Germany and Open Borders

Last month’s issue of the Journal of Economic Literature published my take on the perceived economic benefits from open borders. Some advocates claim that open borders would generate tens of trillions of dollars of additional wealth worldwide, so that policy makers in the industrialized world are stupidly walking by–and leaving behind–“trillion-dollar bills on the sidewalk.”

I never believed those arguments, but it wasn’t until I saw a presentation by one of the leading lights in the open-borders camp that it dawned on me that the whole edifice was built on quicksand. So I started working out simple examples to use in my immigration classes some years ago, with a slight expansion of the model each time I retaught it, until it all came together in the JEL paper.

The basic point of that paper is that those trillion-dollar bills are manufactured by an economic model so far removed from reality that it makes you wonder whether some people are living in a parallel universe. Along with the huge increase in world GDP, that model also predicts that over 5 billion people will move. Somehow that small–and very inconvenient–detail is glossed over more often than not. And it’s easy to see why: the model hinges on the assumption that, despite the billions of movers, nothing will happen to the cultural, political, social, and economic infrastructure of the receiving countries.

Which brings me to Germany. This headline from the New York Times three months ago made such an impression that I took a screenshot of it immediately, knowing that I would use it someday. And today is the day.

German Village

I thought to myself: this is almost like a natural experiment in open borders. Subsequent news reports state that at least 600 of those 750 refugees did settle in the village of Sumte, a “bucolic, one-street settlement of handsome redbrick farmhouses [with] more cows than people.” I’ve looked around the web to find the gloating from the open-borders camp about how their theories were proved right; how the economic pie accruing to those 852 fortunate people increased dramatically and everybody lived happily ever after. But I haven’t found it.

The gloating has not materialized because the model that manufactures those trillion-dollar bills is very flimsy. It is inconceivable that Sumte was unaffected by the arrival of several hundred refugees. And I would not be surprised if the changes had an adverse impact on the economic and social fabric that holds the town together, leading to a quick evaporation of those huge gains, and perhaps even to a net loss. Reality has a way of intruding into promises that sound too good to be true.

Germany is obviously very concerned about this and I’ve now been interviewed by the German media a couple of times. The interviews were published in German so I have no idea what they say. One appeared in WirtschaftsWoche, a leading German weekly, and the other in the Frankfurter Allgemeine Zeitung.

Wouldn’t it be fun to be part of a research team that visits the village of Sumte in a few months to examine the aftershocks of the social, cultural, and economic disruption?

Author: George Borjas

I am a Professor of Economics and Social Policy at the Harvard Kennedy School.