Benjamin Powell and Alex Nowrasteh advance a provocative thesis: that global welfare and economic freedom would be greatly enhanced if countries implemented an open borders policy. My contention is that the problem here is analogous to that highlighted by behavioral economists: that people are not rational economic utility-maximizing “econs,” except in narrow spheres of life. Rather, they are multifaceted individuals shaped by evolutionary psychology and culture. Once we factor in this broader range of human motivation, the costs of an open borders policy rapidly mount, leading to sharp declines in human welfare and even economic freedom.
Powell makes a good point that there are efficiencies to be gained by permitting labor to flow from where it is plentiful and cheap to where it is scarce and expensive. This “productivity equals price” logic for all factors of production makes perfect sense from the perspective of neoclassical economics and global wealth maximization. I also accept that multi-ethnicity in a society makes it more difficult for unions to organize, and that immigration undercuts labor’s bargaining power. All of this reduces the ability of powerful unions and left-wing parties to regulate business or redistribute, increasing economic freedom.
The panel-based cross-country model cited in the piece confirms this mechanism by showing that economic freedom tends to increase with immigration. The authors make a claim that more immigration leads to more economic freedom. This is plausible, though the converse, that economic freedom is what leads to more immigration, is equally credible. I cannot see that this endogeneity problem has been adequately addressed. One possibility would be to take subnational units so a cross-lagged modeling strategy can be used. Another is to consider an instrumental variable for immigration, such as some measure of humanitarianism or liberalism in the culture. But let us grant that there is a relationship. Does this mean we should open the borders? No.
Why not? First, even if the only thing that matters is economics, we have to account for the persistently negative effect of ethnic diversity (a major effect of immigration) on economic growth. In their famous paper on why ethnically homogeneous East Asian economies took off relative to ethnically heterogeneous African ones, Easterly and Levine (1999) write, “High levels of ethnic diversity are strongly linked to high black market premiums, poor financial development, low provision of infrastructure, and low levels of education.” Indeed, 25 to 40 percent of the difference in economic growth trajectories between East Asia and Africa could be attributed to this factor. With increased ethnic diversification, agreement on public goods such as roads, hospitals, or schools becomes a political issue.
Alberto Alesina and colleagues (1999) showed that at county and city level in America, even when controlling for education level, income, population size, and the proportion elderly, ethnic diversity was the most important predictor of low spending on useful public goods such as roads and garbage collection, and high spending on policing and incarceration. In one natural experiment, James Habyarimana and colleagues (2007) showed that when the Ugandan government cut funds for policing, ethnically homogeneous slums in Kampala, Uganda were able to organize self-policing while heterogeneous ones were not.
Numerous studies also show a trade-off between diversity and solidarity. As Robert Putnam wrote in 2007, trust and altruism decline in more diverse societies. A meta-analysis by Dinesen, Schaeffer, and Sonderskov (2020) for over 1,000 estimates of the impact of diversity on trust for 87 studies across western societies shows that this relationship to be robust. The decline of social capital is linked to, among other phenomena, political polarization, which has been increasing in the United States, Canada, and the wider West.
Let us pause to consider the key mechanisms at work here. Immigration tends to increase ethnic diversity. Different ethnic groups often have disparate economic outcomes. People tend to be attached not only to their own fate, but to that of their ethnic communities, and their politics reflects these sociotropic considerations. This is why wealthy African-Americans tend to vote for Democrats while many poor whites vote Republican. In multi-ethnic societies such as Trinidad, Nigeria, or Northern Ireland, parties form along ethnic rather than class lines, which may blunt the degree of economic redistribution, but ethnic party politics leads to sclerotic and crisis-prone governance that is inimical to economic growth. Multi-ethnic Kenya or Tanzania may have weak unions, but they are unlikely to build the social solidarity needed to efficiently locate schools and roads and tackle corruption.
Violent conflict also becomes more common. Côte d’Ivoire imported large numbers of Muslim workers from Burkina Faso and other Sahelian countries to work on its cocoa plantations in its verdant and relatively Christian south. In 1922, Muslims formed just 6 percent of the total population, but this had reached nearly 40 percent of the total by the time of the last census in 1998, over 10 points more than the Christians. In 2000, once the country democratized, a civil war broke out between the now largely Muslim north and mainly Christian south, with southern politicians claiming that many northerners were not Ivoirian and should not be voting. Ethno-demographic shifts were not the only cause, just as the increase in Sunni Muslims in Lebanon due to the exodus of Palestinian refugees from Israel was not the only cause of Lebanon’s disastrous 1975-90 civil war. Yet these demographic shifts cannot be discounted as a major factor in such conflicts. From Xinjiang in China to Kenya’s highlands to West Papua, what David Laitin and James Fearon (2011) call “sons of the soil” conflicts have regularly broken out between natives and migrants. This is hardly conducive to investment and growth.
In the West, the rise of populist right parties is linked to higher levels of immigration. In Europe, James Dennison and Andrew Geddes’s (2019) study of 10 countries between 2005 and 2016 found a significant correlation between changes in immigration levels, the salience of immigration for voters, and populist right voting. The United States is a partial exception to this rule insofar as universalist conservatism—a fusion of the religious right, neoconservatism and fiscal conservatism—among conservative media and political elites kept the immigration issue away from the center of federal politics. But, beginning with Pat Buchanan and Pete Wilson in the early 1990s, moving through to local anti-immigration ordinances in the 2000s, and then, via the grassroots Tea Party and congressional Republicans to Trump in 2015, immigration broke through as a central issue in American politics.
