My previous post was linked (thanks !) as “a skeptical take of Open Borders”. I had blundered into the subject and I’m embarrassed to admit I wasn’t even aware of the Open Borders campaign. After checking it out, I’m just as skeptical as ever. Open Borders hopes to address the fact that people in poor countries earn massively less than people in rich countries. Supposedly the answer is for an epic migration of billions of people from the poor countries to the rich countries where they supposedly will then be “more productive” and so poverty will be eliminated.  

It’s so important that we unpick what is meant by terms such as “more productive”. Imagine someone selling street food in Dhaka Bangladesh. It’s delicious, nutritious food, produced extremely efficiently and is sold on a large scale to an appreciative market of consumers with nothing wasted. To my mind it is grossly insulting to describe that as “less productive” than working in yet another New York restaurant where insufficient custom means the food largely ends up down the sluice. Yet, in terms of how much the workers earn, it is “less productive”. It is all down to the fact that diners in New York have massively more money to spend than diners in Dhaka.

To my mind what we really need to face up to is why customers in Dhaka don’t have enough money to spend and so those running a thriving eatery in Dhaka cannot support an affluent lifestyle. That issue is basically what much of this blog is about (see here, here, here). Redirecting flows of money entails no more real disruption than the effort of clicking a computer mouse. And yet Open Borders advocates such as Michael Clements claim that it is preferable have billions of people move to where the money is rather than looking at why the money isn’t going to where the people are.

In principle I share the libertarian ideal of everyone being able to live wherever in the world they fancy. I think the way to go about realising that aim is to first address the issues that create the disparities between rich and poor countries. Once that is (even if only partially) achieved, then the vast bulk of people would no longer have any desire to migrate. A few people would because of personal reasons and for exchange of specialist expertise. However opening borders would then not be opening the floodgates to a torrent of people driven by macroeconomic forces. It is only the prospect of such a torrent that keeps the borders closed now. My total disagreement with the Open Borders campaign is that they advocate opening the borders to a torrent of migration as a first-line response to the disparities between rich and poor countries.

It could be argued that those in the rich world have little capacity to eliminate poverty in foreign countries and so have a greater chance of benefiting the lives of poor people by opening borders to immigration. That argument hinges on the idea that poverty is due to bad governance abroad and that the only answer is for the population to vote with their feet and emigrate. Firstly, I don’t think it is actually true that the rich world is a mere passive observer of poverty abroad. From what I can see, much of the blame for that poverty lies with active policies conducted by the developed world. Furthermore, over the longer term, those malign policies only benefit a minority even in the developed world. We need fair tradereform of the international monetary system away from “US dollar hegemony” towards a more equitable and less distorting system and a realignment of economic policy away from blowing asset bubbles that enrich the rich by enticing in capital flows from the poor world.

Much of the Open Borders logic seems to stem from the idea that market finance already has an inbuilt characteristic that would always lead towards an optimal solution for the world’s problems if only meddling governments were to stand aside. It’s vital that we keep our eyes open to situations where financial forces instead pull into calamitous vicious cycles. Property prices in London, New York or Tokyo would get pushed ever higher if borders were open for mass immigration. That would entice in ever more capital flight from the developing world, exacerbating the impetus for migration. I’m struck by how Michael Clemens seems fully aware of at least one side of this feedback loop as he writes that an expected consequence of epic migration to rich regions would be that “returns to capital rise in the rich region and fall in the poor region”. I’m left wondering whether Michael Clemens does not appreciate that capital flight from poor countries to rich countries does much to generate the disparities that drive the desire for migration in the first place. Perhaps he and other Open Border economists welcome such bubble blowing feedback loops. Financial sector lobbyists, and those in their thrall, aim for financial instability because the gains from expansion can be harvested whilst the losses from crashes get socialized.

It is also not clear to me that open borders would necessarily encourage a beneficial competition between countries to entice and retain their populations. It is vital to recognise that sometimes bad governments will actually seek to usher out the population. Natural resources may be exploited even from a depopulated country. The Scottish Highland Clearances are a classic example of how a country was brutally depopulated to facilitate natural resource exploitation.

related previous posts:

Demographics, migration and fiscal sustainability

Isn’t a financialized economy the goose that lays our golden eggs?

Globalization, Triffin’s dilemma and demurrage crypto currency

Rich people could benefit if everyone else were also rich

related stuff on the web:

A reply to”Direct Economic Democracy” – Paul Crider, Open Borders (added 09Aug2013)

If people could immigrate anywhere, would poverty be eliminated? -Atlantic

Economics and Emigration: Trillion-Dollar Bills on the Sidewalk -Michael A. Clemens

Open Borders

Addressing development’s black hole: Regulating capital flight

Open borders: A morality play by the 1% -macrobusiness (added 26 Feb 2014)