Immigration and American Power

Joseph S. Nye

10 December 2012


CAMBRIDGEThe United States is a nation of immigrants. Except for a small number of Native Americans, everyone is originally from somewhere else, and even recent immigrants can rise to top economic and political roles. President Franklin Roosevelt once famously addressed the Daughters of the American Revolution – a group that prided itself on the early arrival of its ancestors – as “fellow immigrants.”

In recent years, however, US politics has had a strong anti-immigration slant, and the issue played an important role in the Republican Party’s presidential nomination battle in 2012. But Barack Obama’s re-election demonstrated the electoral power of Latino voters, who rejected Republican presidential candidate Mitt Romney by a 3-1 majority, as did Asian-Americans.

As a result, several prominent Republican politicians are now urging their party to reconsider its anti-immigration policies, and plans for immigration reform will be on the agenda at the beginning of Obama’s second term. Successful reform will be an important step in preventing the decline of American power.

Fears about the impact of immigration on national values and on a coherent sense of American identity are not new. The nineteenth-centuryKnow Nothingmovement was built on opposition to immigrants, particularly the Irish. Chinese were singled out for exclusion from 1882 onward, and, with the more restrictive Immigration Act of 1924, immigration in general slowed for the next four decades.

During the twentieth century, the US recorded its highest percentage of foreign-born residents, 14.7%, in 1910. A century later, according to the 2010 census, 13% of the American population is foreign born. But, despite being a nation of immigrants, more Americans are skeptical about immigration than are sympathetic to it. Various opinion polls show either a plurality or a majority favoring less immigration. The recession exacerbated such views: in 2009, one-half of the US public favored allowing fewer immigrants, up from 39% in 2008.

Both the number of immigrants and their origin have caused concerns about immigration’s effects on American culture. Demographers portray a country in 2050 in which non-Hispanic whites will be only a slim majority. Hispanics will comprise 25% of the population, with African- and Asian-Americans making up 14% and 8%, respectively.

But mass communications and market forces produce powerful incentives to master the English language and accept a degree of assimilation. Modern media help new immigrants to learn more about their new country beforehand than immigrants did a century ago. Indeed, most of the evidence suggests that the latest immigrants are assimilating at least as quickly as their predecessors.

While too rapid a rate of immigration can cause social problems, over the long term, immigration strengthens US power. It is estimated that at least 83 countries and territories currently have fertility rates that are below the level needed to keep their population constant.

Whereas most developed countries will experience a shortage of people as the century progresses, America is one of the few that may avoid demographic decline and maintain its share of world population.

For example, to maintain its current population size, Japan would have to accept 350,000 newcomers annually for the next 50 years, which is difficult for a culture that has historically been hostile to immigration. In contrast, the Census Bureau projects that the US population will grow by 49% over the next four decades.

Today, the US is the world’s third most populous country; 50 years from now it is still likely to be third (after only China and India). This is highly relevant to economic power: whereas nearly all other developed countries will face a growing burden of providing for the older generation, immigration could help to attenuate the policy problem for the US.

In addition, though studies suggest that the short-term economic benefits of immigration are relatively small, and that unskilled workers may suffer from competition, skilled immigrants can be important to particular sectors – and to long-term growth. There is a strong correlation between the number of visas for skilled applicants and patents filed in the US. At the beginning of this century, Chinese- and Indian-born engineers were running one-quarter of Silicon Valley’s technology businesses, which accounted for $17.8 billion in sales; and, in 2005, immigrants had helped to start one-quarter of all US technology start-ups during the previous decade. Immigrants or children of immigrants founded roughly 40% of the 2010 Fortune 500 companies.

Equally important are immigration’s benefits for America’s soft power. The fact that people want to come to the US enhances its appeal, and immigrants’ upward mobility is attractive to people in other countries. The US is a magnet, and many people can envisage themselves as Americans, in part because so many successful Americans look like them. Moreover, connections between immigrants and their families and friends back home help to convey accurate and positive information about the US.

Likewise, because the presence of many cultures creates avenues of connection with other countries, it helps to broaden Americans’ attitudes and views of the world in an era of globalization. Rather than diluting hard and soft power, immigration enhances both.

Singapore’s former leader, Lee Kwan Yew, an astute observer of both the US and China, argues that China will not surpass the US as the leading power of the twenty-first century, precisely because the US attracts the best and brightest from the rest of the world and melds them into a diverse culture of creativity. China has a larger population to recruit from domestically, but, in Lee’s view, its Sino-centric culture will make it less creative than the US.

That is a view that Americans should take to heart. If Obama succeeds in enacting immigration reform in his second term, he will have gone a long way toward fulfilling his promise to maintain the strength of the US.

Joseph S. Nye, a former US assistant secretary of defense and chairman of the US National Intelligence Council, is University Professor at Harvard University. His most recent book is The Future of Power.

