Migration and the sovereign firm

Flushed with pride from an election win—alas, probably still just another cheap hit of publicity crack, huge in the moment and historically ephemeral; but who knows, eh?—the two halves of the so-called New Right, rationalists and traditionalists, have started our new era off in fine American style by squabbling in public over Indian visas. Cool.

For me, this spat just illustrates the inadequacy of the standard liberal framework of political science that history has condemned both sides to live in. Liberalism as we know it is only about 250 years old, a shorter lifespan than some Chinese dynasties. And only for about the last 50 years has it so completely excluded premodern thinking—the shared heritage of the European and antique worlds combined—that even most of us conservative intellectuals have forgotten how to think about political science rigorously within a preliberal framework.

We can still think intuitively, like peasants, about the meaning of the nation-state. There is much to be said for coarse peasant wisdom. But when we think analytically, like lawyers or professors, we have no choice but to think as liberals. “Conservative” politics comes from Locke and, at best, Cicero; “conservative” economics is from Smith and, at best, Mises. Great thinkers, but in a narrow tradition.

In this essay we’ll develop an analytical postliberal framework that will let us think as concretely in an illiberal framework, as liberals do in their liberal framework, about questions like open borders and free trade.

The migration question

Very smart conservatives of today, when they think about immigration in specific, have no choice but to surrender to either of these modes. If you are against the free movement of labor, the only mode in which you can express yourself is intuitive, or even downright romantic. The more you do this, the more you sound like Mussolini. This doesn’t mean you’re wrong, but it doesn’t bode well either. However, when you surrender to your analytical side, you can feel yourself turning into the world’s worst kind of sperg. You know you are wrong. But all the known formulas say you’re right. Wat do? In the end, the choice always comes down to what kind of person you are.

While Trump is a purely intuitive person—a genuine intuitive genius—Musk is something even more rare: an intuitive genius and an analytical genius. The trouble is that sometimes both these geniuses collide, and the latter always takes precedence.

This would be fine if he was using the right analytical formula. Unfortunately, Musk’s libertarian framework is the political-science equivalent of Newtonian mechanics: an oversimplification which works only in special cases. And even more unfortunately, our own time and place does not seem to be within one of these Newtonian envelopes.

Intuition can compensate only so much for bad analysis. Within Musk’s framework, “skilled immigration”—or whatever euphemism stands behind this term—feels like an easy win. Math always beats intuition. But what if the formula is missing a term?

Analytically, it feels like the effect of skilled immigration (abstractly) on productivity is not measurable but is quantifiable, whereas the negative impact (if any) on “society” is neither measurable nor quantifiable.

It’s hard to pick unquantifiable over quantifiable. What is “society,” anyway? What process of scientific government could support this? Once you get used to choosing anything intangible over efficiency, efficiency goes out the window.

Sovereign accounting and labor migration

The traditionalists understand an extremely important analytical principle, But they have no analytical model for this principle, so they can only express it intuitively.

In fact, the negative impact of free movement in labor, while hard to measure, is easy to quantify. The same is true of its close relative, free movement in goods. But Elon’s classical accounting formula is missing the term that would quantify these impacts. Let’s try to correct it by adding back the relativity term.

It is correct to define the government as a company. The nation is a sovereign firm. Or, if we prefer, the firm is a sort of second-order virtual nation-state. The two concepts are clearly different in a clear way, yet clearly related in a clear way. Can we generalize across them? Of course—but we have to do it right.

It is tempting to conclude that the economic purpose of a firm is to create valuable goods and services, whereas the economic purpose of a government is to maximize GDP (the total sum of goods and services created by the nation). This is what I call Newtonian accounting. It is actually wrong for both firms and governments.

This accounting is wrong for firms because maximizing productive output is not the goal of a firm. Maximizing the value of its capital is the goal of a firm. While these goals are directionally similar and often align, they can easily diverge.

Capital is traditionally measured by an efficient equity market. The goal of a CEO is to make the investors happy by making the stock go up. The market’s estimate of the company's capitalization corresponds to its estimate of its future profit until infinity, discounted by the interest rate. Because double-entry accounting, this must equal the total value of its tangible assets (factories, etc) and intangible assets (brand value, etc).

While profit generally corresponds to revenue, they are not the same thing! You can sell a lot of dollars for 99 cents. Moreover, estimating the value of capital involves a little thing called “depreciation.” Factories, houses, and other forms of capital wear out when you use them. Some forms of capital can even experience “appreciation”—they get more valuable. Land can appreciate. All this has to go in the quarterly report.

If you ignore the appreciation and depreciation of your capital, you are driving a rented car. No one ever changed the oil in a rented car.

Maximizing GDP, as a national accounting policy, means we are maximizing the total utility delivered by the productive sector to the consumptive sector. All systems of modern economic policy—from socialism to capitalism—are agreed on this goal.

