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Thursday, November 29, 2007

Market Failure II - Immigration

We are more than a little disgusted with all sides of the immigration debate. Who is exploiting who or what? Get tough. Don't get tough. The patent fact is that any problem with immigration is a market failure, a failure of trade policy, and it has several dimensions.

Rather than argue them in the abstract, let us go directly to a specific example and return to the general case when we've put faces on the straw men.

Mexico. In spite of the easily observed facts of the matter, immigration is being debated on the premise that greedy foreigners are trying to steal American jobs. They ought to be minimized, marginalized and deported where possible.

Displaced American workers, both from offshoring jobs and from the competition of immigrants, have much to learn from displaced farm families in Latin America. So-called free trade through NAFTA has meant subsidized American farm products have been dumped on Mexico, cutting prices for the farm products which once supported its agrarian economy. Incomes plummeted and soon entire villages emptied out, with their inhabitants appearing on the border.

This is not a happy circumstance. Mexican families do not like to see their young people disappear, even if they can survive only because of the remittances that begin to arrive. $300 billion per year is the last estimate I heard of money being sent back home by immigrants.

This failure of the market has its roots in the market failure that created Big Agriculture. We will return to that in the next installment of this series.

The failure of the market to distribute economic benefits broadly is essentially denied by free market apologists by the tactic of ignoring it. If pressed, a weak propositions that either the situation is somehow their own fault, or equally preposterous, that more of the same will make it better. Whatever its merit in economic energy, the market fails because of its intrinsic tendencies.

Among them:
  • Rewards in a market economy are delivered not to the deserving or the needy or equitably, but to those with power.
  • In a market economy, if you don't have money, you don't count.
  • If you do have money, you can get more. The more you get, the more you count.
This is, of course, why we have created the "Mixed Economy," with a strong public sector to mitigate market excesses. But that public sector has been co-opted or intimidated and its support eroded by voodoo economics, "the market knows best." Immigration is a clear case in contrast. In some real sense we are going to import the products of those countries or we are going to import their people.

People want to come to the U.S. because that is where the money is. Are they greedy. No. They are driven here by poverty. Most people would stay in their native countries were it not for persecution or abject poverty.

What used to be called the Third World is not doing well. While some of the world develops, dozens of countries and a billion people fall further and further into desperate conditions. Immigration pressure will only get worse as clean air and clean water become commodities that they cannot afford.

The development model promulgated by the corporate oligarchy and its functional arms the World Bank and the International Monetary Fund, is built on setting up little industries and competing with other countries on the basis of cheap labor. It is a beggar-thy-neighbor race to the bottom.

A very little investment in roads and schools could generate a very great return in the capacity of these countries, providing their basic institutions are not corrupt. Nations ought to be encouraged to organize around the natural base of small (energy-efficient, by the way) small farms.

It is actually we who are so greedy we do not realize the immense benefit of developing these countries from the inside out. Schools, roads, green infrastructure can unlock enormous potential markets. Instead we prefer to destroy those markets by flooding them with the products of American industrial farms or turning them into plantations for the developed world.

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