Friday, May 20, 2011

Who owns Sweden: Nine million Swedish citizens or seven billion citizens of the world?

Adam Cwejman, current chairman of the Liberal Youth of Sweden, responds to my article arguing against open borders in a welfare state (in Swedish).

I don't personally know Adam, but he has a reputation of being a brilliant guy. I thought his response was well argued and intellectually serious, which I appreciated a lot.

1. Adam argues against a fiscal view on immigration. He notes that some studies find that because smoking kills people early and saves on pension costs it is beneficial for the state. Adam argues that we do not consider this sufficient reason to promote smoking, so why should we consider the costs of immigration sufficient reason to limit the free flow of immigrants?

The difference lies in that promoting smoking obviously has massive costs for Swedish society (lost years in life), which outweigh the small benefits for the state. The social cost of smoking is estimated to over $100 billion in the United States. There are no corresponding costs for not having open borders. If anything, unskilled migration has led to large negative social externalities, in the form of crime, reduced trust and cooperation.

Adam is erroneous in saying that smoking is beneficial socioeconomically ("samhällsekonomiskt"), since the social welfare function would include the cost of lost life. It would be better to say smoking may be beneficial fiscally ("statsfinansiellt").

The smoking paradox is about accounting. The central effect of smoking - the cost of the individual dying - is not included in the budget. But no such costs are associated with reducing immigration, so the same paradox does not arise.

2. Adam uses a similar argument as Niclas Berggren, which is that there are groups in our society that have fiscal costs too. Adam believes that I am inconsistent, because I take the cost of immigration into account, but don't want to deport Swedish citizens with "low I.Q".

He also calls me "inskränkt" (paraochial), because in the immigration debate I distinguish between the "nine million" Swedish citizens and the "seven billion" inhabitants of the world.

The difference is ownership rights. Swedish citizens, regardless of gender and race, are collective and equal owners of Sweden. This type of ownership is as legitimate and as absolute as private ownership. It developed in the same way as private property, organically through the formation of spontaneous order.

The rights associated with citizenship are equivalent to ”acquisition of title” associated with private property rights, as discussed by Nozick. They are legitimized by Swedes and their heirs ultimately having created Swedish society, again parallel to how we tend to derive private property rights.

Consequently no citizen has the right to deny another citizen their inalienable rights (i.e deportation) using fiscal costs as an argument. Because citizens are equal, and because citizenship is absolute, there is simply no room for a policy discussion about one citizen denying another citizens voting rights or deporting other citizens, based on I.Q or gender or anything else.

Foreigners by contrast have no ownership right over Sweden, just as Swedes don't have any right to own Albania. It is up to Swedish citizens to decide who gets to come to their club and who doesn't.

Similarly private homeowners decide who gets to enter their home and who doesn't, but they don't have the right to kick out other owners living on the same street if they feel their presence is detrimental. Corporate shareholders get to decide not to bring in a new partner for any reason they like, but they can't kick out a pre-existing owner, barring really extraordinary circumstances.

Swedish citizens therefore have the right to take the fiscal costs of immigration into account when deciding which foreigner to invite, while no Swedish citizen can be denied her rights and deported based on fiscal considerations. There is nothing strange or paradoxical or hypocritical about this.

Modern liberals and libertarians get confused when discussing immigration because they do not acknowledge that Sweden and the United States are associations owned solely by their respective citizens. This is ironic, since libertarians are obsessed with private ownership, which is a (useful) social construction, just as the concept of citizenship is. Without a theory of citizenship and the nation, immigration becomes hard to discuss.

Our unwritten social contract stipulates that we should organize the state around the nation, as the nation is the entity in which the sense of fellowship is the strongest, which makes it the optimal level of collective decision making. This is true for Sweden and virtually every other country.

