Friday, April 15, 2011

Open borders and the Welfare State

Today I write an article about classical liberal theory and compleatly free immigration in Svensk Tidskrift, a journal tied closely to the center-right Swedish Moderate Party. The text is in Swedish. It is pushing the boundaries of what is permitted to say in Sweden and may get me into trouble, but I made the choice to take the hit, hoping for intellectual honesty from those who disagree with me.

My hope is that as someone who grew up for ten years on welfare, who lived close to two years in refuge camps and the rest of his childhood in so called "Millionprogram" housing, in foster-care and "ungdomshem", who in school was physically assaulted several times by skinheads and Neo-Nazis, who had Neo-Nazis come to his home and yell "sieg heil" in the buzzer, who lived in 99% immigrant Ronna while he commuted an hour and a half each way to Handelshögskolan, I can get away with a tiny bit more on this contentious topic than a blond bourgeoisie Swede would.

I argue against open borders in a modern welfare state based on classical liberal principles.

First I demonstrate that unskilled immigration to current welfare states has led to sizable transfers of wealth from and reduction of freedom of the current owners of the state. These owners are of course citizens, needless to say regardless of race or ethnic origin.

Libertarian theory which is used to derive the principle of completely free immigration tends to make the unrealistic assumption that the welfare state and voting rights over the properties of others do not exist. Libertarians sometimes acknowledge the problem of combining a welfare state and open borders, but proceed to declare that they support open borders and no welfare state.

I argue that this is a logically flawed proposal.

Immigrants from third world countries tend to earn less than for example native Swedes or Americans, and furthermore tend to come from countries with no tradition of classical liberalism.

Hence 77% of non-European immigrants voted for the left in the 2010 election, a year when only 43% of native born Swedes voted for the combined left. In the United States whereas only 35% of whites prefer raising taxes and expanding government, the figure is 65% for Hispanic immigrants and 66% for second-generation Hispanics.

These patterns are completely rational, immigrants earn less and unlike Anglo-Saxons have no traditional preference for limited government.

The way immigrants vote and their political preferences cannot simply be assumed away in any serious ideological discussion.

Open borders in a affluent welfare state leads to unskilled immigrants soon becoming the majority of the voters. Since unskilled immigrants in the reality we live in generally do not support libertarian style limited government, the Sanandaji Principe states that you can only pick 2 out of 3 of:

1. Limited Government
2. Open Borders
3. Democracy

Even if Swedes and Americans abolished the welfare state tomorrow (something which I would oppose), with open borders the welfare state would reemerge as soon as the immigrants became the majority of voters. Ignoring the voting patterns of immigrants when you propose abolishing the welfare state and fully opening borders is subsequently a violation of the Lucas Critique. Open borders and an abolished welfare state can only be combined in a nightmare society where immigrants and their children are never allowed to vote.

For me the choice is simple, I prefer Democracy to Open Borders. If a country decides to take immigrants, they have to be included 100% with full rights, and not permanent second-class citizens.

The three most important Libertarian intellectuals of the last century who thought deeply about the subject all concluded that open borders in our societies with welfare states was a bad idea.

Friedrich Hayek thus wrote ”a recognition of collective ownership of the resources of the country which is not compatible with the idea of an open society”. The minimum standard of living that Hayek believed the state should guarantee even its poorest citizens ”necessitates certain limitations on the free movement across frontiers”.

Milton Friedman also recognized this, and stated ”You cannot simultaneously have free immigration and a welfare state”.

Late in his life, Robert Nozick become skeptical about open borders, saying (in an interview with a libertarian Swedish journal no less!): ”Why do we not have completely free immigration everywhere? One reason is the welfare state".

Swedish Libertarians such as Johan Norberg, Mattias Svenssson and Henrik Alexandersson by contrast support open borders combined with keeping or if need be expanding the welfare state. Thus Norberg, Svensson, Alexandersson and others in the "Frihetsfronten" who for decades fought to abolish tax financed health care and schools for Swedish citizens supported the recent decision to grant the same services to illegal immigrants. Mattias Svensson's comment on this historic expansion of the Swedish welfare state in scope to potentially the entire planet was "This is what solidarity is about". Johan Norberg similarly gave the decision a thumbs up in his column.

Remember, a simple libertarian solution would have been to allow illegal immigrants to pay for health care and education services out of their own pockets, just as Frihetsfronten wants Swedes to do. But being pro-immigration has become so important for Swedish libertarian identity that they are cheering expanded welfare state services for illegal immigrants. If you wanted to be unkind, a suitable name for this novel ideology would be Libertarian-Socialism.

