Monthly Archives: November 2013

Weekly link roundup 21

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Here’s our weekly installment of links from around the web (see here for all link roundups). As usual, linking does not imply endorsement.

A Country Deep in Trouble?

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I understand that the following is not a rigorous argument, just something to check intuitions that come so easily to many people.

Here’s the set-up: I will tell you about a country and its situation and you try to judge what happened to them. Are they being swamped by immigrants? Is there a threat of societal breakdown? Do they suffer economically? Is the political system in trouble? Etc.

However, I will not tell you which country I am talking about. For the moment it is just “Openbordia.” To obfuscate it a little, I will change some of the magnitudes. But you will see that I do it only on the side that goes against the usual intuitions. Then I will disclose the name of the country.

Just a fun game. Ready to play?

Okay, here goes …

Openbordia is a rather small country surrounded by much larger countries. There are four countries closeby. And there are plenty of other countries in the wider region. If the population of Openbordia is 100, the four closest countries come in at more than 1,000 each, and all the countries in the region together at more than 10,000. So it does not look good for Openbordians as they are outnumbered at least 100 to 1.

What makes the situation even more desperate is that Openbordia is also richer than the surrounding countries. Here’s GDP per capita (PPP, Worldbank figures for 2005-2012): If Openbordia is at 100, then the four closest countries only muster a meager 40, 44, 45, and 47. And it gets worse. One country in the region with already many emigrants to Openbordia stands at just 28. To be sure: they alone have more than ten times the population of Openbordia. And then there are other even poorer countries of similar sizes where it goes down to dismal levels of 24 for two countries much larger than Openbordia. And a little further away, there are two countries with more than ten times the population of Openbordia, but only levels of 18 and 17. So there are plenty and plenty of poor people surrounding Openbordia.

For comparison: If the US is at 100, then Russia is at 47, Mexico at 33, Venezuela at 27, China at 18, and Nigeria at 17. So if Openbordia decided to open its borders it would be like the US opening its borders for all those countries. But then the US is a much more populous country. It should be worse for Openbordia.

Now you would think that the Openbordians had learned something from reading restrictionist websites. But guess what, they have not. In a fit of complete delusion they threw their borders open with their two closest neighbors already decades ago. But remember: those two countries are still not even half as rich as Openbordia. So probably there was a lot of pressure from unchecked immigration.

With such an experience, you might guess that Openbordians had now at last read up on restrictionism. Well, they stayed completely deaf to it. Instead, they pushed for even more open borders. More then a decade ago, they got their two other close neighbors to open their borders, too. As those two countries are even larger than the first two countries, that should have made the situation untenable. However, the Openbordians ignored the peril they were in and, hard as it is to believe, even prided themselves that the open border treaty was named after a town in their country!

At that point, you’d expect some prominent restrictionist to intervene and write a blog post telling the Openbordians that they were headed for doom. As far as I can see, restrictionists completely missed the problem. And Openbordians went on with their rampage against borders. Already years ago they did away with them also for lots of other countries in the region, all the way down first to the level of 24% of relative GDP per capita and then even to the level of 17%.

This is a disaster waiting to happen, right?

No, this is Luxembourg. The “poor” countries in their neighborhood are The Netherlands, Belgium, Germany, and France. The country many immigrants have come from is Portugal. The countries in the region at 24% of GDP per capita are Poland and Hungary. Romania is at 18% and Bulgaria at 17%.

Luxembourg has been in a customs union with The Netherlands and Belgium since 1948, and completely opened its borders in 1960. The Schengen Treaty with those two countries as well as France and the Federal Republic of Germany was signed in 1985, has been effective since 1995, and is named after the town Schengen in Luxembourg. The Schengen Area grew from there and now encompasses countries with a population of more than 400 million people. Since Luxembourg only has about half a million inhabitants, they are outnumbered not just 100 to 1, but almost 800 to 1.

