Expatriation: not what it used to be

After the American Century

A century ago being an expatriate had a certain cachet. Some major American writers once lived primarily in Britain, notably Henry James and T. S. Elliot. In the 1920s a raft of famous authors resided in Paris, as chronicled in Malcolm Cowley's Exile's Return. Central works of American literature were written while the authors were living in Europe, and they often take place there as well, notably Ernest Hemingway's The Sun Also Rises or F. Scott Fitzgerald's Tender is the Night. A sojourn in Europe was once thought essential for every sculptor, painter, musician, and writer. The American artist abroad then lived well due to a strong dollar. In that era, the terms commonly used for such people included "emigrant," "émigré," "expatriate," and "exile." These did not usually have a negative connotation.

Today, the image of the foreigner who lives abroad is somewhat different. Many terms referring to them do not have positive connotations, including "illegal immigrant," "refugee," "alien," "deportee," "evacuee," "migrant," "foreign national," "itinerant," "displaced person," and "gypsy." The term "expatriate" is not much used, and I do not recall being called that by anyone, at least not recently. These days, the dollar is strong but not as strong as in 1920. 

Stokholm, June, 2013

For many reasons it is getting more difficult to be an American expatriate (the older term) or foreign national. This is an unintended product of many factors, including greater mobility, the tightening of security in the face of terrorism, and the digitization of information. The long lines at airports are one obvious example, where on arrival the non-citizen must wait in the slower queue. 

Banking offers a second example. The Economist writes that "Worried about being hit by massive fines for unwittingly aiding money-laundering, sanctions-evasion or financing terrorism, banks have over the past few years dropped customers in countries or sectors deemed high-risk." Even in countries where risks are low, it is now far more difficult to open a banking account. I know this from personal experience. When abroad for more than a few months, it used to be routine to open a local bank account. This has become more difficult, and one is forced to use ATMs and the bank in one's home country, with all the currency exchange charges that come with it. Yet a foreign account cannot deal with every contingency, as local services often are based on having a local bank and credit card. Digital payment systems, for example in the London tube system, do not always work with foreign accounts.

Pensions are a third example. Work in several counties during your lifetime, and each will give only a partial pension on retirement. Nor is there much logic to how much one receives. A nation where one worked only two years may pay half as much as another country where one worked more than 25 years. Saving privately can compensate for this problem, but saving for a pension in one country may not be accepted as a tax deduction in another. These matters vary from one nation to another, and generalization is impossible beyond the fact that sorting it out takes time. A lot of time.

A fourth example is taxation. A decade ago I was temporarily in Britain for a semester, and agreed to give a lecture in Norway. I made the mistake of accepting a modest honorarium for this work. As a result, the honorarium was taxed in Norway, in Denmark (my permanent residence), in the UK (my temporary residence), and in the US (my citizenship). Taken together, these taxes amounted to more than 100% of the honorarium. Perhaps there was a way to avoid paying so much. If so, the rules are hard to make out, and the time demanded to find and fill out various forms made it impractical to contest it.  Since then, I have been far less interested in being paid for lecturing abroad, unless it is in Denmark or the US, which limits the taxes to "just" two countries. Double taxation demands time and produces anxiety.

The difficulties of being an American expatriate have measurable consequences. An increasing number of long-term residents abroad are renouncing their US citizenship. I am not considering this option, but I know people who have turned in their passports. Fortune magazine noted that more people are giving up American citizenship, with a 26% increase in 2016 alone. That was before Donald Trump became president.

Both political parties have long ignored the plight of expatriates, and it was the Democrats who in 2010 passed tax laws for Americans abroad that are more draconian and punitive. As at the airports, the targets of this legislation were smugglers and terrorists, and the intentions were laudable.  The absolute numbers renouncing citizenship are still small, but the trend is troubling. The increase in the last decade has been more than 100%.

We are continually told that the world is becoming more international. Were Hemingway to return, he might disagree. At times, it seems to be more nationalistic and xenophobic.

The Failed Economics of Austerity in Europe, and its consequences in Denmark.

After the American Century

The way governments responded to the financial crisis of 2008 differed. In Europe, they pursued austerity. They held down deficit spending and cut government jobs. In the US this response was common at the state level, but the Federal Government pursued a different policy. It loaned money to the faltering automobile industry, which has now recovered. It sped up spending on infrastructure, and was not afraid to stimulate the economy. 

Now we can see the results. The US economy has recovered considerably, with unemployment falling almost continuously during the last five years. The economy has grown every year since 2009 when Obama took office.

Contrast almost any country in Europe, where economies are barely holding even or shrinking. The headlines years ago focused on Greece, Italy, Spain, Portugal and Ireland.  But now the austerity policy has begun to hurt the larger, stronger economies. Germany is struggling to keep growing. France is in recession. This is now much in the news.

