I am just a poor boy, though my story’s seldom told. I have squandered my resistance, For a pocketful of mumbles, such are promises.

All lies and jest.

The Boxer, Paul Simon

Poor girl, Oklahoma City, 1936

Why are people poor? The question echoes down the ages. Is it their destiny, their upbringing, their character, their misfortune?

Recently the Economist published a story describing scientific findings that, if confirmed, places a firm evidentiary dot on the graph of nature-versus-nurture, choice-versus-fate.

I am just a poor boy though my story’s seldom told

Apr 2nd 2009 From The Economist print edition

How poverty passes from generation to generation is now becoming clearer. The answer lies in the effect of stress on two particular parts of the brain

As the twig is bent, so shall the tree lean.

Sleeping children, Jacob Riis, New York City, 1890

That the children of the poor underachieve in later life, and thus remain poor themselves, is one of the enduring problems of society. Sociologists have studied and described it. Socialists have tried to abolish it by dictatorship and central planning. Liberals have preferred democracy and opportunity. But nobody has truly understood what causes it. Until, perhaps, now.

The Economist’s story takes as its uncredited title the first line of Simon & Garfunkel’s exquisite ballad The Boxer. Its lyrics (for a haunting rendition, sung with the pathos of age, click here) tell the same story now found by the researchers.

Still a man hears what he wants to hear and disregards the rest.

Since Biblical times, the cause of poverty has driven our attitude toward affordable housing specifically and poverty relief generally. From the English almshouses through the Pilgrims’ work houses right into the New Deal’s public housing, proponents of affordable housing have argued that circumstance – luck, upbringing, prejudice – were the reason. Opponents have laid poverty on sloth, drunkenness, moral weakness, choices made by the poor.

Sherry Levine, After Walker Evans

Children, as we all know, are impressionable. How many parents have found themselves shuddering when they hear, piping from a four-year-old’s unseen mouth, the exact cadences and phrases of reproof and scorn that mom and dad have themselves used in unguarded moments?

The crucial breakthrough was made three years ago, when Martha Farah of the University of Pennsylvania showed that the working memories of children who have been raised in poverty have smaller capacities than those of middle-class children.

Stress destroys cognition. And stress is a byproduct of uncertainty, where the imagination is in constant fearful arousal. In an experiment with dogs wearing shock collars, divided into three groups:

Those who received a shock whenever they performed a specific behavior

Those who received a shock when they did not obey a command

Those who received random shocks

The first group did not show a significant rise in cortisol levels; the other two groups did show a significant rise, with the third group showing the highest level of cortisol.

Dogs who could clearly associate the shock with their action, and as a result were able to predict and control whether they received a shock, did not suffer from considerable or persistent stress.

Ethiopian refugees, 1984

Poverty of housing is defined by insecurity of tenure. Fear of losing one’s possessions, fear of violence done in the night-time, all disrupt the brain’s recuperation and growth.

When I left my home and my family I was no more than a boy, In the company of strangers, In the quiet of a railway station, runnin’ scared.

Around the world, the great challenge of slums is to provide security of tenure. From that flows capital reinvestment – and, if this study’s findings are right, emotional development of our world’s next generation.

Laying low, seeking out the poorer quarters, Where the ragged people go. Lookin’ for the places, only they would know.

Insecurity of tenure permanently damages the brain:

Since Dr Farah’s discovery, Gary Evans and Michelle Schamberg of Cornell University have studied the phenomenon in more detail. As they report in this week’s Proceedings of the National Academy of Sciences, they have found that the reduced capacity of the memories of the poor is almost certainly the result of stress affecting the way that childish brains develop.

Street children, Philippines

As your brain is damaged, you cannot learn; and being unable to learn, you cannot earn.

Asking only workman’s wages I come lookin’ for a job, But I get no offers, Just a come-on from the whores on Seventh Avenue. I do declare there were times when I was so lonesome, I took some comfort there.