The last time I was in Luxembourg is more than a decade ago. It looked rather tranquil then. But I may have missed something and things went downhill from there. Give me a little time to do the research. Restrictionist websites will certainly have lots of posts on Luxembourg …

Additional Remarks

  • One objection might be that GDP per capita is not the correct measure here. However, other measures do not yield materially different conclusions about the relative position of Luxembourg vis-à-vis its neighbors. Take e.g. average net monthly wages. Luxembourg has an average of $4,230. The Netherlands, Belgium, Germany, and France come in at $2,671, $2,496, $2,865, and $2,845, or roughly 60% to 70% of Luxembourg wages. Portugal has $1,164 or 28%, which is about the percentage also for GDP per capita. Poland and Hungary at $866 and $856 look even poorer with a level of only about 20%. And Romanians and Bulgarians at $485 and $414 earn only 11% and 10% of Luxembourg wages.
  • As I said at the start, this is not a rigorous argument that can prove all that much about other countries. Or at least I would have to work harder. However, I don’t think the example of Luxembourg can’t prove anything at all. It is a counter-example to many common intuitions:
    • “With lots of potential immigrants that are poorer and often much poorer, a small country is bound to be swamped.” — Foreigners are making up 38% of the population (the most for any European country), but Luxembourgers are still a majority. There is no takeover going on that I am aware of.
    • “With so much immigration, a country runs into economic problems. Competition from poor people will make domestic citizens poor, too.” — But Luxembourg is doing fine economically, as the country with the highest GDP per capita in the world according to Worldbank figures. Wages are a lot higher than in Germany or in France.
    • “Their wealth and the steep differentials with other European countries will attract lots of criminals.” — But then the homicide rate is at 0.6 per 100,000 a year, which is way lower than in the US at 4.7, and even lower than in neighboring Germany at 0.8 and France at 1.1.
    • “They must be overrun by people only trying to collect welfare.” — Still they have one of the lowest unemployment rates in Europe, lower than Germany and much lower than France. And if the Luxembourg government had to shell out so much in welfare, how come they have much lower tax rates than Germany and France?
  • I really ran a search for “Luxembourg” at the VDARE website, but could not find anything. That’s strange. Luxembourg should be a poster child for demonstrating all the pathologies of immigration. In every dimension, it looks like Luxembourg is in the worst possible position of any European country. This should be a bonanza for restrictionists, and I am giving it away for free.
  • You may ask: How can wage differentials persist for long times? One reason is that labor is not homogeneous, so many potential immigrants do not compete for the same jobs because they do not have the respective skills. Luxembourg is geared towards the banking sector, so competition comes from other such cities, e.g. Zurich, Frankfurt, and London, where wages are also high. It is not as if hundreds of millions could “take away” specialized jobs and drive down wages only because they come from poor countries and are willing to work for low wages. Another possible reason might be cultural and/or linguistic. Many immigrants find it easier to emigrate to countries that are culturally and linguistically similar to their home country. Luxembourgers are fluent in both German and French, and in addition speak their own language, Lëtzebuergesch, which could be viewed as a German dialect strongly influenced by French. The francophone component may explain the rather high proportion of Portuguese immigrants (as for France, but unlike Germany). In general, migration within the EU is lower than would be expected from wage differentials. Here are two papers on the phenomenon:

    Linguistic and cultural barriers may make it harder to capture gains from open borders as predicted by models that only rely on wage differentials as the driving force. This perhaps cuts somewhat against the most optimistic predictions on the open borders side — but also against restrictionist predictions of large inflows of culturally dissimilar immigrants. According to the Gallup Survey on International Migration 35 million people worldwide are interested in migrating to Spain, but only 25 million to richer Germany.

The photograph of Luxembourg featured at the top of this post was taken by Marcin Szala and is licensed under the Creative Commons Attribution-Share Alike licence.

