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Globalization's Assassin
Branko Milanovic is an economist with the Carnegie Endowment for International Peace. His most recent book is Worlds Apart: Measuring International and Global Inequality. His previous post on Webdiary was Lessons from the World Cup
by Branko Milanovic
The world’s first wave of economic globalization, led by the British Empire in the nineteenth century, came to an end literally with a bang on a Sunday afternoon in 1914, when Gavrilo Princip killed (with two uncannily well-aimed bullets) Austria’s Archduke Franz Ferdinand and his wife. The years that followed witnessed pan-European carnage, instability throughout the 1920’s, and the rise of fascism and communism, culminating in the death of countless millions during World War II.
Is today’s globalizing era also coming to an end? If so, it may not necessarily end with a repeat of the slaughters of the last century, but with an economic retrenchment that brings economic stagnation and consigns billions of people to grinding poverty.
Various candidates have been proposed for the role of globalization’s assassin. But one little noticed, yet likely, aspirant has been sneaking up on the world economy: the growing tendency to limit the free circulation of people, to "fence in" the rich world. We see the menace of this tendency constantly nowadays, but we perceive it in such a seemingly unthreatening way that we may well become accustomed to it rather than arresting it.
Globalization means free movement of capital, goods, technology, ideas, and, yes, people. Any globalization that is limited to the first three or four freedoms but omits the last one is partial and not sustainable. As soon as people cannot move, there will be little to stop governments from limiting the free movement of goods or other factors of production. After all, if over-populated countries with high unemployment cannot export people, why not reach for higher tariff barriers to protect the jobs they have?
But what of the unemployed who become locked into their societies? The war on terror has shown us the dangers that can arise from the social frustrations that often result.
Nevertheless, the "fencing-in" of the rich world continues apace. The United States plans to construct a veritable "Mexican Wall" to keep poor people from crossing into Texas or California. Likewise, hundreds, if not thousands, of Africans die every year trying to reach the shores of Fortress Europe.
Efforts to restrict people’s movement between countries expose the soft underbelly of globalization: the deepening gap between countries’ mean incomes. Rather than poor countries growing faster than the rich (as we would expect from Economics 101), mainly the reverse is true.
Between 1980 and 2002, average annual per capita income growth in the rich world (defined as the "old" OECD members) was almost 2%, compared to just 0.1% in the 42 least developed countries. Indeed, average income in Latin America is now barely above its 1980 level. This huge gap spurs migration. People nowadays know much more about conditions in different countries than they did in the past, and if moving across a border means that their income can be multiplied several-fold, they will try to do it.
This is why today’s most contentious borders separate economies where the income gaps between people on the two sides are the greatest. There are four such global hot spots: the borders between the US and Mexico, Spain and Morocco, Greece (and Italy) and the southern Balkans, and Indonesia and Singapore (or Malaysia). The income gaps range from more than seven to one in the latter case to 4.5 to one in the case of Spain and Morocco, 4.3 to one between the US and Mexico, and four to one between Greece and Albania.
Income differences were not always so huge. In 1980, average income in the US was a little more than three times that of Mexico, the gap between Singapore and Indonesia was 5.3 to one, and the difference between Spain and Morocco 3.5 to one. Even the gap between Greece and Albania, at three to one, was narrower than it is now. So income gaps between all these contiguous countries have increased significantly during the last quarter-century.
So it is little wonder that it is in these places that most illegal immigration and human trafficking occurs – pirates in the Straits of Malacca, fast boats between Albania and Italy, and desperate human cargoes from Africa and Latin America.
If today’s globalization continues to widen income gaps, the waves of migration will grow. So the rich world will, in a knee-jerk response, erect ever-higher barriers to stem the human tide.
If globalization, which has so enriched the world’s wealthiest countries, is to continue, governments must find ways to increase incomes more evenly. Otherwise, today’s "fencing in" of the rich world will increase the risk of a backlash against free circulation of goods and capital, as well as of political instability punctuated by terrorism. Global income redistribution by the rich countries should be viewed as a matter not of charity, but of enlightened self-interest.