I am here crudely articulating these principles, which are deeply ingrained in the collective consciousness in Sweden and around the world. Indeed, I have met few immigrants who would deny Sweden the right to make the decision whether to take them in or not! Immigrants of course like to come to Sweden, but almost always acknowledge that this decision is the prerogative of Swedes, just as the decision of Iran to take Afghan immigrants belongs to Iranian citizens. The view that Sweden has no moral right to decide who gets to come to Sweden is something that Swedish libertarians and socialists have invented.

Classical liberal theory is quite clear about the issue of national sovereignty, citizens have the right to make decisions about the nation based on their self-interests. It is modern left-liberalism and left-libertarians, influenced strongly by cultural Marxism, which has deconstructed the nation and citizenship. Adam Smith would not find anything strange in affording Swedish citizens rights of control over Sweden ahead of foreigners, but Adam Cwejman does.

3. More importantly, this view is one of honesty. If Adam and other Swedish intellectuals don't believe that Swedish policies should benefit Sweden, and want to base policies on the welfare of the entire world, they have the responsibility to communicate this very clearly to voters. Intellectuals and politicians have been delegated their power and influence by the public, they have no god-given right to make decision over the collective welfare of Swedish citizens based on their private ideology.

Adam is a bright guy, and will go far. At some point, when he is a member of the government or a member of parliament, he will be faced with decisions where there is a conflict of interest between the "seven billion" foreigners, and the Swedish citizens who elected him. At such a point, I believe Adam has the responsibility to choose based on the welfare of those voters who delegated authority to him, rather than based on personal ideological preferences. Liberals and libertarians in positions of power simply do not have the right to give away the collective assets of Swedish citizens based on their private ideological axioms and their private altruism toward the world.

If Adam wants to give away his own money, no one will stop him. But Sweden is not his to give away to the world, at least not without the explicit approval of the Swedish public.

Politicians who in the interests conflict between the people who elected them and foreigners would choose the welfare of foreigners should at the very least be honest about this during the electoral campaign. Swedish voters still naively believe that the politicians they have elected and the rest of their elites have Sweden's best interests in mind, rather than some private ideological axioms and a personal desire to benefit the world using collective resources.

4. Adam questions my "national perspective", which only takes the welfare of Swedes into account. What about the gains of the immigrants?

My answer is in part the same as above, the national perspective is the correct perspective from the point of view of classical liberalism because of property rights. We accept that a homeowner has the right to make a decision about taking in guests or not based solely on his private welfare. Why should we deny Swedish citizens the same right to act based on self-interest?

The welfare of immigrants does matter for immigration policy, but only to the extent that Swedes are altruistic and care about the rest of the world.

4. He uses the example of remittances. Immigrants send home money and benefit their home country. Shouldn't we take this into account?

Sure we can. But relying on immigration to send remittances back home for economic support is extremely inefficient. According to the world bank, Swedish remittances are 0.15% of Swedish GDP. (Much of this goes to Eastern Europe, rather than the third world).

It is obviously much more expensive to take someone from Bangladesh and house him in Sweden in the hope that he will send back a few percent of what he receives back to Bangladesh. If the aim of immigration is to send aid, why not just cut the middleman and send aid directly ?

Better yet, why don't the people who really care about the third world and believe foreign aid works give away some of their own money, rather than collective assets? Foreign aid is after all a private good, there are very few public good aspects of it, and little reason why aid should be socialized.

5. Adam believes that my views on immigration are not based in principles, but are only consequential. That is incorrect. Using the principle of ownership, Sweden belongs to Swedes, and they get to decide if they want immigration or not based on their own self-interest. I develop my view on this principle more in the debate with Niclas Berggren.

Since it is obvious to me and to the majority of Swedes that Sweden belongs to Swedish citizens, I focused my original article on the consequential effects of open borders. Even if it was not obvious to me, this is what the Swedish public believes, and my responsibility as an amateur pundit is to represent the welfare of the public, not to advance my personal beliefs and self-interest (for libertarian intellectuals to ideologically play around with the welfare of Sweden based on their whims as if it were a toy is indeed a reflection of selfishness, not altruism).

