Radical Markets

 

Who says economics is the dismal science? Actually, no one these days who’s paying attention. The wonk-o-sphere is roiling with clever fixes to seemingly intractable problems ranging from generating fiscal stimulus without creating deficits, to minimizing the chaos in matching med school graduates with residency programs, to getting middle-school kids to eat their spinach. Joining the fray are Eric Posner (University of Chicago Law School) and E. Glen Weyl (principal researcher at Microsoft and a research scholar in economics and law at Yale University), both distinguished scholars and public intellectuals. Their new book, Radical Markets: Uprooting Capitalism and Democracy for a Just Society,* offers some startling new ways to use markets to manage public policy. ¶ In this excerpt, Posner and Weyl puzzle out a way to dramatically increase cross-border migration (and sharply reduce global poverty) without stirring populist wrath. Would it work? Probably, if that populist wrath is, in fact, closely linked to economic interest. At very least, it is the sort of proposal that reminds one and all that there’s more to economics than the dead-end conflicts between social welfare liberals and market fundamentalists. — Peter Passell

*Copyright © 2018 by Princeton University Press. Reprinted by permission.

Published July 31, 2018

Illustrations by Jon Krause

 

Globalization has transformed many aspects of society and yet left other parts virtually untouched. Foreign products surround us. Foreign tourists swarm our cities and talented foreign workers populate our startups, banks and universities. Yet, for all the controversies about refugees and (in the United States) illegal immigration, migration of people with ordinary skills only proceeds at a trickle.

From the standpoint of economics, this “migration imbalance” is puzzling. Economists believe that global wealth increases when all factors of production are allowed to flow across borders to the locations where they can be most efficiently employed. What is special about migration?

The Origins of Free Trade

Long-distance movements of goods and tools have been a feature of human civilization since the beginning of agriculture. Mass migrations were also a feature of early history. Many of the great empires were established and later destroyed by nomadic tribes that flooded from the North Asian steppe.

The advent of long-range sea power in Europe in the 15th century brought this era to an end. By that time, most of the planet was occupied by sedentary agricultural societies. Europeans discovered sea and land routes to most of the world and colonized regions viewed as having “inferior” civilizations. Trade and plunder of colonies expanded as the skill of navigators improved.

During the 16th and 17th centuries, the dominant philosophy uniting colonialism and trade was mercantilism. Mercantilists believed that sovereigns should try to sell goods abroad while importing as little as possible, allowing them to accumulate capital — ideally in the form of hard currency. Some mercantilists advocated unrestricted immigration, hoping that migrants would compete with native workers to drive down wages. For the same reason, they were wary of emigration, which reduced the size of the labor force and hence the economy’s ability to export.

Mercantilist policies burdened ordinary people but generated savings for the state that rulers could use to achieve military supremacy and maintain public order. Those rulers saw their populations as resources to be exploited rather than citizens whom they served.

During the late 18th century, radical thinkers developed a new theory of trade. Jeremy Bentham, Adam Smith and David Hume shifted the focus away from the interest of sovereigns in accumulating wealth and toward the desire of ordinary people to enjoy prosperity. They believed that economic freedom was critical to maximizing the total welfare that a nation’s economy could deliver to its citizens. With their focus on the benefits of markets, they embraced free international trade and opposed monopolies and state-imposed restrictions of domestic markets like price controls.

Before Migration Mattered

While the early radicals passionately advocated free trade, they said little about migration. This might seem odd: the logic of free migration and free trade is the same — namely, that economic openness generates wealth for nearly everyone. Yet free trade overwhelmingly dominated free migration in their thought.

One reason was that, in the 18th and 19th centuries, the gains from trade were far more important than the gains from migration. That’s because persistent differences in mass living standards across countries were unknown until the late 19th century. Even the most extreme gaps in estimated consumption, such as between China and the United Kingdom, were only a factor of three. This contrasts with the 10 to 1 gap between the two countries that opened up by the 1950s.

A natural way to measure inequality is to determine the percentage by which an average individual’s income could be increased if income were equally distributed. To take an extreme example, suppose there are two individuals, one with income of $1 million and one with income of $1,000. If we equalized income, the first person’s income would fall to $500,500, or nearly 50 percent. The second person’s income would rise to $500,500, an increase of 500 times, or 50,000 percent. Thus, equalizing incomes would cause an average percentage increase of slightly less than 24,975 percent.

