Human Capital Is The Solution

How can America improve its problem-solving capacity?

One of the smartest engineers I know lives in San Francisco. While visiting southern California, we stood atop a hill and overlooked the city below. From this high vantage point, we could look down like gods, observing the world as if it were a model train set, considering how best to organize the society below.

My friend told me a story. Once upon a time, California built the Golden Gate bridge, right on time, under budget. It was one of the engineering marvels of America, and at the time, one of the grandest engineering projects in the world. Now, we can’t build anything. “Getting a single toilet installed in San Francisco costs a million dollars in permitting fees.”

Now, when he said “installing a toilet,” I assume he meant from scratch. That would include the cost of installing a new sewage tank, hooking up the water, the plumbing, the electrical work, etc etc all from ground zero. Not necessarily adding a single additional toilet in an existing building, I assume. Still, no matter the technical details or excuses, the complaint came from someone I regard as intelligent and well-meaning. His frustration and exasperation with the California government was palpable. “It shouldn’t have to be this way.”

Even if you don’t live in California, the ability of the government to do great things seems to be diminishing. In Appalachia, overlooking Marjorie Taylor Greene’s stomping grounds, I hiked with a friend along a trail of fire towers in the mountains. These lookout towers were built in ages past by the Civilian Conservation Corps. It’s possible that these structures were a waste of time and money, a socialist project to shore up employment numbers. Still, at that time, the government budget was much smaller than it is today, and yet the government seemed capable of doing much more with much less.

Inefficiency, bureaucracy, waste, fraud, abuse... This was the target of Elon Musk’s DOGE. Yet ultimately, the project only succeeded in destroying USAID, not on the grounds that USAID was a particularly inefficient program [it was actually one of the most efficient programs in the world, in terms of saving lives], but because the cause of helping Africans or Palestinians overseas was considered “too woke.” [USAID was implicated in the “Color Revolution” conspiracy, and dismantling USAID could be viewed as a signal that America was done meddling in the affairs of the third world. It aligned with Trump’s speech in Riyadh that America was done with “globalism.]

Despite all these complaints about government, America’s private section still blows the competition out of the water. For a first world, wealthy country, America has one of the highest growth rates in the world. What gives? Why is the American private sector so efficient, but our public sector is so deficient?

One explanation is that, since 1964, our government has become dominated by the ideologies of affirmative action and DEI. Instead of giving the job to the most qualified candidate, government has become a refuge for the “left behinds” of society. While this is a nice sentiment, stuffing all the dregs of society into the DMV is not a recipe for government efficient. By turning the public sector into a jobs program, quality has gone down.

Even so, this explanation can’t help us understand why it’s so difficult to build great things. Most government infrastructure projects hire third party contractors -- no DMV workers required. And let’s put aside the physical stuff entirely. When is the last time we passed a constitutional amendment? Why can’t we do great things anymore?

White nationalists have a theory that all civilizations collapse due to race mixing. Ancient Greece, Rome, Haiti, Rhodesia, and South Africa all have the same problem: they allowed non-whites to overwhelm the white population, eventually leading to collapse. Brazil is a case study of a civilization which has not collapsed rapidly, but which is stuck in eternal stagnation; India, similarly, was once a great civilization, but is now stuck in third-world status.

Contrary to this theory, I would like to propose the “Braindrain Theory of Civilizational Collapse.” Instead of viewing third-world hordes as the driving force behind the degradation of the state, its the brain draining of human capital which destroys problem-solving capacity.

One of the best case studies for the Braindrain Theory is Albania, because the “race mixing” theory doesn’t work here. Albanians are, genetically speaking, descended from ancient Europeans, not Muslim invaders. Albanians have lighter skin than the Greeks or Bulgarians. So why are Albanians so poor, so criminal, and so dysfunctional, compared to other neighboring European countries?

The best explanation is that Albanians were brain drained. During the period of Ottoman occupation, Albanians were drawn out of their home country by hook or crook. A combination of forced conscription and better opportunities elsewhere enticed Albanians to leave their homeland and venture to Istanbul. After several generations, these Albanians then intermixed with local populations, lost their identity, and “disappeared.” In this way, the Ottoman system was an IQ meat-grinder. It took capable recruits from the provinces, and brought them into the grand imperial city. The Soviets, fearing that same outcome, enforced rigorous restrictions on freedom of movement; after 1991, the relaxation of these restrictions has led to Moscow becoming one of the fastest growing cities in Europe, despite Russia’s fertility being below replacement.

Brain draining human capital occurs in one of two ways: either by geographical displacement or dysgenic fertility. In geographic displacement, the cream of the crop physically leaves their homeland, leaving a diminished population behind. This is precisely what has caused rural Americans to have much lower IQs than urban Americans -- all the smart ruralites get continually sucked out of the country and brought into the city. In the case of dysgenic fertility, smart people have less kids than dumb people. These two explanations are not mutually exclusive, and often work in concert. Ruralites get sucked into cities; cities promote low fertility norms; the meat grinder destroys human capital.

Bringing this back to the public vs private sector, China has the opposite problem: it misallocates its top talent to the public sector. Every time the Chinese government hires a new genius, that’s one less genius working in the private sector. Since employment comes with an opportunity cost, this means that a genius is being “wasted” in a government sinecure, rather than doing useful work in the real economy.