Oooh la, la, la …

The evidence is from a longitudinal study:

Dr Evans’s and Dr Schamberg’s volunteers were 195 participants in a long-term sociological and medical study that Dr Evans is carrying out in New York state. At the time, the participants were 17 years old. All are white, and the numbers of men and women are about equal.

The researchers sought to pick a homogenous starting group, so as to eliminate other potential sources of difference:

To measure the amount of stress an individual had suffered over the course of his life, the two researchers used an index known as allostatic load. This is a combination of the values of six variables: diastolic and systolic blood pressure; the concentrations of three stress-related hormones; and the body-mass index, a measure of obesity.

Here’s a point of retrospective interpolation. Rather than observe the stress the individuals had suffered over their preceding seventeen years, they looked at the physiological residues of stress, just like smoking researchers estimating someone’s previous habit by looking at his lungs today.

Care to guess her income level?

For all six, a higher value indicates a more stressful life; and for all six, the values were higher, on average, in poor children than in those who were middle class.

So we have physiological indicators of a stressful life; and we have past indicators of their parents’ economic situation. But to those current variables, they were able to add a fifteen-year-historical record:

Moreover, because Dr Evans’s wider study had followed the participants from birth, the two researchers were able to estimate what proportion of each child’s life had been spent in poverty. That more precise figure, too, was correlated with the allostatic load.

Though correlation is not causation, when you eliminate extraneous variables, the odds of causation rise.

The capacity of a 17-year-old’s working memory was also correlated with allostatic load. Those who had spent their whole lives in poverty could hold an average of 8.5 items in their memory at any time. Those brought up in a middle-class family could manage 9.4, and those whose economic and social experiences had been mixed were in the middle.

Now we have not only correlation but linear correspondence; as we move up the stress, we move down the brain’s capacity to hold ideas.

These two correlations do not by themselves prove that chronic stress damages the memory, but Dr Evans and Dr Schamberg then applied a statistical technique called hierarchical regression to the results. They were able to use this to remove the effect of allostatic load on the relationship between poverty and memory discovered originally by Dr Farah. When they did so, that relationship disappeared. In other words, the diminution of memory in the poorer members of their study was entirely explained by stress, rather than by any more general aspect of poverty.

If this holds up – and I have no reason to doubt it – the finding is huge. Children are damaged by poverty, and by one particular aspect of poverty – stress.

Street children, Zambia

And the years are rollin’ by me. They are rockin’ evenly. I am older than I once was, and younger than I’ll be. That’s not unusual. It isn’t strange, After changes upon changes, we are more or less the same. After changes, we are more or less the same.

Lie-la-lie …

Providing security of tenure and with it a safe family environment can relieve that stress.

Mary Ellen Marks, The Damm Family, Los Angeles, 1987

To confirm this result, the researchers also looked at characteristics such as each participant’s birthweight, his mother’s age when she gave birth, the mother’s level of education and her marital status, all of which differ, on average, between the poor and the middle classes. None of these characteristics had any effect. Nor did a mother’s own stress levels.

Stress in children leads to diminished cognitive capacity, which leads to adult poverty.

That stress, and stress alone, is responsible for damaging the working memories of poor children thus looks like a strong hypothesis. It is also backed up by work done on both people and laboratory animals, which shows that stress changes the activity of neurotransmitters, the chemicals that carry signals from one nerve cell to another in the brain.

If you’ve ever said, I’m so mad I can’t see straight, then you know how our limbic and adrenal chemicals can take over our brains.

Stress also suppresses the generation of new nerve cells in the brain, and causes the “remodelling” of existing ones. Most significantly of all, it shrinks the volume of the prefrontal cortex and the hippocampus. These are the parts of the brain most closely associated with working memory.

Like acid, stress corrodes the brain’s circuitry.

Southeast Asia

Children with stressed lives, then, find it harder to learn. Put pejoratively, they are stupider. It is not surprising that they do less well at school, end up poor as adults and often visit the same circumstances on their own children.

