Economics, Politics and Public Policy

Insanity is doing the same thing over and over again and
expecting different
results – Albert Einstein

This will be the first and only time I link to a socialist blog for a purpose other than ridicule. But this post is inspired by a post by Aidan Rowe over at http://redwriters1.blogspot.com/2010/07/fences-borders-and-dehumanization.html and the discussion I had with people about it. For once I agree with my Anarcho-Communist friend. Though for different reasons. I’m going to loosely stick them into 3 main headings; Moral, Economic and Cultural. I will try my best to be brief but this is going to be a long post (8 pages of A4 I’m afraid). I would also recommend reading “Immigrants – Your Country Needs Them” by Phillip Legrain for more detailed analysis of what I’m saying. I will link to World Bank reports later that are also useful.

Before I get onto the heavy stuff, a little history. Anti-immigration legislation is a relatively new phenomenon. The British had a absolute right to come to England for anyone who lived within the Commonwealth. This persisted until the 20th century, when laws were enacted to prevent German Jews from coming over to England. So the origins of immigration laws are shrouded in xenophobia and anti-Semitism. Other countries followed suit for a variety of reasons, mostly Mercantilist and ideological, as the concept of modern statehood became more defined. Mercantilism has since been shown to be bollocks economic policy and I hope to show why their labour protectionism is as illogical as their “beggar thy neighbour” policies.

Firstly, morality. By maintaining our current immigration policy we damn hundreds of people a year to suffocate in containers, be shot by border police or be exploited by unscrupulous employers once they get there. We have tried ever and ever more elaborate mechanisms to prevent people getting into our countries. As Matt Santos from the West Wing points out, the US government tripled the border patrol on the Mexican border, to no avail. East Germany constructed a massive wall with armed soldiers shooting people, and yet people got through. No country in the developed world is willing to go that far to deter people, so it is inevitable that people will get through. Perhaps it is time to try a different tactic. Because an action can’t possibly be moral when it creates such immoral outcomes. Hundreds of people die for negligible benefit every year. Is a vague sense of economic security (which is a fallacy in and of itself, as I will explain) worth these peoples lives, when it doesn’t even solve the problem and never will?

The second moral issue is the fact that we owe them. We built up our country through exploiting their resources, taking their gold, using them as slaves and generally treating them like crap. And we still owe them, because we haven’t stopped. Developed countries interfere in LDCs like Rwanda and the Congo, stirring up antipathy and strife so they can (in this particular example) exploit coltan reserves. You can’t say you have never oppressed an LDC, because coltan is an ingredient in mobile phone batteries. Anyone and everyone who owns a mobile phone has blood in their pockets.

Moreover, our trade policies continue to subjugate the developing world. We band together in rich country clubs like the EU and dump our excess on them, undercutting their development in a way that they cannot reciprocate. We use our clout to get better and better trade deals. The IMF in the 1980s gave out loans on the caveat that LDCs open themselves to the free international trade market and we plundered them mercilessly. Even countries like Germany with their export led economies are harming LDCs. Trade is a zero-sum game. You don’t just push your exports over the border and hope someone finds them. There has to be a buyer and a seller in every transaction. And by continuing to run massive trade surpluses, we crowd out the developing countries. So we owe them a duty to come over here and at least profit from some of the employment generated by their misfortune.

Secondly then, economics. Freeing up immigration will help us and it will help them. Before I go on to explain all the wonderful, world economy quadrupling effects that immigration would bring, I want to dispel some untruths – namely that our economy and services would not be able to cope, they will take all our jobs and our wages will be deflated.

Israel operates an absolute “right of return” for Jews all over the world. This is all fine and dandy unless it is 1989 and the Soviet Union is collapsing. Between 1990 and 1994 Israel accepted 1.4 million immigrants. This did put a short term strain on infrastructure and it did lower wages temporarily. But by 1997 all 1.4 million of these immigrants had been housed and wages had returned to their pre-1990 levels, adjusted for inflation. The economy even grew, due to the massive capital inflows caused by the surge in demand.