Socialists want to use the visible hand to shift production from luxuries for the rich, to necessities for the poor. This means they measure utility in a different way—a way not captured by summing up dollars. A thousand bushels of wheat sent to Ghana produces more user utility than one Patek Philippe sent to London. Okay, sure. (In case you didn’t know, Africa imports 85% of its food.) Capitalists point out that the damage done by the visible hand often exceeds its utility even by the socialists’ definition. Okay, sure. But notice what they both agree on: maximizing utility.

Isn’t the goal of the productive sector to produce utility? What else could we optimize for? What other kind of formula could we optimize for?

Well, we could optimize for the same goal as a private firm—maximizing the value of our capital. This would involve thinking about—appreciation/depreciation of capital. But—what exactly are the capital assets of the state?

Human capital and the sovereign firm

Here is where Elon Musk and I disagree. Almost everyone today agrees with Elon. Even the traditionalists, almost all of them, agree with Elon—which is why they have so much trouble expressing their point analytically. Intuitively, they get it perfectly. Essentially, everyone today is a liberal—libertarians are liberals, conservatives are liberals, and liberals are liberals. They are all using the wrong analytical framework.

Historically, however, almost everyone agrees with me. The Newtonian or liberal view is in fact an English view from the 17th century. Unfortunately, just because it took over the world doesn’t make it true.

The liberal, modern view is that the state exists to serve its citizens. The state, in its supervision of commerce, aims to maximize the utility produced by the economy. The purpose of government is to protect a free people in their pursuit of happiness.

The illiberal, premodern view is that the state owns its subjects. There are no citizens. There are only subjects—to put it as pejoratively as we possibly can, state slaves. The purpose of government is to render these slaves as productive as possible, which (because double-entry accounting) means making them as valuable as possible.

To a modern liberal, libertarian, or conservative, this is the most offensive possible declaration of “authoritarianism” or even “totalitarianism.” To Plato, it is Tuesday. Musk assumes he understands political science better than Plato, just because he understands physics better than Plato.

Actually, Plato is right. The nation is the people. The state is the owner of the nation—the land, structures, and people—which are its sovereign property.

Ownership means exclusive dominion. This is the relationship between the state and the subject. Some arms of the state may sometimes protect the subject from other arms of the state. But every state, considered as a whole, can do whatever it wants to any of its subjects. And inasmuch as it cannot—it is not a state at all.

Since a state is an organization which owns territory and people, the only difference between a state and a plantation is (a) size and (b) independence. On a plantation within a state, the relationship between master and slave can at least be checked by the state. Between sovereign state and individual, the individual has no defense at all. This is the very definition of sovereignty.

Anyone who does not believe in sovereign property is fundamentally an anarchist. That he still believes in personal and corporate private property is only a slight mitigation of his destructive and incorrigible leftism—which does to states what socialism does to companies. Fortunately, this anarchism does not prevent the sovereign state from existing—only from analyzing itself clearly and rigorously.

If the subjects of a government are treated as assets on its national balance sheet, as human capital, that means it owns them. That means it has to safeguard them. It has to protect and nurture them. And it is responsible for their appreciation or depreciation. Here is a way to quantify the traditional responsibility of the state for the common good—which conservatives, but not libertarians, believe in.

A government that does not think of itself as owning its subjects—perhaps some kind of temporary military occupation—can afford to disregard this term in the formula. This is why temporary military occupation can be quite careless of the common good. The general in charge is essentially driving a rented car. To traditionalists, it seems that Musk and his fellow open-borders billionaires want to drive America like a rented car. But they need an analytical framework that can express this intuitive truth.

What is quantified does not need to be measured. The USG is not necessarily selling its valuable citizen-slaves overseas, like a European soccer team. It is enough to think about the value of a human being in an abstract sense.

But the classical state trades in an exogenous currency (one it cannot create), and its balance of trade is the exact analogue of the private company’s profit and loss. When we see a trade surplus, we see a profitable company. When we see a trade deficit, we see a money-burning company. The trade surplus is a measure of the productivity of the state’s subjects. Again, compare China to America here.

And we know what makes human beings more valuable—in almost every sense: work. Ideally, complex challenging work that tests the limits of some craft, skill or trade. We sense that a valuable human being, professionally or otherwise, is one who has done the most to develop a lifelong profession at the edge of their human capacity. China has developed not just by building factories, but by building people who know how to buuild and work in factories. Work and meaning and profit cannot be separated.

Humans, like robots, can be productive. But as capital, they obey very different rules. For a machine, production implies depreciation. For a human, production implies appreciation. There are exceptions—health-damaging trades—but they are exceptions.

We know what does not make human beings more valuable—in almost every sense: consumption. At least, consumption once it gets past the level of basic necessity.

