A Modern Migration Theory

An Alternative Economic Approach to Failed EU Policy

Peo Hansen

• Publisher: Agenda Publishing
• Year: 2021
• Print ISBN: 9781788210553, 9781788210546
• eBook ISBN: 9781788214476
• Topic: Social Sciences
• Subtopic: Economic Policy
• Index: Social Sciences

2023 EUSA Book Award - Honorable Mention

Current migration policy is based on a seemingly neutral accounting exercise, in which migrants contribute less in tax than they receive in welfare assistance. A "fact" that justifies increasingly restrictive asylum policies. Peo Hansen shows that this consensual cost-perspective on migration is built on a flawed economic conception of the orthodox "sound finance" doctrine prevalent in migration research and policy. By examining migration through the macroeconomic lens offered by modern monetary theory, Hansen is able to demonstrate sound finance's detrimental impact on migration policy and research, including its role in stoking the toxic debate on migration in the European Union. More importantly, Hansen's undertaking offers the tools with which both migration research and migration policy could be modernized and put on a realistic footing.

1

Migration: the “mother of all problems”

In a European survey conducted by the French think tank Fondapol in 2017, respondents were asked to consider the following statement: “It is our duty to welcome in our country refugees fleeing war and poverty.” Sixty-four per cent of those surveyed “agreed with or strongly agreed with” this statement. Given the anti-immigration climate following in the wake of the 2015 Syrian refugee crisis, this should strike the reader as surprisingly high. But the survey also included another statement: “We cannot let in more refugees because that would harm the country’s economy.” Curiously, 61 per cent of the survey respondents also “agreed with or strongly agreed with” this statement (Fondapol 2017).

In this book, I argue that we must come to terms with this contradiction if we are to gain a proper understanding of the so-called refugee crisis in 2015–16 and the persistence of the migration issue’s political explosiveness in Europe. For one, it seems safe to say that the future existence of international protection in the European Union will come to hinge on the resolution of what we may call a clash of moral and fiscal imperatives. That is to say, although many people still think that we have a moral duty to protect “refugees fleeing war and poverty”, the majority are also convinced that society cannot afford to realize this duty. Were we to leave out the part about refugees “harm[ing] the country’s economy” and instead simply ask people whether they agree or disagree with a statement such as “Refugees and refugee reception constitute a net cost, at least in the short term”, then I am certain that close to 100 per cent of respondents would agree.

The reason I feel confident of such an outcome is that practically all politicians, news media outlets and scholars subscribe to the view that refugees constitute a net cost or a fiscal burden. This does not mean that they necessarily have anything against refugees or migration in general. It just means that they are all convinced that certain types of migrants weigh on the public purse, at least initially. As one scholar put it in a recent publication:

The refugees represent a fiscal burden for the host countries at least short and medium term. Under these conditions refugee migration is unable to help to alleviate the aging related fiscal burden of the host societies, on the contrary, it contributes to its worsening. Thus, when the majority thinks that refugees represent a fiscal burden (they “take out more from the public purse than they pay in”), they are not wrong this time. It is not possible to argue against this with solid empirical evidence. Naturally, the moral (and legal) obligation argument for accepting the refugees is still valid but it couldn’t be underpinned with further economic reasoning. The moral obligations and the economic benefit are in conflict here.

(Gál 2019: 352)

If refugees and low-skilled migrants – i.e. those who are said to contribute less in taxes than they receive in welfare assistance – are singled out as a net fiscal cost for the receiving society, this clearly makes for a poor starting point for their integration. If people believe that refugees constitute a fiscal burden, integration is synonymous with a loss on the part of the host population – a loss many are not ready to take, particularly those who are struggling financially. In response to this, the proponents of the cost perspective simply say that to mask or hide the truth about refugee migration – or any other migration deemed costly – makes for an even worse place to begin integration. Many would add that tampering with the truth will only aid the anti-immigration populists (a particularly common retort from mainstream political parties, pundits and scholars). Since so few challenge the basic principles and maths of the cost perspective, it has gained an air of unassailable truth. But those who claim that they side with accuracy in order to avoid playing into the hands of the anti-immigration right do something even worse than allowing the cost assumption to stand unchallenged. They give it new life and credibility by insisting it be acknowledged in advance. It is like starting a discussion about equal pay by insisting that we acknowledge that women are a fiscal burden on men because they pay less in taxes – and that trying to diminish or hide this “fact” only plays into the hands of the sexists.

