Paul Collier

by Exodus; How Migration is Changing Our World (2013) (pdf)

  24 THE QUESTIONS AND THE PROCESS

  The final perspective, of the indigenous population in host societies, is what is likely to be of direct interest to most readers of this book, and so I start with it. How does the magnitude and pace of immigration affect social interaction, both between the indigenous and immigrants, and among the indigenous themselves? What are the economic effects on different skill and age cohorts among the indigenous? How do the consequences change over time? The same benchmark issue arises for the indigenous population of host countries as for those left behind in countries of origin. The pertinent benchmark is not zero migration but somewhat more than current levels or somewhat less. The answer is evidently country-specific: an underpopulated country like Australia may not arrive at the same answer as a densely populated country like the Netherlands.

  In trying to answer this question I will argue that social effects are usually likely to trump economic effects, in part because the economic effects are usually modest. For the neediest sections among the indigenous population the net effects of migration are often probably negative.

  The long march through these three different perspectives will provide the building blocks for an overall evaluation of migration.

  But to move from description to evaluation we need both an analytic and an ethical framework. In the typical work of advocacy on migration both the analytics and the ethics trivialize the problem because all the important effects appear to work in the same direction, with opposing effects being dismissed as “controversial,” “minor,”

  or “short term.” But any honest analysis must recognize that there are both winners and losers, and that even determining the overall effect on a particular group can be ambiguous, depending on how gains are measured against losses. If some people win while others lose, whose interest should prevail? Much economic analysis of migration comes to a clear and powerful answer: the winners gain

  THE MIGRATION TABOO 25

  much more than the losers lose, so hard luck on the losers. Even with the simple metric of monetary income, the gains far outweigh the losses. But economists usually move on from money to the more sophisticated concept of “utility,” and by this metric the overall gains from migration are even larger. For many economists that answer settles the matter: migration policy should be set so as to maximize global utility.

  In part 5 I challenge this conclusion. I argue that rights should not be dissolved by the sleight of hand involved in “global utility.”

  Nations are important and legitimate moral units: indeed, the fruits of successful nationhood are what attract migrants. The very existence of nations confers rights on their citizens, most especially on the indigenous poor. Their interests cannot lightly be dismissed through the invocation of gains in global utility. The people left behind in countries of origin are in a yet more vulnerable position than the indigenous poor of host countries. They are both more needy and far more numerous than migrants themselves. But unlike the indigenous poor of host countries, they have no prospect of rights over migration policies: their own governments cannot control the rate of emigration.

  Migration policies are set not by the governments of countries of origin but by those of host countries. In any democratic society, the government must reflect the interests of the majority of its citizens, but both the indigenous poor and those living in the poorest societies are of legitimate concern to citizens. Hence, in setting migration policy, host governments will need to balance the interests of the indigenous poor against the interests of migrants and of those left behind in poor countries.

  A rabid collection of xenophobes and racists who are hostile to immigrants lose no opportunity to argue that migration is bad for indigenous populations. Understandably, this has triggered a reaction:

  26 THE QUESTIONS AND THE PROCESS

  desperate not to give succor to these groups, social scientists have strained every muscle to show that migration is good for everyone.

  Inadvertently, this has allowed the underlying question to be set by the xenophobes: “Is migration bad or good?” The central message of this book is that this is the wrong question. Asking this question of migration is about as sensible as it would be to ask, “Is eating bad or good?” In both cases the pertinent question is not bad or good but how much is best. Some migration is almost certainly better than no migration. But just as eating too much can lead to obesity, so migration can be excessive. I show that, left to itself, migration will keep accelerating, so that it is liable to become excessive. This is why migration controls, far from being an embarrassing vestige of nationalism and racism, are going to be increasingly important tools of social policy in all high-income societies. What is embarrassing is not their existence but their inept design. In turn this reflects the taboo that has blocked serious discussion.

  This book is an attempt to break that taboo. I am all too aware that, as with all attempts to break taboos, it carries risks. The fundamentalist guardians of orthodoxies stand ready with their fatwas.

  It is time to get started, and the starting point is to understand why migration accelerates.

  CHAPTER 2

  Why Migration Accelerates

  FOR HALF A CENTURY FOLLOWING the outbreak of the

  First World War countries closed their borders. Wars and the

  Depression made migration practically difficult and immigrants unwelcome. By the 1960s people overwhelmingly lived in the

  country in which they had been born. But during that half-century of immobility, there had been a dramatic change in the global economy: a gulf had opened up between the incomes of countries.

