tax. They point out that as vehicles become more fuel efficient the amount that drivers pay per mile is decreasing, but costs associated due to road damage are not similarly decreasing. This means that in the long term the current gasoline tax will be unable to cover infrastructure costs. (/End of Base Scenario)

Advocates of OReGO also point out that the program can help reduce congestion by discouraging excessive driving and encourage the use of alternative means of transportation such as bicycling, walking, or transit. Although drivers currently pay for their automobile use in the form of the gasoline tax, many view it as a fixed payment. OReGO, which is charged on a per mile basis, may serve to make drivers more conscious of the marginal cost of their driving. (/End of Congestion Scenario)

OReGO could lead not only to reduced congestion, but could also serve to improve local air quality. One of the major sources of air pollution is automobiles, especially in stop and go traffic. (/End of Environmental Scenario)

Looking at support for adopting OReGO within five years the different treatments are little different from one another. The congestion treatment received a decline in support, but it is pushed back up in the environmental treatment.

I regret not adding a fourth group where respondents are told about the base option and the environmental benefits, but congestion is not added. As it is, it is hard to tell if the decline in support for OReGO in the congestion treatment is because people don’t care about ways to address congestion, or they dislike attempts at social engineering.


When we look at treatment effects among only those who identified living in an urban area the effects get more interesting. Urban voters were very responsive to the idea of environmental benefits and increased support for OReGO by over 10 percentage points.




What seems to be driving the difference in support for OReGO is inter-regional differences in perceived local air quality. Those who perceive local air quality to be ‘very good’ are least likely to support OReGO. This finding is exaggerated when looking at only urban respondents.

I played around to see if this was a statistical artifact from the above treatment; i.e. it is possible those who lived in ‘very good’ air quality regions received the ‘environmental treatment’  and I am picking up the latter effect. This was not the case.



Is this a simple case of those living in high quality areas having no interest in improving the region? A “I have mines” attitude. No. When I look at support for OReGO by how respondents judged local air quality had changed in the past five years, those who thought their local air quality was improving also had the highest support for OReGO.

There is a definite relationship here between support for OReGO and perception of one’s local air quality. I can’t put my finger on it just yet.


Bonus result: daily bicyclists are those most supportive of OReGO.


On quasi-rents and the minimum wage

Ryan Murphy of Southern Methodist University has a new article published in Economics Bulletin regarding the minimum wage and “quasi-rents”.  The argument made by Ryan has the advantage of theoretically fleshing out a point made by many skeptics of the new literature. Generally, the argument has been that in the short-term, the minimum wage may have minimal effects, but in the long-term, firms will adjust.

I tended, until Ryan’s article, to be more or less skeptic of the value of this counter-argument. My point has always been that the new literature (like the Dube-Lester-Reich paper) tends to act as a partial equilibrium story (focusing only on one sector only or one indicator). My view has always been very “Coasian” in the sense that there are transaction costs to adapting to any new minimum wage rate.

The height of the hike and what industries are primarily affected will determine the method of adjustments. Firms can cut on benefits, substitute between forms of labor (the minimum wage increases the supply of older workers which remplace younger inexperienced workers), hours or training. They can also, depending on the elasticity of demand for their products, increase prices or cut quality. They can also cut employment. All of these are channels of adjustment and they will be used differently depending on the context. They are all different expressions of the fact that the demand curve slopes downward. But each expression has costs to be used that are to be weighted against their benefits – which are highly circumstantial. For example, if I have a firm of two employees, I will not sacrifice half my workforce by firing a worker (thus sacrificing 50% of my output) for a 5% hike in the minimum wage. Not only would this be an over-reaction, but there are transaction costs for me to fire that worker : separation fees, emotional pain, learning what the employee was doing etc. Reducing his hours would be a safer adjustment.

Until there is a study that measures all of these adjustments channels at once, I am skeptical.

