IMF/World Bank Conditionality and Open Borders

Suppose a country can’t pay its bills. It has a lot of outstanding debt coming due, and it doesn’t have sufficient reserves to pay it. Nor can it find lenders willing to buy its debt. Without money, it will have to stop paying social security checks, interest on bonds, or salaries of civil servants, teachers, and doctors. The problem may take the form of a currency crisis, if the country is trying to maintain a pegged exchange rate which is under attack by forex traders, or simply a debt crisis. It could try to raise taxes, but that would be likely to depress the economy further. Catastrophe looms.

A lot of countries have found themselves in this situation. It’s basically where Greece has been for the past few years, and more recently Ireland, Portugal, to some extent Italy and Spain. Asian countries found themselves in a position like this in the late 1990s. So did Brazil and Argentina. Typically they go to the IMF, which is the official fire-fighter for these kinds of situations. The IMF will provide money, conditional on some reforms that are expected to improve the country’s ability to pay in future. In return, the IMF provides an immediate injection of cash to pay creditors and dispel the crisis. Often the reforms the IMF imposes are unpopular. They may also be necessary and/or beneficial. Asia recovered strongly after the IMF’s intervention in 1997-98, though whether the IMF deserves much or any credit for that is controversial.

Anyway, I doubt this has ever entered the IMF’s collective head– though possibly I’ve blogged about it before, I forget– but in principle, one of the reforms the IMF could demand in return for assistance during crises is an opening of the borders to more immigrants. Though no one thinks about it this way, every country in the world is foregoing a perhaps substantial revenue source by not allowing foreigners to come and receive working visas in return for paying either just ordinary taxes or perhaps special surtaxes of one sort or another. If the IMF were to demand that a country permit more immigrants to enter, it would be operating very much within the proper scope of its responsibilities as a creditor. It could then offer technical assistance to help the countries set up the institutional means to register guest workers and establish credible legal protections for their rights going forward. The policy would be somewhat counter-intuitive in countries which are going through crises and probably have high unemployment. But foreign workers are likely to be complements to, rather than substitutes for, domestic workers. Some may be entrepreneurs, bringing investment capital and know-how with them, and creating jobs upon arrival. If the policy is unpopular, well, imposing unpopular but wise policies and taking the heat for them is what the IMF is for.

The World Bank isn’t a crisis fire-fighter in the same way the IMF is, but it, too, might be able to play a role in liberalizing the world’s borders. It could encourage to be hospitable to immigrants, both to help the immigrants– “Our dream is a world free of poverty” is the World Bank’s motto– and to facilitate economic development in the host countries. It could monitor inter-ethnic frictions that arise and look for ways to ameliorate them. In some cases, migration might mitigate existing inter-ethnic frictions by giving societies more of a “melting pot” character. As I’ve previously suggested, it could promote and administrate passport-free charter cities.

The World Bank and IMF are staid, groupthinky organizations that don’t pioneer radical ideas. They strive for internal consensus, the content of which they derive from the views of global elites seasoned with bright ideas from academia and from NGO activists. They’d only do this if the tide of ideas swung strongly in the direction of open borders. Not that open borders would have to become standard policy for the IMF and World Bank to make them part of the development agenda, but that there would have to be powerful, widespread, deep-rooted sympathy for the goal of liberalizing migration.

New paper on open borders by John Kennan

John Kennan has come out with a NBER paper titled Open Borders (ungated PDF). The paper is heavy on mathematical economics, and adds to a growing literature that indicates that relaxing immigration restrictions would have massive utilitarian benefits while the negative effect on native wages would be small. I haven’t had time to go through the paper in detail, but here’s the abstract:

There is a large body of evidence indicating that cross-country differences in income levels are associated with differences in productivity. If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. The paper quantifies these losses, using a model in which efficiency differences are labor-augmenting, and free trade in product markets leads to factor price equalization, so that wages are equal across countries when measured in efficiency units of labor. The estimated gains from removing immigration restrictions are huge. Using a simple static model of migration costs, the estimated net gains from open borders are about the same as the gains from a growth miracle that more than doubles the income level in less-developed countries.

While you’re reading the literature on open borders, check out the pro-open borders reading list on this site, which includes a mix of web articles, research papers, and books. If there’s one research paper on open borders you should read, it is Michael Clemens’ “trillion dollar bills on the sidewalk” paper (ungated PDF).