  Within a society the distribution of income is hump-shaped:

  most people are somewhere in the middle, with two tails, one being the rich minority, the other the poor minority. The fundamental statistical reason that the distribution of income usually looks like this is chance: the process of generating income depends upon repeated situations in which people can be lucky or unlucky. A cumulative process of good and bad fortune generates hump-shaped outcomes. If the luck cumulates multiplicatively, as with a rolling bet on horse races, then the tail for the rich minority becomes

  28 THE QUESTIONS AND THE PROCESS

  extended: a few people get very rich indeed. So powerful and universal are these multiplicative forces of income generation that the distribution of income in every country on earth conforms to it.

  But by the 1960s the distribution of income between countries did not look anything like that. Instead of having a hump in the middle, it had a hump at each end. In technical language it was bimodal; more popularly expressed, there was a rich world and a poor world. The rich world was becoming richer at rates without historical precedent. For example, between 1945 and 1975 French per capita income tripled: the French refer to the period as “the Golden Thirty Years.” Economists built Growth Theory to try to understand what was driving this new phenomenon. But the poor world had missed out on growth and was continuing to do so.

  Economists built Development Economics to understand why such a divide had occurred and why it was persisting.

  Four Pillars of Prosperity

  In discussing migration policy, much hinges on why some coun-

  tries are so much richer than others, and so I will now offer a succinct account of how both professional opinion and my own

  thinking on the issue have evolved. 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. This explanation has not been completely abandoned, but one fundamental change

  that economics has had to come to terms with is that capital has become internationally mobile: there are huge flows between

  countries. Yet capital is not flowing in significant quantities to the poorest countries. Poor countries still have very little capital, but this

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nbsp; WHY MIGRATION ACCELERATES 29

  can no longer be seen as the primary cause of their poverty; something else must jointly account for both 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. Most have some reasonable basis for support, but none seems likely to be the ultimate explanation: for example, policy choices do not just happen; they are the result of some political process.

  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 thereaf-

  ter affect choices. 1 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. The rule of law induces people to invest, confident that productive assets will not be expropriated. Investment drives growth. Onto this secure base for investment, a further layer of institutions addresses the distribution of income. Protest from the many excluded forces the rich to commit to inclusive political institutions: we arrive at property-owning democracy.

  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

  30 THE QUESTIONS AND THE PROCESS

  history, unleashing the Industrial Revolution and opening the path to global prosperity.

  This line of reasoning has given primacy to political and economic institutions. One indication that democratic institutions matter is that a change of leader only makes a significant difference to economic performance if these institutions are weak. Good institutions restrain the vagaries that would otherwise be generated by the character of individual leaders. 2 So formal political and economic institutions matter: high-income countries have better political and economic institutions than low-income countries.

  But democratic political institutions only function well if ordinary citizens are sufficiently well informed to discipline politicians. Many issues are complex, as is migration policy itself. Keynes insightfully proposed that ordinary people handle complexity through

  narratives: readily digestible theories-in-miniature. 3 Narratives spread easily, becoming public goods, but they can stray quite a long way from reality. Narratives of disease are an example. The switch from the narrative that illness is due to witchcraft to one that encapsu-lates germ theory is fundamental to improvements in public health.

  It occurred in Europe in the late nineteenth century. In Haiti it is still under way: even in the wake of the earthquake, people were wary of hospitals. Depending on their content, narratives can support, complement, or undermine institutions. The narrative

  “Germans no longer tolerate inflation” underpinned the deutsche mark. But no equivalent narrative has been built across Europe for the euro. Like the deutsche mark, it has an institutional defense consisting of two fiscal rules; but since its launch in 2001, sixteen of the seventeen member countries, including Germany, have broken them. The euro is a brave, and perhaps foolhardy, attempt to force the differing economic narratives that have prevailed across Europe to adapt to a common new institution. But such adaptation

  WHY MIGRATION ACCELERATES 31

  is slow and uncertain. Even by 2012, and despite an unemploy-

  ment rate of 27 percent, Spanish inflation remained higher than that in Germany, and cumulatively the prolonged higher inflation had drastically undermined the country’s competitiveness. Narratives can evolve, but they matter.