By this measure, inequality across countries increased from about 7 percent in 1820 to about 70 percent in 1980. This cross-country inequality has since retreated to about 50 percent, thanks to the development of China and India. On the other hand, average inequality within countries has changed only gradually, increasing from about 35 percent in 1820 to about 38 percent at its peak just before World War I, and then declining to a low of 27 percent in the 1970s.

 
Ethno-nationalist sentiments peaked at the outbreak of World War II. Afterward, Western leaders tried to build an international system that would generate prosperity and prevent economic chaos and nationalist conflict from igniting another war.
 

It has fallen a bit more since, to 24 percent. This surprising result is explained by the fact that the growing inequality within wealthy countries was offset by the reduction of inequality within many poor countries.

Together these patterns imply that inequality across countries has gone from a relatively insignificant phenomenon, accounting for a little more than 10 percent of global inequality in the 1820s, to being the dominant source of global inequality, accounting for two-thirds or more in the second half of the 20th century.

This puts into quantitative perspective the very different world we confront today, compared to the one 19th-century political economists faced. Theirs was a world where a worker in one country enjoyed a standard of living similar to that of a worker in any other. In such a world, it was natural for the radical thinkers to focus on the freeing of markets for goods and capital from aristocratic privilege, such as the ending of the British Corn Laws, rather than emphasizing free migration.

Major intellectual debate about migration began only in the late 19th and early 20th centuries. In the United States, it was stimulated by the enormous waves of immigration provoked by strife and famine in Europe and the lure of newly discovered gold — as well as by rapid economic development that attracted millions from Asia, too. By this time, attitudes among economists toward migration had become more complicated, partly in response to public sentiment.

Karl Marx, for example, worried that strategic use of Irish migration by British capitalists divided the international working class and undermined socialism. Radicals and progressives, including John Stuart Mill and Henry George, shared these sentiments.

In the early 20th century, a decisive shift in attitudes took place. With the growing affordability of travel across continents and oceans, and the rising differentials of wages across countries, the economic advantages of migration greatly increased.

The United States slammed its doors in the late teens and 1920s. In Europe, with the rise of ethno-nationalistic sentiments, countries tried to keep out those who were thought to pollute their cultural heritage or racial gene pool.

Globalization

These ethno-nationalist sentiments peaked at the outbreak of World War II. Afterward, Western leaders tried to build an international system that would generate prosperity and prevent economic chaos and nationalist conflict from igniting another war. Among wealthy countries, there was a renewed commitment to open trade and international and regional governance institutions. Starting in the 1980s and 1990s, these international commitments spread more broadly, encompassing China and other parts of Asia, Latin America and Africa. But migration still received little consideration.

The postwar economic system stood on three pillars: international trade, monetary and macroeconomic stabilization, and development finance. Each pillar was represented by an institution: the GATT, the IMF and the World Bank. This patchwork of international cooperation was mirrored at the regional level, and in the case of Europe, these regional institutions became especially strong.

Throughout this period, gaping inequalities between rich and poor countries, together with dramatic advances in transportation and information technology, stirred citizens of poor countries to migrate to wealthier ones. In Europe, governments encouraged migration for post-war reconstruction; in the United States, the government permitted Mexicans to cross the border to engage in seasonal agricultural labor. But political opposition to these policies ensured that they were temporary and often involved winking at illegal immigration. But whether legal or illegal, migration never reached the level that would equalize demand in the host countries with the supply of people willing and able to migrate.

In Europe, migration was institutionalized. Citizens were permitted to move to any member state for a job. But linguistic and cultural barriers kept most people home, and income differences between European countries were modest by global standards, reducing the incentive for migration.

Where migration did take place, it typically involved movement from lower-wage Eastern Europe to higher-wage Western Europe, which generated a political backlash in the host states. Additional tensions were created in 2015 and 2016 when Europe grudgingly accepted a massive influx of refugees from Syria and other countries in the Middle East and southwest Asia.

