I think it was Harry Truman who said that he wanted a one-handed economist. When asked why, he said, economists were always saying in response to a policy question, “On one hand… on the other hand….” In economics, there are always trade-offs.
In the burst of enthusiasm among “progressive” Catholics that Pope Francis’s criticism of the current economic system, what is often forgotten is that good intentions do not produce good results. Extreme poverty has been decreasing throughout the world at an astonish rate, largely because of policies that allow poor nation to develop trade and bring more people into the market economy.
What this means is that workers in developed countries have felt downward pressure on their incomes. The good factory jobs have disappeared in the US. They have gone overseas where they allow millions to escape destitution and starvation. But profits have not declined. Although the American market may have lost comparative income, the incomes less-developed countries have expanded to produce far more customers for international companies. Inequality may be increasing not because poverty is increasing but because the people at the top have so many more customers. A movie star who has only American fans may be wealthy, but one who has fans all over the world is super-wealthy. But is this really unjust?
Unions gain a comparative advantage in wages for their members by restricting the labor market. They usually kept women and blacks out, and tariffs kept out foreign competition. But American workers now have to compete with workers in India, and the internal labor force has expanded with the addition of women and minorities. Some win, some lose, but overall poverty has been reduced.
Immigration also is a difficult issue. Immigrants put some downward pressure on American wages – how much is hotly contested. The fact that the Wall Street Journal supports open immigration should make one suspicious whether the ordinary workers will benefit from it. Companies would, especially tech companies who can bring in foreign tech workers who will work for less than Americans – who still make pretty good six figure incomes. Is it just to raise wages by limiting competition?
Immigration may also hurt poorer countries, as the most ambitious and educated leave for the U.S. Paul Collier raises the question in his NYT article Migration Hurts the Homeland. It is true that immigrants to the US can send home remittances and also bring home ideas about democracy and justice, but open immigration to the US can be harmful to poor countries.
There is migration that helps poor countries:
Migration is good for poor countries, but not in every form, and not in unlimited amounts. The migration that research shows is unambiguously beneficial is the kind in which young people travel to democracies like America for higher education and then go home. Not only do these young people bring back valuable skills directly learned in the classroom; they bring back political and social attitudes that they have assimilated from their classmates. Their skills raise the productivity of the unskilled majority, and their attitudes accelerate democratization.
And there is migration that can hurt poor countries:
But many poor countries have too much emigration. I do not mean that they would be better with none, but they would be better with less. The big winners from the emigration of the educated have been China and India. Because each has over a billion people, proportionately few people leave.
In contrast, small developing countries have high emigration rates, even if their economies are doing well: Ghana, for instance, has a rate of skilled emigration 12 times that of China. If, in addition, their economies are in trouble, they suffer an educational hemorrhage. The top rankings for skilled emigration are a roll call of the bottom billion. Haiti loses around 85 percent of its educated youth, a rate that is debilitating. Emigrants send money back, but it is palliative rather than transformative.
Even allowing refugees to come and stay in the US can hurt a poor country:
Seemingly the most incontestable case for a wider door is to provide a refuge for those fleeing societies in meltdown. The high-income democracies should indeed provide such a refuge, and this means letting more people in. But the right to refuge need not imply the right to residency. The people best equipped to flee from societies in meltdown are their elites: The truly poor cannot get farther than a camp over the border. Post-meltdown, the elites are needed back home. Yet if they have acquired permanent residence they are reluctant to return.
The type of people who come to the US may help us, but their own countries need them more:
Bright, young, enterprising people are catalysts of economic and political progress. They are like fairy godmothers, providing benefits, whether intended or inadvertent, to the rest of a society. Shifting more of the fairy godmothers from the poorest countries to the richest can be cast in various lights. It appeals to business as a cheap supply of talent. It appeals to economists as efficient, since the godmothers are indeed more productive in the rich world than the poor. (Unsurprisingly, our abundance of capital and skills raises their productivity.) It appeals to libertarians as freeing human choice from the deadening weight of bureaucratic control.
If we allowed open immigration, we might be helping individuals
but we might be feeding a vicious circle, in which home gets worse precisely because the fairy godmothers leave. Humanitarians become caught up trying to help individuals, and therefore miss the larger implications: There are poor people, and there are poor societies. An open door for the talented would help Facebook’s bottom line, but not the bottom billion.
Pope Francis and the American bishops seem unaware of the trade-offs in real-world situations. They want one-handed economists, but alas, real-world choices have unintended side effects. Helping “the poor” is not a simple matter, and good intentions do not guarantee good results.