The GDP mindset makes almost zero sense from the standpoint of nation as firm. In fact, the more luxuries you produce for your “citizens,” the softer, weaker, and less productive they get. And they do not just suffer economically—but also, spiritually. The spiritual benefits of challenging, and especially meaningful, work are well known.

Hunter-gatherers rarely feel like they are working. Everything is meaningful and everything is challenging. Is hunting work? Is fishing work? People sell real estate so they can hunt and fish. Who would hunt and fish so they could sell real estate?

When we look at (a) the common good, (b) appreciation/depreciation of human capital, and (c) net production of utility, we are struck immediately by the fact that (a) and (b) are clearly aligned, whereas (c)—the criterion that all modern thinkers agree on, the GDP metric beloved by libertarians and socialists alike—is the misaligned metric.

Analytically, America is being driven like a rented car. If not a rented mule. And when we cast our intuitive eyes across the state of the nation, we see that it is being driven like a rented car. If not a rented mule. Suddenly, now, our formulas do not deceive us. The old formula was wrong and the new formula, which is even older, was right.

China has been managed on the new formula for 40 years. Whose economy is better? China, for the most part, imports neither people nor goods. They seem to be.doing fine without any Tamil-Brahmins at all. Just saying.

Let’s quantify the poisonous effect of importing goods and/or labor into an economy. In the new formula, this toxic impact is as clear as day. If the labor demand (elastic) in the economy does not supply quality work to the labor supply (inelastic), we will see clear depreciation in the human capital. We may not be able to measure this effect (eg, by selling random subjects on some imaginary global slave market), but we can define it in quantitative terms.

If there are not enough good jobs for all the Americans, some of the Americans will become useless bums. Or they will have to take shitty bullshit jobs, which will cause them to fall short of their human potential. It will leave them less valuable as human beings—as human capital—as government slaves. See how easy this new math is?

If it seems paradoxical that accepting the principle that “government slavery” is the key to human freedom and flourishing, it seems no less paradoxical that socialism is the way to ruin and impoverish a society. But it always seems to work out that way. Everything rots when it has no owner—human beings included.

Once we realize that, jn a 21st-century economy, the goal of matching labor demand to labor supply is much more significant than the goal of maximizing the supply of comforts and pleasures to the population—either because, according to my super- spergy analysis, we are all “government slaves”; or because, in terms Hillary Clinton would be quite happy with, purpose, skill and meaning are more important to human existence than pixel count on your flat screen TV—we get to turn liberal economics upside down and make it make sense again.

For instance, if we have a lot of professional programmers who can’t find jobs as such, but have to be Walmart greeters, we are racking up fat losses on these human assets. From a depreciation standpoint, it would be economically ideal to give them fake jobs. But ideally, they would not even know the jobs were fake… Instead, we are pumping all the appreciation energy into these H1Bs, who are human assets of another government, while our own human capital rots on the couch.

The difference between migrant labor and free trade is clearly a difference of degree. In both case, we are using foreign labor to fulfill domestic labor demand. Therefore, the appreciation is being foregone. And human assets depreciate if they are not used. They appreciate when used to the limit of potential. Again, we are driving America like a rented car. It is efficient to change the oil in a car you own, but not one you rent. We own this car, I’m afraid. We should act like it.

Population acquisition

Of course, there is an easy answer to this question: keep the H1Bs. Then the state is appreciating its own assets, isn’t it? Actually, it is capturing assets from other states. Sounds even better. Highly accretive to the balance sheet!

First of all, the H1B is not an immigrant visa. It is a guestworker visa—limited to six years. To the extent that it has become a path to permanent migration, it is simply being misused. The same is true of the famous O1 “genius” visa. There is actually no official USG program for rapaciously harvesting global human capital. If we were to design such a program, it would look very different from the H1B or even the O1.

In theory, there is certainly an economic place for guestworker programs. Labor shortages can render various kinds of activity uneconomic—even military activity.

If you need a rocket program to fight the Soviet Union, and the best rockets are made in Nazi Germany, why not import Nazi rocket scientists to put a man on the moon? Don’t worry, you don’t have to let them put a Nazi on the moon. And it is hard to blame Saudi Arabia for importing Texan petroleum engineers. What if, instead of importing H1Bs—we imported Aadhaar? We could even give it a name which doesn’t sound like you just ran over a frog. And it’s like with recipes—you can just import the code, not the coders. But—all these are genuinely special cases.

When we look at the economic conditions under which such programs were once established, we might find them reasonable. However, they are exceptional cases in the modern world. In these exceptional cases, we see that domestic labor supply is being stretched to its edges, preventing some whole new universe from blossoming. This is not at all the normal situation.