So where does Ryan’s story come in? Well, none of my arguments had a long-term component. They were largely void of any time dimension. While I am aware of research like those of Meer and WestClemens and Wither and Clemens regarding job growth patterns following minimum wage hikes, I always discounted that argument. I was always reluctant to engage in long-term reasoning because I felt it was conceding a point that ought not to be conceded even if that counter-point is valid.  I only used it to top up the rest of my argument. But Ryan introduced to me the concept of quasi-rents, of which I had vaguely heard during my undergraduate microeconomics class.

Basically, here is the argument about quasi-rents: in the short-term, there are rents to be extracted from fixed factors of productions. Firms need these quasi-rents to remain in business, but only in the long-run.  However, if labor can find a way to capture the rents in the short-run, they will get higher earnings and employers will not fire people as much. As a result, there is basically a reshuffling of the consumer surplus. However, in the long-run, nothing is fixed and firm owners can adjust by shifting to different production methods. Thus, they will reduce their future hirings. In Ryan’s words:

But the on-impact negative effects of minimum wages may be hidden. In the longer run, after the quasi-rent is dissipated, the owner would have the incentive to eventually switch from more labor-intensive methods to ones that are less globally efficient (this being the conventional “demand slopes down” result). More perniciously, the threat of future increases in the minimum wage may create regime uncertainty undermining a willingness to invest in the types of technology and capital complementary to low skilled labor, thereby reducing employment for low skilled workers. That is to say, the risk of the appropriation of quasi-rents can shift investment towards capital unlikely to be appropriated via the minimum wage. Repeated and arbitrary increases in the minimum wage worsen this risk. This is consistent with the recent shift towards long run effects of increases in the minimum wage, for instance Meer and West (2016).

This is exactly what Andrew Seltzer found for the introduction of the minimum wage during the Great Depression in certain American industries. In the short-term, the capital was more or less fixed and production methods could not be abandonned easily. In the long run, firms adapted and shifted production methods. This is why Ryan’s argument is convincing. It offers a theoretical explanation for the empirical results observed by Dube, Lester and Reich or Card and Krueger. It fits well with theories of imperfect markets (damn I hate that word that is basically saying that all markets have frictions) like those of Alan Manning (see his Monopsony in Motion here).

This is the kind of work on the minimum wage that, if measured, should force considerable requestionning on the part of minimum wage hike advocates.

“Statogenic” Climate Change?

Is climate change government-made? For some years, I have been saying to my colleagues that climate change is real. Nonetheless, I am not an alarmist and I do not believe that stating that there is a problem is a blank cheque for any policy. Unlike many of my colleagues who believe that climate change is “anthropogenic”, I argue that it is “statogenic” in the sense that government policies over the last few decades basically amplified the problem.

Obviously, there is a social cost to pollution – an externality not embedded in the price system. On that basis, many have proposed the need for a carbon tax to “internalize the externality”. The logic is that anything that brings the “market price” closer to the “social cost” is an improvement.

Rarely do they consider the possibility that governments have “pushed” the market price away from the “social cost” (Note: I really hate that term as it has been subverted to mean more than what economists use it for). Consider the example of road pricing. In my part of Canada (Quebec), road pricing was eliminated in the 1970s. By eliminating road pricing, the government incentivized the greater use of vehicles and, basically, the greater burning of fossil fuels. Thus, by definition, the return of road pricing would bring the market price and the social cost closer together (and it might do so more efficiently than a carbon tax). Thus, there can be “statogenic” climate change because governments encourage indirectly the greater use of fossil fuels.

How big is that “statogenic” climate change? I think it is pretty “yuge.” For the last few months, I have been involved in a research project with Joanna Szurmak and Pierre Desrochers of the University of Toronto regarding environmental indicators in the debates between Paul Ehrlich and Julian Simon (see Joanna’s podcast with Garrett Petersen here at Economics Detective Radio). In that paper, we mention the fact that roughly a quarter of the world consumption of fossil fuels is subsidized directly or indirectly (through price controls setting local prices below world prices). That is a large share of total consumption and, according to an OECD paper, 14% of the effort needed to attain the most ambitious climate change mitigation plan could be made by eliminating those subsidies.