Copyright: Project Syndicate, 2006.
www.project-syndicate.org
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Restricting migration is consistent with Marxism
Rob Wearne, your position does seem to have changed. You’ve introduced ‘common fractional ownership’ as your primary example of migration infringing private property rights. Can I now assume that ordinary private property owned by a single individual is not infringed by migration? If this is not the case, why exactly have you introduced ‘common fractional ownership’? I don’t understand why you can’t explain how migrants infringe on the ordinary private property of individuals Rob? Is it because you’ve realised that just maybe migration doesn’t infringe private property rights?
I reckon you’re trying to divert the debate by focusing on concern for ‘common fractional ownership’. Unfortunately it’s a pretty meaningless illustration in relation to migration. If said ‘common fractional ownership’ is restricted to jointly owned private property (and not public property) like strata schemes and shares, you’ve obviously missed yet another enormous hole in your argument. I’m sure you’re aware that the ownership of strata schemes and shares is not restricted to Australian citizens or even residents. Your original point describing concerns about open migration stated “This is primarily because it ignores the rights of the common property owners or in other words the citizens of the modern nation state”. This means you’re now expressing concern for the property rights of Australian citizens, using the example of property that may not be owned by Australian citizens. I have to thank you Rob for proving my original point about some libertarians holding fundamentally illogical and inconsistent positions.
Regarding migration and ‘trespassing’. If a migrant is ‘trespassing’ on private property (not public) by entering Australia, then all tourists must also be ‘trespassing’ no? Does this mean you are against tourism as well Rob? I’m still trying to figure out how a migrant ‘trespasses’ on someone’s shares. You reckon you could explain it to me Rob?
Re “if say I was selling waterfront blocks in a gated community then entry would a lot depend on a person’s ability to pay?” I reckon a person’s ability to pay would be the only factor. Selling an item of property to the highest bidder is a pretty straightforward concept. I certainly have no problem with this basic element of capitalism. Why exactly have you used this example Rob? Is a ‘quality person’ someone who can pay the market price? Are you saying that you would accept any prospective migrant if they were able to pay a certain fee?
Re “Of course in the mind of a Marxist this is a form of racism. Am I getting close, Gareth?” I reckon anyone who thought requiring a person to pay a market price was racist would be a little loony Rob. If this is where you think I’m going you’re not close at all.
You’re really confusing your terminology Rob, Marx advocated a socialist economic model where property, wealth and production are centrally (or socially) controlled. Restricting migration (sounds like control to me) and thus the mobility of labour (a pretty significant element of production) has more in common with Marxism/Socialism than open migration. Rob if our views on migration were to be distilled into a socialist and a capitalist. Rob you’d be the socialist, I’m not the one demanding controls and restrictions over the movement of labour.
A libertarian on public property
Gareth, I am not changing my position and as a libertarian I don’t believe in public property.
There are numerous forms of common fractional ownership and just because they do not give you unfettered rights does not mean that they are not private property.
Apart from the example I used previously there are also shares and body corporate for residential and commercial strata bodies that at law reflect fractional ownership by respective individuals.
What is unfortunate is that democratic government is typically a poor proxy for fractional ownership (democratic capitalism) in that the opinions and prejudices of those that believe someone else owes them a living can dictate outcomes without having an economic majority stake in the assets.
What you are really advocating in terms of unrestricted immigration (trespassing) without compensation to the native society is Marxism.
Gareth and another thing, I don’t know if you’re a quality person but if say I was selling waterfront blocks in a gated community then entry would a lot depend on a person’s ability to pay?
Of course in the mind of a Marxist this is a form of racism. Am I getting close, Gareth?
What defines a "quality person"?
Rob Wearne, are you now changing your position? Migration doesn’t actually infringe private property anymore? It only impacts your newly minted concern for said “common fractional ownership”, which I guess means government or public property. Your previously stated standing as a libertarian (paleo or otherwise) must now be a distant memory, since you are now expressing concerns about the use of government owned property.
Re “When you are considering interstate immigration in Australia or indeed immigration between the developed world then as long as long as this is largely in equilibrium in terms of numbers and the quality of the people then this is less of a problem.” Does this mean you would support restrictions on migration into Queensland? A state that receives far more interstate migrants that it sends elsewhere.
Re “However when you are advocating open immigration of people from the least developed parts of the globe to the developed world with its superior infrastructure then it is.” So migration only infringes said “common property” (but not private property anymore) if it is sourced from a nation poorer than the destination? Does this mean a wealthy businessman migrating from Brazil to Australia infringes “common property” rights, but an unemployed backpacker from Sweden doesn’t? Am I getting close, Rob?
