Imagine an economic distortion so massive that its effects dwarf those of all existing tariffs, quotas, and subsidies. This distortion is relatively new and inarguably regressive; created by policy makers in wealthy countries such as the United States, Sweden, and Japan, it keeps people in Indonesia, Bangladesh, and Guatemala earning fractions of what they otherwise might for the same work. Some of the poorest people in the world are hit hardest, and the policy further impoverishes the poor while reducing economic opportunities for the rich.
Here in the United States we call this distortion “border control.” Lant Pritchett, a former World Bank economist, has focused his considerable intellectual firepower on diminishing its economic influence, pushing for more cross-border mobility and a freer world market in labor. Pritchett thinks the citizens of wealthy countries can be convinced of the benefits that even the privileged would enjoy in a more open regime. But he is primarily interested in the huge potential benefits for the world’s would-be migrants, people now stuck in economically unviable countries, often in preindustrial economies, fenced in and shut out.
Born in Utah and raised in Idaho, the 48-year-old Pritchett is the son of a Mormon bishop and a graduate of Brigham Young University. He left Boise for Argentina at the age of 19 to serve a mission for the Church of Jesus Christ of Latter Day Saints, the first of many explorations of entrenched poverty and its causes. After picking up a Ph.D. at MIT, he stamped his passport in 40 more countries, often as a research economist with the World Bank. Today he’s back in Cambridge co-editing the Journal of Development Economics and teaching at Harvard, where he conducts a class on development with his friend and mentor, former Treasury Secretary Lawrence Summers.
Pritchett is the author of a powerful new book that catalogues the staggering gains to be had from a liberalized immigration regime. Let Their People Come (Center for Global Development) relates, simply and unrelentingly, the voluminous data on global migration. If the 30 affluent countries making up the Organization for Economic Cooperation and Development (OECD) were to allow just a 3 percent rise in the size of their labor forces through loosened immigration restrictions, claims a 2005 World Bank report, the gains to citizens of poor countries would amount to about $300 billion. That’s $230 billion more than the developed world currently allocates to foreign aid for poor countries. And foreign aid is a transfer: The $70 billion that rich countries give leaves those countries $70 billion poorer. According to the World Bank study, wealthy nations that let in 3 percent more workers would gain $51 billion by boosting returns to capital and reducing the cost of production.
The aggregate gains from a regime of completely open borders are so large as to seem unreal, but immigration policy is perhaps best understood at the level of the individual. According to World Bank economists Martin Rama and Raquel Artecona, data from the 1990s show that a Vietnamese laborer who moves to Japan will make nine times what she would at home, adjusted for purchasing power. A Guatemalan will find wages for the same work increase sixfold in the United States; a Kenyan who moves to the U.K., sevenfold. “These wage gaps create pressure for migration,” Pritchett writes, “because they are not primarily explained by differences in the characteristics of people. Wage rates are predominantly characteristics of places.” The biggest single determinant of how well off you will be is not the college you get into, the color of your skin, your gender, or your work ethic; it’s the country listed on your passport.
Pritchett’s thesis is the kind of thing that sends conservatives and liberals alike running to reinforce the barricades, and he isn’t one to shy from controversy. He compares the world’s system of mobility restrictions to South African apartheid, a system that provoked Western opprobrium precisely because a privileged class allocated mobility rights unjustly. Apartheid, like fettered labor markets, was a system that “sharply limited the mobility of people, that kept people in disadvantaged regions with no economic opportunities, that destined millions to lives without hope, and that split workers and their families—merely because of the conditions of their birth.” The analogy to labor markets, Pritchett points out, is almost exact, with the notable exception that labor restrictions uphold much larger inequalities than apartheid ever did.
If there is one group of people he does not have to convince, it is those unfortunate enough to have been born in economically stagnant countries. Pritchett estimates that labor flows would be at least five times greater if people were free to move. What’s keeping so many would-be migrants in place? “Men with guns,” Pritchett says. His message is less a call to arms than a call to lay them down, less a provocation than a vision of a richer, better, freer world.
Senior Editor Kerry Howley interviewed Pritchett (whose book can be downloaded at cgdev.org) in August. Comments may be sent to email@example.com.
Reason: You worked for the World Bank while writing this book. The World Bank provides assistance to nation-states, and here you are saying that many, if not most, of the extremely poor would be better off just leaving. Shouldn’t someone focused on development encourage people to stay and make their country economically viable?
Lant Pritchett: There are two elements to that. I’m reasonably convinced that the argument that more foreign aid is a way of preventing more people from coming because it will make people better off isn’t consistent with the empirical work that’s been done. If we succeed in making Africa richer, there is going to be more pressure in outward migration rather than less. A lot of people in Africa are not creating pressure for immigration because they are just too poor. The idea that aid and migration are substitutes is just not consistent with the experience of the world.
The second thing is, we shouldn’t create hostages. We shouldn’t keep people locked in place within some arbitrary post-colonial boundaries just so we can continue with the bold experiment of trying to make nation-states develop. People should be free to move.
Reason: And if we got rid of those boundaries, what would the world look like?
Pritchett: The key to predicting that is price differentials [differences in prices charged for the same product in different places]. If you look at what has happened with enormously successful trade liberalization in the past 40 or 50 years, price differentials have fallen a lot. The only remaining enormously egregious price differential in the world is in the price of labor.
But I think the question of what would happen if world barriers to labor were erased tomorrow isn’t that interesting because it’s not going to happen. And to some extent it’s good that it won’t happen immediately. If the world were thrown open to labor mobility today, I suspect it would cause massive disruption of a kind that nobody really wants.
Reason: You consider barriers to the movement of people more problematic than remaining barriers to the movement of goods.