Whenever I work with very poor people, I am struck by how deeply suspicious they are. Don’t you know I’m on your side? I think to myself. And the answer comes, Why should you be? How many other people have claimed to be on their side, and not been?

Then I’m laying out my winter clothes and wishing I was gone, Going home, where the New York City winters aren’t bleedin’ me. Leadin’ me, to goin’ home.

Stress leads to stress; poverty to poverty.

Boys, Mukuru Sinai, Nairobi, Kenya, 2009

Dr Evans’s and Dr Schamberg’s study does not examine the nature of the stress that the children of the poor are exposed to, but it is now well established that poor adults live stressful lives, and not just for the obvious reason that poverty brings uncertainty about the future.

The main reason poor people are stressed is that they are at the bottom of the social heap as well as the financial one.

Sir Michael Marmot, of University College London, and his intellectual successors have shown repeatedly that people at the bottom of social hierarchies experience much more stress in their daily lives than those at the top—and suffer the consequences in their health. Even quite young children are socially sensitive beings and aware of such things.

So, it may not be necessary to look any further than their place in the pecking order to explain what Dr Evans and Dr Schamberg have discovered in their research into the children of the poor. The Bible says, “the poor you will always have with you.” Dr Evans and Dr Schamberg may have provided an important part of the explanation why.

In the clearing stands a boxer and a fighter by his trade, And he carries the reminders of every glove that laid him down, Or cut him ’til he cried out in his anger and his shame, “I am leaving, I am leaving!”

… But the fighter still remains.

Mukuru Sinai, Nairobi, Kenya, 2009

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Flowing north across the Rio Grande

it is counterbalanced almost perfectly by another vast underground river flowing north to south: a flow of capital, in remittances from workers back to their families at home.

Out of sight, the money flows back south

The south-to-north river is being fiercely debated, with Congressional proposals to block or channel the human river north, and local communities like Farmers Branch, Texas are seeking to stem the vast underground tide by hitting the ocean with a baseball bat, enacting an ordinance to prohibit landlords from renting to those who cannot prove they are legal residents.

One view of illegal immigration

Another view

Even as this debate is playing out, the other river is being actively primed by both US and Mexican capital markets, as highlighted in this Economist article:

ACROSS the Mexican countryside, villages are denuded of their working men but kept alive by their labour.

Increasingly we see communities of separated families, where geographical bachelors have migrated to the cities and the jobs, and their spouses, parents, and children stay behind. With capital mobile, labor too can be mobile, because it can send its capital home:

The northward exodus to America numbers about 500,000 people a year.

Every two years, another million in America’s fields

The money sent in the other direction in the form of remittances amounted to about $23 billion in 2006, according to the Bank of Mexico, the country’s central bank, up almost sevenfold in a dozen years.

The rise in remittances is a huge enabler of illegal immigration: as it becomes easier to export the extract of working up north, the desirability increases to move north, by any means necessary. And the capital markets, in their quest for market share, are dramatically increasing capital-transfer efficiency:

As that number has grown, so others have fallen: the fee for remitting money has dropped from an average of 9.2% in 1999 to 3% in January 2007, according to Bancomer, a Mexican bank.

When you reduce resistance in the circuitry, amperage flow increases.

Wow, feel those capital flows!

Transmitting money has become cheaper partly because the cheques have become bigger, from $290 on average eight years ago to $350 now. More importantly, over 90% of remittances are now sent by electronic wire-transfer, according to the Bank of Mexico, compared with only half in 1995.

That Mexico’s economy is tied to the US’s is unquestionable, as shown by this Dallas Federal Reserve study:

In 2003, Mexico received nearly $13.3 billion in workers’ remittances, an amount equivalent to about 140% of foreign direct investment and 71% of oil exports. Continued growth in remittances is expected in 2004. The latest data, through March 2004, show remittances almost 22% higher than the same period a year ago.

