Illegal Immigration Hinders Reform in Mexico
The government and society in Mexico is corrupt from the cop on the beat up to their leading official in the War on Drugs and members of the Mexican legislature. It is the migrant economy that keeps a lid on the unrest in Mexico and allows the kleptocracy to continue. Mexicans outside of the capital have to pay more for potable water, electricity and gasoline than we in the USA do. Considering the income levels, this is not only an unsustainable situation, but gouging of the poor.
Without the cash flow from the north, Mexico might see some unrest leading to reform. Currently, the status quo is enforced by our policy with respect to migrant labor. If we wish to see a reduction in corruption in Mexico and here, then we must have a policy that changes the status quo. Securing our borders would upset this status quo.
A. The impact of corruption
This corruption has a huge economic cost and is a key element in the poverty afflicting Mexico.
[Shang-Jin] Wei found that reducing the level of corruption from the Mexican level to that in Singapore would have the same effect on foreign investment as reducing the tax on capital income by 50 percentage points. In other words, corruption reduces foreign investment as much as a tax that takes half of net income!
This does not mean that corruption in Mexico in fact does take half of net income. Wei showed in another paper that unpredictable corruption is more harmful than routine corruption with a steady cost. Part of the stifling effect of corruption on the economy comes through the uncertainty and insecurity it forces on businesses, above and beyond the financial cost.
For those familiar with the Laffer curve and the impact of such a tax on capital investment, the impact is clear. Economic development in Mexico is stifled due to corruption. A similar pattern is noted elsewhere in the world.
Corruption delays, disturbs and diverts growth and development.
The problem, while not peculiar to Mexico, ought to interest us here in the US the most because it impacts us most directly and negatively. With continued poverty in Mexico, the pressure to come here will not abate. But, with continued corruption, the money brought into Mexico by the illegal migrants shall not alleviate the poverty problem.
Corruption has a negative impact on the scale, form and growth rate of private sector development. It has both direct and indirect consequences for the conduct of business.
At the macro economic level, the consequences include:
* Corruption helps distort the market by redirecting economic activity from one sector to another. In so doing, corruption destroys the structure and pattern of economic development and reduces the efficiency of economic activity.
* Corruption has fiscal, budgetary and debt effects which collectively damage the economy and make private sector development very difficult. In its extreme form, corruption destroys economies and makes business activity impossible.
At the level of the individual business or corporation corruption is damaging in the following ways:
* It raises the costs of doing business
* It increases the risks and uncertainties of doing business
* It discourages and reduces investment in general and capital investment in particular
* It creates unfair competition
* It diverts resources away from productive investment
* It complicates and delays business transactions
* It deters entrepreneurs from starting up businesses
We are becoming more corrupt with the expansion of the illegal migration. The size of the underground economy (black market) is a good indicator of the level of corruption in a society. Furthermore, illegal trade undermines the societal structures upon which it depends.
B. The impact of the migrant economy
The contribution of the black market economy in Mexico from illegal migrant workers alone is 25% of GDP. Then add in the black market activity from drugs, gun running and other activities and the black market percentage of GDP is even larger. The size of the black market indicates how large the corruption problem is in Mexico, and we are contributing to it via our willful neglect. This neglect is not compassionate, it is misguided and it contributes to the misery south of the border.
The 25% GDP is huge. The oligarchy in Mexico feeds on this as it is they who then sell services to the Mexicans who remain. We are paying for this power base to continue and expand. The result is that we are maintaining a corrupt regime when we purchase goods and services from illegal migrant workers.
The securing of the border will put a time limit on how much longer this oligarchy can continue. The securing of our border will stem the flow; the enforcement of our existing laws will reduce the numbers of illegal aliens in this country. The situation we are in is the result of 40 years of willful neglect. It may very well take that long to undo what we have wrought.
The situation south of us is not sustainable. The only question is do we want to fix it, or allow it to continue because it provides us with a new slave class? A good first step would be to cut the corrupt off from one of their chief sources of wealth -- the money the migrant workers send home. The only long-term solution is to reform the Mexican polity, which cannot happen in the current environment.
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