Build It, and They Will Stay Home

So long as the wealth gap between countries persists, there will be a powerful incentive for immigration, legal or not:

Wealth gulfs fuel migration, by Branko Milanovic, Project Syndicate: Is today's globalizing era coming to an end? If so, it may not necessarily end with a repeat of the slaughters of the last century, but with an economic retrenchment that brings economic stagnation and consigns billions of people to grinding poverty.

Various candidates have been proposed for the role of globalization's assassin. But one little noticed, yet likely, aspirant has been sneaking up on the world economy: The growing tendency to limit the free circulation of people, to "fence in" the rich world.

We see the menace of this tendency constantly nowadays, but we perceive it in such a seemingly unthreatening way that we may well become accustomed to it. Globalization means free movement of capital, goods, technology, ideas, and, yes, people. Any globalization that is limited to the first three or four freedoms but omits the last one is partial and not sustainable.

After all, if over-populated countries with high unemployment cannot export people, why not reach for higher tariff barriers to protect the jobs they have? But what of the unemployed who become locked into their societies? The war on terror has shown us the dangers that can arise from the social frustrations that often result.

Nevertheless, the "fencing-in" of the rich world continues apace. The United States plans to construct a veritable "Mexican Wall" to keep poor people from crossing into Texas or California.

Likewise, hundreds, if not thousands, of Africans die every year trying to reach the shores of Fortress Europe. Efforts to restrict people's movement between countries expose the soft underbelly of globalization: The deepening gap between countries' mean incomes.

Rather than poor countries growing faster than the rich ..., mainly the reverse is true. This huge gap spurs migration..., and if moving across a border means that their income can be multiplied several-fold, they will try to do it. This is why today's most contentious borders separate economies where the income gaps between people on the two sides are the greatest.

There are four such global hot spots: The borders between the US and Mexico, Spain and Morocco, Greece (and Italy) and the southern Balkans, and Indonesia and Singapore (or Malaysia).

Income differences were not always so huge. In 1980, average income in the US was a little more than three times that of Mexico, and the difference between Spain and Morocco 3.5 to one. So income gaps between all these contiguous countries have increased significantly during the last quarter-century.

If globalization, which has so enriched the world's wealthiest countries, is to continue, governments must find ways to increase incomes more evenly. Global income redistribution by the rich countries should be viewed as a matter not of charity, but of enlightened self-interest.

To me, in the long-run, the only real solution is to help poorer countries develop economically. I don't hear much objection to free immigration for Canadians and, outside of South Park, I suspect there would be very little. Free trade with Canada also seems mostly acceptable, though there are certainly frictions, e.g. in lumber.

If the wealth gap persists, we won't be able to build fences high enough, moats wide enough, or do anything else to stop people from trying to come here, and from being successful in their attempts. We might reduce the flow, but no more than for, say, illegal drugs. Poverty prevents countries from doing all the things we think of as "fair," better environmental rules (but look back at the choices we made at similar stages of economic development before casting stones), health care, decent wages, etc. The very existence of poverty makes competition with wealthier countries look unfair to those affected by the entry of poor countries into the marketplace.

But how do we solve that? By isolating those countries from the world's wealth through protectionism, immigration restrictions, and other means so that the wealth gap persists while they try to develop on their own? Or are we better off engaging with poor countries economically and doing everything we can to help them develop and overcome the poverty that is holding them back while also helping the poorer residents of developed countries who might be affected by such policies?

People do not want to leave the place they grew up, leave their family and friends, and go illegally to a foreign country with a different language, a place where they are not generally welcome. It takes a powerful economic incentive to induce them to leave. I am not advocating opening our borders to anyone who wants to come here. But doing all we can to encourage investment in poor countries is the best way to solve the wealth gap and associated problems in the long-run, and that may mean accepting US companies outsourcing or moving to poorer countries during the transition period, and allowing more immigrants from those countries to come here and work. But by whatever means, economic development in poorer countries is the key to resolving many of the difficult problems we face and the only way to achieve a lasting solution.

Comments

[save the rustbelt]

If most of the poor countries weren't run by thugs and criminals this might be easier.

How do you improve the economy of Somalia?

And how many US workers are we willing to impoverish because the Mexicans have mismanaged their country for 100 years.

We should take prudent measures to spread capitalism and good health, but we can't save the entire world from itself.

I guess I'm a greedy, self-centered SOB anyway.

Several generations of my family worked to build this country, they suffered, worked some more, suffered, wore the uniform and marched into rifle fire when necessary, and then worked some more.

I want my children and grandchildren to enjoy the legacy.

[wcw]

Well, some people do. My parents did (immigrated from one rich country to another), and my brother may, too (he's been working in a third and now a fourth developed-world country since ~1999).

I like where I was born lots and have returned after my own sojourns elsewhere (runs in the family, maybe), especially the weather, but as a completely personal thing I could stand to have few or no restrictions on global migration.

[wcw]

Oh, and STR? Guess what I'm thinking about you. I guarantee you'll fall short of the vituperation I'd give you if you'd said the same to me at my home.

As this is someone else's, I shall restrain myself.

[felix]

Income differences were not always so huge. In 1980, average income in the US was a little more than three times that of Mexico, and the difference between Spain and Morocco 3.5 to one. So income gaps between all these contiguous countries have increased significantly during the last quarter-century.

Average income seems like a really bad metric to use in such a comparison. Illegal immigrants aren't coming to be CEO's or other high pay workers. They are, mostly, coming to do unskilled labor.

