Tuesday, August 7, 2007

Mexico's Tight Credit Drives Illegals North

People stream across the Mexico-US border in search of jobs. Clearly, there are far too few jobs in Mexico or the pay differential between Mexico and the US is far too high, or both.

Joel Kurtzman, a senior fellow at the Milken Institute, in "Mexico's Job-Creation Problem" (Wall Street Journal, August 3, 2007), provides some illuminating information: "Mexico has a job-creation problem."

"During President Vicente Fox's six years in office his goal was to create six million jobs across all sectors of the economy." During that time, however, "Mexico created only 1.4 million jobs." Of particular interest to Americans is the observation that during that same period, "[t]he number of illegal immigrants from Mexico was roughly equal to the number of jobs Mr. Fox did not create."

Oh, it gets better. Why does Mexico find it so hard to create jobs? They have lots of oil, an abundant and hard-working labor force, long tourist-attractive coastlines, and a shared border with the American economic behemoth. Ka-ching! But jobs are created by entrepreneurs, and in order to create jobs entrepreneurs need access to capital. The problem is that "Mexico's financial and economic structures fail at providing entrepreneurs with the capital they need to create jobs." According to Kurtzman, nearly half the Mexican economy is controlled by one man, Carlos Slim (see WSJ, "The Secrets of the World's Richest Man," Aug 4-5, 2007), and most of the rest is in the hands of a few others. They don't like competition, failing to understand the basic economic fact that a growing economy that is a free economy enriches everyone, even the Carlos Slims.

Read the article for what he says about the oil and banking industries and about household credit and their residential mortgage market. What a mess. "If mortgages were cheap and plentiful -- through the increased use of mortgage securitization tools, for example -- the epicenter of demand for Mexico's trade- and craftsmen would not be California, Arizona, Texas and Florida. It would be in Mexico."

The people crossing illegally from Mexico into the United States are not just job seekers. They are also capital seekers who come here to start businesses. "Solving the immigration problem will not happen unless Mexico solves its job-creation problem."

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