But overall, the amount of migration throughout the world has remained limited relative to the potential gains. Those promoting globalization, with their focus on capital rather than on ordinary people, failed to ensure that welfare gains would be widely shared.

The Migration Imperative

There is a consensus that the economic gain from further opening international trade in goods would be minimal. Economists estimate that eliminating all remaining barriers to international trade in goods would increase global income by only 0.3 to 4.1 percent. For global investment, the most optimistic estimate finds a 1.7 percent increase in global income from the elimination of barriers.

At the same time, the benefits of liberalizing migration have dramatically expanded. Sharp reductions in transportation costs have made the natural barriers to migration trivial. On the other hand, the potential economic benefits of migration have exploded. A typical Mexican migrant moving to the United States increases his or her annual earnings from roughly $4,000 to $14,000 — and Mexico is a wealthy country by global standards. Potential gains from migration from poor countries to Europe and the United States, especially if language barriers are low (as in the case of Haiti and France, for example), would involve gains of tens of thousands of dollars per migrant.

To take an extreme but illuminating example, imagine that the countries of the OECD were to accept enough migrants to double their combined population, presently at 1.3 billion. This would move roughly 20 percent of the global population to the OECD. Suppose, too, that each migrant on average created income gains of $11,000 annually. This would constitute an average increase of roughly $2,200 for every person on the planet — roughly a 20 percent increase in global income These gains would have transformative potential for global well-being, if they could be harnessed and shared.

 

Why Not Just Expand Existing Migration?

Some scholars who are aware of these numbers have declared that opening borders is the only morally acceptable response. While the resulting surge of migration would reduce the wages of workers in wealthy countries, global well-being would increase enormously.

The idea is not as farfetched as it might seem. The borders of the United States were open for more than half of its history, and the effects were as theory predicts: migrants benefited from higher wages. The social problems brought on by migration were often severe but manageable, and over the long term the country prospered. Today, however, open borders are impractical both economically and politically.

In their famous 1941 treatise, “Protection and Real Wages,” Wolfgang Stolper and Paul Samuelson investigated the effect of international trade in goods or labor on the incomes of various groups within different countries. They concluded that, while trade between pairs of countries always increases the aggregate wealth of both, it can have important redistributive effects.

 
Some scholars have declared that opening borders is the only morally acceptable response. While the huge surge of migration would reduce the wages of workers in wealthy countries, global well-being would increase enormously.
 

Trade tends to benefit the factors of production that a nation has in relative abundance and to hurt those in relatively scarce supply. Wealthy countries, by definition, have a greater relative abundance of capital as compared to labor than do poor countries. It is thus natural that trade and migration should both benefit capitalists in wealthy countries and laborers in poor countries at the expense of laborers in wealthy countries and capitalists in poor countries.

While the logic of Stolper-Samuelson is widely accepted among economists, the extent to which various categories of workers are harmed or helped by immigration is debated. There is significant evidence that immigration reduces the wages of native workers whose backgrounds are similar to those of migrants. For example, illegal immigration to the United States from Mexico and Central America tends to hurt native workers with low education and weak language skills. However, the effects of migration on the broader labor markets are murkier.

Some scholars believe that the native workers are, in aggregate, harmed, albeit only to a limited extent. Others argue that effects are negligible or even that most workers may benefit because migrants buy more goods that native workers produce, or take the lowest rungs on the employment ladder, pushing some native workers up into better-paying supervisory roles. Few native workers see large, direct benefits from high-skilled migration.

 

While one might assume that natives living in areas with the highest migrant populations object to migration more than others, often it is in the rural and economically depressed regions where few migrants reside that opposition to migration is strongest. They see the rest of the country moving in directions that increase their isolation and cement their consignment to the cultural periphery.

Let us sum up: migration offers enormous advantages to the migrants themselves and their families back home, to employers and owners of capital and to the high-skilled workers whom they complement and live among. But migration offers few benefits to — and imposes some costs on — those workers in wealthy countries who have already been left behind by the forces of trade, automation and the rising power of concentrated finance. In the United States, the elites who controlled government and supported migration managed to evade political opposition by refraining from enforcement of immigration laws, but in doing so they set the stage for a populist backlash. In this sense, slogans such as “America First,” while offensive to many, capture an inescapable aspect of reality.

