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Thursday, November 17, 2011

Innovation and Open Borders

Borderless Economics: Chinese Sea Turtles, Indian Fridges, and the New Fruits of Global Capitalism
Palgrave Macmillan, 2011

Featuring the author Robert Guest, Business Editor, The Economist; with comments by Edward Alden, Bernard L. Schwartz Senior Fellow, Council on Foreign Relations; moderated by Dan Griswold, Director, Herbert A. Stiefel Center for Trade Policy Studies Cato Institute.
An interesting panel discussion was held on the innovation that results from the emerging international network of ideas generated by migrants who, through their physical and virtual travel through social networks create an instant virtual and real environment.  Chinese, Indians, and Brazilians who study or work in the United States gain expertise, technical skills, and an appreciation of the open society which fosters innovation and productivity.  They then return to their countries and share that knowledge.  Those countries, in turn, adapt the ideas brought from abroad, innovate, and then export the innovation back to the US.

The somewhat cryptic title of the presentation refers to this return influx of ideas (in Mandarin, a ‘sea turtle’ is a returning emigrant); Indian fridges refers to the high level of innovative extremely low-cost products in health care, IT, and consumer products – products which were made possible by the fluid interchange of Indian talent and foreign ideas and training. 

Two particularly interesting anecdotes and points were discussed by the author:
1. Millions of Indians are ‘lost citizens’, for they are without passports, national ID, bank accounts, or land title.  They are therefore unable to travel, get credit, or have any of the tangible credibility that most people take for granted.  The Indian government wanted to create a national bio-ID system where by these disenfranchised citizens would be brought into the national and world economy.
The Government reached out to the Indian diaspora, particularly those residing in the US, especially Silicon Valley and gave them the challenge with the promise of significant rewards.  Thanks to social networking, various experts in hardware, software, networking, data management, etc. joined together to develop a plan for the government.  Because they had been imbued with the Silicon Valley ethos of work, deadlines, risk, and innovation, they were able to accomplish in weeks what the Indian government would have done in years.  The essential lesson was that migrants, working individually, but connected to each other through social media, and maintaining links to influentials in their home country, can be a powerful innovative force with the savvy to turn ideas into products. 
2. A Chinese woman with an American green card noticed something that no one else had – that huge Chinese container ships which had brought TVs, computers, and a myriad of other consumer products were going back empty because what the US sells to China is largely intellectual property. 
At the same time she noticed that tons and tons of paper is thrown out in the US, and only a fraction is being recycled.  She, therefore, set up a business which collects waste paper products in the US, ships them to China on formerly empty ships, sells them to Chinese recyclers who turn them into the very cartons which the TVs are shipped to the US!  She did this because of the special perspective of a foreigner who sees things locals do not; because of her training in innovation; and perhaps most importantly because of her contacts back in China – the way business is done there.  She is now one of the wealthiest people in China.

This transfer of innovation and technology has a very important secondary by-product – exposing ruling elites to the principles of an open society.  Over seventy-five percent of the ruling elite in China has studied in the United States or in other mature democracies.  Sooner rather than later, the Communist political system will necessarily change because these ‘foreign returned’ bureaucrats, who learned the importance of the free flow of ideas for economic progress and competitiveness in the modern world, will want to change. As importantly, as more and more Chinese citizens enter the global economy and are exposed to fully democratic systems, they will demand more intellectual and political mobility.

Therefore, concludes the author, open borders are important; and the current policies of the American government to restrict entry (word on the international street is that the US immigration system is the worst in the world) keep out the most talented foreigners.  Our visa policy is antiquated and still favors family integrity, longevity, stubbornness over ability and creativity.

This, says the author, is the result of 9/11 and a concern for national security.  Personnel within the Homeland Security apparatus are rewarded for keeping people out.  You will be fired if you let someone in who commits a terrorist act; so you have no incentive to let people in.

The key element of Silicon Valley success is risk.  Entrepreneurs and technicians are not only willing to take risks on small ventures but on big ventures, huge ventures, out of the box ventures. In other words innovation can only be truly innovative if radical new ways of thinking are practically applied and risks taken.

The combination of this international network of innovators, risk takers whose ambition and vision know no bounds; and an open society where the free flow of ideas is central, is exciting and only held back by government bureaucrats.

In the discussion about the role of government the real debate is not about size, but about appropriateness.  Where should it be active and where withdrawn?  Where interventionist, and where strict constructionist?

As the author points out, there is an inescapable link between immigration policies and innovation, global competitiveness, and world prosperity.  The immigration of talented foreigners is a good thing, and in today's highly competitive world economy, if they are kept out of the United States, they will go elsewhere.  They want to come here, to prosper here, to contribute here, and most importantly to become part of that global nexus of innovation and ideas which is the key to continuing economic progress both here and abroad.  Government has a definite role to play, and that is not playing a restrictive role to immigration.  Let ‘em in, and let ‘em prosper.

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