Tuesday, September 18, 2012

Brain Drain Is Better Than Foreign Aid

Exporting higher education is the centerpiece of the emerging Talent Economy. What about developing countries that lose these superstar students? Have no fear, opening up the borders is the best thing we could do for economic development abroad:

Exporting education opens possibilities that extend outside the US to the world at large. Beyond educating foreign students in existing programs, the US can draw on a major strength—entrepreneurship—to create new programs aimed at educating entrepreneurial students from countries that could greatly benefit from enterprise-driven growth. Research has shown that face-to-face interaction with seasoned entrepreneurs is key to the effective training of budding ones, and the US has a wealth of highly successful entrepreneurs, many of them originally from developing countries, who can help universities train students from developing countries. Furthermore, bringing ambitious and entrepreneurial students to our shores delivers a compounded effect on the U.S. economy. Even when they leave and start businesses in their native countries, they expand US exports. The brain gain/brain drain debate is in the past. Opportunities have dispersed; “brain circulation” is the new reality.

The U.S. already has the financial resources to strengthen its universities—we need only follow the history of our own economic progress, achieved through entrepreneurial efforts rather than state-led programs. We waste hundreds of billions of dollars on foreign aid to governments, through policies first used during the Cold War that now serve only to centralize power and stall bottom-up progress. Today, remittances sent by immigrant workers and the spread of the Internet and cell phones should render state-to-state management obsolete. Indeed, even the State Department is looking to promote entrepreneurship in developing countries.

Instead of aid, we should redirect money to U.S. universities for program expansion to accommodate 3 million new foreign students and have a much more tangible and beneficial effect on the rest of the world. These redirected funds could be used to create capacity for the new foreign students without taking away spots from American students, both by expanding existing universities and creating new ones, while also creating scholarships to enable talented students from developing countries to attend.

Encouraging brain drain is a smart economic development strategy. Youngstown is a good domestic example of this approach. Return migrants are fueling the Mahoning Valley's revival:

"I'm a 'boomerang,'" said Eric Planey, vice president of international business attraction with the Youngstown/Warren Regional Chamber.

The Youngstown native explained that he returned to his hometown three years ago, giving up a banking career in New York City, so that he could renew ties to a once-prosperous steel town that he had left two decades earlier.

Planey's worldly experience is helping his hometown take full advantage of the Utica Shale rush. His broader horizons allow for a useful analogy that would be lost on someone who has never left the region:

"We probably won't be 'Houston North,'" Planey concluded, referring to a nickname that some have given to nearby Pittsburgh, Pa. "But maybe we'll be 'Odessa North' or 'Oklahoma City North.' We could be a second satellite city."

Talent is cycling back to the Rust Belt. I heard an economist on a Cleveland radio station claim that Youngstown is Ohio's boom city. Brain circulation has a lot to do with that reversal of fortune.

Yes, the United States should import foreign born college students instead of sending aid. US cities should encourage the best and brightest to leave. Seeking to retain talent is a mistake, economically counterproductive. Time to update the economic development playbook.

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