Promises, Promises

Many economists are so religiously wedded to their models that it takes an awful long time, and an awful lot of contrary evidence, to shake them from what they learned in graduate school. We are now in the midst of such a reappraisal when it comes to globalization in general, and immigration in particular. Larry Summers’ new oped in the Washington Post illustrates just how much momentum this rethinking has gathered.

It is clear after the Brexit vote and Donald Trump’s victory in the Republican presidential primaries that electorates are revolting against the relatively open economic policies that have been the norm in the United States and Britain since World War II. If further evidence is needed, one need only look to the inability of Congress to pass legislation on immigration reform and the observation that the last four candidates left standing in the U.S. presidential contest all oppose the Trans-Pacific Partnership…Studies are produced about the jobs created by trade agreements, the benefits of immigration and the costs of restrictions on trade. In most cases, certainly including the cases for TPP and against Brexit, the overall economic merits are clear. But in this advocacy there is a kind of Gresham’s Law (the economic principle that bad money drives out good) whereby bolder claims drive out more prudent ones, causing estimates to often be exaggerated and delivered with far more confidence than is warranted. Over time, this has caught up with the advocates of integration.

And it’s about time, I would add!

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Brexit, Immigration, and the Experts

A lot of commentators seem to be singling out immigration as a root cause of the dissatisfaction that led the British people to vote to leave the European Union. Here’s Reihan Salam in Slate:

Ever since the 1960s, when large-scale Commonwealth immigration sparked intense controversy, the Conservatives have been seen as the more anti-immigration party. And during the Blair years, Conservatives struggled to shake their image as narrow-minded bigots…In more recent years, however, the challenges presented by mass European immigration complicated this neat picture of the prejudiced Conservative…Once the less-skilled immigrants at the heart of the immigration debate were Poles and Bulgarians rather than blacks and South Asians, one could more credibly argue that anti-immigration sentiment was driven by concerns about the fiscal and environmental impacts of immigration, not a blind hatred of outsiders.

Donald Trump has weighed in as well:

I think a lot of it has to do with immigration…[The British people] got tired of seeing stupid decisions, just like the American people are tired of seeing stupid decisions…the border where people just flow across the border like Swiss cheese…I really do see a parallel between what’s happening in the United States and what’s happening here. People want to see borders. They don’t necessarily want people pouring into their country that they don’t know who they are and where they come from.

And here’s David Frum in the Atlantic:

Is it possible that leaders and elites had it all wrong? If they’re to save the open global economy, maybe they need to protect their populations better against globalization’s most unwelcome consequences—of which mass migration is the very least welcome of them all?

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On Brexit

There’s not much I can add that hasn’t already been said. But Larry Summers makes a point that touches on the themes in We Wanted Workers, so I wanted to highlight the point:

The political challenge in many countries going forward is to develop a “responsible nationalism”.  It is clear that there is a hunger on the part of electorates, if not the Davos set within countries, for approaches to policy that privilege local interests and local people over more cosmopolitan concerns…We now know that neither denying the hunger, or explaining that it is based on fallacy is a viable strategy.

As I put it in the title to the concluding chapter of my book, policy makers face a very simple question: “Who are you rooting for?”

The British people had a choice, a choice put to them in a very stark fashion by the long list of “expert” doomsayers who supported Remain (and who obviously benefited from the way things were yesterday). The more I thought about the arguments made by the experts, the more I felt that a typical voter’s choice could be summarized by:

Give me liberty…or give me a 1.2% higher per-capita GDP.

The British people chose wisely.