"Brain Drain": A New Paradigm

One of the unintended consequences of the global meltdown has been a shifting of skilled labour away from the traditional centres of commerce towards secondary and developing markets.   Whereas there was initially some noise in the U.S. around whether TARP banks should and could continue to hire employees that required H-1B visas (see here on TARP and work visas), otherwise there has been very little attention paid to the Brain Drain phenomenon and the effects of the redistribution of human capital.  The debate about immigration typically conjures up images of uneducated and unskilled workers chasing the American Dream and little thought is given to the thousands of graduates from America’s top universities who no longer find themselves able to stay in the U.S. post-graduation.  The top MBA programs, in particular, are facing a changed environment where they can no longer promise the opportunities on Wall Street or in Silicon Valley that had previously attracted the best and brightest (or, perhaps, the most ambitious and privileged) from around the world (see here on the reduction of foreign MBA students).  So who gains and who loses in this new reality?  Are Americans better off no longer having to worry about foreigners competing fairly for U.S.-based positions?  Or is the growing xenophobia draining America of critical brain power needed for the effort to get the economy and industry growing again?

From the perspective of countries outside the U.S., the results of the closing of the American skilled labour market are particularly beneficial. Countries like Canada, Australia and Israel, not to mention China and India, have suffered from Brain Drain for years as many of their most talented graduates sought degrees and positions in the U.S. (see OECD map of global Brain Drain).  Wall Street, in particular, was not only gobbling up the top students in the U.S. but it was feeding itself on the best human resources from around the world (Freakonomics highlighted the reversal of this trend as a “silver lining” of the crash back in November 2008).  Now, however, not only are there fewer opportunities for U.S.-based foreign graduates, but those that had been working in the U.S. for years are suddenly finding themselves without work visas or Green Card sponsorships and are being forced to look at their home markets.  Furthermore, the opportunities for experienced professionals to move from traditionally less desirable markets to the U.S. have all but disappeared.  Even for those foreigners who have the ability to remain in the U.S., a shift has occurred whereby their home economies have become stronger and may now have better employment prospects.  For one or a combination of these reasons, many regional financial and industrial centres are seeing top talent returning home, bringing an unforeseen but very welcome boost in human capital.

In a world that has seen gradual moves towards the free movement of labour (the E.U. is a prime example, NAFTA a less successful one; on international migration trends see the OECD), the skilled labour situation in the U.S. is another example of how the Great Recession will alter the way the world’s most talented professionals consider their employment options.  First, of course, will be the move away from finance as the ultimate career for top students regardless of area of study.  There has been a lot of speculation on the recalibration of career choices as mathematicians are no longer clamouring to become “quants”, political scientists reconsider law school, and electrical engineers are less inclined to repackage themselves as traders (see NYT on career choices).  Second, whereas being accepted to a top U.S. MBA program was until very recently seen as the gateway to a job on Wall Street, these students are not only not choosing finance in the same numbers as before but, even when they do, often they are unable or unwilling to stay in the U.S.  Finally, this is equally true of nascent entrepreneurs, who find themselves with the uncertainty of not knowing whether they will be able to remain in the U.S. long enough to build a viable start-up and are, therefore, prudently looking elsewhere.  This is further enhanced by a changing landscape in which VC and angel investors, themselves increasingly international, no longer look only to Silicon Valley and Route 128 for their next success but are setting up shops in Bangalore, Beijing, Dubai, Tel Aviv and Barcelona.

The benefits to the home countries are clear and are already being felt.   Expats are returning home in record numbers, bringing experienced, global talent to companies that would otherwise might have very little chance of recruiting these top professionals (see Forbes on China and the AEI on India).  In addition, because of the dislocation caused by the current recession, professionals from all countries are finding themselves faced with an altered sense of normalcy that has encouraged many to consider career choices that would have seemed too risky or unconventional (or banal) as recent as two years ago. Consultants who had previously been working in the U.S. are suddenly able to pursue their dreams of returning to Africa or Asia or South America to work in economic development; former Wall Street investment bankers are deciding that entering the family business back home is a viable alternative;  High Tech professionals are taking the seed idea that seemed nothing more than a dream and are launching it on their own, with much lower overhead and with the advantage of being experienced fish in a much less experienced pond.  There are also those skilled workers in the U.S. who hail from other developed countries that have not suffered nearly as much as the U.S., e.g., the Canadian banking system is considered the strongest in the world and the Australian economy and financial system has done significantly better than the U.S. (see the WSJ on Australia’s strong economy).  For many, Toronto and Sydney have become soft landings as they head home whereas for others these world-class cities are becoming the first port of call, even before NYC (or London).  The idea of giving up the hard-won privilege of working in the U.S. is no longer sacrilege as many foreigners leave, either by their own volition or because they no longer having visas (on the reverse brain drain).

What does this mean for America?  The knee-jerk reaction has been that this will only help Americans keep the jobs that exist and reduce competition for those looking at whatever new opportunities appear. This, however, is a blinkered approach.  Whereas there might be some very short-term gains from having the competition culled of foreigners, the negative impact will be longer term and far greater.  Entrepreneurs will not give up on their ideas just because the U.S. no longer offers them an incubator, they will simply build their companies elsewhere.  U.S.-based financial firms that will no longer sponsor work visas will not deter the ambitious for entering or staying in the field, they will simply do it off-shore and help the growing international competition become even stronger. 