Limits on free migration is not just an arbitrary state construct, it is necessary to uphold ownership rights imposed by owners (citizens), just as a fence is necessary to uphold private property. Organizations such as condo-associations who produce social externalities for their members and make decisions about collective matters always limit membership. Since we have chosen to organize ourselves in a nation-state and grant some rights over our lives to fellow citizens, we need to restrict who has coercive power over us. Borders are limits on expanding the necessary-evil which coercion through voting represents.

Voting rights of citizens over common decisions and collective assets should therefore best be viewed in this context as form of property. If you accept this premise, abolishing borders in a modern welfare state is a form of socialism, just as abolishing fences would be. Note that both private property and citizenship rights evolved gradually through the spontaneous order and were not "created", that both serve to increase societal efficiency, and that both are common to all modern societies. Libertarians should remember that that private property also limits free mobility. This theoretical view confirms with reality, where the consequence of unskilled immigration to the welfare states such as Sweden have been an expansion of government and a reduction of the freedom of the existing citizens.

Classical Liberals should take after Hayek, Friedman and Nozick and think deeply about these issues. The discussion should take real world empirical patterns into account and use a richer model than the simple neoclassical model with assumes away voting, the public sector and social externalities. We have to first have a theory of what a nation-state is, what citizenship is and what voting rights are, before we propose to abolishing these rights through open borders.

P.S

I had to cut parts of my article [In Swedish] due to space limitations, so I will put it here:

"Ett något tyngre vägande argument än det ekonomiska är att invandring gjort Sverige kulturellt rikare. Men även det påståendet brister. Visst har Sverige berikats enormt mycket av globaliseringen. Men dessa extremt viktiga influenser utifrån har till överväldigande del inte kommit genom invandring, utan genom utbyte av information (och i mindre utsträckning genom handel). Steve Jobs och Jerry Seinfeld var inte tvungna att flytta till Sverige för att vi skulle kunna påverkas av dem.

Det land som Sverige utan jämförelse har tagit mest kulturella influenser ifrån under efterkrigstiden är USA, ett land som vi har få invandrare från i Sverige. I jämförelse är de kulturella influenserna på vanliga svenskar från t.ex. Afghanistan, Irak, och Somalia i det närmaste noll. Sverige har visserligen fått matinfluenser från Mellanöstern, men vi har också fått ännu större matinfluenser från Frankrike, Japan, Thailand och Indien, utan att ha någon omfattande invandring från dessa länder.

Med tanke på att matkultur består av information och råvaror är detta egentligen självklart, på grund av frihandel och informationsrevolutionen behövs det ytterst få individer för att sprida matkultur. Italiensk och fransk matkultur har i och med globaliseringen erövrat hela världen, utan någon storskalig utvandring. Johan Norberg påstod nyligen att Sverige inte skulle ha haft olivolja eller espresso i affärerna utan invandringen. Detta är fel – trots allt finns olivolja i t.ex. finska mataffärer, trots att Finland haft avsevärt lägre invandring än Sverige.

Om invandring inte stärker Sveriges ekonomi, är det åtminstone inte det bästa sättet att hjälpa andra till ett bättre liv? Svaret är tyvärr troligtvis nej. För det första är tredje världens problem för stora för att lösas av invandring, invandringen till väst är en droppe i havet satt i relation till totalbefolkningen i dessa länder. Inget land har i modern tid blivit rikt på att dess invånare flyttat utomlands. Kina och Indien började i slutändan inte utvecklas genom extern utvandring, utan genom interna liberala reformer (precis som i Sverige på 1800-talet, all romantik kring utvandringen till trots). Inte heller är invandring effektiv biståndspolitik. Sverige skulle kunna rädda miljoner liv med mat och medicin för de stora summor invandringen kostar.

Det går inte att täcka in alla aspekter av ett så brett fenomen som invandring i en artikel. Jag är kanske något mer ensidigt pessimistisk än jag borde vara. Å andra sidan är det ytterst sällan sakliga negativa argument lyfts fram på ett samlat sätt. Invandringspolitikens inverkan på samhället börjar nu bli så pass påtaglig att det inte längre räcker med att konstatera att ”som liberal är jag givetvis för en generös invandrings- och flyktingpolitik”."

21 comments:

  1. America seems to give far fewer benefits to immigrants (legal and illegal) than citizens. Maybe that's a workable alternative. Open (or near so) immigration but no promise of citizenship or benefits.

