"We Need An Immigration Stimulus".

We Need an Immigration Stimulus
A recession is exactly when we want innovative outsiders.
By L. GORDON CROVITZ

At the dawn of the Industrial Age, in 1719, the British Parliament passed a law banning craftsmen from emigrating to France or other rival countries. The law also targeted anyone who tried to entice skilled British workers to share technological information with foreigners.

"At that time the chief concern was the loss of iron founders and watchmakers," Gavin Weightman writes in his new book, "The Industrial Revolutionaries." Spies from around the world tried to uncover the secrets of British engineering, but "were often reduced to lurking around local inns, hoping to engage knowledgeable workmen in conversation and induce them to cross the Channel for some splendid reward."

This attempted protectionism of ideas was doomed by easier travel and communication. The precursor to the London Times complained in 1785 that a Briton who set up a textile plant in France had "entailed more ruin and mischief on this kingdom than perhaps even the loss of America."

Which brings us to our own era, and the debate on immigration reform beginning this week with congressional hearings that include an appearance by former Federal Reserve Chairman Alan Greenspan. President Barack Obama says he wants to address the issue by the end of the year.

It usually pays to be skeptical about immigration reform, given the alliance between nativists and labor unions for tighter borders. Still, an economic downturn is the right time to move on immigration, one of the few policy tools that could clearly boost growth.

The pace of lower-skilled migration has slowed due to higher unemployment. This could make it less contentious to ease the path to legalization for the 12 million undocumented workers and their families in the U.S. It's also a good time to ask why we turn away skilled workers, including the ones earning 60% of the advanced degrees in engineering at U.S. universities. It is worth pointing out the demographic shortfall: Immigrants are a smaller proportion of the U.S. population than in periods such as the late 1890s and 1910s, when immigrants gave the economy a jolt of growth.

Immigrants have had a disproportionate role in innovation and technology. Companies founded by immigrants include Yahoo, eBay and Google. Half of Silicon Valley start-ups were founded by immigrants, up from 25% a decade ago. Some 40% of patents in the U.S. are awarded to immigrants. A recent study by the Kauffman Foundation found that immigrants are 50% likelier to start businesses than natives. Immigrant-founded technology firms employ 450,000 workers in the U.S. And according to the National Venture Capital Association, immigrants have started one quarter of all U.S. venture-backed firms.

Banks getting federal bailouts are saddled with new hurdles to get visas for skilled workers. The wait for H-1B visas for skilled people from countries such as China and India is now more than five years, with only 65,000 visas granted annually among 600,000 applications. But countries such as Canada and Singapore actively recruit technologists and scientists. As Intel Chairman Craig Barrett has suggested, instead of sending the half million higher-education students from overseas home when they graduate, we should "staple a green card to their diplomas."

Economic recovery and immigration are closely linked, as New York City Mayor Mike Bloomberg also understands. Last month he launched a business-plan competition targeting business and engineering students overseas with winners getting cash and introductions to venture capitalists in the city. "Unfortunately, as we're moving to open our doors even wider to the world, Congress is moving in the opposite direction," Mr. Bloomberg said.

There's a strong case that we need both more skilled and unskilled immigrants. In "The Venturesome Economy," Columbia business professor Amar Bhidé showed that wherever technology is developed, it's the creative application of innovation that builds great businesses. The Web was conceived in a lab in Switzerland, but it matured in Silicon Valley. Mr. Bhidé argues that immigrants at all levels, including as "venturesome consumers," are an important reason the U.S. retains a strong lead in innovation, even as the lead in advanced technology and science has eroded.

At a time when our financial-capital markets are still reeling from the credit bust, the human-capital market remains open for business. Fewer workers will be lured to the U.S. during a recession, but the ones who come will speed recovery. There are costs to immigration, especially in border states with generous welfare programs, but the overall benefit is akin to the advantages of free trade in goods and services.

In contrast to the early days of the Industrial Revolution, when manufacturing secrets drove competitive advantage, today's information technologies thrive as innovators share new ideas and make businesses out of them. Much of this activity is being done by foreigners who want to become economically successful Americans. This makes more open immigration one of the few stimulus packages Washington can deliver with confidence that it would help.

Write informationage@wsj.com.