This book is not just an argument to debunk the cost perspective’s detrimental impact on integration and inclusion. It will also, and more importantly, demonstrate that the cost perspective builds on a flawed economic conception. Much of this is attributable to the heavy imprint of the orthodox “sound finance” doctrine on migration policy and research – the assumption that governments face a budget constraint much in the same way as households, municipalities and businesses. Money spent is money lost, so to speak, and if the state does not “live within its means” it will sooner or later face a solvency crisis in a principally similar way to a household that fails to pay its bills (for more on this fallacious analogy, see Ehnts 2017; Mitchell & Fazi 2017; Wray 2015). As a consequence, when refugees, low-earning migrants and their families arrive in a country and receive social assistance, this means that the country also incurs a net cost or a fiscal burden. Another way of putting this is to say that there is an inherent trade-off between migration and the welfare state, also expressed as the “numbers versus rights trade-off” (Ruhs & Martin 2008). Put simply, we either have high levels of immigration or we have a sustainable welfare state, but we cannot have both. Or, in a different scenario, we either admit many migrants whose access to the welfare state is restricted, or we admit very few migrants who all receive equal treatment in terms of welfare state access. Of course, given the household budget accounting involved, if a country admits many high-skilled, high-earning migrants, these will not impact negatively on the public purse, although their non-working spouses and children may.

The notion of a migration–welfare trade-off makes up an important baseline and consensual position within much research on migration. As one of the world’s foremost inequality scholars, migration experts and former World Bank lead economist Branko Milanovic (2016a: 152) has it: “We can debate the sharpness of the trade-off, but we cannot deny its existence.” This book will demonstrate why this assumption and outlook is both conceptually and empirically mistaken.

An intriguing aspect of the cost perspective is that it cuts across political, theoretical and ideological divides. This is what lends it its seemingly incontrovertible status. Whether pro- or anti-immigration in the political world, whether advocating less or more immigration control in the academic policy world or whether endorsing a mainstream or Marxist theoretical perspective, the fiscal cost and trade-off assumptions remain constant.

Milanovic is a case in point. He wants to see more migration from poor countries to rich countries, he likes to pay homage to Karl Marx and he despises the Davos class (Milanovic 2019). But he also claims to be acutely aware of the fiscal constraints in the real world. “The arrival of migrants,” Milanovic stresses (2016b), “threatens to diminish or dilute the premium enjoyed by citizens of rich countries, which includes not only financial aspects, but also good health and education services.” In his attempt to “make greater migration acceptable to the native population of the rich countries”, therefore, Milanovic makes a case for the second trade-off scenario mentioned above. He thus proposes that rich countries admit more migrants but make sure to restrict their social and residence rights, affirming that “[r]‌estricting the citizenship rights of migrants in this way would assuage the concerns of the native population”, to which he adds: “The more we insist on full rights for all residents, the less longstanding residents will be willing to accept more migrants” (2016b). If only “longstanding residents” are made aware, in other words, that policies are going to be enacted that make low-skilled, low-earning migrants worse off, this will soon soften the edges of the migration debate and facilitate harmonious relations between natives and immigrants. It is a bit like arguing that white people’s awareness of black people’s inferior rights portfolios in Jim Crow America or apartheid-era South Africa made white people more welcoming and hospitable towards black people. Today, many EU citizens are already aware of the disproportionate precariousness faced by low-skilled labour migrants toiling in, for instance, agriculture, the service or care sectors across the European Union, with little or no access to social and labour rights. But who would seriously argue that such awareness has made EU citizens more tolerant or accepting towards migrants? In Milanovic’s quest to figure out ways to “pay for increased migration” (2016a: 152), such policy proposals – or “discriminatory treatment”, as he terms it – are both necessary and beneficial to all (2016b). Migrants, Milanovic (2016b) suggests, “could also be made to pay higher taxes since they are the largest net beneficiaries of migration”.

Although they are far apart on the utility of Karl Marx’s ideas, Milanovic’s tiered or discriminatory approach to migration is almost identical to the one adopted by Deutsche Bank’s global head of research, David Folkerts-Landau. As Folkerts-Landau (2016: 34) outlines his blueprint:

For example, why not ask migrants, but not refugees, to pay a higher rate of tax until they naturalise as citizens? Or compel migrants to contribute to social service for a certain period in order to earn their citizenship? The general principle is to loosen physical borders and at the same time build stronger ties of obligation – fiscal and otherwise. A new settlement along these lines would allow the current wave of migration to become a political and economic opportunity, far outweighing the fiscal costs, discomforts and political risks. A tiered welfare system is the most effective tool to reduce the integration strains from immigration – and an equitable solution to the legitimate objections by nativists to unfettered welfare access for those yet to make their contributions to society.

A third case in point would be the real Marxist and former head of Cambridge’s sociology department, Göran Therborn. He is a solid anti-racist and he shares none of the anti-egalitarian and pro-discrimination approaches of Milanovic and Folkerts-Landau (e.g. Therborn 2018a). This notwithstanding, Therborn’s perspective fails to steer clear of the orthodox cost perspective. In a recent book on class in Sweden, Therborn (2018b) brings up the issue of migration and how it is being manipulated by liberals and the right to hide class conflict, systemic problems and exploitation. But, instead of showing how the claims about migration’s net costs also are part and parcel of this manipulation, Therborn (2018b: 34) writes: “If we are to believe the Moderate party [conservative/neoliberal right], the net cost of migration amounted to 40 billion crowns in 2018. That is 0.9 per cent of Sweden’s national income. The wealth hidden abroad by the Swedish upper class is estimated at 500 billion crowns by leading researchers, or around 10 per cent of national income.”