December 10, 2012 7:33 pm

Europe must stay the austerity course

Confidence is returning as structural reforms help rebalance the economy, says Olli Rehn

The eurozone is living through lean times, but there is light at the end of the tunnel. On the one hand the short-term economic outlook remains weak. On the other hand, there are signs that confidence is returning.

Ireland has returned to the debt markets. In September more private capital moved into Spain than out for the first time in 15 months.

And Italy recently sold 10-year debt at the lowest yield since 2010. That was clear recognition of the resolve shown by Mario Monti’s government to boost competitiveness and pursue sound public finances. With Italian bond yields on the rise again after Mr Monti’s decision to stand down, it is also a reminder of the need to maintain resolve in the future.

The progress made reflects important decisions at both the national and European levels. These decisions have begun to rebuild confidence, calming markets and countering fears of a collapse of the euro. Far-reaching structural reforms are helping to rebalance the eurozone economy.

Progress is tangible: current account imbalances among eurozone members have fallen markedly, as competitiveness lost by some members in the decade before the crisis is regained.

It is true that the correction of current account imbalances has so far come predominantly in deficit countries, but this is no surprise given the scale of the challenges they face. As John Maynard Keynes noted before the Bretton Woods talks, such adjustment is “compulsory for the debtor and voluntary for the creditor”.

This does not invalidate the case for a more symmetrical external rebalancing within the eurozone, involving creditor as well as debtor countries. The European Commission has said surplus countries should implement reforms to strengthen domestic demand. Germany could do this by opening up its services market and by encouraging wages to rise in line with productivity, two of the recommendations made to Berlin by the EU Council last July.

But at the same time, we should be aware that the eurozone is neither a small open economy nor a large closed one, but a large open economy that trades a lot with the rest of the world.

This means adjustment channels are influenced significantly by global economic interdependence. A reduction of surpluses in the north will not lead automatically to a corresponding increase of demand for exports by the south.

The principal beneficiaries of greater German demand would be the central European economies closely integrated into Germany’s supply chains. Our analysis suggests that a 1 per cent increase in German domestic demand would improve the trade balance of Spain, Portugal and Greece by less than 0.05 per cent of gross domestic product.

This would not get us very far, which is why policies to enhance competitiveness – both structural and cost-related – remain crucial for the adjustment and rebalancing of the eurozone.

The case for a significant fiscal stimulus in Germany, as some call for, is also weak. The country will de facto have a much less restrictive fiscal stance in 2013 than the rest of the eurozone: the structural budget balance is expected to be little changed in Germany but to increase by 1 percentage point of GDP in the eurozone as a whole.

Berlin’s fiscal stance is also fully in line with the recommendations made by other organisations, such as the International Monetary Fund, and promotes growth-friendly components of spending such as education and research, as consistently called for by the European Commission.

In spite of persistent misperceptions to the contrary, the EU’s reformed stability and growth pact takes full account of evolving economic conditions. Each country’s consolidation effort is specified in structural terms, removing the effects of the business cycle and one-off measures, and takes into account the country’s fiscal space and macroeconomic conditions. If growth deteriorates, a country may receive extra time to correct its excessive deficit, provided that the agreed consolidation effort is being made. Such decisions have been taken this year for Spain, Portugal and Greece.

We also intend to explore further ways, within the rules of the stability and growth pact, to accommodate public investment in our assessment of national fiscal plans.

In order to overcome the crisis and restore confidence, we must continue to remove structural obstacles to sustainable growth and employment; pursue prudent fiscal consolidation; and turn bold thoughts into convincing actions when redesigning and rebuilding our economic and monetary union. In short, we need to stay the course and pursue decisive reforms in our member states and deeper integration in the eurozone.

The writer is vice-president of the European Commission, responsible for economic and monetary affairs and the euro

Copyright The Financial Times Limited 2012.

Argentina’s Debt Conundrum

Eduardo L. Yeyati

11 December 2012





BUENOS AIRESArgentina is in a quandary. Prior to its 2005 sovereign-debt exchange, its legislature enacted a “lock law,” which barred the way to any future offers to holders of bonds on which Argentina defaulted in 2002. While the lock law helped to boost the participation rate in the 2005 exchange, holdout creditors remained, and have pursued litigation to force repayment.


In late November, Thomas Griesa, a United States federal judge in New York, ordered Argentina to deposit the $1.33 billion owed to holdouts into an escrow account by December 15. Griesa lifted the stay on his order from February 2012, following indications from Argentina’s government that it intended to ignore the ruling – including public statements calling the holdoutsvulture funds” and a vow by President Cristina Fernández de Kirchner never to pay. The ruling, pending appeal, leaves Argentina with three options: violate its own law, violate US law, or default again.