Secondly, the “DEY TUK AWR JAWBS” argument. Two problems with this, namely A. that there aren’t a constant fixed number of jobs in the economy at any one time and B. immigrants do different work to natives.

this is relatively intuitive. If economies were bounded by only having like 10000 jobs, every time someone had a baby they would be forcing someone into pensioner status 18 years later. Employment is cyclical governed by boom and bust cycles, just like other business cycles, not influenced by immigration.

A Mexican high school drop out is not competing with a Texan steelworker. Most unskilled immigrants have a low grasp of the language and because of that are consigned to the lowest forms of labour. So immigrants naturally gravitate towards jobs that natives don’t want to do. Even skilled workers (who would be directly competing for jobs) are a benefit, why do you think those are the kind of immigrants that Western Governments are actively seeking?

Ok then, on to the main constructive reasons as to why letting immigrants in would be good for the economy; benefits of globalization, benefits of transient workers and the changing age profile and economic needs of the first world.

So, I mentioned mercantilism earlier. It was bad. It favoured protectionism and tariffs to try and grow each countries economy at the expense of one another. But what it ignored was the laws of comparative advantage and also the ability that people being free to move their factors of production gives to compliment the production of goods and services. When free trade took over as the dominant force in orthodox economics and globalization was given free rein, the world economy grew faster than it ever has in human history; it has more than doubled since 1950.

So what effect would opening the border have? Some economists predict that the world economy would quadruple if labour was given the same mobility as other factors of production. The World Bank was not quite as optimistic, but thinks that it would lead to massive increase in global prosperity. In fact if you have any issues with migration, I would recommend reading all the PDFs on this page http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21121930~menuPK:3145470~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html

Since pretty much every single one of them explains a benefit of migration.

Onto the benefits of transient workers then. Basically, existing economies have unemployment because of structural deficiencies. Some jobs are for certain skilled individuals that we have not trained yet, some jobs are too unpopular with the natives or some jobs are in locations that there isn’t a high enough indigenous population to fill. Every job vacancy is a drain on the economy – the wages they would have received are not entering the economy and costing other people business. Migrants enable us to fill all these jobs – they can fill jobs like nurses or doctors, which we have not enough graduates to satisfy. They can take jobs cleaning streets or toilets, which Irish people turn their noses up at and they will gladly move to smaller towns and cities in search of work, not stay in Dublin, just because they are born there. And when they earn the wages in their new jobs, they spend them – boosting consumption and generating more jobs. Consumption that would not happen otherwise, as these jobs would remain unfilled.

Also, cheap services like childcare (lots of foreign nannies providing competition) enable natives such as career women and single mothers to go back to work in higher paid (relative to the immigrant) employment. One of the main reasons for voluntary redundancies resulting in long term unemployment presently is the high cost of childcare. (which bizarrely is still at pre-recession levels) By reducing or mitigating against these costs we can help facilitate a stronger economy.

Immigrants are also more likely to become entrepreneurs. Nigerians are statistically the highest ethnic group for starting their own businesses in Ireland. There are many reasons for this; Irish people being attracted to stable jobs in public services and academia, Irish people not having the drive due to being overly comfortable, the relative loss of earnings being lower if a Nigerian business fails or the business opportunities presented by catering to their fellow immigrants. New business is something we should be advocating and if Irish people won’t do it, perhaps letting our immigrants innovate for us is a positive step.

Diversity is also proven to boost productivity. Cities with a high level of ethnic diversity have a higher standard of living and production. Some of this is the availability of ethnic cuisine and services, as choice increases standards of living. But a lot of it is also the clash of ideas and backgrounds resulting in new better ideas. One of the reasons touted for Japans stagnation and deflation is its restrictive immigration policies and ethnic homogeneity. Cities like London and New York on the other hand are vibrant and highly productive. The diversity of the workforce also helps grow trading links. The growth of Taiwan as a microprocessor centre is due in part to the huge Taiwanese diaspora located in Silicon Valley. These kind of links are beneficial to both parties.