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  2. OneEyed:

    That is a commonly held myth. Immigrants collect more welfare benefits on average than native born Americans (and those figures includes illegal's).

    http://cis.org/immigrant-welfare-use-2011

    No less authority than the supreme court decided that it was unconstitutional to limit public services even to illegal immigrants.

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  3. Never heard of the CIS. In your experience is this a non-ideological organization? A few quick searches suggests they promote an agenda of immigration reduction.

    What court case was that? Plyler v. Doe? That's limited to K-12 education, not all benefits.

    America has a H1-B visa where you get deported if you lose your job and don't get a new one. They could easily expand that program to more people and those less skilled.

    My understanding was roughly that "the 1996 Personal Responsibility and Work Opportunity Act barred illegal immigrants from receiving any welfare benefits except in medical emergencies. It also barred legal immigrants from eligibility for welfare benefits during their first 5 years in the country. "

    It also seems to be a pretty narrow definition of the welfare state. Social security, Medicare, higher education grants, unemployment benefits, farm subsidies, and other benefits look to me like part of the welfare state. Nevertheless, they accrue massively disproportionately to the native born.

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  4. 1. The fact that they have an ideological position doesn't mean you can ignore their data, based on reporting simple results from the Census.

    I have an ideology, you have an ideology, but if you cite facts than I have to have a substantive critique other than not liking the result or you having an ideology.

    Their results are no different than what was found by the National Research Council in 1997, and by in depths studies in California and New Jersey, who looked at the public sector in its entirety.

    http://www.nap.edu/openbook.php?isbn=0309063566

    The NRC study, the most in depth, found that unskilled immigrants on average collect $160.000 net present value (2010 dollars) more in their lifetime than they pay in taxes.

    Unskilled immigrants get much more benefits than natives, because they are much poorer, and because the American government *in practice* gives immigrants, even illegal immigrants, benefits which they are officially not supposed to get. (e.g. Barack Obama's illegal aunt was living of welfare in subsidized housing.)

    This is why the CIS study is important, because they look at *actual* welfare use, not what would happen *in theory*. In theory, illegal immigrants don't even have the right to remain in the U.S. Let me give you another example of obfuscation. The definition of "emergency" health care is as health care is practiced currently in hospitals "virtually everything".

    2. I am not against elite migration. But with open borders you have no choice, and mathematically the overwhelming majority will be unskilled.

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  5. Singapore and other countries which rely on immigrant labor tend to just use a more relaxed visa system. Working in Singapore is very easy but actually becoming Sinaporean is hard.

    The CIS study is funny because it uses households. Almost certainly, then, it's not measuring immigrant reliance on welfare as immigrants are legally barred from most of the programs. Rather, it's probably producing a measure of child poverty but the children aren't likely to be immigrants.

    When you actually look at the numbers, they're not that bad. Immigrants in general come in using about 50% more welfare than natives, despite a heavy skew towards poor countries of origin, and less than the average of native minorities.

    So... yeah... your case against immigrants would be better as a case for kicking out non-immigrant minorities and opening the borders otherwise.

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  6. Heyna:

    1. You talk about "kicking out" minority citizens is racist. An African American citizen is a owner of the United States with full right that you nor anyone else can take from them.

    The fact that libertarians refuse to understand the difference between other citizens and foreigners with no god-given right to move to the United States is emblematic of the problem of not having a full theory of the nation-state.

    The United States belongs to American citizens. They are equal, so they don't have any right whatsoever to 'kick out' any other citizen.

    They however have the right to decide who else is rewarded the privilege (not right) of migrating to the U.S, based amongst others on how it impacts Americans.

    2. So if the welfare is going to the children of immigrants, it doesn't count?!?

    This doesn't change the consequence of unskilled immigration: massively higher welfare expenditure.

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  7. Just out of curiosity - I know this is about Sweden, but how is your analysis affected by a large, generally unclosable border such as the one shared by the US and Mexico?

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  8. Helt fantastisk artikel! Tack för att du vågar och bemödar dig att röra om i den svenska ankdammen.

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  9. Mike:

    There is nothing "unclosable" about the border. The decision not to close is entirely political. For decades there was little illegal immigration from Mexico, suddenly it is inevitable?

    A fence combined with more patrol and penalties on employers will reduce illegal immigration by 90 percent or more. Other simple suggestions are removing public benefits for illegal's (not just in appearance) or making it a punishable crime to be illegal (which it is generally not today).

    As a technological matters, Israel almost 100% closed its border. Yes, Israel has a shorter border, but the United States has almost 100 times higher GDP.

