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Sunday, August 20, 2006

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.

    Posted by on Sunday, August 20, 2006 at 01:46 PM in Economics, Income Distribution, International Trade, Policy, Politics, Terrorism, Unemployment | Permalink  TrackBack (2)  Comments (15)


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