Re “in terms of numbers and the quality of the people”, Rob, you reckon you could advise me on how I would differentiate between people that are “quality” and people that aren’t? What is it exactly that identifies someone as being a “quality” person? Are you a “quality” person, Rob? Do you think I might be one?
The concept of common fractional ownership
Gareth, The concept of private property rights extends to things other directly in an individuals control.
Although there are numerous examples of common fractional ownership where individuals have certain but not absolute rights - the most useful in terms of a proxy for the borders of the nation state would be the common areas in a gated community.
As a member of that community have certain rights of usage but most typically they would not extend to renting out your house to 30 Mexicans whom also make disproportionate use of the common property let alone letting the Mexicans enter the community and camp in the park.
As we live in a society where we have social welfare democracy where large portions of the infrastructure are in ‘common ownership’ then by allowing immigrants to enter whom do not pay for a share of that infrastructure and as well due to their low skills do not generate enough to pay for the services they consume such as education and healthcare will disadvantage the existing owners of that infrastructure.
As I have stated to you previously the employers of such people and the immigrants will be advantaged but the existing owners of that common property (residents of the country) will not.
When you are considering interstate immigration in Australia or indeed immigration between the developed world then as long as long as this is largely in equilibrium in terms of numbers and the quality of the people then this is less of a problem.
However when you are advocating open immigration of people from the least developed parts of the globe to the developed world with its superior infrastructure then it is.
I do not think that this is a difficult concept to understand or is incongruent with private property rights.
Outcomes from a global labour market
CP, re “Every employer will confront a global labour market, as well as a global market for his/her goods and services.” Most industries already compete in both. This is not a matter of “will” in a theoretical future. It’s a matter of now and how we can maximise positive outcomes (e.g. employment, wealth, equality etc) and minimise the negative ones (e.g. poverty, hunger, unemployment etc).
Re “An important likely outcome from global population movements will be increasing economic and social inequality in the developed world.” Global and free competition in labour markets will result in diverse individual outcomes (i.e. inequality) in developed nations, just like free trade does. In our present global market, restricting immigration does not prevent inequality (even within developed nations), it only impacts how it occurs. In our current mode of restricted migration, when more competitive labour exits elsewhere, the industries move to the labour (e.g. India, China, Philippines etc). In a world of open migration the labour is able to move to the industry. There are of course industries exempt from this trend.
I don’t think you can differentiate between free trade in goods/services and free trade in labour. Once the first exists, the second follows, no matter what the migration laws say.
Re “free access to global markets should mean that inequality between countries should diminish.” Isn’t this an argument in favour of open migration?
Re “You might be in the same market for garbage workers as those fellows coming out of the labour exchange in Mumbai and California and Brazil.” If you can’t find work as a ‘garbage worker’, I suggest you re-train and find a career for which there is surplus demand. This applies independently from the origin of your competing ‘garbage workers’.
Global labour markets - inequality for all!
Every employer will confront a global labour market, as well as a global market for his/her goods and services.
An important likely outcome from global population movements will be increasing economic and social inequality in the developed world.
Basically, globalisation will re-distribute inequality in much the same way as it re-distributes economic rewards.
If globalisation means free movement of capital, goods, technology, ideas, and people between countries, then free access to global markets should mean that inequality between countries should diminish.
But that doesn't mean that inequality between people within countries will diminish. In fact, quite the opposite.
There will be no separate or regulated Australian labour market, for example. Merely a global market for labour which would include workers in Australia.
In the same way as our producers would have to compete for a place in the global market for goods and service, you will have to compete in the global market for the sorts of skills you can sell.
What sorts of global demand would there be for your skills, say? And how about that of the guy who picks up your garbage?
You might be in the same market for IT specialists as, say, those fellows coming out of Uni in Mumbai and California and Brazil.
Or you might be in the same market for garbage workers as those fellows coming out of the labour exchange in Mumbai and California and Brazil.
See what I mean?
Repeating the same illogical argument
Rob Wearne, nice to see you back here, perhaps you can address my questions asked previously now. From the ‘Intrinsic Value of Humanity’ thread.