    Maryland voted a few days ago to have the taxpayers pay the college education of illegal immigrants. They will get in state tuition, but an American citizen from Virginia will not.

    http://www.nationaljournal.com/maryland-bucks-trend-by-passing-dream-act-20110415

    Does this sound like a country where the political class is determined to close the border?

    Barack Obama decided not to build the fence because he benefits from more illegal immigrants in the United States, since they and their children in time equal more votes for the Democrat party. This is why Obama also supports amnesty (regardless of what euphemism he will use).

    Partisan Politics is a zero sum game. What benefits President Obama hurts those with the opposite political ideology.

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  10. Israel has illegal immigration too. There is even a page about it on wikipedia. Our problem might proportionally be 10 times worse, but as you point out, they are doing everything they can to shutdown their borders.

    I wanted to know if CIS was reliable, perhaps in comparison to other think tanks like Brookings, Heritage, Cato, ect. Of course everyone has an axe to grind.

    I still think that their methodology omits many huge wealth transfers that immigrants do not receive, and if you took them into account it isn't obvious their results would hold.

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  11. OneEyed:

    Did Israels illegal immigrants cross the border after it was beefed up in the early 2000s, or fly or enter previously?

    What I read is that the border was made secure in order to prevent terrorism, and that it has been effective. If they can stop committed nuts, I am sure we can stop decent folks who just want to earn a little more.

    Of course it will never be 100%, even 90% would be plenty.

    I am sure there are some benefits immigrants get less off. But what is important to remember is that unskilled immigrant households are poor, and contrary to public perception do receive lots of public benefits.

    Needless to say skilled immigrants is a whole different story.

    CIS is no Brookings or AEI, but I would put them on the same level as Cato (trust, but verify).

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  12. Thanks for a stimulating argument.

    A few caveats:

    1) Open borders to the U.S. was historically considered an absolute right by most Republicans--for example, William T. Sherman and Frederick Douglass--the latter of whom actually used the example of passports and visas as markers of an unfree society. The U.S. is not like Sweden; we think of the world population as divided between potential Americans and the rest. Immigration is pretty much the norm throughout our history, although of course with varying levels and composition.

    2) Why don't you direct your fire at the eligibility of immigrants for welfare? If there were a probationary period before eligibility kicked in, then only those who were productively contributing would choose to settle. That would arrest the unfavorable political dynamic you cite, since the flow of public resource recipients would be choked off.

    3) I could have used the same political economy argument in the 19th century to argue that the U.S. should have kept out Jews, Irish, Poles, etc., who were more prone to vote for redistribution and even socialism. In fact, there were big fights about this at the time, including anti-Catholic, anti-Jewish, and anti-Italian sentiments. But I think it's fair to say that the U.S. would be worse off today without those immigrants having come here.

    40 The studies I've seen that look at the complementarity of different types of labor and that allow for capital investment in response to increased labor supply find that unskilled immigration raises the standard of living of all but the bottom part of the U.S. income distribution (and has only a small effect at the bottom). I know Borjas and the authors of these articles are engaged in technical debates over these issues, but I don't think it's as open and shut as you make it sound.

    5) When Utica, N.Y. was trying to revitalize its economy, it invited Bosnian refugees. That indeed seemed to give an entrepreneurial (no, I don't mean starting Google) jolt to the place, although it's far from a cure for the long-term economic and policy problems of upstate New York. The point is, though, that an open attitude to immigration can lead to more dynamism, at least in the U.S. I have no idea if that kind of thing is even possible in Sweden, given the different economic and social conditions.

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  13. 1. Open borders in a historical period where there was no welfare state, no ideology of multiculturalism, where the economic basis was farming and land virtually limitless, and when transportation costs limited immigration to Western Europe is a different story. We have to base our conclusion on the present world.

    2. Limiting welfare to immigrants is not a viable long term idea. They will vote themselves these benefits once they are the majority. I cannot stress this point about time inconsistency enough.

    3. Just because there exists historical examples where people opposed immigration and it turned out they were wrong doesn't mean all opposition to immigration is certain to be wrong forever as some sort of Iron Law of History.

    There are also historical examples where the opponents were right. Migration of Muslims to western Europe didn't turn out that well. Migration of Albans to Serbia didn't turn out well for Serbians. Mexican migration to the U.S has so far not assimilated, even after 3 generations.

    4. " but I don't think it's as open and shut as you make it sound."

    Not for AGGREGATE immigration, but it is open and shut for UNSKILLED immigration. If you look at what I write about the U.S I always talk about unskilled immigration. America has a choice of whom to invite. Open borders will lead to mostly unskilled immigration, simply because that's who most of the world's poor are.

