Immigration and growth at any cost
Immigration and growth at any cost
Why the elite must avoid economic contraction
Immigration of both the legal and illegal varieties played a critical role in Trump’s victory in 2016, and it remains a key driving factor in the appeal of the Trump-Vance campaign during this election cycle.
The above claim is likely uncontroversial (albeit emotionally fraught for many), but I want to analyze an under-appreciated aspect of why the immigration debate continues to rage unabated — and that’s how immigration addresses the economic problems presented by demographic change.
In his recent stumping for the Harris campaign in Georgia, Bill Clinton has said that “we got the lowest birthrate we’ve had in well over a hundred years, we’re not at replacement level, which means we’ve gotta have somebody come here if we want to grow the economy.”
He’s right, but it’s rarely put so bluntly by the ruling class.
Many on the Right raise a shrill voice about immigrants voting in our elections, but these theorists miss a massive opportunity when they spend time pushing those claims instead of describing in detail the economic, political, and personal forces which create the immense pressure for continuing to increase immigration levels against the wishes of the 55% of Americans who favor decreasing current immigration levels.
Those who are wealthy and powerful in the United States will continue to ignore the electorate on this issue because they understand the effects which key demographic trends will have on the economy (and, consequently, on their personal situation) in the long run; effects which they must avoid at all costs.
Trends are pointing towards contraction
Put bluntly, we are an aging population which is not reproducing above the replacement rate. This combination spells disaster for a number of reasons:
A society with many elderly people consumes more resources than they put back into the economy, both because they draw on public money (Social Security and Medicare) and because they are not economically productive. They require the younger and more able to take care of them.
However, low replacement rates mean that there will be fewer productive people to economically support this growing bloc of elderly, who will be the largest and most expensive cohort in society. This means that each person will have to shoulder a greater share of the burden of supporting the elderly than if the costs were spread across more net tax-payers.
Fewer workers to support the greater demand for services for the elderly will drive up costs for providing those services for the elderly, which will in turn increase costs for public money covering those expenses, or will get pushed to more millennial and Gen X workers dipping into their own savings to support the costs of housing and caring for their elderly parents, thus increasing private burdens.
Finally, the asset distributions which will begin to cascade as this large cohort of elderly begins to pass away and transfers their retirement savings and property to the remaining generations have the potential to put downward pressure on prices for assets, such as how new housing stock coming on the market can lower prices by flooding the market.[1]
These factors and more run contrary to Bill Clinton’s stated goal that we have a “growing economy,” and would instead lead to a long term economic contraction.
However, contraction is the one thing which the wealth and powerful in our society absolutely must avoid. Prolonged negative growth would not only be disastrous for their portfolios, but would also likely kick off negative feedback loops which would unravel important public and quasi-public institutions which also rely on never ending “line go up” to keep them afloat.
Economic contraction would have a domino effect of undermining the financial, political, and symbolic structures which support our society today, ultimately leading even to the collapse of the dollar as a global reserve currency and medium of exchange. The world we live in is built on the assumption of infinite growth. The only way it can sustain itself is by consuming more today and pushing the cost out into the future.
Notional wealth and inflationary assets
The American empire relies on a principle of continual growth in order to function properly, because wealth in our society is notional and assets are inflationary. What does that mean?
By notional wealth I mean wealth which exists on paper as the valuation of an asset based on its future expected value (or return). The infamous mortgage-backed securities which triggered the 2008 financial crisis are good examples — the price of these securities was pegged to the future anticipated cash flow generated by the payments made by the borrower on the underlying mortgage. That is what defines what a mortgage will be worth in the future, and it’s that future value which determines its present price.
Many of the wealthiest people and corporations in our society are like Elon Musk — their wealth exists primarily as the valuation of financial assets, like equity in companies, and they can operate from a shockingly cash poor position by either selling their assets, issuing bonds, or leveraging their assets as collateral for loans. That’s why when Elon went to buy Twitter, it wasn’t exactly clear how he would pony up the cash to do it, and we saw how in the end he had to sell a lot of Tesla stock at a discount and get financial help from others.