Adam is incorrect in writing that Hayek does not have a "deep" analyses based on principles regarding sovereignty and immigration. Hayek has an rich theory of the state which in my view is quite clear on who owns and has decision rights over society, and more importantly why. Since Hayek already has a well developed theory about rights, it is easy for him to discuss immigration.

Regarding Milton Friedman, Adam provides a link to a libertarian that tries to prove that Friedman "really" believed in open borders.

The truth here is that Milton Friedman's view evolved. Friedman is sometimes portrayed as dogmatic, but this is untrue. He was a fundamentally empirical and pragmatic thinker, in the University of Chicago tradition. American immigration worked quite well historically, but worse and worse after the 1965 reform and as society changed. Late in his life, as Milton and Rose Friedman increasingly observed that modern immigration combined with the welfare state and multiculturalism were having negative effects, their views changed. This is clear in interviews about the topic I have seen, where they contrast today's ill-functioning immigration with their own experience.

After all, as Keynes is reported to have said:

"When the facts change, I change my mind. What do you do, sir?"

Wednesday, May 11, 2011

Ethnic Diversity and the Size of Government

In recent posts I formulated the Sanandaji Principe, which stipulates that due to the left-leaning voting patterns of unskilled immigrants, we can at most have two out of three of Open Borders, Libertarianism and Democracy.

Open Borders and Democracy will inevitably lead to a welfare state, as non-libertarian immigrants sooner or later become the majority of the voters and vote themselves benefits.

One objection that people such as Swedish libertarian Economist Niclas Berggren made is that mass migration causes native voters to turn against redistribution. The reason is that economists believe that solidarity is diminished in ethnically heterogeneous societies. According to this theory voters care more about people with the same race and ethnicity as themselves, and are less willing to help the unfortunate if they have a different skin color. This theory is most prominently suggested by Harvard professors Alesina and Glaeser.

Some libertarians want to rely on this mechanism to tear down the welfare state through open borders and the ethnic tensions they believe that migration will cause.

My first reaction if that is the price of limiting the welfare state, is that I would oppose it. Milton Friedman famously stated that he would oppose reducing the welfare state unless the public was convinced in a democratic fashion that this was in their best interests. I understand that some free-marketers have turned against the very notion of "solidarity", because the left has exploited the term so much. However this should not let us lose sight of the fact that solidarity and national cohesiveness are social goods, not something that we should want to destroy through an immigration shock doctrine.

Leaving my preferences aside, I also believe that Berggren and other libertarians and liberals who rely on the Alesina-Glaeser theory are substantively wrong. Ethnic diversity overall tends to expand the welfare state, not reduce it. While the research only focuses on one effect of unskilled immigration (reduced fellowship), there are at least three effects that go the other way. Here are the main effects of increasing the share of low income minorities:

1. Solidarity is diminished and social ties are wakened, so that the majority population becomes less willing to pay taxes to help "the other". This limits the size of government. The ethnic-diversity-and-redistribution-literature has almost entirely focused on this sole effect.

2. Increasing the share of low income individuals increases the welfare state through a mechanic effect. This means even if you don't vote for any changes to the welfare state, the use of preexisting welfare programs such as unemployment insurance and public health care increases.

For instance, 71% of Hispanic immigrant households in the U.S use at least one form of public welfare, compared to 39% of native households. In Sweden, according to the latest figures around 40% of all unemployed individuals are immigrants.

Even if you don’t make unemployment insurance more generous, having groups with a higher unemployed rate automatically expands the size of government.

3. More disadvantaged citizens increases the need for a welfare state. To the extent that the welfare state reflects a desire to reduce social problems, having more deprived individuals increases the demand for more government to solve problems. The welfare state exists largely because the middle classes and the rich feel sorry for the poor. The left is not stupid or irrational, they rarely demand government intervention where there are few problems.

As immigration increases poverty and social problem, demands for government intervention grow. Note that this is consistent with lower solidarity across ethnic lines, as long as solidarity is not zero (If the new poor immigrants were your co-ethnics, voters would be even more inclined to help them).