Auctioning Visas?

Most migration to OECD countries is controlled by government bureaucrats or by private employers who can apply for visas for high-skilled workers they want to hire. Another portion of the system allows for immigration of close family members of citizens (especially in the United States) and for people of the national ethnic stock (especially in Europe). These systems are to a large extent topdown and statist, or controlled by concentrated economic interests. It is thus hardly surprising that they benefit employers and migrants the most. In short, the system of migration suffers from the same problems as our economy and democracy: a combination of inequity and often arbitrary government discretion.

In 2010, Nobel Laureate Gary Becker proposed a simple auction-based system for migration: set a quota and auction off the rights to the would-be immigrants who bid the most. The revenue raised by this radical market could be used to fund public goods or a universal social dividend.

This scheme has its limitations. However, notice that it immediately attends to a number of weaknesses in the present migration system. It ensures that a large share of the gains accrue to the public rather than to businesses. Hence, it would advance equality. As a consequence, it would soften political opposition to migration.

Recent research has shown that migration systems that rely most heavily on bureaucratic judgments of migrants’ merits (so-called points-based systems, where migrants with educational credentials and the like receive priority) tend to fail. Systems that put employers in charge seem to work better than points-based systems but, as we have noted, allocate gains mostly to employers. An auction-based system avoids both of these pitfalls.

An auction-based system could raise a remarkable amount of revenue to improve the living standards of ordinary citizens in wealthy countries while still delivering enormous benefits to migrants. Suppose that OECD countries accepted enough migration to increase their populations by a third. Suppose, too, that migrants on average bid $6,000 per year for visas.

This sum seems plausible given that even illegal Mexican migrants to the United States gain more than $11,000 annually under the current, highly inefficient system. Average GDP per capita in OECD countries is $35,000, so this proposal would boost the national income of a typical OECD country by almost 6 percent, comparable to their growth in real income per person in the past five years.

Imagine that the gains from this growth are equally distributed among all citizens. This would effectively reduce the share of the top 1 percent of income earners by 6 percent, going an eighth of the way toward restoring the low-point of inequality back in the middle of the 20th century.

Median household income for a family of four in the United States is about $50,000. This family would gain roughly $8,000 under an auction system and thus would see their income rise by about 15 percent, roughly equal to all inflation-adjusted gains for such families since the 1970s.

Gains to the migrants would be even more dramatic. Depending on who migrated, an increase of $5,000 in income (the $11,000 gain minus the $6,000 bid) would increase migrant income many-fold, given that most migrants would come from countries with typical annual incomes of a few thousand dollars or less.

Under this scenario, about half the dollar gains would accrue to OECD countries and about half to migrants and those they remit funds to back home. Because the OECD represents half of global income, the global economy would grow roughly 6-7 percent as well.

Nonetheless, the auction system in its purest form has several weaknesses. Clearly, money is not the only thing that matters in migration. Cultural fit to local communities, likelihood of committing crimes or disobeying the terms of a visa and the willingness of employers and host country citizens to welcome migrants are all crucial components of the social value of the migrant. A pure auction ignores these factors.

By the same token, positive cultural, social and economic interaction at a personal level between migrants and natives is critical to political support. A simple auction would do little to ensure this. But there is a solution.

Democratizing Visas

Under the H1-B program, employers “sponsor” migrant workers. Google can hire a software engineer from another country (say, India) by obtaining a visa subject to various restrictions. Family members of migrants who are U.S. citizens can also sponsor visas under the Family Reunification policy.

Our proposal, which we call the Visas between Individuals Program (VIP), would extend this system so that any ordinary person could sponsor a migrant worker, albeit with some adjustments to reflect the difference in circumstances, and for an indefinite period rather than a renewable three-year period. We would allow people to sponsor one migrant worker at a time, bringing a rotating cast of temporary guest workers or one migrant for a lifetime.

The major difference, of course, is that sponsors would no longer necessarily be employers or family. When Google sponsors a migrant, it gives them a job and help in settling. The worker contributes to Google’s bottom line by writing code, and Google compensates the worker out of that surplus.