British hostility to immigration, and myths that refuse to die

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The United Kingdom in the past few years has embarked on an aggressive campaign to cut down immigration. Restrictionist sentiments are alive and well amongst the British. A few months back, I wrote about how perplexing it was that even British left liberals, such as author David Goodhart, readily embrace restrictionist myths and assumptions. Unfortunately, in the UK — just as in most countries — the well-meaning side making the case on anecdotes instead of facts wins. Instead of debating the real issues at hand — such as what keyhole solutions are appropriate — we’re essentially debating whether Jews do in fact poison wells or Mexicans are in fact potheads.

Goodhart recently authored a book, The British Dream, purporting to show the disaster that has been British immigration. This book turned out to have played very loose and fast with the data, as economist Jonathan Portes observed in the London Review of Books. If you enjoy watching a train wreck, Portes published an unabridged version of his debate with Goodhart (since the LRB refused to give them both sufficient space to respond to each other) — Portes shows clearly how Goodhart has ignored the economics of immigration and blatantly insisted on substituting anecdotes for data.

This fact was driven home to me a couple months ago when I attended a Cato Institute panel on what economists think about immigration. The economic consensus: there is no evidence that immigration economically harms natives; any harms are so small that they are virtually indistinguishable from zero. Yet looking at the debate on immigration, you would think that only deportation can save the welfare state or provide jobs. Goodhart himself blames British immigrants for impoverishing British whites and stealing their jobs — and he is on the left of the British immigration debate!

After the Cato panel, one audience member from Ukraine came up to moderator Alex Nowrasteh and panelist Michael Clemens to say: your presentations were great, but what do your opponents say to rebut your claims that immigration doesn’t harm natives? Alex and Clemens essentially said: “nothing!” Even the strongest finding here has been that 20 years of immigration to the US caused a total 3% drop in the wages of low-skilled natives. If you take a simple average of that, it’s a 0.15% drop per year. And that itself is a figure which many economists mistrust, because it makes arguably naive assumptions about the economy — such as assuming capital investments don’t change in response to labour market changes. Why do even people on the left buy into the myths of immigration’s costs? This would be like a leftist saying “Yes, I suppose we can’t let all the Chinese in, since otherwise they might rape too many of our women, but we have to treat those we do let in better!”

The Cato panel focused on the US economy, but economists who’ve studied the issue in other developed countries have had just as hard a time finding harmful impacts to natives. Portes covers the issue well in his full discussion with Goodhart — British data show that youth unemployment fell in communities receiving more immigrants, which is exactly counter to Goodhart’s claims. Yet the myth that immigrants “steal” jobs persists.

The myth that immigration destroys jobs or drives down wages may seem a petty issue in comparison to the myth that Jews drink the blood of babies or that Mexicans are drug mules (this latter myth came up in plenty of informal discussion after the Cato panel, since one American Congressman had only just that week made the physically impossible assertion that virtually all unauthorised Mexican immigrants carried 75 pounds of marijuana with them across the border). But these economic myths are I daresay even more harmful than the petty racist myths that no right-thinking person today believes. These myths give a veneer of respectability to inhumane immigration policies that in fact destroy jobs, tear apart households, and spit upon the concepts of justice and fairness.

The Cato panel on what economists think about migration came to mind again and again as I followed a recent debate in the UK House of Lords about the impact of new immigration laws. The full transcript of that debate is quite interesting reading, and you can also always watch the debate if you prefer (the video opens at the start of the debate in the House of Lords that day, around 11am; skip ahead to 3:41pm for the start of the immigration debate).

The gist of the problem is this: the British government wants to reduce rates of immigration, by hook or by crook. To accomplish this, they have enacted seemingly arbitrary requirements for prospective immigrants to meet. And now, the government is reaping what it has sowed: British citizens are unhappy that their rights to invite and engage with foreigners have been severely curtailed, in the service of a regime that reduces jobs and families down to a single number: zero net non-EU migration. This debate in the House of Lords centred specifically on restrictions of the rights of British citizens and residents to invite their family members to the UK — rights that have been arbitrarily curtailed in worship of a nonsensical goal.

