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Will Rudd Government's high immigration program turn Australia into Argentina?

This short article was originally posted as an anonymous comment with the title Australia: The Next Argentina? to the short article The rich get richer whilst the Australian middle-class is out-sourced.

To consider the effect of sustained high levels of immigration on a country's middle class, one only has to look at Argentina.

In his book, The Case Against Immigration (pdf 1.4M), American writer Roy Beck notes:

One need only look to Argentina this century to see the possible perils of waiting too long to scale back immigration. During the late twentieth century, most observers have tended to lump Argentina with other Latin American countries, their economies characterized by small economic elites, a vast class of impoverished citizens, and a weak middle class. The economist Carlos Diaz-Alejandro wrote that some modern commentators have even classified Argentina with less developed nations such as India and Nigeria. Such comparisons would have been thought ludicrous just eighty years ago, he said: "most economists writing during the first three decades of this century would have placed Argentina among the most advanced countries-with Western Europe, the United States, Canada, and Australia.... Not only was per capita income high, but its growth was one of the highest in the world.”

How did Argentina cease to be one of the world's richest countries? That puzzle was the challenge for Allan M. Taylor, the Mellon Fellow at the Harvard Academy for International and Area Studies and the Department of Economics at Harvard. "More compelling and mysterious examples of failure than the ruination of Argentina are hard to imagine," Taylor said in a 1992 paper published in the journal of Economic History. He concluded that a key factor for Argentina's economic disintegration was the continuation of high European immigration to Argentina after the United States, Canada, and Australia began ending their eras of mass immigration early this century.

No single explanation could account for such a sustained and deep economic demise, Taylor said. But a crucial factor surely was the country's remarkably low savings rate, as compared to Australia, for example. Taylor linked the low savings rate to the high rate of immigration and the high fertility rate of the immigrants. Both immigration and fertility were higher than in Australia and contributed to Argentina having higher consumption and lower savings, Taylor found. The country made up the shortfall of capital for a while by heavier reliance on foreign capital. The differences in Argentina's circumstances-with their roots in the difference in immigration rates-left the country much more vulnerable than the other advanced nations to international events. Argentina's rich, middle-class economy was not able to survive.

Like early 20th Century Argentina, present day Australia has unremittingly high levels of immigration combined with a woefully low domestic savings rate. Thus, the money needed to fund the larger stream of imports and additional infrastructure projects generated by immigration has to be imported from overseas, adding to Australia's current account deficit. This has been a major factor in giving Australia one of the highest per capita foreign debts in the world.

The whole unsustainable edifice is a house of cards, just waiting to come crashing down. And when it happens, it will inevitably drag the Australian middle class down with it.

See also: The Case Against Immigration (pdf 1.4M) by Roy Beck,, The rich get richer whilst the Australian middle-class is out-sourced of 9 Jul 08, Online Opinion forum Greens lose the plot on population issues of 11 Jun 08, Larvatus Prodeo discussion Will “the great immigration debate” take place? of 21 May 08. The cost of multiculturalism of 1992.


More on the effect of immigration on Australia's current account deficit:

According to the Former Minister for Finance, Senator Peter Walsh, Australia's immigration program during the late 1980s was dramatically expanded - primarily because of pressure on the Federal Government by ethnic leaders. By the late 1980s, immigration had imposed massive economic costs on Australia. High levels of immigration increased annual population growth to over 1.5 per cent, the highest in the developed world. According to Mr. Stephen Joske, an economist with the Australian Parliamentary Library, immigration increased demand for basic infrastructure - such as housing, hospitals, roads, and schooling. Because of Australia's low levels of domestic savings, investment capital for such infrastructure had to be imported from overseas, adding up to A$8.0 billion each year to Australia's current account deficit.

By the early 1990s, Australia - with a population of only 17 million - had accumulated a foreign debt of over A$140 billion, equal to 40 percent of GDP and exceeding other major 'debtor' countries such as the former Soviet Union. A key cause of this debt 'blowout' was the high and unsustainable levels of immigration during the late 1980s.

Stephen Rimmer, The Cost of Multiculturalism, The Social Contract, Volume 3, Number 1 (Fall 1992).

Australia's foreign debt has ballooned since the 1980s, topping more than A$600 billion. Our current account deficit continues to exceed the "Banana Republic" levels experienced during the Hawke-Keating era.

Yet, even in the face of this impending Argentina-like disaster, immigration is being ramped up to record high levels.