Interesting opinion. Although I like to advise you to read the landmark book How migration really works, written by professor Hein de Haas, a Dutch scholar on migration. He places migration also in a broad historical perspective. Funfact: the main fundings are not foreign direct investment and official development assistance, but the remittances of the migrant workers. Estimates, made by the Worldbank, are about $ 905 billion (2024).
Indeed, the remittances are the largest economic benefit for the people left behind. But usually, remittances are used to support daily life and not 'invested' in better healthcare and education. I think (but I might be horribly wrong here) the mix is different.
"The more things change, the more things stay the same then. But what I find particularly interesting about the study of Blanc and Wacziarg is that they find that higher emigration from (over?)populated countries facing a natural crisis like a famine helped the rest of the people who stayed. Countries with higher emigration rates subsequently had higher growth and developed faster. If it weren’t for the people moving to the US or the colonies, the UK, Ireland, etc. would be much poorer today."
It isn't clear to me from the text, but over what timeframe is that final chart? If it captures German, UK, and Irish emigration to North America in the seventeenth-twentieth centuries, one could indeed conclude that emigration helps the home country by reducing labor competition and driving technological innovation to fill the gap. But there *were* more than ample sources of cheap labor for Britain in the eighteenth and nineteenth century, namely millions of colonized people and slavery (early on for Britain directly with sugar and rum, but continuing by proxy through its dependence on cotton from the southern US). And if the timeframe is long enough, it doubtless reflects remittances, always a feature of emigration but one that accelerated once people could wire money home.
I completely agree with you that the return on investment on foreign aid is very high, and that we cut it at our peril.
Sorry, I didn't make that clear. the last chart is contemporary migration between 1990 and 2020.
And yes, the British Empire had lots of cheap labour in the colonies, but remember that the empire only came about after the industrial revolution started in the UK in the 18th century. The start of the British Empire was essentially the victory in the Battle of Trafalgar (1805) which gave the Royal Navy unchallenged rule of the sea (I am oversimplifying here).
Plus, the British Empire banned slavery in the UK pretty early on (1807 they abolished the slave trade and in 1834 they abolished slavery in the colonies), which meant that it was much more difficult (and expensive) to 'import' cheap labour from the colonies. That and the fact that the British were pretty racist in the day (just like everyone else at the time) which disincentivised people to come to the UK and disincentivised employers to import labour.
Still, despite having banned it themselves, Britain benefitted immensely from US and Carribean slavery right up to (and through) the American Civil War https://en.wikipedia.org/wiki/United_Kingdom_and_the_American_Civil_War , "During the Civil War, several British arms companies and financial firms secretly conducted business with Confederate agents in Europe, supplying the Confederacy with badly needed arms and military wares throughout the conflict, in exchange for Southern cotton. ... One historian estimated that these actions extended the Civil War by two years and cost 400,000 more lives of Union and Confederate soldiers and civilians."
A cynic might view that sort of behavior as similar to Germany's today; virtue signalling on green energy and banning nuclear power, all the while happily consuming nuclear-produced electricity from neighboring countries through the grid.
I suppose the point of contention is whether interdependency in the post globalisation world means we benefit from the faster development of third world countries sending immigrants, though them becoming greater consumers of the services/higher cost goods offered by the developed world, or whether over the long term we suffer erosion of our standard of living through competition as they become lower cost competitors.
Indeed. And over the past 25 years, on average we benefitted more than what it cost us. But then again, if you are a blue collar worker in an industry where your job has been replaced by robots and Chinese workers, you obviously will differ in your opinion.
Tax will only ever capture a proportion of a gross gain, I wonder how much of the gross gain would need to actually be captured in extra tax to make compensation feasible.
If concentrated in a small elite, you'd imagine feasibility of compensation would be lower than if it were captured in the middle classes. Perhaps this is what we're seeing evidence of in the current incarnation of globalisation and challenges of an increasingly narrow tax base.
Generally net benefit captured by workers over time is hard to capture, I'd be interested if you knew of any good papers trying to quantify it. If certainly feels like a significant rise in income is irrelevant if the three bedroom home Joe UK covets moves further out of reach.
Basically, I suspect the ability for a society to compensate/protect those who lose out from globalisation, depends how able governments are to capture net gains from a tax perspective.
Tax is progressive, rising with income up through the middle classes.
A rise in income in the middle classes can more realistically be captured to provide services, benefits/retraining for those who lose out.
But even where gains are seen by the middle classes, a western economy can only capture a proportion of a rise in income (top rates of tax rarely exceed 40%). So if the net gain is small, its unlikely to generate the tax revenue necessary to offset the losses to the tranche of society who lose out.
Furthermore, tax rates become more regressive as we hit the richest in society, who are best able to protect themselves from tax, and are less restricted by things like geographic location.
I'm just musing (without any quantification) on whether a more egalitarian society is better able to capture and redistribute net gains from globalisation, than one where a greater share of the benefit accrues to an elite.
Ah, now I get it. And I think if you look at the second link to Reuters in my answer above, you can see that it is not just the people who are well-off that pay for re-training but also the immigrants. So, IK think it is not clear whether it will be enough. And I honestly have never seen a study that looks into this.
Interesting opinion. Although I like to advise you to read the landmark book How migration really works, written by professor Hein de Haas, a Dutch scholar on migration. He places migration also in a broad historical perspective. Funfact: the main fundings are not foreign direct investment and official development assistance, but the remittances of the migrant workers. Estimates, made by the Worldbank, are about $ 905 billion (2024).