As the Dallas Fed’s charts show, Mexico has the world’s highest remittance-receiving volume:

Mexico’s 2002 remittances were about 15% of all remittances received by developing countries. They exceeded those received by Africa ($7.8 billion), Europe ($5.8 billion) and the Middle East ($6.1 billion). As recently as 2000, India was the top receiver with $8.3 billion, followed by Mexico with $6.5 billion.

And the US has the largest remittance-paying volume:

On the flip side, the United States is the leading source for workers’ remittances. In 2002, the United States alone provided almost $23 billion in remittances, followed by Saudi Arabia with nearly $16 billion (Chart 2). The top 10 countries accounted for 85% of 2002 remittances.

Those figures are three years old. Since then, as the Economist noted, remittances have increased a further 70%.

As a result of their vigorous growth, workers’ remittances now occupy third place as a foreign exchange generator for Mexico. Maquiladoras continue to be the top foreign exchange generator, at $18.4 billion in 2003, followed by oil at $15 billion.

Thus, of Mexico’s top three sources of foreign exchange, two tie directly to cost advantages Mexico has versus the US economy: maquiladoras and remittances. That’s an enormous amount of economic pressure, a tide that will not be stopped by half-hearted interdiction — the more so because of the capital markets’ tireless drive for even greater efficiency:

However in rural communities in Mexico, where every peso counts, even 3% is a big bite out of a remittance cheque. That is why the Bank of Mexico and America’s Federal Reserve are running a programme, called Directo a Mexico, to cut the cost further.

Back in the Cold War heights, when we were grappling against the Soviets, a great deal of Herman Kahn and other think-tank leadership went into the complexities of long-term strategic warfare.

In the long run, even a full stomach is an economic weapon

The more Kahn and similar theorists thought about decade-long geopolitical conflict, the more everything became a strategic weapon, because everything tied into the nation’s capacity to sustain effort. In the same way, the longer you study the immigration question, the more you realize that everything to do with the US economy touches upon it one way or another — including capital … and housing.

Do the migrants themselves have accounts to send money from? As many as 70% do, according to a recent report by the Bank of Mexico. This is largely because hundreds of American banks, eager for deposits, will gladly open accounts for people carrying only a Mexican consular identity card, rather than official United States government identification. This allows people to formalise their finances without formalising their immigration status.

As I’ve written elsewhere, it’s absolutely critical to formalize financial status; otherwise those who are excluded from capital are condemned to poverty. Yet this formalization — which helps workers (legal or illegal) here in America, and their families back home — also enhances the attractiveness of making it over the border, to the land of employment.

Bansefi has seen rapid growth, with 3.4m accounts now open, compared with 850,000 in 2001. If banking continues to spread on both sides of the border, Mexico’s villages should continue to benefit from the fruit of their emigrants’ hard work, without it being squeezed along the way.

Capital, my favorite businessman Auric Goldfinger explained to James Bond, is a catalyst:

“My treasure of gold is like a compost heap. I move it here and there over the face of the earth and, wherever I choose to spread it, that corner blossoms and blooms. I reap the harvest and move on.”

Goldfinger, page 135

“That’s the second lesson: when the odds aren’t right, make them right.”

Where does the capital from Mexicans’ labor go? Back into Mexico’s development:

The World Bank reports that remittance flows are developing countries’ second largest source of external funding, after foreign direct investment.

This is really important. We make much of wealthy-nation governments’ foreign aid efforts, and yet right behind them is the grass-roots foreign-aid source: millions of expatriate workers sending their money home to their families.

Further, remittances are more stable than private capital flows, which often move with business cycles, raising incomes during booms and depressing them during downturns.

Any economic-development strategy for Mexico, therefore, must look not just at the discrete and visible flows of foreign aid and foreign direct investment, but also at remittances, which have arisen spontaneously through two market forces: capital and labor/ earnings. Trade trumps edicts.