H/T: Arnold Kling

“The Right of a Nation to Exist”

Open borders is sometimes attacked as a threat to “the right of a nation to exist.” I seem to remember this phrase from various arguments, but I don’t recall any linkable example off the top of my head, however, a critic of Bryan Caplan quoted in Vipul’s recent post says something close to it: “You have to be a special kind of genius to fail to understand basic points like: nation-states exist, and have borders, and have a fundamental interest in controlling those borders, meaning, ideally, via law enforcement.” Of course, an interest is not the same thing as a right– I may have an interest in taking your car, but not a right to do so– so this commenter isn’t articulating the notion of a “right of a nation to exist” which I wish here to critique. However, he seems to implicitly assume this. After all, if it is not presumed that nations have a right to control their borders, to assert that they have an interest in doing so is irrelevant.

Now, I would assert that rights belong only to individuals, or at least that they belong most fundamentally to individuals, and the rights of collective entities such as nations are derived from individual rights. I won’t attempt to prove that in this post. Rather, I will point out some problems with the notion of “the right of a nation to exist.”

Suppose that 99% of the residents of Germany express an intention to emigrate to friendly countries, say Britain, France, and the USA, which agree to accept them as immigrants. Suppose further that the 1% of the German population which will be left behind is too small to sustain national life. To sustain basic services and cultivate the land, they will have to let in English-speaking immigrants, and the German language will soon become nearly useless and probably extinct in a couple of generations. Does this decision by individual Germans violate the right of the German nation to exist? Could Germany justly prohibit the emigration of these people, in order to secure the continuance of its national life? Continue reading ““The Right of a Nation to Exist”” »

Undocumented No Longer

I welcomed Obama’s “DREAM decree,” which just took effect on August 15th, with an article at The American entitled “A Face for the Faceless.” In it, I celebrated the career of Jose Antonio Vargas (life story, blog posts about him on Open Borders), characterizing his stance and that of the movement he is leading as civil disobedience:

By coming out publicly, Jose Antonio Vargas and many others have transformed the lawbreaking of illegal immigration into something heroic—civil disobedience. They have become, to adapt an exquisite phrase from writer David Bentley Hart, “a face for the faceless.”

Hart, describing the impact of Christianity on the culture of the late Roman Empire, writes that “to the literate classes of late antiquity … a rustic could not possibly have been a worthy object of a well-bred man’s sympathy,” and that the story, in the Gospels, of Peter weeping after he denied Christ on the eve of the Crucifixion, would “likely have seemed like an aesthetic mistake.” By contrast, in the Gospels and other Christian texts, “we see something beginning to emerge from darkness into full visibility, arguably for the first time in history: the human person as such, invested with an intrinsic and inviolable dignity, and possessed of an infinite value.” (Hart, p. 167)

To feel human sympathy for someone makes it much harder to abuse, exploit, or brutalize them, or in general, to do unto them as one would not have others do unto oneself. Over time, though sometimes with terrible tardiness, this new appreciation of human dignity has altered man and society, making charity more urgent and beautiful, making slavery first anomalous and then untenable.

I also explore the charge that Obama’s DREAM decree is a violation of the principle of “rule of law”: Continue reading “Undocumented No Longer” »

Optimistic futility arguments against open borders

In the past, I’ve addressed Roy Beck’s argument on the futility of open borders. There is, however, another direction of argument that comes from an optimistic, rather than pessimistic, view of the future.

This argument emphasizes the rapid strides being made in the elimination of world poverty, improvement in other human development measures, and progress of technology around the world. The end of 2010 saw a lot of celebratory articles about the past decade and the promise of the future (such as this). One website aims to end poverty by 2015, and their ambitious blueprint doesn’t include open borders or anything close. The Global Poverty Project uses a simple line fitting to estimate that poverty can be ended by 2040 or so, provided the right steps are taken — steps that don’t involve significant changes to immigration policies (see here and here). Open borders advocate Bryan Caplan thinks that, even without a shift to an open borders policy, absolute poverty will be completely eliminated and living standards will be much higher a hundred years from now.

If open borders advocacy does significantly open world borders, the process is likely to take at least 15-30 years. If all the things that people are already doing will lead to the elimination of poverty within 15-30 years, doesn’t that dramatically undercut the end of poverty argument for open borders? And once poverty is eliminated, won’t the pressure for open borders dissipate considerably? Perhaps open borders will be rendered redundant, and so there’s no point working oneself up over them?

This argument has some merit, but I list here some counter-arguments.

Open borders now help people now, and 15-30 fewer years of poverty mean a lot

If open borders can solve the problem of world poverty more rapidly, then they’re worth it. It’s true that completely open borders will take a long time to achieve. But even minor, partial reductions in migration restrictions that can help a few people would be a meaningful improvement in their lives. Continue reading “Optimistic futility arguments against open borders” »