To give you a recent example, the majority of the long term uninsured in the United States are ethnic minorities. (Long term uninsurance is a better measure, since many uninsured are just between jobs.)

According to the Medical Expenditure Panel Survey, Hispanics "represented 42.8 percent of the long-term uninsured for the period 2005-2008"

The media does not understand and will not tell you this, but the long-term uninsurance rate of non-Hispanics whites’ above 25 in the United States is merely 3%. This is incidentally one explanation why the white Tea Party activists don’t like President Obama's health care reform, they and their families already have health insurance.

The American uninsurance ”crisis” would likely never had arisen without a high percentage of minorities with extremely high long term uninsurance rates.

Similar, in Sweden the social problem currently most emphasized by the Social Democrats is child poverty. As I explained, 65% of poor children in Sweden are immigrant children (interestingly about two thirds of poor children in the United States are minority children).

Without immigration, there would be no child poverty "crisis" in Sweden for the left to mobilize politically against.

4. Though ignored by proponents of the ethnic-diversity-and-redistribution, minorities also get to vote, and they vote overwhelmingly for the left. This effect is dominant when we are discussing free migration, because with open borders in a world where 700 million people have told Gallup they would like to migrate right now, sooner or later the immigrants will become the majority of voters and make the political preferences of the natives irrelevant.

Pew recently conducted a large survey with lots of questions on economic and social issues. It shows as all other polls that African Americans and Hispanics minorities are far to the left of whites. While 12% of Non-Hispanic whites in America have views that Pew classifies as Libertarian, only 3% of American minorities are libertarian. As America becomes increasingly minority, it will become less libertarian.

The proponents of the Alesina-Glaeser theory tend to focus entirely on point one and ignore points 2, 3 and 4.

It is difficult to test the theory empirically. I will however give you two pieces of suggestive evidence. I am not going to claim that this is definitive proof, just that it is consistent with my view that the net overall effect of diversity is bigger government.

Libertarians like the Alesina-Glaeser theory, because it tells them with more immigration they can reduce willingness to pay for the welfare state. Liberals similarly love the theory because it quite explicitly states that the main reason Americans deny themselves the benefits of a European style Social Democratic system is the racism of Republican voters.

First, I plot the vote share of Obama among non-Hispanic whites with the share of non-hispanic whites in each state. The Alesina-Glaeser theory would predict that whites in states with lots of minorities should vote less Democrat, because of racially motivated lack of support for leftist policies.

In fact, there is no such overall trend. The correlation is not statistically significant, and if anything goes in the opposite direction as their theory would predict.

Sure, there are states with high share of minorities in the South - such as Georgia and Alabama - where whites came out strongly against Obama. Similarly, some very white states in New England went solidly for Obama.

On the other hand, other lily-white states such as Wyoming, Kentucky, West Virginia, Utah and Idaho voted against Obama. Similarly whites in minority states such as Maryland, New York, Nevada, New Mexico and California strongly supported Obama.
A more parsimonious explanation which corresponds better with the observed pattern than the ethnic-diversity-and-redistribution literature is that whites in conservative states voted against Obama, and whites in liberal states voted for him, with little connection to the racial makeup of the state.

A second graph plots per capita spending State and Local spending in 2007, from U.S Census State and Local Government Finances, with the share of state population that are non-Hispanic whites.

Contrary to the prediction of Alesina-Glaser, the overall effect appears to be that states with more minorities spend more per capita.

Thus minority states such as D.C, California, Maryland, New York, Illinois, New Jersey and even Louisiana and Mississippi stand out as spenders, whereas white states such as New Hampshire, South Dakota and Idaho spend the least.

While this is not definitive evidence, I believe points 2-4 tend to dominate point 1, so that the net effect of more diversity is bigger government and less solidarity. At the very least, points 2-4 should be taken into account in the ethnic-diversity-and-redistribution-literature.


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