So a better comparison would be to median pay, or better yet, to wages for those who have not completed a high school education.

I think the comparison of that with the original metric would be a good contrarian blog post for a non-lazy person with the knowledge of where to get the info (AKA not me).

[anne]

STR, I am completely sympathetic to the complaint but not the failure to look back to the New Deal for possible domestic responses to displacement. Heck, we can read John Steinbeck.

[Bruce Wilder]

It is not clear which way restrictions on immigration lean, in terms of promoting the development of other countries.

Has relatively easy immigration from Mexico helped Mexico? We have reduced trade barriers with Mexico, but immigration still draws off a lot of dissatisfied people, and, maybe, relieves the pressure to reform and restructure in Mexico.

Communist China seriously limits emigration. Has that policy hurt or helped them.

It doesn't seem to me that Brad's neo-liberalism offers anything dispositive on the value of immigration restrictions.

[marcel]

Bruce Wilder writes We have reduced trade barriers with Mexico, but immigration still draws off a lot of dissatisfied people,...

I've read (but not tried to verify on my own) that one of the big effects of NAFTA was to wipe out much of Mexican agriculture. The US has not really opened its agricultural market, given the size of the subsidies paid to that sector. Combined with the requirement that Mexico open its agricultural sector, the result was a bloodbath for the small farm sector, particularly in southern Mexico (think Chiapas). Industrial growth in Mexico faltered after the Mexican crisis and esp. as China took off, resulting in nothing for these (former) farmers to do in Mexico. So they come north looking for work.

[dryfly]

To me, in the long-run, the only real solution is to help poorer countries develop economically.

There is another 'solution'... we see real incomes & wages of US workers fall so low the foreigners would rather stay where they are as the US wage 'premium' gets so small it isn't worth the hassle to immigrate.

I suggest that is a more likely outcome given the billions of them at world poverty levels and the relatively small number of us (mere hundreds of millions) living like kings in 'global terms'.

I am all for seeing poor countries develop - I just don't see it happening without US wages falling in response REGARDLESS of whether they come here or not.

We compete against them here and even more importantly we compete against them in third party nations where we both export into. We lose that competitive battle unless US wages & costs are on the same basic level as offshore wages & costs. Result is our wages & costs converge with theirs at some intermediate level... probably closer to theirs now than ours now... given then the numbers of bodies involved.

Tell me how this doesn't happen?

[Movie Guy]

Mark,

You put it out there. Go to the next step. What is your specific plan?

Identify a few examples, such as Mexico, and explain what you would change in U.S. trade policy with Mexico and all other initiatives that you put in play if you had the power of the Presidency and Congress to make it happen.

And what are your milestones?

[berta]

Mark-

When did you join the Bush administration? We can most certainly assist all these poor natiosn become democratic societies that respect property rights. I am sure this is a simple task.

[Chris Mann]

They don't have to be democratic societies to respect property rights. In many regions a benevolent(ish) dictator works fine too. Dubai for example.

[Movie Guy]

What should be done to improve the economic conditions in Mexico? NAFTA II, and what would that entail? What else?

For clarification, the Doha Round study and trade model provided by the Carnegie Endowment indicated that the failed Doha Round would not have helped Mexico, particularly its farmers.

It's easy to adopt a position that states that the U.S. should do more to help poorer nations. The difficulty is taking the principle or vision to the next step: designing the solution, implementing it, and adjusting it as time progresses.

Where is the discussion of what the new trade model for Mexico would involve?

Does any member of Congress have such a Mexico proposal on the table? Do any U.S. or Mexican economists?

What is the United States doing presently to improve economic conditions in Mexico?

[Ethan]

I have a modest proposal. Why not have an amalgamation of the US and Mexico? Neither should annex the other, but an amalgamation of equals would immediately solve what many consider to be a serious problem -- illegal immigration. It would no longer be illegal or immigration; it would be normal migration of labor to jobs.

When mid-west techies flocked to silicon valley, nobody in California called them illegal imigrants who were dragging down the local pay scale and burdening the local systems. Indeed the Californios welcomed the increasing demand (and higher prices) for housing. And since they were all subject to the same tax systems -- real estate, sales, income -- nobody could complain that the newcomers failured to support the local or national government while being a drag on the social services, health care, schools, etc. Indeed, doctors, grocers, car dealers, and everyone else -- just like the real estate brokers -- welcomed the expanded demand for their goods and services.

This amalgamation should at first be limited to the US and Mexico, but might later be expanded to other latin american countries if they continue to send us "illegal immigrants". We should never open it to Canada. We need Canada as a nearby guide and model for our collective conscious.

[Movie Guy]

Mark - Build It, and They Will Stay Home

Build what, exactly?

You've never bothered to respond to any comments on this thread, let alone identify what actions you would undertake to assist the economy of Mexico.

Here are my open-minded questions once again, Mark.

For clarification, the Doha Round study and trade model provided by the Carnegie Endowment indicated that the failed Doha Round would not have helped Mexico, particularly its farmers.

It's easy to adopt a position that states that the U.S. should do more to help poorer nations. The difficulty is taking the principle or vision to the next step: designing the solution, implementing it, and adjusting it as time progresses.

Where is the discussion of what the new trade model for Mexico would involve?

Does any member of Congress have such a Mexico proposal on the table? Do any U.S. or Mexican economists?

What is the United States doing presently to improve economic conditions in Mexico?

Do you have opinions or ideas as to what economists should be recommending to the U.S. Congress or Mexican government? Any?