Finally then (on this topic) to the changing age profile of the Developed World. We’re getting older and our birth rate is falling. We need immigrants to just keep our economy ticking over. We need hundreds of thousands more than we presently let in, just to keep the EU in the same shape as it is today. Italy needs 650,000 immigrants a year to stop its economy plummeting by 2050. We need them to earn money to pay our pension, to act as doctors and nurses and to staff our care homes when we’re old and incontinent. The workforce to do all this is out there and willing, we just wont let them in because of our jingoistic attitude.

So now that I have covered all the selfish stuff about how we will be better off, I’m going to quickly chat about why it will help 3rd World Economies (more on this on the World Bank links earlier). After that I’m going to have a quick look at the benefits to culture then I will stop typing, I promise.

Going to look at the benefits under a controversial two headings; Remittances and Brain-drain.

Firstly remittances – wages in the Developed World are on average 14 times higher than those in the developing world. Immigrants generally send one sixth of their wages home in remittances. Some countries can have up to 40% of their economy based on the receipt of remittances (such as Poland until recently). The benefits of this are obvious – the increase in demand, increase in wealth within the economy and the ability to pay for things like education and healthcare that they would otherwise be unable to afford. Remittances also increase after natural disasters, as the diaspora send more to combat the increase in reliance. Facts from after the Haiti earthquake and the Boxing Day Tsunami back this up. These payments are also more reliable than the often ad-hoc employment offered in LDCs. The benefits of certain payments are explained quite well in The Economists article on conditional cash transfers. Some countries, like the Phillipines (again see the World Bank links for more details) have programs designed to maximize emigration and remittances to grow their economy, such is the benefit to the recipient country. Remittances take the best factors of foreign aid and microloans and then make them self perpetuating and targeted. As for any arguments regarding the use of remittances for consumer goods and television, television ownership is firstly proven to increase womens liberty and reduce domestic violence in LDCs, as well as increasing popular democratic involvement, and secondly, think for a second about the irony of the first world consumer like yourself critiquing what a poor African spends their 20 dollars on.

Secondly then to brain-drain. Yes, the best and the brightest will leave. Some of them at least. But that is not the end of the world. In a world without borders, it is easy to return to your country of origin. That is where your family is, your roots are. The best skilled people will go abroad, but figures show that most of them will return. Most illegal immigrants say that they would return to their country of origin if they could. Once they have saved enough to return they generally wish to. Most immigrants are unaccompanied males, who leave to earn money to put their kids through college and then wish to return home. Most immigrants to the US from Honduras that were surveyed expressed a wish to return home some day. When they do, they return with new skills picked up in the developed world, as well as the capital and resources to start projects and companies in the LDC as well as the ability to forge trade links with their former host country as I discussed earlier. So it is not all terrible, in fact it can often be beneficial to the native country. Again the Phillipines is an example of a country using brain drain to their advantage, purposely training doctors and nurses for “export”.

Lastly then to culture. No hard facts here, just an ideal. What is a national identity? How do you sum up what it means to be Irish? Catholic, Anti-Abortion, Rural, Farmer? Only one of those applies to me (and only insofar as I refuse to consider Waterford “urban”), The reality is that we share very little with our fellow compatriots, disagree with them on most things and only have a bond because we were randomly thrown on the same piece of rock with them. A respect for our differences and embracing other culture can only enrich us all. The ability to have a full Irish breakfast, Subway for lunch and a Chinese for dinner is something that most people would not have conceived of 50 years ago and it is something that is fundamentally enriching for all parties. We have to stop seeing foreigners as the enemy, invite them over here to be equal partners in our success and we will all benefit from the results.