A Flood of Bad Economics on Tech and Immigration

 by Ray Keating

The Keating Files – October 7, 2020

 

With a presidential election less than a month away, the political silly season has shifted into high gear. And that’s saying something because we now live in a 24/7, 365-days-a-year political silly season.

It’s not just the calendar that signals the current stage of such silliness, but what politicians are saying and doing as well. For example, these days it’s standard fare to rail against technology firms and immigrants, while, of course, ignoring actual economics. After all, economics and reason can be an annoying distraction when trying to turn out one’s political base.

 

So, we have a hot-off-the-presses report from the Democratic staff of the House Antitrust Subcommittee that accuses tech companies Amazon, Facebook, Alphabet (i.e., Google), and Apple of wielding monopoly power, and stomping out competition and innovation. The Democrats ominously declared, “Our economy and democracy are at stake.” Golly.

 

The Democrats tossed out some ideas for government action, including forcing companies to separate certain lines of business and more forceful antitrust powers.

 

Not to be out done, Republicans on the subcommittee chimed in with their own report, which asserted that “Big Tech is out to get conservatives.” Golly … again.

 

In reality, this political stunt fails to take note of the vast innovation that is ongoing in and around the internet; the ever-multiplying choices and reduced costs for consumers; the expanded opportunities for entrepreneurs and small businesses; and the fact that no tech company, no matter how big it happens to be today, can afford to sit back like a fat monopoly, and raise costs or reduce quality for consumers. Were that to happen, that company would be crushed by new or existing competitors, and consumers would quickly move on.

 

Political grandstanding and antitrust regulation are by nature backward looking. Trying to guide and regulate a sector of our economy via antitrust is the equivalent of putting a government bureaucrat in an industry driver’s seat – which should make us all very uneasy – and then have that political appointee drive the car while looking in the rearview mirror. This has always been the case, but given the fast-changing, dynamic nature of our tech economy, it’s particularly ridiculous and dangerous.

 

The question really is quite simple. Who do you want calling the shots in the end: consumers or government? If you favor consumers, then let tech companies – big, small, emerging and still-yet-to-be-born – compete to serve consumers. If you favor government, then forget consumers, let politics reign, and pull more technology under the control of government. After all, how could that possibly go wrong?

 

Oh yeah, and by the way, regarding accusations from Republicans – in particular, populists – who say that tech companies are out to get them, well, while Silicon Valley clearly leans strongly Left in terms of its prevailing politics, the tech tools they produce seem to be serving Republicans and populists quite well. Hmmm, go figure.

 

For good measure, Democratic presidential candidate and former Vice President Joe Biden also favors increased antitrust regulation. For example, a Biden campaign spokesman toldThe Wall Street Journal recently: “Many technology giants and their executives have not only abused their power, but misled the American people, damaged our democracy, and evaded any form of responsibility. That ends with a President Biden.” Golly, one more time.

 

But attacks on so-called Big Tech can’t stop there during the political silly season. How about a two-for-one policy change that not only slaps U.S. tech companies, but immigrants as well? President Trump and his administration certainly can’t pass up that opportunity. After all, that anti-immigration base needs shoring up.

 

As a result, the Departments of Homeland Security and Labor have announced a tightening of requirements for H1-B visas, which cover high-skilled foreign workers. Apparently, it’s time to make it tougher to bring in such immigrants and to raise the costs of doing so.

 

The new regulations, according to officials, will increase the level of rejected H1-B visa applications, and mandate that H1-B visa workers receive higher pay. Wait, is that like an increased minimum wage for immigrants? The political folks might want to take a closer look at that – could be a bad look with the base. 

 

Joe Biden also favors jacking up government mandated wages for H1-B visa workers.