By contrast, consider Anthony a construction worker with limited prospects. Anthony learns of a new program that allows him to sponsor a migrant worker. But what’s in it for him? Unlike Google, he can’t simply place the worker in an office and expect him or her to generate revenue for him.

Using a website created for the purpose, Anthony describes the sort of worker he is willing to sponsor. English is a necessity. Anthony asks for someone in his 20s who has worked in construction and has no criminal record or health problems. Anthony knows of several new building projects being planned and hopes to place a foreign worker at one of them. Anthony also wants to start a handyman business and could use the worker as an employee.

The website puts Anthony in contact with a Nepalese man named Bishal, who has been a guest-worker in the United Arab Emirates. Anthony interviews Bishal over the web, and the two agree that Bishal will work for Anthony for one year in the United States for $12,000 (five times what Bishal can earn in Nepal if he is lucky enough to get a job). They agree that Bishal will reside in Anthony’s spare room.

In the optimistic version of this story, Bishal flourishes. But what if he cannot find work, or becomes ill and needs to be hospitalized? Or what if he commits crimes, or simply disappears? It is necessary to make Anthony responsible in such a case so that sponsors have compelling incentives to screen out migrants who will not contribute.

Rules of this sort exist elsewhere in our current immigration system. For example, sponsors under family reunification programs must provide financial support for migrants who cannot support themselves. In our case, Anthony would be required to obtain basic health insurance for Bishal. If he is unable to find work, Anthony would be required to support him for as long as he remains in the country. Bishal would not be entitled to welfare. If he committed a crime, he would be deported after serving his sentence and Anthony would pay a fine. If Bishal disappeared, Anthony would also be fined.

 

For this system to work, the law must make two further adjustments. First, migrant workers must be permitted to work below the minimum wage. However, all other worker protection rules — for example, those relating to workplace safety — would apply to them. Second, immigration enforcement would need to be strengthened. If Bishal disappears, there must be a reasonable likelihood that he will be caught and deported. Existing illegal migrants would have to be fit into the system through a combination of a one-time amnesty with a path to citizenship or through sponsorship. Enforcement against future illegal migrants would have to be more stringent to avoid undermining the rights of the large new class of legal migrants and their hosts.

Many would object to this system. Perhaps to some readers it is uncomfortably similar to indentured servitude, even though migrants would be free to leave at any time. Or perhaps it just seems exploitative. But our proposal is similar in basic ways to existing programs that are broadly accepted.

Consider the H1-B program, the major avenue for migration by skilled workers. Under this program, an employer sponsors a worker by certifying that the worker satisfies various criteria and that he will be paid the prevailing wage. After the worker arrives, he must work for that employer. If the employer fires the worker, then (subject to a few exceptions) the worker must return to his home country. The major difference between the H1-B program and the program we propose is that we would allow ordinary people to be sponsors.

Could ordinary people be expected to “manage” a foreign employee? Indeed, they could. There is another program that is even closer than H1-B to the one we propose. Under the J-1 visa program, Americans can sponsor guest workers, typically young women, who work as au pairs for a year or two and live in their homes.

While the J-1 program was initially designed for cultural exchange, Congress has permitted its use for what is essentially low-wage nanny work. The program is very popular. Note that ordinary Americans serve as employers and sponsors, relying on private intermediaries to find the au pairs — all subject to regulations and supervision by the State Department.

The J-1 program is virtually the same thing as the guest worker program that we propose, except that the former is limited and more highly regulated than we believe necessary. While some people argue that the au pairs are exploited, we have not found any rigorous studies that document abuses.

The au pair program also provides clues as to how our program would work in practice. The intermediary institutions have developed easy-to-use websites that allow host families and au pairs to match up. Host families can interview promising applicants over Skype.

While the VIP would grant the primary right to sponsor migrants to individuals, communities would be allowed to put constraints on their residents’ use of the VIP program, akin to zoning regulations. We predict that some communities would prefer a higher level of openness and impose few restrictions. It might be natural to pilot VIP in a community that would act as a “special economic zone,” using the program as a way to revive a currently depressed area and to investigate its potential without disrupting a whole community. And by empowering communities to decide the texture of their cultural life, the VIP would avoid the negative reactions that are possible when people feel rapid changes are being imposed from above.

