Migration and the world economy

The world economy thrives on openness and exchange, but many people and most countries are prevented from reaping the full benefits of migration. Today more than 200 million people live in a country other than their own.

They make up close to three percent of the world’s population. On different occasions, they tell their stories: the reasons why they left their homes, the often dangerous journeys they embarked on, the conditions that await them on arrival, and, above all, the impact their arrival has on their host societies and on the societies they left behind.

This impact has taken centre-stage in recent debates about migration, which in truth are debates about immigration. But, compared with the first massive wave of global migration during the rapid globalization of 1840-1914, migration today is more diverse and complex, facilitated by new transport and communications technology.

 

Diaspora networks of Huguenots, Scots, Jews and many others have always been a potent economic force, but the cheapness and ease of modern travel has made them larger and more numerous than ever before. There are now 215m first-generation migrants around the world: that’s 3% of the world’s population. If they were a nation, it would be a little larger than Brazil. There are more Chinese people living outside China than there are French people in France. Some 22m Indians are scattered all over the globe. Small concentrations of ethnic and linguistic groups have always been found in surprising places, Lebanese in West Africa, Japanese in Brazil and Welsh in Patagonia, for instance but they have been joined by newer ones, such as West Africans in southern China.

These networks of kinship and language make it easier to do business across borders. They speed the flow of information: a Chinese trader in Indonesia who spots a gap in the market for cheap umbrellas will alert his cousin in Shenzhen who knows someone who runs an umbrella factory. Kinship ties foster trust, so they can seal the deal and get the umbrellas to Jakarta before the rainy season ends. Trust matters, especially in emerging markets where the rule of law is weak. So does knowledge of the local culture. That is why so much foreign direct investment in China still passes through the Chinese Diaspora. And modern communications make these networks an even more powerful tool of business.

Diaspora also help spread ideas. Many of the emerging world’s brightest minds are educated at Western universities. An increasing number go home, taking with them both knowledge and contacts. Indian computer scientists in Bangalore bounce ideas constantly off their Indian friends in Silicon Valley. China’s technology industry is dominated by “sea turtles” (Chinese who have lived abroad and returned).

Diaspora spread money, too. Migrants into rich countries not only send cash to their families; they also help companies in their host country operate in their home country. A Harvard Business School study shows that American companies that employ lots of ethnic Chinese people find it much easier to set up in China without a joint venture with a local firm.

Such arguments are unlikely to make much headway against hostility towards immigrants in rich countries. Fury against foreigners is usually based on two (mutually incompatible) notions: that because so many migrants claim welfare they are a drain on the public purse; and that because they are prepared to work harder for less pay they will depress the wages of those at the bottom of the pile.

Countries that receive large numbers of migrants tend to experience significant emigration as well; citizens of rich countries have themselves become more mobile; and migrants frequently move from one host society to another in search of safety and economic opportunity. This makes national debates about ‘immigration’ unsatisfactory. They imply that people move once, permanently from outside the country to inside when migration for the most part is temporary, repeated, or circular. Migration has come to be seen as something to be managed, a cost to be minimized rather than an opportunity to be embraced.

Today’s world economy “thrives on openness, diversity, innovation, and exchange. But a patchwork of national rules in the rich world continues to control the movement of people. Outdated regulation prevents migrants, their countries of origin and host societies from reaping the full benefits. These benefits provide receiving countries with higher innovation and economic growth, enriched social diversity and improved public finances. In countries of origin, the benefits include financial and social inputs to economic development. And migrants themselves stand to gain from higher income, better health and better education.

Even a small increase in migration will produce major gains for the world economy, and especially for developing countries. An increase in migration equal to 3% of the rich world’s workforce would generate global gains of $356 billion in 2005-25, according to World Bank estimates – more than twice the current level of development aid and of expected gains from fully liberalized international trade.

But just as with trade liberalization, there are political problems in opening national borders to migrants: gains and losses are unevenly distributed. Economic and other benefits of migration tend to be dispersed and generalized, while its costs are short-term, visible and concentrated.

The statistics cited by many economists obscure the reality experienced by many Europeans: classrooms where half the children do not speak the local language; low-skilled jobs where locals are crowded out by cheaper immigrants, or foreign contractors; or neighborhoods where decay is all too easily attributed to the inflow of immigrants. Migration has losers as well as winners and the two groups are unevenly distributed across regions, neighborhoods, industries, and social classes.

What is in the collective long-term interest does not necessarily match the short-term domestic interests of politicians or all their constituencies. Politicians will always keep an eye on the next election and therefore be swayed by localized, short-term costs rather than generalized, long-term benefits. Simply presenting the evidence, that migration, on aggregate and across time, is beneficial, will not do the trick. What is needed is international leadership, perhaps in the form of an empowered International Organization for Migration. But how do we get there? This is one of the questions that experts on the field may answer very well.