The debate is so interesting that I hope to blog about it in depth separately. Suffice it to say that it is a litany of failures in every imaginable way. When you have a government trying to centrally plan immigration — to issue an edict from upon high that no more than X number of immigrants must be allowed in — you have an economic and human disaster. Doctors who cannot care for their aged parents leave the country. British businesspeople who marry foreigners are told they should go live in Australia. A Syrian refugee trying to join her sons in the UK, with a charity guaranteeing and sponsoring her, is told by the British government that she should stay in the war zone that is Syria. The British government purports to establish a fair and firm regime for immigration — by mandating that only high-income Britons may marry a foreigner. It is estimated that almost half of all Britons do not earn enough to meet the income requirements for sponsoring a spouse’s visa — and even if they can apply, success is not assured, as in the case of one British-Australian couple told their visa was denied because there is no pressing need for their family to leave Australia.

In what must certainly be a frustrating turn of events for economists like Clemens and Portes, most of the Lords in that debate paid lip service to the goal of reducing immigration, taking for granted that it is, as matter of good policy, important and desirable to cut down immigration by what is essentially an arbitrary number pulled out of thin air. Some even forthrightly state that many of the new restrictions are good insofar as they create jobs for British youth. It is like hearing a lawmaker declare that it’s unfortunate that good people would be harmed by exiling all Jews, but at least this mass deportation would reduce the prevalence of poisoned wells in Britain.

Open borders — by which I mean an actual fair visa regime that grants a presumptive freedom of movement to all — is the only regime that can truly avoid the calamities and catastrophes we are witnessing today in the UK, and continue to witness every day across the world. As long as arbitrary laws ban our fellow humans from being with their families and seeking honest wages, we will continue to count the costs of closed borders in wasted tears, sweat, and blood. Any regime that declares “I have the arbitrary right to ban good people from being with their families if I feel like it” — which is exactly what the unjustified, pulled-out-of-thin-air numerical quotas of the sort we see in virtually every country today amount to — is utterly irreconcilable with basic humanity.

Open borders is not costless. One can well imagine that if we moved overnight from the closed borders regime to an open one, most developed countries would face an unmanageable flood of people. But it’s not clear to me why we count this as a cost of the open borders regime, rather than a cost of the closed one. If we had never closed the borders in the first place, we would never have had to worry about the adjustment costs of undoing our grievous mistake. Before we closed the world’s borders, we had no evidence that levels of immigration then reduced wages or employment. This is unsurprising; economists agree that the long-run effect of open borders is nil. It is only the short-run sudden release of migrants, held back artificially by arbitrary laws, that we need to manage carefully.

Only a few days ago, the Bristol Freedom Society hosted a debate on open borders — one that apparently went rather better for the open borders side than the similar Intelligence Squared debate recently hosted on the American side of the pond. Reflecting on the Bristol debate, Ben Southwood of the Adam Smith Institute cogently observed:

Any claim that migration should be kept to a particular level, because of the risk of undermining British institutions, implies an assumption about how much damage the marginal immigrant does or will do (reliably or with some probability). One cannot cop out of the question, you need to have an answer. But no one has yet set out good evidence about exactly how much damage to institutions the marginal immigrant does or will do—typically arguments in this area depend on anecdote or things that people feel they “just know”. This won’t do when the benefits to immigration are so high. We cannot simply assume the cost to our institutions outweighs the other benefits.

As Southwood suggests, the paucity of evidence for the claims frequently made about migration is appalling. Meanwhile, the evidence of the moral horrors of how we treat migrants is plain for all to see. Closing the borders for the sake of an arbitrary number ruins lives. We see that writ on a large scale today in the UK. There is no sense or logic possible under the law the moment justice is enslaved to an arbitrary quota. And it is all the more sad that the profound injustice of a quota on jobs and a quota on families is being perpetuated on the basis of ignorance and falsehoods. In no other area of law or public policy do we let the government so wantonly rip up families and destroy jobs, without due process, relying only on the evidence of myths — to the extent they rely on evidence at all. It’s time we demanded our governments do something different about immigration — something actually informed by the evidence and consistent with the rule of law.