This discrepancy is then graphically illustrated by placing a migration bar next to a tax haven bar. When seen in such comparative light, the tax haven bar of 10 per cent greatly dwarfs the migration bar of 0.9 per cent. The message is clear: migration costs are small in comparison to the huge amount of unpaid taxes stored in tax havens. By the same token, the exercise serves to illustrate politicians and the media’s disproportionate alarm around migration costs.

There is of course nothing new about Therborn’s maths, this being a time-honoured way of drawing attention to skewed and class-biased perspectives on what various things really cost. Needless to say, this is also a very common strategy among individuals and organizations advocating refugee and migrant rights. On the face of it, it is hard to disagree with this approach. Yes, the argument goes, hosting and integrating refugee incurs a cost, but it is a small one in comparison to so many other things in the budget. The bottom line is this: we can afford it. “Britain has the sixth largest economy in the world,” says the co-leader of the British Green Party, Jonathan Bartley; “we can afford to look after refugees and asylum seekers if we want to” (Independent 2018).

Again, my intention here is not to deride those who do the cost comparisons between refugees and wealthy tax dodgers and who argue the sympathetic case for refugee reception being within our means. It is, rather, to further press my point about the general agreement around the mistaken cost perspective – from right to left, from anti- to pro-immigration, from mainstream to Marxism. The dividing line instead runs between those who think we can afford it and those who think we cannot, those who think the costs are manageable and those who think they pose a fiscal risk. There is of course a literature that critiques the trade-off theory; yet it stops short of questioning the theory’s basic sound finance premise.

What I also wish to emphasize is that not all Europeans are anti-immigration, anti-asylum and racists; far from it. To verify this, we need look no further than to the extensive and long-standing work conducted by refugee movements and related non-governmental organizations (NGOs). We can also consult numerous polls. Even so, all are convinced that refugee reception constitutes an outlay that subtracts from the government budget and its capacity to meet other welfare needs. Of course, those who support refugee admission and human rights may not always express it in such negative terms. Rather, their claim is that despite the extra spending we can still afford it. This immediately opens the door for those, on both the right and the left, who hold that the refugee-welcoming people are just a bunch of well-to-do do-gooders, all living at a safe distance from those deserving nationals, or, if on the left, the “left-behind” working class who, allegedly, foot the bill for the refugee party. Of course, they can afford it, but the poor cannot. This, by the way, was the precise platform on which the leftist Aufstehen (Stand Up) movement in Germany sought to build its case when it was launched in 2018. As put by Deutsche Welle (2018), this was “the movement” that “could present a leftist case for limiting immigration” – or, more accurately, the movement that obliviously sold sound finance orthodoxy as a friend of the working class.

Given this, the cost conception may be crowned the common denominator among all the actors, organizations and institutions that in one form or another try to influence the course and content of migration and asylum policy – be they from the governmental, EU-supranational, non-governmental, Church, think tank, activist or academic worlds. It is the one thing that no one can ignore. Again, governments and pro-asylum NGOs draw radically different conclusions from the conception of migration costs, the former saying we cannot afford it, the latter saying we can, although the latter will concede, when pressed, that, of course, there are outer financial limits.

As everybody is aware, however, in terms of policy influence, there is no equilibrium between these two positions. Hence, in today’s migration debate and policy-making there is no room for the “yes, we can afford it” perspective. Instead, it is the “no, we cannot afford it” perspective that has the upper hand. Accordingly, this book will attend closely to the consequences of the latter’s dominance and, from there, point to ways in which this dominance can be challenged. I will do this by examining the cost and trade-off perspective’s impact on two central migration policy fields and crisis spots in the European Union: (1) labour migration; and (2) refugee migration, or asylum. By introducing the alternative macroeconomic framework provided by modern monetary theory, I will also show why our current cost perspective within both scholarship and policy-making is deeply flawed. From there, finally, I bring this to bear empirically on the economic and societal impact of the 2015 refugee crisis, looking specifically at the consequences of the increased government spending on refugee reception and integration in Sweden. Sweden is the country that, proportionally speaking, has admitted the most refugees in the European Union, and i...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Epigraphy
• Contents
• Preface and acknowledgements
• Foreword
• 1 Migration: the “mother of all problems”
• 2 The fiscal impact of migration
• 3 A modern migration theory
• 4 Demography, security and the shifting conjunctures of the European Union’s external labour migration policy
• 5 Labour migration in a sound finance policy logic
• 6 Why EU asylum policy cannot afford to pay demographic dividends
• 7 “We need these people”: refugee spending, fiscal impact and refugees’ real bearing on Sweden’s society and economy
• 8 Conclusion
• Bibliography
• Index