Stocks provide us with another great example — a stock is a share of ownership in the future returns of a corporation. The present value of a stock indicates how buyers in the market feel about the future returns of the underlying corporation. The correlation between the price and the underlying asset has grown increasingly strained in the past few years since the increased presence of retail investors in the market (think of the GameStop fiasco), but the reality remains that a stock in a doomed or struggling company will fall precipitously if another force does not intervene to counteract it.
Notional wealth means that the present valuations of the wealth of individuals, corporations, and institutions (which often constitute a sizable portion of these individuals’ wealth!) comes down to market opinion about the future growth of certain economic entities or financial assets. But if we cannot rely on future growth, how will these assets perform? Surely some winners will outperform, but the price of the S&P 500 currently stands at 29.62 times the amount of the earnings of the companies within it (P/E ratio)— this means that the S&P 500 currently trades at nearly 30 times what its underlying assets are worth.
Inflationary assets are closely related to notional wealth (we’ll spell this out in just a bit), but inflationary assets are those assets whose valuation rises over time, in no small part, due to inflation. Housing would be the primary example here, but any real assets like precious metals, corn, or oil would qualify too. As long as there is some restriction on supply, the combination of growing societal demand (which is itself based on continued economic growth and a growing population) and the devaluation of the underlying currency will cause the value of an asset to rise at rates which outstrips real inflation rates and real wages.
In the 1950’s the average home cost $7,354, but the average worker’s wages could purchase that home with three years of wages. However, today the story is much different. The median home sale in the US in 2024 was $412,300 (many houses costing more like $800k+ in the hottest markets), meaning that the cost of that home compared to the US average wage ($59,436) has risen to 6.9 years of wages.
While the real wages which companies choose to pay workers have not kept up with inflation, we also have to account for the massive amount of money printing which has caused one dollar in 1950 to be worth 13x a dollar in circulation in 2024. Some quick math shows that a $31,692 house in 1950 would be equivalent to today’s $412,300, so perhaps we can surmise that the $24,338 difference between that pricier house and the average one can be accounted for by all the other economic factors going into driving up prices, mostly the effects of demand and the costs of materials.
We can’t afford to ignore these inflationary assets because they are actually the bedrock upon which much of the notional wealth in society is based. For instance, $379 trillion is tied up in the world’s real estate, making it by far the most valuable asset class in the world (global debt securities comes in a distance second at $129 trillion). Inflation is also much much worse in most other countries, so the effect of inflation on the value of assets is even more dramatic.
Again, thinking about mortgage-backed securities, the value of the underlying mortgages in the bundle is dependent upon both the demand for homes and the devalued currency in which the asset is priced, which raises the notional value of the asset. Further, if inflation and market demand continues, this means that the future notional value which almost certainly be higher than it is today. This means that you can leverage real estate today in a more valuable currency (less de-valued), using it as collateral to secure credit or loans whose amounts are based on the higher price which the asset will command in the future because the currency it’s priced in is worth less.
Notional wealth and inflationary assets allow the ruling classes to eat tomorrow’s cake today, and infinite growth lets them continually defer the cost into the future. The economic contraction which would result from allowing contemporary aging and fertility trends to continue without some ameliorating measures would mean that the consequences of enjoying tomorrow’s money today would finally come home to roost.[2]
If this all sounds like a Ponzi scheme, it’s because it is.
Now, back to immigration
To summarize that last section, I argued that notional wealth represents underlying assets which are priced in a currency which is being devalued (so it looks more valuable in the future), and an economic engine of population growth drives demand which outpaces the devaluation of the currency. Thus all present wealth depends on the inevitability of continual future economic growth.
But what does this all have to do with immigration?
The answer is that immigration addresses the demand part of the equation which allows notional asset values to outstrip inflationary devaluation, because it’s precisely this demand which is threatened by an aging and shrinking population. As Clinton points out, we have to start importing human beings to feed the economic engine which underlies the notional value of all assets.