In his ruling, which was based on the pari passu (“equal footing”) clause included in the bonds, Griesa included the Bank of New York Mellon (the bondholders’ trustee) among entities that act “in active concert and participation” with Argentina, and cautioned it against transferring funds if Argentina ignores the order. As a result, if Argentina chooses to pay exchange bondholders as usual, BNY Mellon may refuse to transfer the funds, triggering a technical default.

But time to search for loopholes is limited. While the US Second Circuit Court of Appeals has granted Argentina an emergency stay order, temporarily lifting the threat of default, Argentine officials will need to present their arguments before the court in February.

The decision ensures normal debt payments by Argentina in December. But, beyond that point, Argentina’s government may face a dilemma: By continuing to make payments, it would be committing to comply with a ruling that is widely viewed as excessive and unfair; but refusing to pay would undermine the appeals process by exposing Argentina’s unwillingness to abide by an adverse ruling. Indeed, the government’s harsh rhetoric has given it little leeway. As in poker, it will have to pay to see the next card.

But Argentina does have options. While the required escrow deposit is not an actual payment to holdouts, given that the guarantee would be recovered if the appeals court ultimately ruled in Argentina’s favor, it could be considered a contingent payment in violation of the lock law. The government could easily avoid this by obtaining parliamentary agreement to suspend the law temporarily, as it did in 2010, when a second sovereign-debt exchange was conducted. Indeed, reopening the exchange, an option already being assessed, remains a natural alternative to Griesa’s maximalist interpretation of pari passu – though it may be too late to pursue this route.

By contrast, refusing to comply with the ruling would likely inhibit BNY Mellon from executing the payments, making it virtually impossible to pay the warrant to exchange bondholders on time. But, even in this case, a technical default – which would further reduce Argentina’s already-limited access to international funds – could be avoided by re-routing payments on the exchange bonds to the United Kingdom, elsewhere in Europe, or Argentina (the most likely option). According to the bonds’ collective action clause (CAC), this would not amount to a default if 75% of bondholders accepted the change of venue.

To be sure, the bondholders might refuse, given that, if they individually declared the exchange bonds to be in default, they could demand in court immediate payment in full of the remaining debt. But they might not if it meant that Argentina, unable to cover the accelerated payments, would be forced to repudiate the debtleaving the bondholders with nothing.

In the absence of a sovereign bankruptcy procedure, a coordinated solution – which debt exchanges and CACs are designed to facilitate – is the best option. But Griesa’s ruling undercuts prospects for cooperation. After all, investors are more likely to reject a longer period of lower payments on exchange bonds if they can seek immediate and full retribution for the original debt.

Indeed, not even the risk of receiving nothing ensures that bondholders will not revert to the old bonds. And, beyond the much debated – and, in my view, overstatedaggregation problem, lowering the cost of “holding out,” as Griesa’s ruling does, would impede the success of CACs.

Unless Argentina puts forward an alternative payment proposal, the US Court of Appeals (and, possibly, the US Supreme Court) will have to choose between the holdouts’all” and Argentina’snothing.” Suspending the lock law and reopening the exchange could provide a basis for revision of the case – and lead to a ruling that begins to fill the gaps in the international financial architecture. At a time when new sovereign-debt restructurings are distinct possibilities, such action is crucial.

Eduardo Levy Yeyati is Professor of Economics at Universidad Torcuato Di Tella and Senior Fellow at the Brookings Institution.


Copyright Project Syndicate -

December 11, 2012

Messi’s Brilliance Transcends His Numbers



It was Pep Guardiola, the former manager of Barcelona, who once suggested that Lionel Messi should be observed instead of dissected. He is, after all, widely considered the world’s greatest soccer player, not a biology project.
Don’t try to write about him,” Guardiola said. Don’t try to describe him. Watch him.”

