Make More Singapores!

I have advocated the DRITI policy– instead of coercively restricting migration, tax it and use the proceeds to compensate natives– for years, and Principles of a Free Society was written, if you like to think of it that way, as a political philosophy suited to undergird DRITI policies. By now, this has become a standard part of the case for open borders. Thus, in “Meant for Each Other: Open Borders and Western Civilization,” Bryan Caplan writes:

Still worried [about open borders undermining natives’ wages]?  There’s a cheaper and more humane remedy than keeping foreigners out: Charge them an admission fee or surtax, then use the proceeds to help displaced native workers.

Which is the same idea as DRITI. Not that I’m blaming Caplan for borrowing the idea from me without acknowledgment. Caplan knows I advocate migration taxes. He even wrote one of the blurbs for Principles of a Free Society. But Gary Becker proposed a migration tax to the IEA back in 2010. Actually, that was four years after I published the idea, but Becker had written about it before, in an op-ed in the 1980s. Recently, at the APEE conference in Las Vegas last April, Richard Vedder also proposed a migration tax. The idea is really too obvious to quibble over its paternity. It’s a simple cross-application of the standard free-trade advocacy truism– “yes, free trade has winners and losers, but tax the winners to compensate the losers”– to migration policy. I’m not sure whether Caplan got the idea from me. I’m pretty sure that if he hadn’t got it from someone, he’d easily have thought it up on his own. It’s a no-brainer for economists, but somehow policymakers are blind to it. Or so I thought.

What I didn’t realize is that Singapore already has something close to a DRITI policy in place, as Carl Shulman reports. From 1970 to 2010, the number of foreign workers in Singapore rose from just over 20,000 to more than a million, a third of the labor force, and still rising. Most of these are not the high-skilled workers that OECD democracies tend to privilege. Nearly a million are here on low-skilled “work permits,” including foreign domestic workers (214,500) or construction workers (319,100). How is the number of immigrants regulated? First, by Foreign Worker Levies, i.e., migration taxes, a policy variable. There are also Dependency Ceilings, maximum foreign shares of an employer’s workforce. Shulman doesn’t say how often these are binding, but they seem liberal, e.g., 87.5% of construction crews can be foreign. And how much do migration taxes raise?

Levies for unskilled workers range from $3,600-$9,000 per annum. With around a million workers subject to levies, the proceeds to Singapore should be in the billions of dollars (all figures are Singaporean dollars, about 0.8 $USD each).

Total levies collected amounted to $1.9 billion in 2010 and $2.5 billion in 2011. Total government operating revenues in 2010 were $45.5 billion and $50.5 billion for 2011, so worker levies alone accounted for 4-5% of operating government revenue. Since then the migrant population has grown substantially and levies have been hiked, by a third or more in many cases, with further increases scheduled, so the current percentage is likely significantly higher. Even so, the figure will be small compared to the economy, because low-skill workers contribute disproportionately little to economic output, but is high as a proportion of compensation costs. While Singaporean natives with such low incomes would pay no income tax, the top levy rates for unskilled workers (charged to employers) can be half or more of wages.

In short, while we can quibble about details, Singapore more or less understands and is applying and applies the citizenist case for open borders. Singaporeans benefit from cheap cleaners, bus drivers, and domestic workers. And they don’t just benefit themselves; foreign workers also gain opportunities. As Vipul Naik pointed out in conversation, if all developed countries adopted policies like this, migrant wages and wages in migrant source countries would be competed up. I might argue for slightly different moral side-constraints (e.g., I wouldn’t endorse deportation of pregnant women), but it would be a great thing for both economic development and freedom if other developed countries followed Singapore’s lead.

Lastly, a more general point. Singapore is amazing. Every time I read about policy in Singapore, I find myself involuntarily thinking Wow! This is the most enlightened regime on earth. Perhaps that’s a slight exaggeration, but few would deny that Singapore is a spectacular success. So why don’t we make more of them? Much of the key to Singapore’s success seems to be simply that it’s a sovereign city-state. In general, sovereign city-states make wildly disproportionate contributions to civilization. Think of the city-states of ancient Greece, Athens and Sparta and Corinth, birthplaces of philosophy, history, science, and democracy. Or the city-states of Renaissance Italy– Venice, Florence, Genoa– which were also gloriously accomplished in arts and letters and sciences. Today, Hong Kong has a kind of partial sovereignty. It, too, is a dazzling success, whose success has spilled over in a massive way. Hong Kong has been a major catalyst for China’s economic take-off. Yet, perversely, we have established a system of international sovereignty which makes it impossible to found new sovereign city-states. We need charter cities.

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith

7 thoughts on “Make More Singapores!”

  1. I plan to respond with my own take on Carl’s post at some point. My response would not be terribly dissimilar to yours, but I’d urge more caution about adopting Singaporean policy wholesale. Many Singaporean policies are unnecessarily repressive of citizens and/or migrants: to take a particularly egregious example, a migrant worker who marries a Singaporean citizen will automatically be deported. Singapore also requires many if not most migrant workers to live in segregated housing — you can’t just rent or sublet your home to a foreigner if they are present under the wrong visa type. Finally, there is no process for guest workers to naturalise or otherwise choose to join Singaporean society as permanent residents. Guest workers who stay long enough are eventually forced to leave, because they will not be allowed to renew their work visas.