If we were to compare the entire US labor force to a union, we might say that American citizens are “going on strike” by aging and not having kids to replace themselves, so the government is doing some union busting and importing scabs from overseas. The aim is to both juice demand and keep wages stagnant or depressed. Keeping wages down ensures that profit margins and future profit projections can stay the same or even grow, which increases the overall value of the stock market and the companies traded on it. Of course, it also increases the government’s tax payer base.
But how can demand continue to grow if wages stay stagnant? The first part of the answer is that immigration adds net new population, which increases demand simply because more humans need more things. Another part of the answer is that increased spending by the US government on benefits and services for immigrants and refugees stimulates certain sectors of the economy.
But another important part of the equation is credit. People whose wages are not keeping up with inflation, and who find themselves competing with more and more people in their community for a finite amount of resources will find themselves increasingly turning to credit to pay for things. Loans and credit are very good for business — they have a built-in rate of profit (interest rate), payments are scheduled and predictable, and debt can be re-packaged and re-sold in arcane financial instruments which are then traded on the market.
All in all, an indebted population is profitable and easy to control. Without cash reserves, people are less likely to take risks, more likely to rely on debt or subscriptions to finance their needs, less likely to jeopardize their employment, more likely to accept unfair or exploitative corporate behavior, and generally afraid of the consequences of deviating from established social scripts.
The reality is that the elites need to continue to accelerate immigration if they have any hope of the achieving economic growth which they desperately need in order to buoy their notional wealth and generate demand for their inflationary assets (on which that notional wealth depends). Baal can’t give us more crops unless we keep sacrificing children, and we’re running out of children!
The discourse around immigration has been highly duplicitous, with Bill Clinton’s comments being either senility or a rare moment of candor. While racism and xenophobia can never be eliminated as an operative factor in a policy discussion concerning foreigners, the elite in our country have nonetheless disguised their economic interest in immigration under a cloak of moralism about our moral duty to welcome the poor and the oppressed (using government money and resources, of course).
More Americans are seeing through the self-righteous gloss with which the elite covers over the structural disaster which the looming economic contraction poses to their lifestyle and identity. However, high levels of legal (and illegal) immigration are disadvantageous to the lower and middle classes, which means that they bear the brunt of the economic and social costs of the immigration policies advocated for by the elite.
Since the ruling class in this country needs immigration for reasons which they cannot openly acknowledge, they must resort to emotional reasoning and moral condemnation to silence any discussion of the topic whatsoever. To suggest that immigrations may not be a net positive to society is tantamount to racism, and to propose the idea of restricting the number of people who can come into the country is equated with genocide.
This discussion about immigration will not go away, despite all of the performative moral furor from the credentialed, chattering, and capitalist classes condemning ordinary Americans as Nazis and ‘deplorables.’ The rhetoric about immigration has reached such a fever pitch because the conversation cannot even begin — the ruling class smothers it before the question can even be broached. Thus, the push for a conversation about immigration stands for much more than developing a plan for how best to let foreigners into our country (although it’s at least that), but it touches on the economic and political divide in our country between those who the system works for and those for whom the system doesn’t — which, it turns out, is the vast majority of us.
[1] This is an experimental claim on my part, and I’m open to constructive dialogue on this point. Further, this situation of lots of new housing coming on market and a generational wealth transfer is likely too complicated to definitively predict what the effects will be. After all, housing stock coming back on market could just as easily be a boon to private equity and large rental corporations who can snatch up cheap housing for cash, thus buoying prices and outcompeting lower and middle class homebuyers. Also, the transfer of assets and wealth could spur additional spending which may stimulate the economy because those funds are no longer being funneled into less productive industries like hospice care. I’m curious to get others’ thoughts on this!
[2] The unfortunate realization on this front is that the elite have effectively designed the economy to where even ordinary people would go down with the ship if this happened, creating a game of chicken where if they fail then we also fail. For most Americans who own homes, their home is their most valuable asset, so an economic contraction would reduce their home’s value. Further, most Americans are invested in either a 401(k) or a pension fund, both of which are invested in the stock market and bond market to grow. So, while the wealthy get to enjoy this state of affairs, we will all have to share in the pain if and when things unravel. A classic ‘heads I win, tails you lose’ sort of scenario which the rich and powerful in society have constructed for themselves over time.