Immigrants Make the Best Capitalists

For scholars, who are my tribe, the chief sin of laymen is “essentialism.”

“All Jews are . . . Black folks tend to . . . We all know Asians are good with. . . .” That’s called essentializing by race or ethnicity. It is a shorthand that allows all exceptions to be proof of a rule. For the professor, it is always more complicated than that.

Yet we risk missing very real phenomena for fear of being labeled simpletons or, worse, racists. Actually, Jewish Americans did experience a meteoric rise in financial status. Black Americans have been perpetually underbanked. Asian Americans do over-perform other races for per-capita income. The wealthiest U.S. ethnicities by per capita income are not white, and it is not even close. Indians, Taiwanese, Japanese, Chinese, and Koreans are the top five for non-natives. Whites come in around seventeenth, making them a fifth seed in the ethnic-money-March-madness tournament. Among whites, the wealthiest ancestries are Macedonian, Russian, and Latvian—certainly not “from Kentucky.”The best cash-flowing native-born white group is the Amish. The wealthiest single ethnic group in America is the Shakopee Mdewakanton Indian tribe in Minnesota, with per-capita income of over $1 million annually from casino revenues.

Something is going on here. What is it? Nineteenth-century eugenicists (and not a few online today) argue it’s all in the DNA. I’ve found no evidence of this in history. History, in fact, may itself be one of the best explanations of why some groups thrive and others don’t. Most of that history is about immigration.

It would be much more accurate to say that there were immigrant versus native financial strategies, rather than ethnic or racial ones. Nearly all immigrants to the United States, from four continents and across three centuries, were accused of living too frugally, saving excessively, and obsessing on home ownership. These traditions dissipated over generations in some traditions more than others, but they are why so many immigrant groups in every decade of U.S. history outperformed the overall economy. Working, saving, thinking, and (perhaps most critically) moving like an immigrant were some of the most powerful tools for getting ahead in American history. They still are.

* * *

We’ll track this story in the opposite direction than it is normally told, from west to east. From San Francisco’s gold rush to Washington State’s fertile Yakima Valley, major waves of Pacific Coast immigrants came from Asia. Pamphlets circulating in Guangdong, China,¹ told workers, “Americans are a very rich people . . . There will be big pay, large houses, and food and clothing of the finest descriptions.” The housing promises proved overhyped, but claims that “Money is in great plenty and to spare in America” were true enough to make the risk worth taking.

The first wave of Chinese immigrants,² all male, spent their financial lives remitting funds to families back home. Young men were married to a village girl with strict instructions to get her pregnant before leaving, ensuring his return to the village. One Cantonese lullaby for those children summarized the financial strategy well:

Daddy has gone to Gold Mountain³

To earn money

He will earn gold and silver

Ten thousand taels

When he returns

We will build a house and buy farmland

These men hurried off in search of wealth to send home. What they found were mixed blessings. There was, indeed, gold in the mountains, plains, and towns of California, the northwest, and Hawaii. In the 1880s, one week’s pay in America was worth one month’s in rural China. The work, though, was brutal, even by the standards of farmers used to toil.

Remittances to China forever changed families, some for good and others for ill. Many saved, invested in lands and houses, and went from peasants to landlords in one generation because a son or two left for America. Other families founded hospitals, schools, and poor relief. For some families back home, the wealth was so great multiple generations stopped working altogether. Many Chinese immigrants hailed from the Taishan area, renowned for its work ethic and entrepreneurial spirit due in part to the poor condition of the soil. But twenty years of remittances changed Taishan into a land of neglected fields, fine art collections, and extra concubines.

With time, workers preferred to keep their wealth where they’d made it. For those willing to break with tradition and send for their wives to join them, the results were profound. Husband and wife teams could earn around $450 per year together, a solid income in the mid-1800s. They also achieved staggering savings rates of up to 60 percent.⁴

By 1920, nearly a third of Chinese Americans found their way into the laundry business.⁵ Largely seen in American eyes as “woman’s work,”thus not in competition with white industrial workers, Chinese-owned laundries blossomed across the country. Laundries fueled the growth of an Asian middle class. Despite the low social acclaim, multi-generational laundries were a haven for Chinese incomes that faced little competition and built wealth. Requiring easily obtainable skills, small capital outlays, and minimal command of English to run, many college-degree–holding children of laundry owners found to their surprise that their parents made more than their white collar jobs did. One study of Chinese Americans found families who sold their laundries to move up to higher social status jobs lamented the fact financially.