Actually, what we are doing with all this mass migration—in both the high-skill and low-skill areas—is a cope for our inability to develop our own human capital. It is especially noticeable that in low-skill employment, we have both a native underclass that does not work, and an imported helot class that does work. While the high-skill situation is more complicated

We cannot pretend that the government is following a rational policy in this one area, when the nature and motivation of the policy has nothing to do with this analysis. The USG is not focused on developing its human capital. To the extent that it is acquiring capital in this way, it is not because it understands what it means to be a country, but for the opposite reason: as a cope for not understanding human-capital economics. It wrecks its own capital as it scours the world for replacements. This is hosed.

Moreover, why would another country let its most valuable human capital emigrate? Especially a Third World country, which needs its Tamil-Brahmins far more, I feel, than we do. This question goes to the very nature of the post-1945 world order, which has always had a bizarre science-fictional Wendell Willkie telos of world government. Is there any life left in that dream? What if we shut down the UN, and no one noticed? Like: what are we even doing here?

Then, of course, we have the well-documented damage that diversity causes to the social fabric—in both neighborhoods and workplaces. This is settled science, so there is no reason to talk about it. It only encourages the deniers. In this house, etc. But we have to agree with the H1B-defenders that the impact here is not that great. Let’s talk frankly about race for a moment. In this house, we believe in science—race science.

Within my lived experience, middle-class immigration from India seems reminiscent of Irish and Italian immigration in the early 20th century. While the Irish and Italians were quite uncouth, their children were only mildly coarse. Today their descendants, if they live in a few small cultural enclaves such as South Boston or the Jersey Shore, remain figures of fun; but the normal historical course, aided of course by a 50-year migration moratorium so profoundly racist that it distinguished between Northern and Southern Europeans, is for Irish, Italians, and Indians to assimilate more or less perfectly across generations—modulo a nontrivial decline in the national character. Which is sad, but probably would have happened anyway. Certainly the character of WASPs, Jews, etc, also declined across the 20th century. And while India may be in some ways the worst country in the world, we can’t say they’re not sending their best. All the evidence is that they are sending their best. Unlike some other regions you, I or Trump could name. And the best Indians can be excellent. Surely there is a racial reason why there are more Indian than Chinese CEOs. So, all in all—a mixed bag. In the Indian case it is less the action that is wrong, than the principle behind the action.

Because finally, across the board, we sense that all the talk of the objective advantages of mass migration is just what my father, with his Sopranos accent, used to call “pissing down my neck and telling me it’s raining.” None of this policy is motivated by any kind of noble aim—not humanitarian empathy, and not technocratic governance.

I believe that many intellectuals genuinely believe in these policies for these reasons. Not everybody is a shill. And some live players are even intellectuals. I do not think Elon Musk is motivated by the opportunity to hire a few $85K dealer technicians. But—the intellectuals are always the exceptions. And they are never the actual cause.

Mass migration, as a policy, is motivated by one of two things: corporate externalities or political ambition. At its most respectable, it is a way for businesses to save money by using cheaper foreign labor. At its least respectable, it is a design to gain power for a small “meritocratic” oligarchy over the whole of society, by disrupting the philia and asabiya of that society while diluting its vote.

The businesses should realize that they can still win by being the best, so long as their competitors also must use domestic labor. The oligarchy should be deported to Mars. (Someone told me Elon’s real plan is actually to keep Earth, but send the libs to Mars.)

Alien immigration

The real systemic shock will be, of course, AI.

AI is essentially equivalent to alien immigration. The aliens are a little clumsy with their JavaScript at the moment. Their driving isn’t quite perfect either. In five or at most ten years—what will our Nepalese Uber drivers (here on God knows what visa) do? It was long the joke in Palo Alto that “AI” stood for “actually, Indians.” But now silicon is beating out carbon for reals. Look out below.

The effect of AI will be the same effect that technology has all across the productive sector. It creates tournament-economy effects in which a few rockstars rake in all the bucks. It is a worse destroyer of labor demand than the spinning jenny and the steam engine put together. It will destroy demand for human beings in the developed world, the developing world, and probably even on Mars.

Human populations, to governments, are left as residual liabilities that need to be fed. And, in some sense, pleasured. Almost everyone is a zero-marginal product employee.

At this point, to protect any kind of humane existence, it is necessary to restrict the technology of production in a way that maximizes high-quality labor demand. We are essentially turning real life into a videogame—a maximally-engaging videogame. We may even have professional dragon-fighters (once we can bio-engineer real dragons).

The only alternative I can see to such a policy of artificial difficulty is one of “fully automatic luxury communism,” in which the total absence of meaning makes humanity suffer a moral and then political collapse. This political collapse seems likely to result in civilizational suicide, subjugation by barbarians, and a return to pre-pre-industrial technology levels (having lost all the secrets of pre-industrial technology as well). The species may survive, unless there is some kind of technical self-extinction scheme. Which seems likely. Covid, after all, was almost a dry run.