The cartoon featured in the header dates to 1886, and depicts fears of Chinese immigration to Sydney, Australia.

Schindler or Eichmann?

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More than a few times I’ve heard sentiments like this expressed: “I would support the legalization of immigration, but as long as it remains illegal, those that break the law shouldn’t be allowed to stay.” This appeal to authority can seem reasonable at first-glance: It denotes a respect for law, while also giving lip-service to support for immigration. There’s something to be said for respecting the rule of law in general, even if you disagree with specific laws. After all, some might claim, if we simply disobeyed every law we thought was unjust without respect for the avenues by which we might legally change those laws, then what is the point of legislation at all?

However, nearly all people have a point at which they would disobey a law – the point at which it conflicts sufficiently with their own ideas of true morality. That point may be different for every person, but almost all people have such a point. If a law was passed tomorrow legally mandating that parents abandon their children in the woods, it’s unlikely that many would obey such a law. So does this mean that people only obey laws that they morally agree with – or at least, don’t morally disagree with strongly? Not necessarily.

Numerous examples in history and psychology have demonstrated that a person’s moral limit on obedience is not an immovable line, but rather is quite malleable depending on circumstance – and technique. The Milgram experiments done in response to the trial of Adolf Eichmann, the Stanford Prison Experiments, and the Mount Washington McDonald’s incident all provide examples of how people can be pushed beyond their stated moral limits. If you know about those (and other) examples of the malleability of human morals, then it suddenly doesn’t become so far-fetched to imagine that people could be convinced to obey a number of laws they’d find immoral if asked directly.

So is that what’s happened? Have the citizens of the developed world been slowly conditioned to accept immigration restrictions as moral, when philosophical reasoning so easily reveals them to be the opposite? It’s certainly possible. It’s in the nature of authority to condition those under it to respect that authority for authority’s sake – to accept that authority itself is morality. Even though the residents of a nation usually benefit from migration, individual political leaders often oppose it, and the gradual effect is cyclical: politicians oppose immigration, which helps to condition people to oppose it. People conditioned to oppose it demand politicians that oppose it. Those politicians oppose it, and the cycle continues.

The effect is not absolute, however. The Milgram Experiments demonstrated that while people may have a tendency to allow their morals to be eroded by the proper conditions, there were always those who bucked the trend and opposed the commands. When slavery was the law, there were still those who, as a part of the Underground Railroad, helped to break that law because it was morally right to do so. Those people were lawbreakers, but history regards them positively. Despite the fact that they broke the laws, history sees people like Harriet Tubman and Oskar Schindler (and many others) as heroes. Those we see as heroic in history were often those who bucked the trend of allowing authority to dictate morality, despite the pressures.

One hundred years from now, will the cause of Open Borders have a Tubman or a Schindler to admire?

Open Borders editorial note: The following posts suggest some possibilities: Why Jose Antonio Vargas Matters: Making Human Rights Real by Nathan Smith, and How Undocumented Organizers Can Lead the Way to Open Borders by David Bennion. Nathan Smith’s post Illegal immigrants and runaway slaves is also related to the point Roccia makes about the Underground Railroad.

Response to Paul Collier: Chapter 2

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(This post is part of a series in response to Paul Collier’s Exodus. See my response to Chapter 1.)