1931: Mexicans being deported

In Mexico, economic impact studies have focused on the southern states, such as Michoacán, Guerrero and Oaxaca, where it is believed that remittances mostly or sometimes completely cover general consumption and/or housing. One estimate indicates that 80% of the money received goes for food, clothing, health care, transportation, education and housing expenses.[4]

Because remittances are higher in Mexico than in other developing countries, they also may play a key role in the development of productive economic activity.

Thus Mexican labor here in America does not merely support families in dependency; rather, it is transforming the Mexican economy in some very impoverished southern Mexican states.

One study concludes that remittances in Mexico are responsible for about 27% of the capital invested in microenterprises throughout urban Mexico.

In America, home ownership is a driver of new business formation because people readily tap home equity to start new businesses. The same thing happens in Mexico, with the remittances flow.

The estimate goes as high as 40% in states that have typically high migration rates to the United States, such as Zacatecas, Michoacán and Guanajuato.

Numbers 9, 15, and 19 on your map — central Mexico

Even if US politicians has been slow to recognize the value of the remittance flow, the Mexican government has been quick to support it:

Two government-sponsored programs channel remittance flows into infrastructure development and business start-ups in Mexico. In the Dos por Uno (Two for One) program, established in 1993 by the state government of Zacatecas, the federal and state governments each match one dollar for each dollar immigrants contribute for infrastructure development projects such as paving roads.

Saving precedes borrowing, for governments and municipalities as for people.

In 1999, this program evolved to Tres por Uno (Three for One) when the local government began to participate. Through 2002, about $40 million had been invested in 788 projects in several Zacatecas municipalities. Dos por Uno programs have spread to other Mexican states such as Guerrero, Jalisco, Guanajuato, San Luis Potosí and Michoacán.

The housing component in all this is evident. Mexicans living and working illegally in America are interested in minimizing their housing consumption up here so they can maximize their remittances back home to Mexico. Living as geographical bachelors, and coupled with their clandestine status, they are likely to live in overcrowded conditions, the slums inside. In fact, because slums are a wealth-extraction machine, it is economically rational for them to arise in American neighborhoods dominated by illegal immigrants who regard their time here as transitory, simply so they can build up equity and invest it farther south:

Another government-sponsored program to channel remittances into business start-ups is Invierte en Mexico (Invest in Mexico), launched by Nacional Financiera SNC, Mexico’s largest development bank, in conjunction with the Inter-American Development Bank and organized groups of Mexican immigrants in the United States. Invierte en Mexico offers Mexican immigrants the opportunity to invest in their communities to generate employment and foster economic activity through starting businesses such as drugstores, supermarkets, gas stations and restaurants. The program provides business advice and support in developing business plans at no charge to immigrants. The program budget is about $2.2 million and is available only in Hidalgo, Zacatecas and Jalisco.

As I wrote recently in when a town dies,

Throughout history, cities have been where wealth was created, ideas were born, businesses blossomed, and revolutions started. Cities exist for their connections of people to people, and as we have seen in posts on local real estate taxes, they too are economic organisms, whose ability to provide services and amenities to their inhabitants depends in large part on the city’s economy. A city and its residents are symbiotes, each contributing to the other’s health.

Here in America — and as remittances demonstrate, also in Mexico — labor mobility is a huge economic strength. Markets and people move much faster than government, and their movements shape and grow cities and spontaneous communities. The north of England is still suffering economically because people cling like lichen to their native soil, yet in the Americas people readily accept a thousand-mile separation.

Running for the future

It’s why our economy grows, and our population grows, even as much of Europe economically stagnates.

America is the land of opportunity. That’s why it attracts people: far from being ‘those’ people, they are ambitious. For many, especially those sending home remittances, that’s why they stay, and why they accept substandard housing conditions: for the economic opportunity.

Wanting in

As the United States thinks about immigration, legal or illegal, and how to rationalize what everyone agrees is a currently untenable situation, keep your eyes fixed on jobs, housing, and infrastructure development. The more we make Mexico rich, the more we strengthen Mexican communities and housing alternatives, the less the pressure to have illegal immigration.

As long as there is money to be made, they will keep coming

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