On Sunday, Messi set an international record by scoring his 86th goal in a calendar year, for both Barcelona and the Argentine national team, delivering an average of one goal every four days, more frequently than a starting pitcher takes the mound, as often as Starbucks opens a new store in China.
But Messi is best appreciated, Guardiola admonished, in the virtuosity of the moment, not against the backdrop of history and statistics. Soccer, like figure skating, demands art as much as sport. This is not baseball, where numbers mean so much that they seem to carry a moral weight. Soccer’s beauty is that it surpasses mathematics, or, in Barcelona’s case, conjures a sublime human geometry of triangular passing and movement.
International soccer is generally played from late summer, through the winter, and into late spring, the schedule defined by seasons, not by calendar years. So this record of 86 goals is an artificial construct, a figure that celebrates Messi but also reduces his achievement to mere quantity. It is inadequate to say that he has scored 75 times with his left foot in 2012, 8 times with his right foot and 3 times with his head. Or that when he has scored in a Spanish league match since August, it has never been a single goal but always two or more. Such dry accounting pins him like a butterfly to Styrofoam, relegates his greatness to taxidermy.
As Guardiola said, Messi, at age 25, must be watched to be fully appreciated. To be wholly valued for his vision and anticipation and enthusiasm and ruthlessness and humility. For the way he chips a shot over a goalkeeper as if his foot were a sand wedge. For the way he dribbles in tight spaces, the ball bound to him like an electron bound to an atom.
The goals must be seen, and just as important, they must also be heard. For it is the excitable voices of the announcers that best convey Messi’s triumph over the parsimony of soccer. It surrenders so few goals to most others and so many to him. Only one response is appropriate, “Gooooooooooooal,” a prolonged, shrieking exhalation that takes the breath away.
On Sunday, Messi received a no-look, back-heel pass from Barcelona teammate Andres Iniesta and angled a hard, diving shot across the mouth of the goal, inside the far post, to break the record of 85 goals scored in 1972 by Gerd Müller of Bayern Munich and West Germany. Messi’s verbal biographer, the British announcer Ray Hudson, erupted with his usual bombastic poetry, mixing his metaphors but not his uninhibited celebratory intent.
Lionel Messi rewrites the history book!” Hudson screamed. “And we were all there to witness it, to be privileged by this artisan! He does it in his own inimitable, brilliant way, Messi twisting, turning, like an alligator with a twitch, beautiful give and go! He takes a million pictures in that crystal ball that’s inside of his head! Beautiful from Iniesta, laying it on for the golden honor for this golden footballer, the most wonderful, stupendously magnificent, player in the history of the game! And he’s only getting better.”
Anyone with 10½ minutes to spare can watch all 86 goals compressed and shelved in a video library on YouTube. The Web site has annotated each goal, date and manner of scoring. What these compilations do not directly show is that Messi has complemented his scoring with 29 assists.
And that he has great stamina, preferring to play from beginning to end without substitution. But the goals are there. And they have often come in clusters, like grapes.
His first two goals of the year came on Jan. 4. After sitting on the bench with flulike symptoms, Messi entered in the 60th minute for Barcelona. He scored twice, first on a stabbing header and then on a bending shot that left the Osasuna goalkeeper pounding his fists into the turf.
The videos demonstrate Messi’s predatory confidence on penalty kicks, the sweeping power of his lesser-used right foot, the punching accuracy of his rare headers. And his decorous manner. Seventy-four of his goals have come inside the penalty area, but absent is the diving that often turns European soccer into a deceitful ballet.
Messi is the world’s most prolific scorer, maybe the world’s most famous athlete, but he remains smaller than life, not larger than life, nicknamed the Flea, having needed injections of growth hormone to reach 5 feet 7 inches. His celebrations are demure, no jersey-waving or dancing with the corner flag. What draws the eye to him after a goal is that he is mostly restrained while many around him, on the field and in the stands, are running and jumping and waving wildly.
No doubt this calm aids him in pressured moments. On Feb. 26, with Barcelona tied, 1-1, against Atletico Madrid in the 81st minute, Messi curled a free kick from 25 yards with impeccable accuracy and clever timing. The opposing goalkeeper stood with his arms outstretched, baffled, incredulous. In another setting, he might have been a boy who had just seen a birthday magician pull a quarter from his ear.
On March 7, Messi had a day that no one had ever had in the Champions League, Europe’s premier club tournament, scoring five times for Barcelona in a 7-1 rout of Bayer Leverkusen of Germany. Twice, Messi lobbed shots over the head of goalkeeper Bernd Leno. A third time, he tapped in a rebound that had deflected off Leno’s hands. Two more of Messi’s shots were driven inside the left post on a day when Leno could do little more than hop and roll as if trying to smother an invisible fire.
Messi is a joke. For me the best ever,” Wayne Rooney, the Manchester United and England star, wrote on Twitter.
On June 9, before an exhibition crowd of 81,994 at MetLife Stadium, Messi delivered a hat trick as Argentina subdued its rival Brazil, 4-3. He scored the game-winner in the 85th minute, driving at the defense and curling a shot inside the left post from 22 yards, leaving Rafael Cabral, the defeated Brazilian goalkeeper, on his knees as if searching for a lost contact lens.
Leo is supernatural,” Gerard Piqué, Messi’s Barcelona teammate, would tell the Spanish newspaper El Mundo Deportivo, after Messi broke the scoring record on Sunday. “He has no limits and we always have to remember everything that he’s given us. We have to enjoy him every single minute that we have him now.”
It is a brilliance that can be as fragile as it is rare. On Nov. 11, Messi scored twice for Barcelona, surpassing the 75 goals that Pelé of Brazil scored in 1958. Then, last Wednesday, as Messi drew within one goal of Müller’s record, he collided with goalkeeper Artur Moraes in a scoreless Champions League match against Benfica of Portugal. His left knee in pain, Messi shot weakly, saying, “I thought it might be the last time I kicked a ball in a long time.”