“Does this mean all immigrants to Australia in the last year, legal or otherwise have infringed on your own private property? Are you talking about your car, your house/unit (if you have one), your CD collection? I don’t get it mate. How does someone flying, sailing, swimming (whatever method they choose) into Australia infringe your personal private property? This might make sense if you privately owned the entire continent of Australia, but you don’t. Does interstate migration infringe your private property rights as well? If international migration infringes private property rights, then so must interstate and even intra-city migration.”
You repeat your argument that private property rights are infringed by migration. Repeating a fundamentally inconsistent position does not make it work Rob. Are you prepared to explain this position now? Perhaps you could illustrate how this works by identifying which of the following parties currently residing in Australia, infringe you private property rights.
- - Citizen & Permanent resident
- - Permanent resident, not a citizen
- - Refugee & permanent resident
- - Refugee on temporary protection visa
- - Person on a student visa
- - Person on a tourist visa
- - Refugee here illegally
- - Tourist overstaying visa, now here illegally
- - Rich person on business visa
- - Rich person overstaying business visa, now here illegally
That’s only ten Rob, could you please help my understanding by identifying which of these folk currently residing in Australia have and haven’t infringed your property rights?
CP, re “Ironically, too, many so called ‘libertarians’ advocating the unrestricted movement of populations nonetheless hold a position of restricting free trade.” I believe you are correct CP. Like I said earlier, strongly held, yet inherently inconsistent views are not unique to any particular ideology.
the pro-globalisation crowd
Gareth Eastwood: "Too many so called ‘libertarians’ advocate individual rights and democracy, yet still manage to hold a position of restricting immigration."
Ironically, too, many so called ‘libertarians’ advocating the unrestricted movement of populations nonetheless hold a position of restricting free trade.
Or haven't you noticed?
The developing world needs property rights
The reason for the dichotomy between living standards between the West and the third world is mainly because of the lack of freedom and property rights in their various polities.
It is liberty that is the best hope of mankind and statism in its various forms that has been the largest contributor over human history to poor economic outcomes, wars, death and famine.
Notwithstanding the open borders lobby likes to dress the “freedom of movement’ argument in terms of liberty this is not necessarily the case.
This is primarily because it ignores the rights of the common property owners or in other words the citizens of the modern nation state. Today this is most commonly done by transferring the costs of newly arrived immigrants to the native society at large – ie by ignoring the central tenet of libertarianism of private property rights.
It would be questionable if the owners of capital that are reliant on low cost labour or the refugee and open borders lobby would be quite so vociferous in their demands if they had to underwrite the long term social and economics costs of these immigrants themselves.
Another cost of open borders is the moral hazard in countries that can put off reform in favour of keeping corrupt and autocratic policies. The continuing poor performance of the Mexican economy which is propped up materially from repatriation of moneys from illegal immigrants in the US is an example of this.
It took the western world thousands of years to develop the institutional checks and balances that brought about our freedoms and higher living standards. The policies of the open borders lobby such as the modal libertarians, neo-conservatives and the liberal left is a form of cultural Marxism.
The legacy of immigration to the west from societies that have nothing but histories of authoritarian rule is not adding to our chances of keeping our Western liberties but in fact diminishing it.
The best thing we can do for the third world is to allow open trade and encourage them to develop the societal changes to respect individual liberty and put in place economic policies that will allow economic growth. This means they need to develop private property rights, low taxation and be weaned off ‘economic welfare’.
A good first step on the West’s part would be to disband the World Bank and IMF and their questionable development policies that justify high taxes to pay for questionable big ticket developments that benefit western contractors and the elite minorities in the developing world.
Genuine liberty means open immigration
I have to agree with Branko here. Saying “Globalization means free movement of capital, goods, technology, ideas, and, yes, people” is a statement of fact. Anyone who wishes to uphold the ideals of liberty and individual choice, should automatically support the free movement of people. Too many so called ‘libertarians’ advocate individual rights and democracy, yet still manage to hold a position of restricting immigration. I suspect the reason so many apparently sane folk can’t see the logic hole in their view, is due to irrational fears of other races, religions and cultures blocking their common sense. Of course strongly held, yet inherently inconsistent views are not unique to the so called ‘right’.
Genuine free trade and genuine open immigration are required steps before the successful elimination of third world poverty and suffering can ever hope to be achieved.