UK / Europe — 10 October 2006

The World Trade Organisation (WTO), which is working to resuscitate the Doha trade talks, purports the benefits of free trade estimating that millions of people in the developing world will be lifted out of poverty. Given free trade, countries will naturally maximise output by specialising in producing those goods and services in which they possess a comparative advantage; and buy in those goods and services in which they don’t. Barriers to trade inhibit countries from specialising and therefore reaping the benefits of free trade. As an example, the elimination of US cotton subsidies to its farmers in the developed world would result in higher cotton prices accruing to developing worlds’ farmers hence lifting them out of poverty.

By analogy, the free movement of human capital can yield similar benefits. Immigration increases the pool of labour and eases supply shortages thereby lowering wages, increasing profits, and if lower costs are passed on to consumers, reducing prices of goods and services provided by immigrants. Labour supply and demand reaches equilibrium as immigrants do the jobs domestic workers are not prepared to do for the wage offered. Immigrants, while normally receiving low wages, have income they otherwise would not. A high proportion of this income is remitted back home to support poorer families and communities with housing, education and health care. Moreover, back home wage levels rise as employers try to hold on to workers attracted to a better-paid life abroad.

However, the West and its institutions view unhindered immigration with distinctly less enthusiasm than free trade. As the gap between the have and have-nots grows ever wider, increasing numbers of economic migrants land at Western borders and are having the doors slammed shut to them. The USA is erecting a 15-foot wall on its Mexican border to stem the flow of poor Mexicans venturing to the land of the free to make their fortune. The EU has laid on stricter conditionality on Romania and Bulgaria because many in Europe, even among the business community, feel it unwise to continue with the unrestricted open door policy following the recent accession into the EU of eight former communist states. Risking life and limb, hordes of poverty stricken young North African men illegally land on the shores of Europe daily only to be deported shortly thereafter. Australia has been deluged with so many unwanted immigrants that it has resorted to detaining them in camps in the country’s Outback.

Why the contradiction in the application of capitalist economic theory? After all, there are plenty of economic migrants (more pleasantly known as expatriates) from the West in very lucrative employment in the Gulf. Still many more work in very poor developing countries as consultants/ specialists/ economists reportedly earning as much as a £1000 per day. Some have argued that the level of immigration in the West has reached unsustainable levels. Among the countries where this debate has been fiercest is the UK, where ethnic minorities account for about 10% of the overall population, although in some cities that proportion is greater. However, this argument is less convincing when looking at the level of economic migration, for example, the Gulf, where over one hundred thousand Western expatriates work. According to the latest data there are 3.5 foreigners for every national in the United Arab Emirates, with expatriates accounting for more than 90% of the 2.7m workforce.

It appears that the reason why increased immigration to the West is being staunchly resisted is the same as the reason the US and EU are unwilling to reduce farm subsidies despite the stark contradiction with free market theory. Western self-interest is the biggest obstacle to the clear benefits for the worlds’ poorest from free trade and less restricted migration. Trade and work are ways in which the poorest could help themselves rather then relying on handouts. Western aid and loans to the developing world on the other hand ingrain dependence, which in turn forces compliance.

Globalisation generally favours the wealthiest resulting in ever-greater concentration of wealth in the West. This increases global inequality with growing numbers of desperate people unable to fulfil their basic needs. Thus, is the Western policy of keeping people out sustainable?

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