Trump's appalling comment about other countries proves he's a lousy investor

The president knows nothing about human capital

Donald Trump and Kevin McCarthy.
(Image credit: Nicholas Kamm/AFP/Getty Images)

President Trump has, once again, said something appalling.

In this case, he labeled a host of poorer countries with predominantly non-white inhabitants as ... comparable to the interior of an outhouse. Why, he protested, should we be taking people from places like that, when we could invite people from cleaner countries instead? Countries like, say, Norway.

Plenty of other commentators, including The Week's Matthew Walther, have made the moral case against both the language used and the sentiments implied. But in the Trump era, a willingness to ignore moral scolds has become a kind of inverted virtue. For the sorts of voters who first cottoned to Trump precisely because of his willingness to use strong language about immigration, it's just common sense: Why take the risk of inviting people in from countries like Haiti, El Salvador, and Nigeria, with their endemic problems of poverty, crime, and corruption?

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Now that the Republican Party is increasingly lining up behind Trump's sentiment — if not his language — it's worth dissecting the case for investing in people from rough places.

The simplest reason we take in so few immigrants from countries like Norway is that very few Norwegians want to leave. Net migration of Norwegian citizens has been close to zero for the past 25 years; 8,000 to 10,000 Norwegians leave every year, but about the same number move back.

This is because Norway is a wealthy and highly developed country with excellent schools and a low crime rate. Its unemployment rate has remained below 5 percent for the past 20 years, and its total fertility rate has been below two births per woman since the mid 1970s (while also never dropping below 1.7, suggesting that economic constraints on fertility are also limited). Norway is a stable, prosperous society with the highest "happiness index" in the world, as well as extremely enviable rankings on indices of both political and economic freedom. Why would any significant number of people bear the costs and risks of emigration when things are so great at home?

By contrast, Haiti and El Salvador have suffered multiple man-made and natural disasters, which create a pressing incentive to leave. Nigeria, meanwhile, is a burgeoning African power, with significant oil resources and a large and educated middle class — but also rampant corruption, poor infrastructure, and, with a total fertility rate above five births per woman, inadequate economic opportunities for a rapidly growing and increasingly mobile population.

All of these factors drive emigration — sufficiently so that large numbers of people are willing to bear significant personal costs and, in some cases, mortal risks to move to a foreign country. This, our hypothetical Trump supporter might say, is precisely the problem. If the people who want to come here are overwhelmingly from the "wrong" places, shouldn't we work harder to bring in people from the "right" places instead?

This is looking through the wrong end of the telescope.

The supply of potential migrants from Nigeria or El Salvador is vastly larger than the pool from countries like Norway. That means we can be far more selective if we are open to immigration from less-developed countries than if we aren't — creating rich opportunities for the United States.

Leave aside questions of compassion and whether we have a moral obligation to open our gates to help citizens in need from other countries. Even if America took a purely skills-based and economic approach to immigration, we would expect far more Nigerians than Norwegians to be accepted. It's not only that the population of Nigeria is so much larger; it's that America has more to offer skilled Nigerians than it does skilled Norwegians. And to the extent that war or crime or natural disaster drives people who would otherwise prefer to stay home to emigrate — people who had achieved success and through no fault of their own watched it turn to, as the president might say, outhouse material — that creates an opportunity for an enterprising country like America to acquire human capital on the cheap.

For evidence, look at Canada. Yes, Canada does take refugees and admits some immigrants under the rubric of family reunification — but over 60 percent of recent immigrants were admitted through an economic program. In other words, they had to demonstrate valuable skills and have employment arranged. That hard-nosed approach is why Canada is often touted by moderate immigration skeptics as a model. But between 2011 and 2016, the majority of immigrants to Canada came not from Europe but from Asia and the Middle East, from countries like the Philippines, India, Iran, and Pakistan. And more immigrants to Canada came from Africa than from Europe.

Advocates of open borders often talk about the value unlocked by freedom to migrate. But even if you assume that we shouldn't have free movement of labor, even if you assume that migration rules should be highly restrictive, and that we should focus on bringing in people who already have the skills to benefit the country, the way to maximize the value of immigration is to cast the net wide and then be highly selective. And doing that will, yes, overwhelmingly lead to immigration from non-European nations — and particularly nations with problems at home that pose barriers to advancement.

It's not surprising that Trump doesn't see things this way because he's never been a value investor. His philosophy has never been to see the potential in an asset or enterprise that's undervalued by his competitors. Rather, Trump routinely chased properties — like the Plaza Hotel — that were already exorbitantly valued and then overpaid for them and lost money. In his more successful ventures, he simply played on a similar desire for status on the part of his customers, selling them an inferior product wrapped in the cliche trappings of luxury.

Moreover, Trump's original business was residential real estate, and when you're evaluating tenants, you only care about the downside. You worry about whether a tenant will be able to make his rent or whether he'll trash the place, not whether he's willing to work two jobs to put himself through medical school. If you can avoid getting sued for it, there's a narrow but valid business logic to discriminating against tenants who didn't grow up with indoor plumbing. But it's not right and it's not good for the country as a whole — which is precisely why the law says you can be sued for doing it.

America isn't a condo association. It does have an interest in the upside of its residents. And it will never achieve that upside by paying up to acquire already fully-priced assets. There's a legitimate debate to have about whether we're investing enough in our own human capital, and whether business interests prefer immigration as a solution to any labor problem because they don't have to foot the bill for those investments. But insulting immigrants does nothing to advance that debate.

Meanwhile, inasmuch as there's a boost to be had from immigration, it'll come disproportionately from the diamonds in the rough. And we're far more likely to find those unexpected diamonds in places that are, well, a little rough.

To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us