Now imagine that estimate was made in 2011. These policies have existed since the 1970s! One paper from the World Bank from the 1990s argued that eliminating them back in the 1980s would have reduced greenhouse gas emissions by 5% to 9%. Imagine a level lower by 9% (just for the sake of illustration) and imagine that the growth rate of greenhouse gases would have been reduced by 9% as well. Using CAIT data, we can see how this oversimplified scenario (which is by no means a general equilibrium scenario – which is the only way to measure the overall lower levels) means in terms of lower levels of GHGs. Relative to the observed data, a 9% drop back in 1990 with a 9% reduction in the growth rate of GHGs mean that the level of GHGs in 2012 in a world without subsidies would have been more than 12% lower relative to what they were in a world of subsidies.


Again, this is an oversimplification. However, it works against my claim. The use of sophisticated methods is likely to yield much larger differences over time. Think about it for a second – alone the policy of fossil fuel subsidies explains a lot even with the oversimplification. Now, imagine adding the fact that many countries do not practice road pricing; that some countries tax the resale of used goods forcing the production of more goods; that they discourage construction in urban environments forcing a greater population sprawl; that trade barriers in agriculture prevent us from concentrating production where it is the most efficient; and the list goes on!

When people say “anthropogenic” climate change, I hear “incentives-driven” climate change or “statogenic.”

A Note on Trump, Immigration, and Healthcare Reform

Hopefully, the US election will start getting out of the he-said-she-said of assassination attempts and badmouthing parents of military personnel and start being about actual policy issues. Unfortunately, that isn’t going to happen at all, but in a minuscule and futile attempt to help get us there, I’m going to blog about some policy issues for a minute.

Trump’s campaign released a brief memo about his healthcare positions recently. For the most part the positions—though not quite detailed enough to really call a “plan”—are fairly decent. They contain most of the reforms free-market analysts have been proposing for decades such as opening insurance competition across states, allowing for Health Savings Accounts, and streamlining Medicaid funding. Notably missing was abolishing the employer mandate to reduce price fragmentation, as Milton Friedman proposed, although Trump proposes taking steps in that direction by introducing a tax deduction for individual insurance plans.

But what stuck out to me was that Trump, surprise, surprise, made xenophobia an element of his health care proposal by furthering the myth that immigrants are a further drain on our healthcare and welfare programs:

Providing healthcare to illegal immigrants costs us some $11 billion annually. If we were to simply enforce the current immigration laws and restrict the unbridled granting of visas to this country, we could relieve healthcare cost pressures on state and local governments.

Meanwhile in reality, undocumented immigrants actually contribute more to Medicare than they withdraw. It is unclear where Trump is getting his $11 billion figure, but he is ignoring the increased payroll taxes undocumented immigrants pay into these programs. A 2015 study found that, in fact, between 2000 and 2011 immigrants paid up to $3.8 billion more into Medicare than they took out. From the results of the study:

From 2000 to 2011, unauthorized immigrants contributed $2.2 to $3.8 billion more than they withdrew annually (a total surplus of $35.1 billion). Had unauthorized immigrants neither contributed to nor withdrawn from the Trust Fund during those 11 years, it would become insolvent in 2029—1 year earlier than currently predicted. If 10 % of unauthorized immigrants became authorized annually for the subsequent 7 years, Trust Fund surpluses contributed by unauthorized immigrants would total $45.7 billion.

Poor immigrant children, both legal and illegal, are also less likely to be enrolled in Medicaid or CHIP than citizens.

Thus Trump’s campaign is being factually dishonest by claiming that restricting immigration will help fund government healthcare systems, it will actually make Medicare go insolvent sooner. Which is especially concerning given that, until this memo, Trump has shown no interest in any meaningful entitlement reform.

This refrain—that immigrants are a fiscal drag on America’s welfare programs—has been among the most common refrains from Trump, and has even been popular among libertarians who are otherwise sympathetic towards immigration. But, as I’ve argued extensively in the past, it is completely false. Almost every major study shows that immigrants, at worst, pay as much into welfare programs as they get out of them.

Why Brexit is bad for Liberty

I have been debating classical liberalism and the European Union with Edwin van de Haar. For the moment at least, I think the debate should end or we will risk repetition of previously made points. I would like to thank Edwin for a constructive debate and to invited readers to read through it themselves. Now is the time to move onto a more concrete discussions of the UK referendum vote to leave the European Union.