    5. Bosnian immigrants work better also in Sweden, because they are not unskilled and have a European culture (although even Bosnians are employed 10-20% points below Swedes).

    But let's say that you prove to me that Bosnian immigration is beneficial, while we observe that Latin-immigration is a cost. Does that imply we should have open borders for everyone or specifically more migration of the type that works?

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  14. I think a better argument against point 5 is that the people of Utica don't pay all the marginal cost for the immigrants who move there. Those costs are defuse, subsidized by areas attracting fewer immigrants. Therefore, we can't see a locality succeeding because of immigrant revitalization if that's made possible by state and federal funds.

    I'm no expert on Israel's illegal immigration issue, but the Wikipedia page says "Illegal immigration from Africa to Israel is the name of a phenomenon that began in the second half of the 2000s " http://en.wikipedia.org/wiki/Illegal_immigration_from_Africa_to_Israel

    Your model of a country as a corporation is new to me. Where could I learn more?

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  15. Apparently the illegal immigration is from the Egyptian border, where they don't currently have a fence. Now the Israelis are going to build one also there.

    http://www.haaretz.com/news/national/netanyahu-illegal-african-immigrants-a-threat-to-israel-s-jewish-character-1.302653

    I don't know much about the theory of the nation state, if you find something interesting tell me.

    Yes making the benefits local and socializing costs is common also for Swedish municipalities. Although again even at the local level unskilled migration doesn't seem to be a great deal:

    "State and local fiscal impacts of US immigrants: Evidence from New Jersey"

    Population Research and Policy Review 1994

    "...The typical immigrant-headed household imposed an average fiscal burden of 350 on local governments throughout New Jersey, versus roughly 225 for each native-headed household. At the state level, however, net fiscal impacts of immigrants and natives were similar: an average annual deficit of 841 for immigrants compared with 846 for native households.

    There are larger disparities among the foreign-born population than between native-headed and immigrant-headed households. Latin American households have the most unfavorable fiscal implications of any immigrant subgroup."

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  16. Am I correct in my impression that illegal aliens can send their kids to public school in the US?

    If so, then I'm not surprised that the problem is so pronounced in the US. In much of Europe illegal immigrants exist, but those are AFAIK mostly young men without families who stay only for a couple of years, or as long as they are not caught, but they by and large don't bring wives and children with them.

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  17. dieter:

    Not only that, the Supreme Court has ruled that the States are prohibited from denying illegal immigrants tax-funded education or even taking fees.

    http://en.wikipedia.org/wiki/Plyler_v._Doe

    The courts similarly stopped California's referendum where voters decided to limit schooling, heath care and other public services to illegal immigrants.

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  18. I'm agreeing with Tino right down the line. One point I do want to to introduce into the discussion is how do we measure economic contribution of immigrants and where do we draw the line which separates net contributors from net recipients.

    Government spending, as a percent of GDP, is now close to 40%. With GDP at $14.5 trillion and population at 307 million, the per capita spending on government is $18,900. Clearly some people people pay far more than $18,900 in taxes per year while others pay less.

    What are the mathematical effects of continually adding to the denominator while keeping the numerator constant or growing at a far smaller rate than the denominator?

    What are the effects of adding net tax recipients to a system where the net tax contributors grow at a slower rate?

    These questions were moot in the era that preceded the welfare state but today I believe that they are quite appropriate. What happens to income inequality when the floor keeps getting lowered by the importation of poverty? The usual response is to call for more confiscation from those in the higher income quintiles. As the numerator holds constant and the denominator continues to grow over the years, with the added people who comprise the denominator disproportionately filling out the lowest income quintiles, the redistribution effect gets diluted and the calls for even more expansive redistribution grow stronger. The effect is akin to a rowboat with a hole in it needing to be bailed while on a journey across the lake as the occupants of the row boat purposely make the hole larger and larger, thus necessitating ever more vigorous bailing.

    Importation of poverty is not a rational policy choice.

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  19. Finland has a 1000 miles long border with Russia. The wealth gap betwen them is similar to that of the USA and Mexico. Very few illegal crossings even though Finland is part of the Shengen area. I'm not sure what's the reason but I assume it has to do with the more tightly organized society which makes it almost impossible to work, rent a flat or what not if you're not legally in the country.

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  20. Tino, tack för en fantastisk artikel! Med risk för att vara självmotsägande: kan du inte ta och "vandra" tillbaks till Sverige? Hjärnor som din behövs sannerligen här!

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