    The alternative, of course, is that Singapore could just have banned these people from coming — like every so-called “liberal” democracy does today. Singapore has pursued the less inhumane alternative of allowing guest workers to come, but it continues to exclude and oppress them in highly-questionable if not outright unethical ways. I would say we need to do more than just make more Singapores.

    (There’s also another question of Singapore’s high-skilled immigration policy, which subsidises high-skilled migration. I have some qualms about this as well, though far fewer than I do with immigration policies which coercively enforce housing segregation and still impose arbitrary limitations on how people may enter Singaporean society and make Singapore their home.)

  2. Dear Nathan,

    Another wonderful argument for an important humanitarian reform. I only want to quibble a bit with your call for charter cities at the end.

    Remember that these zones as they have been advocated are large, constructivistic projects that grow directly out of nation-states and therefore carry along a great deal of their baggage — including the heritage of colonialism. Many proposals for charter cities put the cart before the horse. They assume ‘if you build it, they will come’, which is a risky proposition especially if the project demands billions of money outlaid in infrastructure (as Romer’s rejected proposal for Honduras demanded).

    Yes, a working charter city could absorb a lot of immigration but, because they treat institutions as ‘copy and paste’, we lose the opportunity to engage in valuable trial-and-error learning to grow new institutions or meaningfully reform existing institutions. This also assumes that institutions can actually be easily copy-and-pasted rather than grown through piecemeal learning (as the successful Chinese SEZs have).

    We know that people want better institutions. The immigration tragedies that occur everyday show us that there’s a high demand for new forms of governance. We can make general guesses that institutions like property rights and a functional legal system are being demanded. But how those systems can work well in a particular time and place for many populations is a discovery process awaiting a truly experimental approach to reform. Texas labor law or Singapore contract law is not the end of history.

    Please consider joining the growing conversation at StartupCities.org, which offers all the benefits of charter cities but treats the problems of institutional development in a more entrepreneurial manner. We’d love to have you!

    startupcities@ufm.edu

  3. Dear Zach,

    Thanks. You might want to take a look at a couple of my previous posts:
    http://openborders.info/blog/the-constitution-of-a-city-of-refuge/
    http://openborders.info/blog/charter-city-constitutions-filling-in-the-blank/

    While I kind of like the Startup Cities concept, I think you’re on the wrong track with remarks like “Texas labor law or Singapore contract law is not the end of history,” and talk of “treating the problems of institutional development in a more entrepreneurial manner.” Ordinary entrepreneurship occurs within the institutional framework of market capitalism, which to some extent is able to ensure that good entrepreneurial ideas prosper and bad ones don’t. I’m not sure that the concept of “entrepreneurship” applies well to “startup cities.” Even to the extent that it does, private business is constantly emulating best practices developed elsewhere. Texas labor law and Singapore contract law may not be the end of history, but they do (arguably) represent current best practice. Why reinvent the wheel?

    I’m not particularly averse to “the heritage of colonialism.” At its worst, colonialism was an engine of atrocities– though even at its worst, it was never as bad as 20th-century totalitarianism; nor, I think, were the worst colonial regimes as bad as the worst of their successors, not that that’s saying much– and at its best, in Hong Kong and Singapore, colonialism was a very beneficent form of institutional export.

    I’m not sure how you could avoid charter cities being neocolonial. Suppose there’s a new startup city. It needs rules. Who writes the constitutions? Locals? They probably don’t have the expertise. Foreign experts? That’s neocolonial. And where do the inhabitants come from? If we’re talking about a “startup city,” there presumably wasn’t a city there before, or not much of one. So wouldn’t it have to be inhabited by… colonists? And would a “startup city” be *sovereign?* That is, would it be fully self-governing, or would it be part of the territory of another state? If it isn’t at least semi-sovereign, I don’t see the difference, or the advantage, vis-à-vis city forms already available. If you want it to have a higher degree of self-government than is generally enjoyed by cities today, and in that sense is sovereign or semi-sovereign, then (a) you somehow have to crack the territorial oligopolistic stranglehold that today’s cartel of sovereign nation-states has over the surface of the earth, and (b) the result will certainly be labeled “neocolonial,” and as far as I’m concerned, rightly so.

    I think successful startup or charter cities are most likely to be “large, constructivist projects” and that to some extent they’ll probably “grow out of nation-states.” At any rate, I think it’s misguided to be too scrupulous about that. Let the city be founded in constructivist fashion and authorized by nation-states, but then let membership in it be based on voting-with-the-feet voluntarism, and it will change the world.

  4. With all due respect, Singapore is currently ethnically 74.1% Chinese, 13.4% Malay, 9.2% Indian, and 3.3% other. They have had mass immigration, but it’s been ethnically/culturally homogeneous immigration. It’s been largely ethnic Chinese immigration to an ethnically Chinese majority city state. Citing this as the model example of successful open borders is rather daft and I suspect the authors are fully aware of that. Ethnic Chinese immigration hasn’t been causing the problems in Europe/US/Australia and you know that.

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