Open Markets, Closed Borders

Immigration reformers miss the point. Again.

To best grok the inevitable failure of the Comprehensive Immigration Reform Act of 2007, think in terms of Ireland in 1845. Famine threatened to drive anyone who stayed to starvation or malnutrition-related diseases. Over the next six years, a quarter of the Irish left, en masse, to legally enter more prosperous countries. Millions more left in the years after; even now the population of Ireland is only where it was 200 years ago. And, incredibly, real wages never fell through the period of adjustment after the disaster. Labor prices rose as population dropped. The Irish suffering the ravages of famine had a strategy: exit.

In his 2004 paper, Boom Towns and Ghost Countries, World Bank socioeconomist Lant Pritchett uses the example of mid-19th century Ireland to illustrate the inefficiencies of today’s labor market, where bureaucratic barriers have never been more intractable. To leave a country that is failing, Pritchett explains, it helps to have somewhere to go. But in important ways it is harder for today’s immigrants to relieve pressure on a failing economy than yesterday’s.

Where once moving in meant showing up, the process of emigration has become bureaucratized, escape valves shut tight. Imaginary lines have hardened into often impassable borders, labor markets sharply curtailed. Europe is not replacing itself, but it is harder to enter; developing countries cannot sustain their bulging populations, but they are harder to leave.

As the U.S. decides how many immigrants to let slip through its barricades, historical contingencies should give some perspective to those who would throw up walls and slam doors. Pritchett lays out the humanitarian stakes of debate in his latest book, Let Their People Come, where he argues for a poverty-alleviation strategy that prioritizes mobility and a vision of free enterprise that embraces free movement. The greatest distortion for Chadian farmers is not American cotton subsidies, writes Pritchett, but that “farmers from Chad have to farm in Chad—and not farm in France, Poland, or Canada.”

The simultaneous opening of markets for goods and closing of markets for labor has sparked a strange dissonance in debates about free trade. The same Republicans who will go to the mat for your right to buy cheap widgets from Bangladesh will fight as hard to keep the widget makers safely behind the fence. Burmese kids are watching pirated copies of Pirates of the Caribbean and reading translations of Harry Potter novels, but bureaucratic barriers to mobility loom larger for them than they did for their great grandparents.

As Pritchett points out, “the current differences in unskilled wages, or wages adjusted for skill, are more than twice as large as those that set the world in motion in the late nineteenth century.” The benefits of mobility, in other words, are far greater. Simply transferring the same labor from Mexico to the U.S. promises a huge and unprecedented jump in standard of living.

Put that way, what becomes extraordinary about the United States is its impenetrability, not its much decried porousness. The Land of the Free is, contrary to popular opinion, not packed coast to coast with disease-ridden castaways. The U.S. ranks 168th in population density, below the vast majority of developed countries. As earnest pundits are fond of pointing out, there is a “real” America out there, and it’s largely a land of sparsely dotted exurbs and open space.

Mexicans, alas, do not typically cluster on the plains of North Dakota. More relevant is the number of immigrants who make it here relative to the native population, including those who settle without state sanction. According to the OECD factbook, the percentage of the foreign born in the United States in 2004 was 12.8. This is significantly less than the leprous, teeming cesspools of Switzerland, Canada, Australia, famously anarchic Singapore, and the U.S. a century back. Person for person, we're running about the same risk of being overrun by foreigners as the Swedes.

One place to start thinking about labor market liberalization might be with the demand for labor our economy has already demonstrated. At present, 500,000 undocumented immigrants come into the country annually, finding employment at above native rates. The Labor Department projects that the economy will create 400,000 or more low-skilled service sector jobs every year, while the number of Americans without a high school education continues to fall.

How will the immigration bill meet this challenge? The 790-page bill as amended creates a guest worker program for 200,000 workers, a number the Cato Institute’s Dan Griswold calls “woefully inadequate.” The trade-off is not insubstantial; the bill’s provisions include a stretch of wall, 105 surveillance towers, 18,000 more border agents, and billions of dollars. Most disturbingly, the bill includes the Electronic Employment Verification System, which would require that every single worker, American or otherwise, seek the Department of Homeland Security’s permission to work legally.

A guest worker program could be a step forward, in that cleaving immigration from public services and permanence addresses the incompatibility of open borders and a welfare state. And even a small step forward could be enormously beneficial. As Dani Rodrik, a professor of international political economy at the John F. Kennedy School of Government, explains on his blog, “since trade barriers for labor services are so much steeper in today's world economy than barriers in goods, even a small amount of liberalization in this area promises huge income gains in aggregate.” The question is whether a trickle of visas is worth an onslaught of enforcement, the billions spent to support distortions in the labor market.

The bill fails to tap into the huge potential of the U.S. and developing world for mutual wealth creation; that’s a potential employers and illegal immigrants will continue to discover themselves, outside the formal economy. Which means that we’ll soon be having this debate again—and the biggest potential overhaul to immigration law since 1986, at 790 pages, is at most a prelude to the next reform.

Kerry Howley is an associate editor of reason.

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