Was it really just 20 years ago that the United States “solved” its illegal immigration problem with the Simpson-Mazzoli Act?  Then why do we now have 12 million new “extralegal” immigrants in this country?  And what are we going to do about it?

Among the options being bandied about these days are: create a pathway to citizenship for most extralegals; create a “guest worker” program without any promise of a citizenship pathway; or simply round them all up and send them home.  No one, though, is talking about stopping the problem at its source – or about streamlining the crazy quilt U.S. legal immigration system that clearly fails to match entry opportunities with our legitimate national needs.

Let’s say just six million “extralegals” are working in our economy today.  We have an unemployment rate at under five percent.  This means we do not have enough unemployed people available for all of the jobs that some would force today’s extralegals to forfeit.

Whether or not these extralegals are “doing jobs no American would ever do,” the fact is that we have made them an informal, yet vital part of our workforce. Simultaneously, we have failed to open the doors for enough legal immigrants to fill our job market’s gaping holes, which are partly the result of declining domestic birth rates and an aging population of baby boomers.

Peruvian economist Hernando de Soto, in his classic book The Mystery of Capital, could have been describing our immigration problem, rather than access to property rights in countries like Mexico, when he wrote: “extralegal activities burgeon whenever the legal system imposes rules that thwart the expectations of those it excludes.”

The harsh truth is that the vast majority of those who have crossed into the United States were virtual extralegals in their native countries. Many were landless, lacked access to legal jobs, and were unable to obtain basic documents or start their own legal businesses, due to corruption and archaic legal and social structures.

Mexico, for example, recently ranked 58th out of 123 nations in economic liberty and 88th in measures of legal structures and property rights, according to the World Economic Freedom Index. Mexican society is rife with kidnappings for ransom, the “disappearance” of women, drug cartels and gang killings, and the ever-present bribes.

The benefits of NAFTA and CAFTA do not reach down to the 80 percent of Mexicans whom de Soto says either live or work in that country’s extralegal (underground or unofficial) economy, at least a quarter of whom are engaged in subsistence agriculture.  Nor do they reach those in other nations where upward social and economic mobility is far less fluid than in the United States.

Just as sadly, U.S. business and government entities have tacitly endorsed the extralegal immigrant economy and its cheap (and uninsured) labor force. However, the cost of keeping these people outside the law is high. Legal immigrants are more likely to buy property, invest locally in businesses, and assimilate into the broader culture, more likely to continue their education and improve their earning power, and more likely to turn in criminals and drug dealers.

So it is in our economic and societal interest to integrate into our legal structure otherwise law-abiding immigrants who want to make the USA their home. As de Soto further explained, “most governments … recognize that the reason their extralegal sectors are growing exponentially is not because people have suddenly abandoned their respect for the law, but because they have no alternative for protecting their property and earning a living.  Once governments come to terms with this fact of modern life, they will have to strike a deal.”

De Soto also points out that extralegals helped build this nation.  The “noble pioneers” who settled states like Maine and Kentucky started off as extralegal squatters.  Later, much of the Midwest and West was settled by people who formed extralegal claim associations and mining districts, creating their own social polities that were not recognized by federal law.

It took decades for the U.S. government to finish the job of legitimizing these extralegal property rights arrangements, by integrating them into the law of the land. But through this lengthy and often bitter process, de Soto concludes:

Americans built a new concept of property, one that emphasized its dynamic aspects, associating it with economic growth, and which replaced a concept that emphasized its static character, associating it with security from too rapid change.  American property changed from being a means of preserving an old economic order to being, instead, a powerful tool for creating a new one.  The result was the expanded markets and capital needed to fuel explosive economic growth.

Today, we have the opportunity to impart the principles of political and economic freedom to a group of people who had been denied such benefits by their own governments – and to work with them to create an even more dynamic social order both here and in their native lands.  To ensure this outcome, the U.S. should insist that our trading partners expand liberty and property rights for their citizens, if we are to increase quotas for temporary or permanent immigrants from them.  Once those nations start seeing their poor as underdeveloped assets rather than long-term liabilities – as “resilient and creative entrepreneurs and value-conscious consumers” – they may begin to persuade more of them to stay home and help their countries achieve their full economic potential.

Our closest southern neighbor, Mexico, has come a long way up the ladder toward freedom, improving its economic freedom index score (Heritage-Wall Street Journal) from 3.41 in 1998 to 2.83 in 2006, but it still has a long way to go.  One hopeful sign is that de Soto has been advising the Fox Administration on ways it can turn an estimated $315 billion in “dead capital” into liquid assets, so as to benefit both property owners and the nation’s treasury.

One more thing: Any deal on immigration must accommodate the people who have been following the legal pathway toward residency and/or citizenship. De Soto might well have been speaking of the U.S. Citizenship and Immigration Services when he wrote: “Many countries make the obstacles to entering the legal systems so daunting and expensive that few migrants could ever make their way through the red tape.”

For some time, U.S. immigration policies have rewarded illegal entry and frustrated those who try to come here “by the book.”  Such actions belie the reality that people are our best resource, and that the freer the people, the greater their resourcefulness and value to society.
Duggan Flanakin serves as a CFACT environmental programs officer.


  • Duggan Flanakin

    Duggan Flanakin is the Director of Policy Research at the Committee For A Constructive Tomorrow. A former Senior Fellow with the Texas Public Policy Foundation, Mr. Flanakin authored definitive works on the creation of the Texas Commission on Environmental Quality and on environmental education in Texas. A brief history of his multifaceted career appears in his book, "Infinite Galaxies: Poems from the Dugout."