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America’s southern border has become a global crossroads

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SOME MIGRANTS huddled in tents provided by local volunteers. Others slept on the desert floor, facing fire pits burning rubbish. The camp, which in 2023 sprang up outside Jacumba Hot Springs, a town in San Diego County, California, was encircled by mountains, highways and the border wall. When Border Patrol agents came to take people for processing, they had to resort to nonverbal communication. “Sit if you have a passport.” “Step forward if you are travelling with children.” If the migrants were from Mexico and Central America, as most used to be, Spanish would suffice. Yet among those who had just walked across from Mexico were people from China, India and Turkey.

Image: The Economist

Last year seems to have set records for the number of migrants apprehended at the southern border, and Republicans in Congress are demanding reforms to America’s asylum system in return for aid to Ukraine. A deal has proved elusive. Slightly more under the radar, the diversity of the Jacumba camp reflects a big change in who is crossing over. In fiscal year 2023, for the first time, migrants from places beyond Mexico, El Salvador, Guatemala and Honduras made up more than half of all those apprehended at the border (see chart 1). Venezuelans are the largest part of this group. But last year 43,000 Russians, 42,000 Indians and 24,000 Chinese also made the crossing—up from 4,100, 2,600 and 450, respectively, in 2021. America’s northern border has proved porous, too. In total some 40,000 Indian and Chinese migrants came south from Canada last year.

Migrants take different paths to the southern border, depending on where they come from. An analysis by Idean Salehyan and Gil Guerra of the Niskanen Centre, a think-tank in Wasington, DC, suggests that most Chinese fly to Ecuador, to which they have visa-free travel, before making the long and dangerous trek through Panama’s Darién Gap. Panamanian data confirm that the number of Chinese migrants crossing the jungle rose steadily in 2023. In October, El Salvador began to tax African and Indian travellers at the country’s main airport. Turkish migrants in Jacumba had flown to Tijuana and then walked into California.

Certain nationalities tend to cluster in specific border sectors. Chinese and Russians often cross near San Diego and Indians near Tucson, Arizona. Migration flows are constantly evolving, says Ariel Ruiz Soto, of the Migration Policy Institute, a think-tank. He likens the border to a balloon. If you squeeze one side (say, enforcement increases in San Diego), the air will flow to another (migrants will head to Tucson or El Paso.) Social media and messaging apps have helped spread information. TikTok and YouTube are filled with videos teaching migrants about routes. “Once families know that their friend or cousin has made it,” says Mr Ruiz Soto, “they’re much more likely to take a chance.”

Smuggling networks have evolved to serve the increased demand. Notices painted on walls and printed on fliers all over the Indian states of Punjab and Gujarat promise help with moving to America, Australia, Britain and Canada: visa services, college admissions, job opportunities. A charter plane bound for Nicaragua and filled with Indian migrants was recently grounded in France while officials conducted a human-trafficking investigation. The Turks in Jacumba admitted they had paid a coyote to show them the way to a hole in the border wall. Mexican cartels are also diversifying their enterprises by getting into the people-smuggling business.

Why the surge? A number of trends converged in 2023 to diversify irregular migration to America. War and instability pushed people to leave their countries. The Jewish Family Service of San Diego, which runs a migrant shelter, helped more Russians than any group besides Mexicans in the nearly two years since Russia invaded Ukraine. The end of China’s lengthy and repressive zero-covid policy allowed Chinese to travel internationally again.

Several Republican politicians have suggested that China is sending spies to infiltrate America. It is not lunacy to be wary of potential agents working for Chinese security services. Last year the Department of Justice charged two Chinese men living in New York City with operating an illegal police station “to monitor and intimidate dissidents”. Yet Mr Salehyan argues that there is no evidence that asylum-seekers, who willingly give themselves up to Border Patrol, have sabotage in mind.

Image: The Economist

Roughly 70% of asylum applications from Chinese migrants between 2003 and 2023 were granted, suggesting that their reasons for leaving China were mostly credible (see chart 2). In fact, Ecuadorian data show that a disproportionately high share of Chinese migrants are coming from Hong Kong, where dissent has been punished, and Xinjiang, where Uyghurs have been persecuted. Rather than plotting to undermine America, plenty seem to be seeking freedom.

But many, probably most, migrants have a financial incentive to come. Several at the camp in Jacumba said they were fed up waiting years for a visa, and hoped to earn more money in America than back home. As of December, more than 300,000 people who had submitted immigrant visa applications were waiting for an interview. Delays are largely the result of the pandemic, which shut down consulates and decimated their staff. More important, there are not nearly enough visas for the number of people who want to come. Yet expanding legal pathways has not, so far, been part of Congress’s spasmodic negotiations.

This increasingly global migration to America’s borderlands says something about the enduring power of the idea that America is a land of opportunity. For many migrants in Jacumba there is no other place that they would risk everything—their money, their safety—to get to. When asked why he didn’t try to move somewhere closer to Turkey, Selim Gok, a 20-year-old student, responded matter-of-factly: “Because I speak English.”

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Economics

Germany’s election will usher in new leadership — but might not change its economy

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Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

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