Immigration, the brain drain and development

DSC00236aMass immigration across the capitalist world is arguably one of the factors that has been fueling nationalist and populist politics. From Brexit in the UK to Trump in the US, anti-immigration rhetoric has proved appealing to many. Despite promises made by former Prime Minister David Cameron here in the UK, net immigration from the EU and beyond has been substantial since the Conservatives came to power in 2010.

It is clear that huge numbers of immigrants come to the UK to find higher paying jobs than they would get in their home countries, and the EU’s policy of free movement has been part of this story. A number of Eastern European countries joined the EU in 2004, when Tony Blair’s Labour Party was in power, and immigration soared. Nevertheless, until the Great Recession of 2008, unemployment stayed relatively low. It rose during the recession but has since fallen back to fairly low levels, with record numbers now in work.

If those immigrants who have taken low paying work in the UK have had any impact on the labour market, it is argued that this has been through them depressing wages at the bottom of the distribution rather than affecting overall employment levels. This has been the subject of debate, and I will not go into that here. What I want to argue is that part of the response to those who are concerned about immigrants should be to encourage the creation of better-paid jobs in their home countries. This is a long term policy, but it nevertheless remains vital. Immigration can be controlled to some degree in rich countries, but if the UK economy continues to create employment, people will still want to come here and work, and the ‘problem’ as understood by some will persist.

The aim must be to encourage more rapid economic development in poor and middle-income nations, in a way that leads to job creation and rising wages for the majority. This would help to slow the ‘brain drain’ whereby the potentially most productive workers leave their home nations for lack of sufficient labour market opportunities. Such countries need to be given the policy space to adopt policies which do this. While this aim is hardly controversial and surely commands broad acceptance, the necessary policies are subject to debate.

The richest countries and global institutions such as the IMF and World Bank tend to favour free markets and free trade as routes to economic prosperity, but I would argue that all countries need to adopt some form of industrial and technology policy. The historical record confirms this. What this means in terms of specific policies will vary depending on a country’s stage of development relative to the technological leaders, and on the political institutions and balance of power among different social groups.

Industrial policies have a chequered history. At their best, they have promoted rapid industrial development and helped particular countries ‘catch up’ with their rich world counterparts. At their worst they have failed to do this, and have led to inefficient subsidies flowing to lame-duck firms and sectors which have not caught up at all. The key aim for policymakers is to learn from these successes and failures and try to build the institutions which can support the achievement of international competitiveness and the ability to export successfully by domestic industry.

Education and infrastructure are also important components of a strategy for economic development, but policies that promote industrial development, which may require a strategic rather than a completely open integration with the global economy, are also essential. A successful education policy will increase the supply of skilled workers, but it may do little to raise the demand for them. If there is insufficient demand for skilled workers, this is likely to lead to a brain drain, as they leave for job opportunities in richer and more successful economies. To prevent this happening on a large scale, more rapid industrial development needs to be promoted in order to create the demand for skilled workers.

Even successful development in more and more nations will not eliminate immigration. Uneven development tends to be the norm under capitalism, with periods of varying growth performance within and between nations. This will give rise to the movement of people internationally, seeking better opportunities. But we can at least manage such tendencies. The current trend politically in some countries seems to be towards increasing controls on the movement of people. While this may prove inevitable at least for a while, it cannot be the whole solution and certainly not in the long term.

Policies which promote more widespread prosperity, by giving poorer countries the space to develop more rapidly in ways that lead to job creation and rising wages at home are essential. This may require something of a revolution in economic policy, with more pragmatic approaches to markets and trade than are currently the norm. The most prosperous nations need to be flexible champions of development among those who have the room to catch up in terms of incomes and wealth. Indeed, the defense and promotion of liberal societies needs a less liberal economics.

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