Indeed, the remittances are the largest economic benefit for the people left behind. But usually, remittances are used to support daily life and not 'invested' in better healthcare and education. I think (but I might be horribly wrong here) the mix is different.
"The more things change, the more things stay the same then. But what I find particularly interesting about the study of Blanc and Wacziarg is that they find that higher emigration from (over?)populated countries facing a natural crisis like a famine helped the rest of the people who stayed. Countries with higher emigration rates subsequently had higher growth and developed faster. If it weren’t for the people moving to the US or the colonies, the UK, Ireland, etc. would be much poorer today."
It isn't clear to me from the text, but over what timeframe is that final chart? If it captures German, UK, and Irish emigration to North America in the seventeenth-twentieth centuries, one could indeed conclude that emigration helps the home country by reducing labor competition and driving technological innovation to fill the gap. But there *were* more than ample sources of cheap labor for Britain in the eighteenth and nineteenth century, namely millions of colonized people and slavery (early on for Britain directly with sugar and rum, but continuing by proxy through its dependence on cotton from the southern US). And if the timeframe is long enough, it doubtless reflects remittances, always a feature of emigration but one that accelerated once people could wire money home.
I completely agree with you that the return on investment on foreign aid is very high, and that we cut it at our peril.
Sorry, I didn't make that clear. the last chart is contemporary migration between 1990 and 2020.
And yes, the British Empire had lots of cheap labour in the colonies, but remember that the empire only came about after the industrial revolution started in the UK in the 18th century. The start of the British Empire was essentially the victory in the Battle of Trafalgar (1805) which gave the Royal Navy unchallenged rule of the sea (I am oversimplifying here).
Plus, the British Empire banned slavery in the UK pretty early on (1807 they abolished the slave trade and in 1834 they abolished slavery in the colonies), which meant that it was much more difficult (and expensive) to 'import' cheap labour from the colonies. That and the fact that the British were pretty racist in the day (just like everyone else at the time) which disincentivised people to come to the UK and disincentivised employers to import labour.
Thanks for the clarification.
Still, despite having banned it themselves, Britain benefitted immensely from US and Carribean slavery right up to (and through) the American Civil War https://en.wikipedia.org/wiki/United_Kingdom_and_the_American_Civil_War , "During the Civil War, several British arms companies and financial firms secretly conducted business with Confederate agents in Europe, supplying the Confederacy with badly needed arms and military wares throughout the conflict, in exchange for Southern cotton. ... One historian estimated that these actions extended the Civil War by two years and cost 400,000 more lives of Union and Confederate soldiers and civilians."
A cynic might view that sort of behavior as similar to Germany's today; virtue signalling on green energy and banning nuclear power, all the while happily consuming nuclear-produced electricity from neighboring countries through the grid.
These are not refugees, they are invaders, and we should close the borders, they're destroying our countries and our cultures
I suppose the point of contention is whether interdependency in the post globalisation world means we benefit from the faster development of third world countries sending immigrants, though them becoming greater consumers of the services/higher cost goods offered by the developed world, or whether over the long term we suffer erosion of our standard of living through competition as they become lower cost competitors.
Indeed. And over the past 25 years, on average we benefitted more than what it cost us. But then again, if you are a blue collar worker in an industry where your job has been replaced by robots and Chinese workers, you obviously will differ in your opinion.
Tax will only ever capture a proportion of a gross gain, I wonder how much of the gross gain would need to actually be captured in extra tax to make compensation feasible.
If concentrated in a small elite, you'd imagine feasibility of compensation would be lower than if it were captured in the middle classes. Perhaps this is what we're seeing evidence of in the current incarnation of globalisation and challenges of an increasingly narrow tax base.
Generally net benefit captured by workers over time is hard to capture, I'd be interested if you knew of any good papers trying to quantify it. If certainly feels like a significant rise in income is irrelevant if the three bedroom home Joe UK covets moves further out of reach.
I am not sure what you are trying to say, but I think the benefits of globalisation are clearly contributing to higher income inequality. Paul Krugman is writing about that at the moment: https://paulkrugman.substack.com/p/understanding-inequality-part-ii
But I am not sure that answers your request.
Also, I have written in the past about the net benefits of immigrants to host societies: https://www.reuters.com/markets/europes-immigration-pushback-fails-economics-101-joachim-klement-2024-11-27/
But again, I am not sure if that covers what you are after.
Can you maybe explain it to me again (sorry, I might be too tired today to think)?
its not you, its my terrible explanation!
Basically, I suspect the ability for a society to compensate/protect those who lose out from globalisation, depends how able governments are to capture net gains from a tax perspective.
Tax is progressive, rising with income up through the middle classes.
A rise in income in the middle classes can more realistically be captured to provide services, benefits/retraining for those who lose out.
But even where gains are seen by the middle classes, a western economy can only capture a proportion of a rise in income (top rates of tax rarely exceed 40%). So if the net gain is small, its unlikely to generate the tax revenue necessary to offset the losses to the tranche of society who lose out.
Furthermore, tax rates become more regressive as we hit the richest in society, who are best able to protect themselves from tax, and are less restricted by things like geographic location.
I'm just musing (without any quantification) on whether a more egalitarian society is better able to capture and redistribute net gains from globalisation, than one where a greater share of the benefit accrues to an elite.
Ah, now I get it. And I think if you look at the second link to Reuters in my answer above, you can see that it is not just the people who are well-off that pay for re-training but also the immigrants. So, IK think it is not clear whether it will be enough. And I honestly have never seen a study that looks into this.