Labor Day, 2007

Interesting news this morning on NPR that Americans lead the world in worker productivity, second only to Finland (whatever that means). I have no idea what the metric is but it doesn't matter to the large and growing number of citizens euphemistically called the "working poor." Every year about this time that segment of the population receives an obligatory nod from all the right people, few of whom feel compelled to make any meaningful changes that will materially help that group. Of all the possibilities the most potent and least likely to change is nothing more than an attitudinal shift on the part of those at economic top of the pile. The Puritan ethic that couples economic success with moral excellence is alive and well. I must be a good person because God has rewarded me with all this abundance. If those poor people would just learn to make the right choices they wouldn't be in the fix they're in.

Grumbling about immigrants has muted lately as the media spotlights aim their prurient focus at more popular subjects...presidential politics, forest fires and celebrity troubles of one kind or another. But mention immigration in just about any group and find a range of ideas shaped mostly by partisan politics or an experience with a foreigner unable to understand plain English. Those most likely to have any sympathy for immigrants are front-line supervisors or small business people whose personal interactions allow large numbers of interactions that reveal among immigrants a normal range of human abilities and ambitions, tilted in all likelihood toward a greater emphasis on hard work, courtesy and personal responsibility.

The Lounsbury at Aqoul has a Labor Day post worth reading in detail. It is a book report -- magazine, actually -- on a well-researched series in Financial Times. His experience doing business in the international arena gives this man keen insights into how economics works at all levels. His acerbic pen makes an otherwise dry subject come alive. Just as you might find yourself nodding off in a sea of statistics, he tosses off a snarky remark that brings you back to life. Think of your wife's elbow at church during the sermon, but with occasional profanity.

The main theme of the series is "remittances," the large and growing amounts of money sent to undeveloped countries from family members working abroad. Most Americans are vaguely aware that immigrants from the South send money home. Anyone doing business in a post office cannot miss the posters in Spanish advertising postal money orders for that purpose. But few realize that the amounts being sent add up to a very large sum, in some cases more than the US sends via official channels. I have always regarded employing immigrants who send chunks of their earning home to their families as a much more effective form of "foreign aid" than anything the government does. Among my very modestly paid employees in the food business I know personally of several who routinely sent home big amounts (relative to their earnings...maybe fifteen or twenty percent of earnings officially recognized as poverty) to Kenya, Mexico, Haiti, or Bagladesh.

This quote from FT underscores the point.

In many developing countries today, more money comes from remittances than from foreign aid, foreign investment or even traditional exports. In Central America, remittances have long eclipsed traditional agricultural mainstays such as coffee and bananas. Migrants send more money to Morocco than tourists spend there. In some small countries – Lebanon, Serbia, Haiti, Tonga, Albania and Jamaica are all examples – remittances generate more revenues than all merchandise exports put together. The latest World Bank figures list 14 countries where migrants’ earnings account for 15 per cent or more of economic output, ranging from Moldova with 38 per cent to Jamaica with 16.4 per cent.

The series that Lounsbury talks about is excellent. But for most casual readers his summary will be more interesting. His main expertise is business around the Mediteranean, but his scope of understanding is global.

I was particularly interested to learn about The Hawala System, an informal method of moving assets across national borders outside official international banking. Those of us who have grown up in the sheltered world of regulated banking and commerce have no need or experience with systems such as these.

Economic and cultural factors explain the attractiveness of the hawala system. It is less expensive, swifter, more reliable, more convenient, and less bureaucratic than the formal financial sector. Hawaldars charge fees or sometimes use the exchange rate spread to generate income. The fees charged by hawaladars on the transfer of funds are lower than those charged by banks and other remitting companies, thanks mainly to minimal overhead expenses and the absence of regulatory costs to the hawaladars, who often operate other small businesses. To encourage foreign exchange transfers through their system, hawaladars sometimes exempt expatriates from paying fees. In contrast, they reportedly charge higher fees to those who use the system to avoid exchange, capital, or administrative controls. These higher fees often cover all the expenses of the hawaladars.

This series can keep you busy for the rest of the morning. My guess is that the average reader will learn a lot that he didn't know before. And it's not trivia, by the way. It's hard information that has meaningful, if not measurable impact on the world economy. And no one needs to be told how important that is to everyone.