Poverty, International Aid and Immigration

re-blogged from Open Borders

AUGUST 14, 2013 BY  2 COMMENTS

Post by Michael Carey (occasional blogger for the site, joined May 2013). See:

One of the main justifications for supporting open borders is that it has the potential to alleviate poverty.  But opening borders is not the first thing that comes to mind when people think of poverty reduction measures.  Most people tend to think of international aid programs. Trouble is, international aid isn’t that effective.

For a quick primer, see this report published by the Center for Global Development. The main points include the following:

  • International aid has four main objectives: stimulation of economic growth, strengthening local institutions, immediate humanitarian relief, and economic stabilization after a shock.
  • The evidence accumulated from numerous studies is that there is basically no correlation between international aid and economic growth even though many countries receive over 10% of their gross national income in aid annually.
  • Donors are faced with a significant Principal-Agent problem, which results in a lot of aid ending up in the hands of corrupt officials and useless bureaucrats, or being wasted in some other way.
  • There is some evidence that aid is (slightly) more effective when given to countries with better governance and policies in place, but this does not always correlate with who needs aid the most.

Basically, international aid doesn’t work that well in the long run. Interestingly, this does not mean that we are losing the war on poverty. In fact, according to this article in the economist, the world met the millennium challenge goal of cutting poverty in half between 1990 and 2015 five years early.  So how did it happen?

In a word, China. We are all familiar with the story of China by now. After China adopted meaningful economic reforms in the 1970′s, their economy exploded and millions of people got jobs in new industries making goods that are exported across the world.  What we don’t always take into account is that this massive economic growth depends on a massive level of economic migration.  Chinese cities have over 250 million migrant workers.  Some estimates claim that another 250 million will move to the city by 2025.  China’s migrant population will soon be greater than the entire population of the US.

China has hundreds of millions of internal migrants despite the fact that the government does not allow its citizens to freely move around the country.  Chinese migrant workers live under conditions similar to illegal immigrants in this country.  Millions of migrant worker children are not even allowed to attend school even though China’s leaders know that their urban industries depend on migrant labor.  Migration has been vital to China’s economic growth, but there is massive bureaucratic resistance to granting these migrants basic rights because of the strain it would put on local welfare and education systems.  Sound familiar?  Still, hundreds of millions of rural Chinese have decided it is better for them to live on the margins of an industrialized economy than to risk starvation in a backward agricultural area.

Despite government attempts to prevent it, migration has been a fundamental part of how the world was cut poverty in half.  The explanation is pretty simple. Prior to industrialization, pretty much everyone lives in poverty.  Individuals in agricultural societies don’t produce very much, and they are fairly evenly distributed across the land. Individuals who specialize in a modern economy are very productive but they need to live in close proximity to other people. Thus industrialization goes hand in hand with massive rural-urban migration.

China isn’t the only country that has been transformed by internal migration. 30 percent of India’s population are migrants, as that countries citizens search for better conditionsIn Brazil, the urban population went from 36% to 81% of the total in the second half on the 20th century.  And of course, the United States has experienced several periods of migration that shaped our nation’s history.

When we talk about poverty reduction, migration should be the first word that comes to mind.  Of course, the movements discussed here have been internal.  Internal migration is a bigger factor than international immigration in global poverty reduction because it is easier for people to move around within their own countries (despite restrictions, as in China).  A few countries have both the massive rural populations and dynamic urban production centers that make economy changing rural-urban migration possible.  But many areas of the world are being choked off either because their rural population has nowhere to go or their aging economy lacks an influx of new workers.

The benefit of open borders is that it allows the process of industrialization and poverty reduction to proceed without artificial barriers.  The China miracle could become a comprehensive global solution to poverty.

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