 

This entire effort, of course, is built upon the fiction that immigrants coming to the U.S. take jobs from native-born Americans, drive down wages, and contribute nothing. But the truth is that these and other immigrants fill jobs that U.S. businesses cannot fill otherwise; do complementary work that enhances the productivity and incomes of native-born workers; generate further growth as producers and consumers; and have a higher propensity for entrepreneurship than do the native born. Immigration, as most economists will tell you, is a net-plus for the economy, and studies overwhelmingly show no negative effects on wages of the native born due to immigration.

 

The U.S. economy is not a zero-sum game, whereby one person’s gain is another’s loss. Instead, when not held back by pandemics, government shutdowns, and/or costly public policies like high taxes and onerous regulations, entrepreneurs, investors, businesses and workers – including tech companies and immigrants – drive wealth creation, economic growth, productivity, income growth, and job creation forward.

 

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Recent and Related Columns by Ray Keating…

 

“Polls Before the Dreaded Presidential Debates”

 

“Voting Your Conscience Isn’t Wasting Your Vote”

 

“Character-Rich Sci-Fi: Take the Netflix Journey with ‘Away’”

 

“Applaud, Don’t Attack, Robinhood”

 

“Sports Are Back But Americans Aren’t Happy”

 

“Should We Take Our Ball and Go Home When Pro Athletes Disagree with Us?”

 

“‘Greyhound’ Ranks as Strong Storytelling – Even on a Smaller Screen”

 

“2020 Politics as the Conventions Get Rolling … Kind of?”

 

“Biden Picks Harris: Will It Matter on Election Night?”

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

Keating’s latest novel is  The Traitor: A Pastor Stephen Grant Novel, which is the 12thbook in the series. The best way to fully enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

PRESS CLUB C Podcast with Ray Keating – Episode #24: Big Government vs. Big Tech

Guess Who is the Real Problem? – CEOs of top technology companies were recently hauled before Congress, albeit remotely. The purpose? Well, for all of the importance attributed to this hearing, in the end, it was just another excuse for political posturing and grandstanding. Go figure. Tune in here! 

Guest Column: No, The Government Should Not Tell Apple How To Make iPhones

by Bryan Riley

The Keating Files – July 25, 2020

A recent Wall Street Journal op-ed, “Bringing the Factories Home: Any new industrial policy has to make the U.S. less vulnerable to Chinese suppliers,” by Hudson Institute Senior Fellow Arthur Herman, adds little to the debate over what to do about China.

Plans to “bring the factories home” come with great risks. One that is rarely mentioned is the likelihood that other countries may decide to copy this policy and “take the factories home.” For the 2.6 million American manufacturing workers employed by foreign-owned companies that have built U.S. factories, this would be a devastating result.

Perhaps the key takeaway from the piece is embodied in the suggestion that the federal government should tell Apple, one of the most innovative and successful companies in American history, how to produce iPhones.

Mr. Herman further suggests that China has a stranglehold on American’s access to important health-care goods like ventilators, and therefore the government should reduce American “dependence” on China-sourced pharmaceuticals and health-care products.

Last year, China accounted for 17 percent of all U.S. ventilator imports. That’s hardly a stranglehold.

Overall, more than half of medical goods and pharmaceuticals used in the USA are made in the USA. China accounts for about 2 percent of the combined U.S. market for medical goods and pharmaceuticals.

According to Mr. Herman, 97 percent of antibiotics used in America are sourced from China. It’s not clear where that statistic comes from. According to data from the U.S. International Trade Commission, about 2.4 percent of U.S. antibiotic imports came from China in 2019.

Perhaps he is referring to “Active Pharmaceutical Ingredients” (APIs) imported from China.

According to March 2019 testimony from the Food and Drug Administration (FDA), “we cannot determine with any precision the volume of API that China is actually producing, or the volume of APIs manufactured in China that is entering the U.S. market.” In June 2020, an FDA spokesman reiterated this: “Data available to FDA do not enable us to calculate the volume of API being used for U.S.-marketed drugs from China or India, and what percentage of U.S. drug consumption this represents.”