America, by contrast, has the opposite problem. Before I described a theory of “DEI swamping,” which is along the same lines of the white nationalist theory of collapse; dumb people swamp the state and make it worse. If we instead use the brain drain theory, we can explain the loss of problem-solving capacity by a relative increase in the competitive wages of the public sector.

If you have an IQ of 130, and you have to choose between a government job and a private sector job, unless you are strongly ideologically motivated to work for the government, the private sector is going to have better wages. If you repeat that experiment millions of times, what you end up with is a government bureaucracy which is less intelligent and more intensely ideological than ever before. This could also help explain why universities, in which professors are paid a fraction of the wages that they could make in the public sector, seem to have an increasingly ideological bent. There’s no reason to work for a university unless you have some kind of grand political project or status game that you’re playing. People who want money go into the private sector.

To test my theory, we could look at the average wages of a private sector worker in 1920, compare it to a public sector worker, and see how it has changed over time. If the gap between the public and private sector has increased, then this should produce a “brain drain effect,” while simultaneously infecting the government with more ideologically motivated leaders.

What’s the solution?

On the surface, there is no good solution. We could try to implement IQ tests and raise wages for government employees, but this would be expensive and require a huge overhaul. This leads us to a paradox: the government is being brain drained and ideologically-swamped. In order to solve this problem, someone would need to force through massive reforms... but reforms like that are impossible, because everyone in government is too dumb and too ideological to allow for something like that to happen. The solution rests upon a capacity for change which does not exist.

Before we despair entirely, there is a way to marginally improve the situation over time. Yes, it is true that the public sector is being brain drained by the private sector, but we can think of this like a leaky bucket. Right now, the state lacks the capacity to get things done, because all the good talent is leaving for the private sector. However, if we raise the *overall* quality of human capital, then both the public sector and private sector will improve in quality. The problem of problem-solving capacity is, fundamentally, a problem of human capital.

How then do we raise human capital? The first thing we should recognize is that the environmental conditions for improving human capital in a first world country are rapidly diminishing. If you double the salary of a K-12 teacher, you do not double the SAT scores. In fact, you can double the salary of teachers and see no statistical improvement in test scores *at all.* This is because, past a certain level of quality, teachers are totally incapable of increasing the human capital of their students. These students are “high hanging fruit” -- they’ve already been given incredible opportunities to learn how to read, write, and do math. At a certain point, once the environment is “saturated,” the rest is up to “nature.” [When I use the term “nature,” I am not just referring to genetics, but also things far outside the control of the teacher: peer effects, parental environment, family history, etc.]

If American students are “high hanging fruit,” then the low hanging fruit is to be found in the third world. The GDP per capita of India is incredibly low; yet, reliably, when Indians immigrate to America, they far out perform white Americans in test scores, income, and crime rates. Whether this is due to selection effects or environmental effects does not change the outcome.

[The same could be said of American Jews in 1870. Jews immigrated from Russia, bringing with them abject poverty, living in tenement houses in New York. Despite the importance of reading Hebrew in Judaism, they could neither read nor write English. Many of them worked manual labor jobs, like my great grandfather, working in dock yards, or factories. The experience of moving to America radicalized many of these Jews into becoming socialists and communists. Jewish radicalism could be seen in the treason of the Rosenbergs, who preferred the Soviet Union over America. Less radical Jews lobbied for America’s entry into WWII, and for Civil Rights. Jewish immigration turned shtetl dwellers into millionaires, and this had dramatic effects on American law and culture.

I am less confident that the new crop of immigrants will have this radicalizing effect, for several reasons. First of all, in 1870, there was no such thing as Hollywood or Michael Jackson. Russian Jews coming to America were fully blasted with culture shock; they were completely overwhelmed, and this produced much of their radicalism. Indian Americans, however, are familiar with Anglo-Saxon culture through British imperialism. They grow up speaking English; they watch American movies; they listen to American music. While Russian Jews lived in a completely alien universe, in segregated shtetls, the experience of Indian Americans is more akin to a movement from a province of the empire to the center of the empire.]

Conclusion

If we want to increase problem-solving capacity, we need to increase human capital. In the short-term, the best way to achieve this is to bring in as many self-sufficient immigrants as possible, and to “build a wall” around the welfare state. So long as immigrants are supporting themselves, and not dependent on welfare, they increase net productive capacity, which impacts the public sector as well.

Just as building a luxury apartment also lowers housing prices for poorer residents, bringing in immigrants to work in the private sector will also increase the capacity of workers in the public sector.

The potential here is very high. By implementing a reasonable equity test on Social Security and Medicare, the government could save trillions of dollars per year, and redirect that money towards facilitating high-skilled immigration. A Wit Visa would pay intelligent immigrants in cash to flood America.

The down side of immigration is that it produces cultural clash and hostility. American antisemitism was a response to large numbers of Jews flooding into American cities. Anti-Indian sentiment today follows the same template. If high-skilled immigration becomes politically untenable (as it was in 1924), then Americans can build up human capital the slower way, by shifting the dysgenic ratio. By promoting feminism for the lower classes, and encouraging the upper classes to have more kids, America can slowly grow its human capital. However, such a project would take centuries, and if we care about creating change within our lifetimes, immigration is the way to go.