  Whereas Europe provides an example of differing economic nar-

  ratives, the contrast between America and South Sudan illustrates differing political narratives. President Clinton famously won an election campaign on the slogan “It’s the economy, stupid!” A society in which this sentiment resonates is going to use a given set of political institutions quite differently than one in which the narra-

  tive is “The Dinka have been wronged by the Nuer.” 4 Similarly, a society that thinks “foreign investment means jobs” is going to run a National Investment Authority rather differently than one that thinks “foreign investment means exploitation.” False narratives eventually fade, but they may take a long time a-dying. So one reason for the wide gap in incomes may be that institutions are supported in high-income societies by narratives that are more functional than those prevailing in low-income societies.

  But many of the rules that govern economic behavior are informal, so the analysis can be extended beyond institutions and

  narratives to social norms. Two key norms concern violence and cooperation. In a violent society the rule of law keeps getting over-ridden: households and firms must divert effort into safety, and in the limit they seek safety through choosing to remain poor so they are

  less of a target. 5 The capacity to cooperate is fundamental to prosperity: many goods and services are “public goods” that are most efficiently supplied collectively. So the social foundations of peace and cooperation matter for growth and are not direct corollaries of formal institutions. Steven Pinker has convincingly suggested that norms concerning violence have evolved quite radically in distinct

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  steps over many centuries. 6 An early step is the passage from anar-

  chy to centralized power: a passage that Somalia has yet to make.

  Another is the passage from power to authority: a step that many regimes have yet to manage. A more recent step has been the

  enhanced ability to empathize with the suffering of others and the demise of codes of clan and family honor, making the infliction of violence less acceptable.

  The foundations of cooperation have been extensively studied

  through game-based experiments and are now quite well under-

  stood. Sustained cooperation depends upon trust. The extent to which people are willing to trust each other varies enormously between societies. High-trust societies are better able to cooperate and also face lower costs of transactions because they are less dependent upon processes of formal enforcement. So social norms matter, as well as formal institutions. The norms prevalent in high-income societies support much lower levels of interpersonal violence, and higher levels of trust, than those prevalent in low-income societies.

  In turn, institutions, narratives, and norms facilitate the emergence of effective organizations that enable their workforce to be productive. Typically, high productivity depends upon reconciling large size with worker motivation. Economists have long realized that big is productive: large organizations are able to reap economies of scale. But only recently have they developed a convincing analysis of motivation. Incentives are evidently part of the story, but the work of Nobel laureate George Akerlof and Rachel Kranton has opened up a new appreciation of how successful organizations

  motivate through identity. An effective firm persuades its workers

  to adopt identities that are conducive to productivity. 7 Akerlof’s

  central idea comes through posing the question “What makes a

  good plumber?” He argues that the essential step is neither technical

  WHY MIGRATION ACCELERATES 33

  training nor incentive pay, but whether the plumber has made

  the leap of identity: “I am a good plumber.” For a plumber who has made this leap, doing anything less than a good job woul
d be

  inconsistent with his sense of identity. In the private sector, competition forces organizations to make their workers productive.

  Akerlof and Kranton show that successful firms indeed devote time and effort to persuade their workers to internalize the objectives of the firm: to become “insiders.” In the public sector, political accountability forces organizations to do the same. The higher the proportion who become insiders, the more productive is the workforce, so that everyone is better off.

  One reason poor countries are poor is that they are short of effective organizations: many are too small to reap scale economies, and many, especially among the public organizations, fail to motivate their workers. For example, teachers in many poor countries typically do not show up for work and have not maintained essential skills such as functional literacy. The consequence for educational

  standards is disastrous, as revealed by international test scores. 8

  Such teachers have evidently not made the crucial leap of identity:

  “I am a good teacher,” and this is, in part, a failure of the organizations that employ them.

  I will refer to the combination of institutions, rules, norms, and organizations of a country as its social model. Even among high-income countries social models differ considerably. America has particularly strong institutions and private organizations, but somewhat weaker public organizations than Europe, and Japan has

  much stronger norms of trust than either of them. But though they differ in detail, all high-income societies have social models that function remarkably well. Quite possibly, different combinations work well because the components adapt so as to fit each other: for example, institutions and norms may gradually evolve so as to be

  34 THE QUESTIONS AND THE PROCESS

  well suited given the state of narratives and organizations. But such adaptation is not automatic. On the contrary, hundreds of different societies existed for thousands of years before any of them happened upon a social model capable of supporting the