By and large, Chinese families remained renters⁶ for the first half of the twentieth century, but not by choice. Three political changes profoundly shifted this dynamic. First, the Chinese Exclusion Act’s repeal (partially in 1943 and fully in 1963) and other legal reforms allowed successful Chinese Americans to bring their families to the United States. Then, in 1952, Alien Land laws were deemed unconstitutional, allowing home ownership again. Finally, the Korean War era enforcement of the Trading with the Enemy Act barred remittance payments to China. With more money staying in their own accounts, families increasingly residing in the United States, and the legal ability to buy, Asian Americans exploded upward in real estate and home ownership rates. Over 50 percent owned their own homes by 1980, and Asian American home ownership remains among the highest rates today.

* * *

We start with Asian Americans along the Pacific Coast (and, interestingly, the Mississippi Delta)⁷ not because they were unique but because they weren’t. Nearly everything about the European immigrant experience in the east played out the same as in the west. Young men led the way, and their financial instructions were mostly to send money back home where they hoped to return. The more women came, the more men stayed. Work was grueling, but pay compared to what was possible back home boggled the mind. Immigrants often saved in excess of 50 percent of their income, numbers that caused white progressives to reform immigrant evils, since workers weren’t eating, bathing, dressing, or housing themselves to middle-class standards. Local men complained that immigrants would work harder, longer, and for less. Immigrant small-business owners outpaced natives’ entrepreneurial spirit in leaps and bounds.

Ironically, the word frugality appears across 300 years as an insult hurled at new arrivals. In “the mind of the Hebrew,” complained a New York writer in 1879, “the principles of frugality are inherited.” At almost the same time on the opposite coast, the California State Senate decried that Chinese immigrants were able to survive on just fifteen cents a day compared to the two dollars of white workers. Cursed frugality was thrown at Scottish immigrants in the 1700s, Irish in the 1840s, Jews in the Gilded Age, Indians after World War II, Hispanics of the late twentieth century, and African and Caribbean immigrants today. All got tarred with the brush of underconsumption.⁸ How very un-American of them.

There was an immigrant way of getting ahead in America. It was not for the faint of heart. That wasn’t what made it controversial, though. The controversy was that it worked. Intense immigrant savings regimens were nearly universal. Immigrants in 1890s Pittsburgh were notorious savers,⁹ known to save up to 40 percent of their salaries, and many single men set the goal of saving half of their pay. A visiting Irish priest in New York noted with worry the tenacity with which the women of Éire hoarded income, enduring unfathomable abuse at work so they could increase their savings.

Immigrants, then and now, sought jobs in the highest-cost areas¹⁰ because that was also where the highest wages were. By combining the highest possible pay with sacrifices on living standards, they could arbitrage America’s best income zones. Many achieved their tremendous savings rates by boarding as cheaply as possible. “Stag boardinghouses” (all male) were known to keep four to six men in a room, often sleeping in rotating shifts based on work schedules. In Omaha, officials found a small house with forty-six men living in it, and near Chicago sixty Romanians lived in a single two-story home. These were extremes, but the principle was constant: the mania for saving could only come with significant sacrifice. Strivers were willing to forgo better lodging to send money home or save it.

* * *

What was it all for? In 1774 the ship Bachelor¹¹ ran aground in the British Isles with colonists bound for America. Through a bureaucratic fluke, and with months of time to kill, the passengers gave detailed interviews to local officials. William Gordon was a farmer well over sixty years old from the Scottish Highlands. He was going with an aged wife, six adult children and their families, and sold everything he had to pay for their journey to North Carolina. When asked to explain his leaving, he told interviewers he was “an old man and lame so that it was indifferent to him in what country he died.” He was leaving “for the greater benefit of his children . . . in hopes that his children would earn their bread more comfortably than elsewhere.”

One hundred and twenty-five years later, the largely immigrant Ford plant workers¹² of the early 1900s were notorious savers. A Turkish immigrant named Mustafa was reported to have saved in the local bank over $1,000 (about $30,000 today) in a year, a 65 percent savings rate. When concerned managers investigated to see why he lived so frugally, he explained he was saving to bring his wife and children to the United States. Over a century apart, a Scottish Catholic and Turkish Muslim went on their journeys for the same reasons.