But Denmark is also having economic problems. Its economy has essentially stopped growing, and even shrank during some recent quarters. According to the World Bank, the Danish economy shrank in 2009 by -5.7 %. Five years later it has not gotten back to where it was before the crisis. With growth of -0.4% in 2012 and + 0.4% in 2013, the Danish economy is flat. This failure of economic policy ought to be the focus of attention. 

But the ruling Danish politicians have mounted a massive campaign of distraction. They have managed to convince many journalists and much of the public that unemployment is high and that this is the fault of the universities. Both statements are false. The Danish unemployment rate is historically lower than for most of the last twenty-five years (see chart below.) 

The idea that the universities are somehow responsible for this non-existent unemployment problem is nonsense. The real problem is that the economy as a whole is stagnant and that few new jobs are being created. Moreover, the age of retirement is rising, so that replacement of the old by the young has slowed down. But no politician wants to admit that the economy is stalled. 

Instead, the "solution," the Ministry of Research claims, is to eliminate thousands of admissions to universities, especially in the humanities. But this is all nonsense. The number of unemployed in Denmark was much higher between 1990 and 2005 than between 2010 and the present.

Historically speaking, the number of unemployed is low, if one's point of comparison is any time except 2006-2008. The real problem is that the percentage of people working is falling, both because the economy is weak and because the population is aging.  Starting in 2009, the percentage of the total population that is working has fallen from 75% to 70%. That is a big drop, and that drop has little or nothing to do with the universities.

More generally, the European-wide crisis that began in 2008 was not caused by universities. Regardless of what students majored in, there just are not as many jobs available as there were in 2009. Eliminating thousands of university admissions in the humanities will not create any jobs, but it will create a cohort of uneducated, unemployed people. If 3,000 fewer people enter the universities every year, after a decade there will be 30,000 more Danes who never attended university. As a result, they will earn less, pay less in taxes, and be more often among the unemployed.

Why is the Danish press unable to see through this government PR campaign? The government's analysis of the problem is wrong, and the "solution" to the problem is wrong. Austerity will make matters worse, creating a stagnant pool of unemployable people.  

The total number of Danish jobs has declined, because the government has pursued an austerity policy. It should have listened to Nobel-winning economist Paul Krugman. He has written about this often, for example in 2012, when he said, "in Europe, as in America, far too many Very Serious People have been taken in by the cult of austerity, by the belief that budget deficits, not mass unemployment, are the clear and present danger, and that deficit reduction will somehow solve a problem brought on by private sector excess." He noted that "research by the International Monetary Fund suggests that spending cuts in deeply depressed economies may actually reduce investor confidence because they accelerate the pace of economic decline."

President Obama's administration listened to such advice, though I should note that Krugman suggested an even higher level of pump-priming than Obama practiced. As a result, the US economy has turned around. In contrast, the Danish politicians obediently marched in lockstep with the Germans, believing against common sense, as well as against the economic analysis of Krugman and others, that if all the European countries reduced spending  their economy would magically improve. 

The Danish government is incompetent in economics, but it is good at creating a distraction, and it has managed to blame the universities for its own mistakes.  As Professor Krugman remarked, with regard to widespread failure of austerity policies to produce the results they had predicted, this is  "a case in which rival theories made different predictions, the predictions of one theory proved completely wrong while those of the other were totally vindicated — but in which adherents of the failed theory, for political and ideological reasons, refuse to accept the facts."

When prophecy fails, a famous psychological study found, its adherents circle the wagons more tightly and re-embrace their mistaken ideas, convinced that someone or something else is responsible for the failure. Today, as Krugman notes, "the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner."

The Danish government and its economic advisers are in this situation, and therefore they need to blame someone else for the failure of austerity. And so they blame the universities. The failed logic is that, if only the universities had trained 3,000 more scientists and engineers every year since 2008 rather than humanities students, then these 15,000 people would now be working. But the statistics clearly show that workforce participation has fallen 5% and that there are fewer jobs now than there were five years ago. Even so, the unemployment rate is lower than it has been for most of the  25 years since 1990, because there are more old people and fewer young people. 

Reducing the number getting a university education will not change these facts, but the Danish media seem unable to read statistics, to make elementary calculations, or to read alternative views. Instead of seeing whether there is any logic or statistical basis for the new government policy of austerity for the universities, the Danes have engaged in a heartfelt discussion of the value of the humanities and their place in the development of civilization. An interesting discussion, but it just adds to the confusion artfully created by the government, and it gets in the way of understanding the real situation, which is that the government's German-inspired economic policy has been a fiasco.