The UK referendum vote to leave the European Union is not producing the consequences its most eloquent supporters and ideologues had predicted. It is of course very early to have a complete view of the consequences of Brexit, but a large part of Brexit journalistic, campaigning and intellectual elite have argued for leaving the EU on the grounds it would enable a mıore free market UK, one less burdened by regulations ‘imposed’ from Brussels.

A disproportionate part of this elite claims to be libertarian or conservative libertarian, operating in party politics via the Conservative Party and the UK Independence Party and operating in libertarian to conservative campaigning groups. Employees of the most important classical liberal and libertarian policy institutions, the Institute of Economic Affairs and the Adam Smith Institute were divided on this issue. However, some part of the Brexit elites were High Tory, that is traditionalist conservative.

The insistence on sovereignty and national institutions outweighs a commitment to free markets and individual rights. Immigration in particular comes off badly here. The High Tory narrative dominates the Brexit narrative in practice. Some Brexit enthusiasts welcome the supposed opportunity to boost defence spending (though this has nothing do with the European Union which places no limits whatsoever on national defence spending) and believe Brexit will allow restoring the UK’s Great Power status. This is already very high by general European standards and given the inherent limits of the UK’s resources compared with the USA, Russia and China, it’s hard to see how great power status could be attained and why the UK should try. It is clearly not compatible with retrenchment of the state.

David Cameron announced his resignation as Conservative Party leader and Prime Minister straight after the referendum result. His replacement Theresa May began her term of office with a speech suggesting greater state involvement in the economy and society. As Home Secretary she has a particularly illiberal record in civil liberties, immigration and drugs. She has announced support for changes in company law to force firms to accept employee representatives onto boards and restriction on takeover laws.

These measures have led the ‘Red Tory’, Philip Blond, to announce compatibility with his views and enthusiasm for her leadership. Blond runs the policy institute, ResPublica ( He was a colleague of mine in graduate programs at the University of Warwick in the late eighties, though I have not been in touch with him since. He moved from a period of research and university teaching in theology (he was studying European philosophy since the early nineteenth century when I knew him) into the policy world.

The contemporary theologian who influenced him most is John Milbank, an adherent of a version of the Christian tradition which tends to advocate community above individual, or at least would seem to do so if its social philosophy is turned into state enforced actions. There is a strong element of Medieval nostalgia for an organic society in Blond’s social and political thought. He is arguing for less not more free markets and individualism. Now there is no reason to think that Blond’s ideas will have a major influence on May, but if he feels so comfortable with her then that is reason to think there will be strong streak of communalist conservatism in the post-referendum government and even a hint of Christian socialism.

May’s approach has also been compared to that of Joseph Chamberlain, a nineteenth century advocate of interventionist local government and then of a protectionist, state-welfare orientated British Empire; he was as well considered by some to be the strongest advocate of Empire ideology in his time.

Even the Brexit supporters who have the strongest free market small government history have come out in favour of interventionist and corporatist polices. Allister Heath, a senior member of the Daily Telegraph staff, who has a reputation as a free market advocate published advice to Theresa May which is anything but free market, full of corporatism and buying off people who might be relative losers in the post-Brexit UK.

Previous free market advocates, who found it easy to be advocates when the EU served as a scapegoat for any and every overextension of state activity in the UK (whether or not in reality it originated with the EU), have become less clear in their commitment given that some EU support for open markets, such as bans on subsidies to keep bankrupt companies afloat, are no longer available. With some institutional supports for free markets removed, the Brexit liberty advocates find themselves in a world of paying off voters who voted for ‘leave’ because they don’t like ‘neoliberalism’ and blame any difficult consequences of technological invention and market innovation on Brussels Bureaucrats along with immigration from EU countries.

One key theme of the more ostensibly libertarian parts of the ‘leave’ campaign was to argue that they did not want to reduce immigration, but globalise it by replacing automatic rights of EU citizens to live in the UK with an Australian points system, which allows people to enter from anywhere in the world who has sufficient points with regard to educational level, scarce skills, money to invest and so on. However, it is clear that many ‘leave’ voters just want a reduction in immigration and May has distanced herself from a ‘points’ system in favour of absolute reduction.