The counter-claim that diverse areas like major cities do not vote for populism, and that therefore diversity has nothing to do with the rise of populism, is misleading. Once one accounts for age, education and nonwhite share, there is very little difference in support for national populism between diverse regions and homogeneous ones. London, for instance, voted to remain in the European Union, but it is only 45 percent white British and is younger and has more residents with college degrees than the rest of England. 38 percent of the capital still voted Leave, and white working-class Londoners are as likely as rural white working-class voters to have voted Leave. In Eastern Europe, it is countries located inside the EU and thus exposed to potential immigration, like Hungary, rather than outside it, like Serbia, that have seen an upsurge of national populism.
The rise of populism is a prelude to a more intractable political polarization as the basis of politics shifts from class and economics (left vs right) to culture (nationalist vs cosmopolitan). In Britain, the Conservative Party now has a more working-class composition than the Labour Party, something absolutely unthinkable from the 19th century until 1997. In the United States, the Republicans are also becoming much more working-class, while the Democrats control the wealthiest ZIP codes in the country. The reason for this change is that attitudes to immigration have become more important than views on economic redistribution for voting.
Meta analyses of immigration attitudes, notably Hainmueller and Hopkins (2014), find that people’s views on immigration have virtually nothing to do with their income or employment situation. Instead, they are shaped by deep-seated psychological preferences. Whether one views difference as disorder or as interesting, whether one views change as loss or as stimulating, is half heritable. Trying to teach or shame these inclinations out of people only leads to resentment (Stenner 2005). We thus see radically different responses to immigration within the white population of western countries. The populist response to immigration triggers a moralistic politics among what Sobolewska and Ford (2020) term “identity liberals,” many of whom are younger, urban, and highly educated. This demonization of the white working class and populist conservatives, such as Brexiteers or Trump voters, in turn produces blowback against the elite, setting in motion a toxic ratchet of accusation and counter-accusation, a zero-sum conflict with no room for compromise.
How does this affect economic freedom and growth? A secondary reflex arising out of anti-immigration populism is for populists to sour on globalization, withdraw from international institutions, and move toward isolationism in foreign policy. This is because, as Yotam Margalit (2019) has shown, hostility to immigration and increased diversity tends to shape economic attitudes such as support for free trade. This is not a straightforward relationship: Brexit reduced Britain’s ties to Europe but opened it up, potentially, to ties to non-EU markets. Yet the rise of populism seems linked to more protectionism and mistrust of multilateral institutions, which can hardly be conducive to global growth.
There are some counter trends. Electorally, the rise of populism and shift of the basis of politics from economics to culture benefits the right, with the European left recording their worst results since 1945 in country after country as the white working class shifts right. This probably weakens the left and protects economic freedom in an age of surging inequality, but we also must bear in mind that left-wing anti-immigration voters change the character of the conservative parties they join. Since 2017, Britain’s Conservative Party has embraced high public spending and the “leveling up” of poorer regions because they get more of their seats from these areas than used to be the case under Thatcher. In the United States, fiscal conservatives with their tax cuts still dominate in Congress, but Trump did particularly well among left-leaning anti-immigration Republicans who support Social Security, Medicare, and infrastructure spending. Do not discount the possibility of a more Michael Lind/Theodore Roosevelt-style populist Republicanism emerging in the future and tacking left on economics but right on culture.
I am more of a believer in the virtues of a welfare state than Powell and Nowrasteh. I also think a world in which we must be as attached to strangers as to those we have special ties to is a worse one than the one we currently inhabit. But even if my objective function was merely to maximize global wealth and economic freedom, I think open borders is the wrong move. It will result in increasingly fractious host societies, stimulating populism, polarization, protectionism, and even civil violence.
There is no getting away from the fact that immigration levels in modern societies with welfare states and inclusive citizenship must be calibrated to the rate of assimilation. Only where immigration is relatively similar in ethnic composition to the host population or where native-born fertility is high enough to minimize the rate of change, as in the United States during the 1776-1840 and 1860-90 periods, can higher immigration work. It took 70 to 80 years for the ethnic diversity of the America of 1900 to fully melt. If anything, this suggests that immigration levels should fall rather than rise in the coming decades so that assimilation can reduce diversity to levels more conducive to national solidarity. When that process succeeds, a more generous policy can be considered once again.
References
Alesina, A., et al. (1999). “Public Goods and Ethnic Divisions.” Quarterly Journal of Economics 114(November): 1243–1284.
Dennison, J. (2019). “How Issue Salience Explains the Rise of the Populist Right in Western Europe.” International Journal of Public Opinion Research 32(3): 397-420.
Dinesen, P. T., et al. (2020). “Ethnic diversity and social trust: A narrative and meta-analytical review.” Annual Review of Political Science 23: 441-465.
Easterly, W. and R. Levine (1997). “Africa’s Growth Tragedy: Policies and Ethnic Divisions.” Quarterly Journal of Economics 111(4): 1203-1250.
Fearon, J. D. and D. D. Laitin (2011). “Sons of the Soil, Migrants, and Civil War.” World Development 39(2): 199-211.
Habyarimana, J., et al. (2007). “Why does ethnic diversity undermine public goods provision?” American Political Science Review 101(4): 709-725.
Hainmueller, J. and D. J. Hopkins (2014). “Public Attitudes Toward Immigration.” Annual Review of Political Science 17: 225-249.
Margalit, Y. (2019). “Economic insecurity and the causes of populism, reconsidered.” Journal of Economic Perspectives 33(4): 152-170.
Sobolewska, M. and R. Ford (2020). Brexitland: Identity, Diversity and the Reshaping of British Politics, Cambridge University Press.
Stenner, K. (2005). The authoritarian dynamic, Cambridge University Press.