Wed, Jul 26, 2006 - Page 9 News List

Migration laws may be the end of globalization

Limiting migration from poor countries to richer ones threatens to put a stop to the present free movement of capital and goods

By Branko Milanovic

The world's first wave of economic globalization, led by the British Empire in the 19th century, came to an end literally with a bang on a Sunday afternoon in 1914, when Gavrilo Princip killed (with two uncannily well-aimed bullets) Austria's Archduke Franz Ferdinand. The years that followed witnessed pan-European carnage, instability throughout the 1920's and the rise of fascism and communism, culminating in the death of countless millions during World War II.

Is today's globalizing era also coming to an end? If so, it may not necessarily end with a repeat of the slaughter of the last century, but with an economic retrenchment that brings economic stagnation and consigns billions of people to grinding poverty.

Various candidates have been proposed for the role of globalization's assassin. But one little noticed, yet likely, aspirant has been sneaking up on the world economy: the growing tendency to limit the free circulation of people, to "fence in" the rich world. We see the menace of this tendency constantly nowadays, but we perceive it in such a seemingly unthreatening way that we may well become accustomed to it rather than arresting it.

Globalization means free movement of capital, goods, technology, ideas and, yes, people. Any globalization that is limited to the first three or four freedoms but omits the last one is partial and not sustainable. As soon as people cannot move, there will be little to stop governments from limiting the free movement of goods or other factors of production. After all, if over-populated countries with high unemployment cannot export people, why not reach for higher tariff barriers to protect the jobs they have?

But what of the unemployed who become locked into their societies? The war on terror has shown us the dangers that can arise from the social frustrations that often result.

Nevertheless, the "fencing-in" of the rich world continues apace. The US plans to construct a veritable "Mexican Wall" to keep poor people from crossing into Texas or California. Likewise, hundreds, if not thousands, of Africans die every year trying to reach the shores of Fortress Europe.

Efforts to restrict people's movement between countries expose the soft underbelly of globalization: the deepening gap between countries' mean incomes. Rather than poor countries growing faster than the rich (as we would expect from Economics 101), mainly the reverse is true.

Between 1980 and 2002, average annual per capita income growth in the rich world (defined as the "old" OECD members) was almost 2 percent, compared to just 0.1 percent in the 42 least developed countries. Indeed, average income in Latin America is now barely above its 1980 level.

This huge gap spurs migration. People nowadays know much more about conditions in different countries than they did in the past, and if moving across a border means that their income can be multiplied several-fold, they will try to do it.

This is why today's most contentious borders separate economies where the income gaps between people on the two sides are the greatest. There are four such global hot spots: the borders between the US and Mexico, Spain and Morocco, Greece (and Italy) and the southern Balkans, and Indonesia and Singapore (or Malaysia). The income gaps range from more than seven to one in the latter case to 4.5 to one in the case of Spain and Morocco, 4.3 to one between the US and Mexico, and four to one between Greece and Albania.

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