This lack of data is certainly problematic. It was addressed by Congress in a CARES Act provision authorizing research to get to the bottom of this. In the meantime, there is no reason to believe that 97 percent of U.S. antibiotics are sourced from China.

Mr. Herman adds: “Asia produces 90 percent of the world’s circuit boards—more than half of them in China.”

This statement is reminiscent of the time Scott Williams (2 points) and Michael Jordan (55 points) combined for 57 points in game 4 of the 1993 NBA finals. Why commingle production by China with that of Japan, Korea, Taiwan, and other U.S. allies? More fundamentally, if U.S. manufacturers can procure affordable circuit boards for garage door openers and refrigerators from abroad, how exactly does that threaten American security?

He repeats this tactic with respect to STEM education: “A 2019 Congressional Research Service report found that India and China together made up nearly 70 percent of foreign students enrolled in STEM courses in the U.S.” It makes even less sense to lump together India and China than it does to combine the scores of Michael Jordan and Scott Williams, unless the goal is to concoct a big, scary number.

Mr. Herman is concerned that manufacturing now makes up 11 percent of U.S. gross domestic product (GDP), compared to 25 percent in the 1960s, and that more than five million American manufacturing jobs have been lost since 2000.

It seems that critics of American manufacturing capacity will look at any measure except for how much we manufacture to justify their policy prescriptions.

Manufacturing output has steadily increased over the years. There is no reason Americans should be concerned that other areas of the economy have grown even more, reducing manufacturing’s share of total GDP.

Nor should Americans be concerned that technological advancements made U.S. workers more productive than ever, reducing the number of manufacturing jobs. The economy added new jobs elsewhere, and overall employment grew.

If there’s a problem with that, the easiest fix would be to fire all the country’s doctors, accountants, teachers, and plumbers and ban all imports of affordable clothing. Manufacturing’s share of GDP would increase, and more Americans could return to factories to run sewing machines 40 hours a week.

As is always the case with industrial policy advocates, the proposed solution to the misdiagnosed problem involves the federal government picking winners and losers -- specifically, “Washington should identify commercial-sector technologies that may be crucial to national security. Artificial intelligence, robotics, quantum technologies and nanotechnology all need a strong domestic manufacturing base.”

Perhaps there are those who sincerely believe in the existence of some wizard or super-computer or fortune-teller or bureaucrat who knows the future, and who can use that knowledge to decide how much money to take from farmer A to throw at robotics company B instead of robotics company C or nanotechnology company D. But history suggests that limiting federal involvement to specific, targeted national security needs is an approach that’s much more likely to work.

Telling pharmaceutical companies how to make drugs and Apple how to make iPhones would make us weaker and worse-off.

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Data Notes:

Ventilator imports based on HTS number 9019.20.0000, “ozone therapy, oxygen therapy, aerosol therapy, artificial respiration or other therapeutic respiration apparatus; parts and accessories.”

Medical goods calculations based on NAICS number 3254, "Pharmaceutical and Medicine Manufacturing," and NAICS number 3391, "Medical Equipment and Supplies Manufacturing." 

Antibiotic imports based on HTS number 3004.10, “medicaments, in measured doses, etc., containing penicillins or derivatives thereof, or streptomycins or their derivatives,” and HTS number 3004.20, “medicaments, in measured doses, etc., containing antibiotics, nesoi.”

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Bryan Riley is Director of the NTU’s Free Trade Initiative. This column was originally published here.

Free Enterprise in Three Minutes - Episode #12: No, Apple and the NFL Are Not Monopolies

Politicians, the media and more than a few economists rather haphazardly toss around the word “monopoly.” Ray Keating sets the record straight on what a monopoly actually is, and no, Apple, the NFL and Major League Baseball are not monopolies.

Tune in at http://www.buzzsprout.com/155969/707801-episode-12-no-apple-and-the-nfl-are-not-monopolies