U.S. policy makers should not pander to the protectionists and xenophobes and should continue to make the U.S. the preferred destination for the most talented individuals from around the world.  If the barriers to entry are made onerous enough they will achieve their aim – fewer and fewer will want to enter.  The U.S. cannot assume that other nations will not take advantage of this situation, making their countries increasingly attractive to those who are looking to repatriate or immigrate.  America and Americans can do a lot on their own but they achieve so much more in collaboration with the “value added foreigners” who have been integral in building the incredibly dynamic U.S. market.  The world’s best talent will not give up on realising its visions and dreams – if the U.S. closes it doors, there are already many other countries that have eagerly opened theirs, and have conspicuously laid out the welcome mat.

Slippery Slope: Silencing of the Centrists

Watching the shifts in the political landscape in the U.S. makes one wonder whether Americans themselves are aware of how quickly and how dramatically the realm of the acceptable has changed.  Are the participants in the American political theatre sensitive to the impact of the scenes that they are acting out or are they simply responding to cues and fulfilling identifiable roles?  To the outside observer it is disheartening to watch; whereas Americans can and do use the protection of freedom to justify nearly any act or public statement, the direction in which the U.S. is heading is clearly towards the more radical and polarised.  Does the American public realise that it is stepping ever closer to the radical behaviour that it so quickly condemns in other nations?  The rhetoric, hate and ignorance being expressed in mainstream America today demonstrates an intolerance that was once left to the political fringes.  Accusations, condemnations and outright fabrications that were once beyond the pale of acceptable discourse have now become tolerated and readily used.  None of this is to the credit of freedom of expression or to the culture of political discourse in the U.S.

So, where does this leave the centrists, be they leaning left or right?  When one side of the debate has been taken over by, or perhaps handed over to, the extremists, where are the moderates to go?  Whereas it is obvious that the loudest, most shrill voices belong to a minority, what were once marginalised groups that were condemned by the establishment have now become tools cynically used by it (see Stuart Fischoff in Psychology Today).  Opposition in the healthcare debate is critical to the process (as is opposition to other prominent issues on the new administration’s agenda, including alternative energy, global warming and education).  The issue is not that there are those who disagree with or oppose, even passionately, any particular policy but is the radicalisation of the debate and the use of hate, lies and terror tactics (see here for President Obama on the issue).  The behaviour being witnessed at the healthcare town halls or in the crazed objections to the President’s recent address to school children is a combination of the loss of reason in the face of fear and the media’s clamouring for more of the same (and ignoring events that are not sensationalist) (See Rick Perlstein).

Whereas the Republican leadership is responsible for handing over its party to the extremists, the right-wing talking heads are to be blamed for creating the climate and incentives that appeal to politicians that put popularist pandering before ethics and civic values.  The media and, as a result, the public are distracted by extremist accusations that Obama is a Nazi who wants to kill everyone's grandma, thus presenting a distorted view that feeds the feeling by moderates that they are no longer represented in the debate (see James Rainey in the LA Times). The level of ignorance being displayed by Republican leaders and their use of the destructive demagoguery is shocking.  Regardless of their views on a specific policy, what has happened to the concepts of integrity and accountability?  Or, perhaps, they really are that stupid, which is no consolation. The American national policy debate has turned into a sad parody of the intentions of freedom of speech.

The centre, as a result of the circus (with a disproportionate number of clowns) that is political debate in American, has had its already acute feelings of helplessness and disenfranchisement sharpened.  The sane, even-keeled citizens of the centre find themselves in a polarised society that feeds off sound-bites, sensationalism, fear mongering and demonization.  This phenomenon is by no means exclusively American but somehow the American manifestation of these problems is particularly difficult to stomach, partially because of the exponential increase in “radical creep” that has infected mainstream politics.  It was during the last presidential campaign that the blurring line dividing acceptable rhetoric from radical, irrational and hateful spewing was fully dissolved.  Whereas John McCain still had the courage to challenge the ignorance of the Birthers and those propagating racist and bigoted lies, Sarah Palin encouraged the hateful chants at her rallies (see Frank Rich in the NYT).  The Republican party today is no longer representative of centrist that favour, amongst other things, small government and fiscal conservatism, but has become the party of the type of ignorance espoused by the reactionary followers of the likes of Rush Limbaugh and Glenn Beck (See conservative David Brooks on the insanity).

So, where does this leave American democracy?  For one, without a respectable and viable opposition.  It also leaves a meaningful portion of the centre without a voice; whereas one does not expect to agree with all of a party’s positions, the Republicans have fallen so low that many of its moderate members can no longer find a way to defend and justify its positions or how it communicates them.  With the radicalisation of the Republican party there is no longer a reasonable alternative to the Democrats.  Americans are now feeling the helplessness that has been the plight of moderates in many other nations, both democratic and not.  Will the Republicans come to their senses and reclaim their place in the centre-right of the political arena?  Is the current situation a natural over-compensation following the morally corrupt tenure of W. and his party’s subsequent defeat?  Will the pendulum inevitably swing back towards the centre?  Or are we seeing an irrevocable descent into radical, polarising, and popularist politics that will either drag the whole system down with it or, more optimistically, lead to the creation of a new alternative?  For the sake of the American centre and, indeed, the country as a whole, we hope the latter prevails over the former.