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Economist: The Hub Nation

April 22, 2010


Immigration places America at the centre of a web of global networks. So why not make it easier?

IMMIGRANTS benefit America because they study and work hard. That is the standard argument in favour of immigration, and it is correct. Leaving your homeland is a big deal. By definition, it takes get-up-and-go to get up and go, which is why immigrants are abnormally entrepreneurial. But there is another, less obvious benefit of immigration. Because they maintain links with the places they came from, immigrants help America plug into a vast web of global networks.

Many people have observed how the networks of overseas Chinese and Indians benefit their respective motherlands. Diasporas speed the flow of information: an ethnic Chinese trader in Indonesia who spots a commercial opportunity will quickly alert his cousin who runs a factory in Guangdong. And ties of kin, clan or dialect ensure a high level of trust. This allows decisions to be made swiftly: multimillion-dollar deals can sometimes be sealed with a single phone call. America is linked to the world in a different way. It does not have much of a diaspora, since native-born Americans seldom emigrate permanently. But it has by far the world's largest stock of immigrants, including significant numbers from just about every country on earth. Most assimilate quickly, but few sever all ties with their former homelands.

Consider Andres Ruzo, an entrepreneur who describes himself as "Peruvian by birth; Texan by choice". He moved to America when he was 19. After studying engineering, he founded a telecoms firm near Dallas. It prospered, and before long he was looking to expand into Latin America. He needed a partner. He stumbled on one through a priest, who introduced him to another devout IT entrepreneur, Vladimir Vargas Esquivel, who was based in Costa Rica and looking to expand northward. It was a perfect fit. And because of the way they were introduced-by a priest they both respected-they felt they could trust each other. Their firm now operates in ten countries and generates tens of millions of dollars in annual sales. Mr Ruzo wants the firm, which is called ITS Infocom, to go global. So although he and Mr Vargas Esquivel natter to each other in Spanish, they insist that the firm's official language must be English.

Trust matters. Modern technology allows instant, cheap communication. Yet although anyone can place a long-distance call, not everyone knows whom to call, or whom to trust. Ethnic networks can address this problem. For example, Sanjaya Kumar, an Indian doctor, arrived in America in 1992. He developed an interest in software that helps to prevent medical errors. This is not a small problem. Perhaps 100,000 Americans die each year because of preventable medical mistakes, according to the Institute of Medicine. Dr Kumar needed cash and business advice to commercialise his ideas, so he turned to a network of ethnic Indian entrepreneurs called Tie. He met, and was backed by, an Indian-American venture capitalist, Vish Mishra. His firm, Quantros, now sells its services to 2,300 American hospitals. And it is starting to expand into India, having linked up with a software firm there which is run by an old school chum of one of Dr Kumar's Indian-American executives.

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