Chapter 2 of the migration-skeptical economist Paul Collier’s Exodus is entitled “Why Migration Accelerates,” but he starts by explaining the wealth and poverty of nations. The way he does so sets the stage for serious doubts about the beneficence of migration. He summarizes the state of development economics as follows:

When development economics was in its infancy, the standard explanation for the astounding gap in income was the difference in the endowment of capital. Workers in high-income countries were more productive because they had so much more capital with which to work… [But] capital… can no longer be seen as the primary cause of… poverty; something else must jointly account for their lack of capital and their poverty. Poor choices in economic policy, dysfunctional ideologies, bad geography, negative attitudes about work, the legacy of colonialism, and a lack of education have all been proposed and investigated as explanations…

Increasingly, economists and political scientists have coalesced around explanations that focus on how the polity is organized: how political interest groups shape long-lasting institutions that thereafter affect choices. One influential line of argument is that the key initial conditions for prosperity are those in which it is in the interest of political elites to build a tax system: historically in Europe they needed revenues to finance military spending. In turn, a tax system gives a government an interest in enlarging the economy, and so induces it to build the rule of law…

A related line of argument is that the key institutional change is the shift in political power from predatory elites bent on extracting revenues from the productive population to more inclusive institutions that protect the interests of the productive. In an important new study, Daron Acemoglu and James Robinson argue that the English Glorious Revolution of 1688, in which power shifted from king to Parliament, was the first such decisive event in world economic history, unleashing the Industrial Revolution and opening the path to global prosperity.

Alas, this may be an accurate summary of the state of development economics, but it makes me want to cry. The study to which Collier refers, Why Nations Fail, is one of the most over-rated books I’ve ever read. It’s fatally unrigorous, equally destitute of formal theory and econometrics. A naïve view of the beneficence of democracy has long since been ripped apart by public choice economics, yet Acemoglu and Robinson revive it in the crudest form. People good, elites bad. The book is somewhat persuasive via selective anecdotes if you’re willing to swallow its bizarre terminology, e.g., “inclusive economic institutions” means protection of property rights, even though property rights consist precisely in the right to exclude others. All in all, I tend to think development economics peaked with the empirical work of Jeffery Sachs in the 1990s, and it’s been downhill from there. Daron Acemoglu, in particular, has been a disaster for the field. Honest empirical work on the democracy => growth causal link suggests that the effect is basically nil. But Acemoglu and Robinson’s tendentiously fact-packed and conceptually confusing tome has given development economists a pretext for taking a more politically correct view.

In spite of my dismay at his embrace of Acemoglu, I wouldn’t wholly deny Collier’s claim that national wealth depends on institutions and on a country’s social model, and he is certainly right that “democratic political institutions only function well if ordinary citizens are sufficiently well informed to discipline politicians.” In fact, it’s a bit of a mystery why democracy works even in the mediocre fashion that it does work, in view of rational voter ignorance, Arrow’s impossibility theorem, and other public choice insights, and I think the explanation of the mystery has a lot to do with overlapping webs of altruism among fellow nationals. That’s why ethnic fragmentation in a democracy can lead to disaster: each side cares only about its own, and elections become a contest to grab the spoils of office. But never forget this: open borders does not mean open citizenship. It’s fine to let people come and not let them vote.

Collier writes that “many of the rules that govern economic behavior are informal, so the analysis [of the determinants of wealth] can be extended beyond institutions and narratives to social norms.” Yes, social norms can facilitate economic cooperation. Yes, immigrants may not share the social norms that enable natives to cooperate. But it does not follow that immigrants will undermine economic cooperation among natives. After all, if immigrants don’t share certain social norms that make certain kinds of economic cooperation among natives possible, natives can simply go on cooperating among themselves in the ways that require those norms, and not with natives. Does that sound like reprehensible discrimination? If so, I’m OK with that, but I don’t really think discrimination is involved here.

Here is the key question: How frequent, and how important, are trust-based transactions with total strangers randomly selected from the resident population? If the answers are “frequently” and “very important,” then Collier has good reason to worry about immigration. If much of our prosperity depends on our being able to bump into random people on the street and do big deals with them that aren’t adequately covered by contracts but involve major reliance on shared social norms, cultural understanding, and character-based trust, then letting the native population be greatly diluted by a large influx of foreigners from countries with dysfunctional social models really might impoverish us.

But I think the answers are “pretty infrequent” and “not very important at all.” Continue reading Response to Paul Collier: Chapter 2 →