Freeing the ultimate resource


What’s the single best policy change that could be made to reduce poverty and boost global GDP growth? Many would say the elimination of trade barriers. Unfortunately, many would probably suggest a “big push” of development aid money. But a new paper in the Journal of Economic Perspectives argues that the most positive change that could be made by far is the elimination of barriers to migration.

The paper, which is free to download, compares the existing academic estimates for global GDP efficiency increases from the elimination of trade barriers with those from eliminating migration barriers. Free trade estimates are around 1-5%, or between $600 billion and $3 trillion. This is a substantial figure and would be a huge boost to people in poor countries, since most of it would probably accrue there. But the jaw-dropping estimates for open borders make the boost from free trade benefits look like pocket money.

The existing academic literature suggests that eliminating legal restrictions on migration could increase global GDP by between 67% and 147%. Global GDP is about $58 trillion, so that means the bottom end of the scale would be around $39 trillion. That’s an astonishing figure, and would change the world if it was achieved.

The paper discusses the reasons for these huge figures, including the question that I think is most important – is labour productivity mostly about who you are, or where you are? If it’s the latter, then it’s not hard to see why things would improve so much if more labour was located in the West. As Adam Smith said, all you really need for prosperity is peace, easy taxes and a tolerable administration of justice. Compared with the world’s poor countries, we in the West have these things in abundance.

Naturally, this money doesn’t just fall from the sky – the high estimates are contingent on a very high amount of emigration from poor countries to rich ones. Would so many people be prepared to move? And how much of the money would flow back to the home countries through remittances, where it would be most useful? Both are unclear and difficult to predict, as the paper admits. And I’m always sceptical of economic predictions that claim much precision. But, really, these are all beside the point. However imprecise the estimate and predictions, the evidence is quite consistent that opening barriers to migration would deliver enormous boosts to global GDP that are far beyond most of the other policy options currently on the menu.  

When I write posts in support of more migration, I either get replies that (a) the welfare state couldn’t take it, or (b) we need to protect our culture. I have some sympathy for both arguments. My response to (a) is fairly simple – most people in poor countries who want to move to rich ones do so because they want to work and earn money for their families, not because they want to be parasites. The welfare state perverts incentives to work, but it does so for native populations as well as immigrants – indeed, the evidence in the UK suggests that it’s immigrants who are willing to take low-paid jobs and Britons who stay at home collecting benefit cheques. There’s a significant problem here, but it’s far from being an immigrant-only one.

If a “welfare-lite” package for immigrants – say, provision of non-rivalrous services like roads and streetlights that would be impractical to withhold, and a rolling-out of the full array of the welfare state after a certain number of months or years in employment – would make immigration more politically feasible, fine. I doubt it would put many would-be immigrants off.

Argument (b) strikes me as a fundamentally anti-property stance to take, though I understand the thinking behind it. Yes, national culture is extremely valuable, but not at the expense of people’s private property rights. If a homeowner wants to rent out her spare room, what right does the state have to tell her whom she may and may not rent it out to? If an employer wants to hire someone, I do not want the state to be able to dictate what nationalities they can choose from. Immigrant ghettoization is a big problem, but mostly a state-made one.

Some arguments against immigration have merit and shouldn’t be dismissed. But the evidence of the enormous gains to wealth that open borders would bring should diminish their weight. If opening borders could deliver even a fraction of the huge gains suggested by the academic literature, it should be the priority for people interested in fighting poverty. 

As Julian Simon said, people are the "ultimate resource". Allowing that ultimate resource to move across borders freely would be a massive step towards a freer, richer world.