The ‘leave’ vote won based on the anti-immigration, anti-globalist and anti-‘neoliberal’ instincts of a significant section of the ‘leave’ vote. It is not the whole of the ‘leave’ vote, but  ‘leave’ could not have won without it. The evidence so far is that whatever the intentions of the libertarian to conservative element of ‘leave’ thinking that the government is now driven by the wish to follow that aspect of public opinion. The UK is headed towards communalist corporatism, or even protectionist/mercantilist, security-state Great Power nationalist versions of conservatism. Clearly there is much work for liberty advocates to do in the UK counteracting this disaster.

Putting a stop to the Argenzuela Project

[Editor’s note: The following piece is written by Dr Nicolás Cachanosky, an economist at Metropolitan State University, Denver and a native Argentinian. Dr Cachanosky hails from the same PhD program (at Suffolk University) as Rick, who introduced us. His homepage is here, and he is also a member of the group blog Punto de Vista Económico (which you can find on the blogroll here at NOL). Check out his popular work for the Mises Institute, too. – BC]

For the last 12 years Argentina was under the influence of the Kirchner administration. First by President Néstor Kirchner (NK), and then two terms by her wife (and widow since 2010) Cristina Fernandez de Kirchner (CFK). Their plan, as perceived by many, was to alternate presidential terms between NK and CFK and remain in power endlessly. While this plan came to an end with NK’s death in 2010, CFK started to entertain the idea of reforming the Constitution to be able to run a gain for office. Because this was not possible, she chose Daniel Scioli, the Governor of Buenos Aires Province to be her successor. Last Sunday, November 22nd, Mauricio Macri, Mayor of Buenos Aires City beat Scioli in a ballotage and became president elect starting his term this coming December 10th.

Argentina was in path to become what is referred as Argenzuela. Namely, the Kirchner administration was taking the country, step-by-step, to become the next Venezuela of Latin America in a close way to what has been described as the four stages of populism. Under the Kirchner administration, the government increased their political ties with Venezuela, Iran, and China, at the expense of political relations with countries like the United States, Germany, and the United Kingdom. But the resemblance was not only in terms of political friendship, but on institutional and economic reforms. Argentina became a country where “Republic” is just a word on paper without a real presence in the country’s institutional reality. According to the Fraser Institute’s Economic Freedom of the World, in 2003 Argentina ranked 99 out of 153 countries. By 2012 it ranked 149 out of 152 countries. The loss of economic freedom was fast and significant. Economic troubles and imbalances did not take long to appear.

Macri’s victory in the presidential elections put a stop to the Argenzuela project. We know what a presidency by Macri won’t look like. But it is still hard to say what it will actually look like. Macri is known for his emphasis not in free or unfree markets, but on an efficient administration. While not difficult to be more free market than the Kirchners, it might prove difficult to describe Macri’s political movement, Pro, as a free market party. The Kirchner administration has refused, at least so far, to share information with Macri and his appointed ministers, so the real situation of the economy and the Treasury remains unknown. Macri and his team are working on reform plans half-blinded because they don’t have reliable economic information, if they have it at all.

Specific reforms by Macri are still unknown (at the time of writing these lines), but his team of Ministers has already been announced. The people he’s bringing to the government with him show significant successful careers in government, the private sector, and international organizations (her chosen Chancellor is the Chief of Staff of Ban Ki Moon, General Secretary of the United Nations.) This is a clear contrast with the Kirchner administration, where all the Ministers showed a strong ideological motivation before professional accomplishments.

The economic crisis in Argentina hands Macri a unique opportunity to carry long needed significant reforms. He has, also, a unique political position. His political party has not only won the presidential election, with Pro Macri has also retained the Mayor’s office of Buenos Aires City and also won the Governor elections for the Buenos Aires Province. Macri’s Pro is in charge of the three most economically and political important districts. Let us hope that Macri does not become yet another lost opportunity in Argentina’s history.