Institutional Supports

The VIP system does have some drawbacks. Anthony may be too busy and lack the skills or the knowledge of the local economy to navigate the VIP system. Call this the “competence problem.”

Anthony might also mistreat or exploit Bishal. While Bishal would have the right to leave, he might be unwilling to exercise that right, even in extreme circumstances. Call this the “exploitation problem.”

The competence problem shows up in virtually every aspect of market economies. People must manage their pensions, mortgages, credit cards, job searches and other complex economic relationships. Dozens of institutions have emerged to help individuals navigate these obstacles. In the worst case, some people would abstain from participating as sponsors. But we suspect most would use institutions to help them navigate the VIP system.

Exploitation is a more serious problem. But it is important to recognize the ways in which the structure of the VIP program would reduce the risk of exploitation compared to the current system of migration. Workers are most vulnerable when their employment options are limited or operate outside the protection of the law. When potential employers are forced to compete, workers tend to prosper.

This competition is precisely what the VIP promotes. At present, only a few powerful corporations can sponsor visas; under VIP, every citizen would be able to.

Could VIP Work?

The restructuring of migration we propose is radical. Could it ever attract the necessary popular support? Some recent experience is encouraging.

The migration systems in the United Arab Emirates, Qatar, Kuwait, Bahrain, Oman and Saudi Arabia (all countries of the Gulf Cooperation Council, or GCC) are often criticized as exploitative, but they tell an interesting tale. Where the United States has roughly nine natives for every foreign-born resident, the ratio in the UAE is reversed. Bahrain and Oman host roughly one migrant for every native, while in Saudi Arabia, there is one migrant for every two citizens.

The GCC countries are not the only successful ones with such large non-citizen populations. Singapore hosts two migrants for every three natives. Australia and New Zealand have roughly one foreign-born resident for every two natives. Some prosperous and successful cities, such as Toronto, are 50 percent foreign-born.

 
All countries with successful migration systems have designed them to broadly share the benefits of migration among natives rather than exclusively accruing benefits to businesses (and the migrants).
 

Yet despite these large migrant populations, none of these countries (with the possible exception of Australia) has experienced as large a popular backlash against migration as the United States and Western Europe, with far fewer migrants. Not coincidentally, all of these countries have migration systems designed to broadly share the benefits of migration among natives rather than exclusively accruing benefits to businesses (and the migrants).

Beyond these features, the migration systems of these countries differ widely. In the GCC, migrant workers are tightly controlled by the government and, except for the large domestic servant population, live segregated from natives. Most natives have benefited from publicly owned wealth distributed in a reasonably egalitarian manner, and the state has firm control over the social organization of migrants to prevent crime and uprisings. Furthermore, as in VIP, natives can sponsor migrants for tasks that benefit them. Thus, political support for this massive scale of migration has been strong and sustained for years.

Of course, an important aspect of these systems is their neglect of the rights of their migrants: the GCC countries are not a model for the OECD. Yet Singapore has sustained near-GCC level migration with fewer violations of migrants’ rights.

While we do not want to imitate these systems, we describe them because they offer an important lesson: a political backlash against massive migration is not inevitable. Even in closed societies, migration receives political support as long as its benefits are widely and visibly distributed.

An Internationalism of People

There are about 250 million adults in the United States. In principle, they could sponsor 250 million migrants under the VIP program, though in practice many would forgo the opportunity. Imagine, then, that 100 million people sponsored migrant workers. Currently, there are about 45 million foreign-born in the United States. Of those, about 13 million are legal non-citizens, and 11 million are illegal aliens.

If our program replaced existing migrant worker visas, the number of migrant workers would increase dramatically, from 24 million to 100 million — but not in a way that would disrupt society and overwhelm public services. We expect that sponsors would represent a cross-section of society. Our aim is to involve working-class people who would be attracted by the financial benefits of sponsorship. A low-income person who could net $6,000 from sponsoring a low-skilled migrant worker would significantly increase their well-being; in contrast, a middle-class or wealthy person is not likely to find such an opportunity attractive.

This is the key reason for the program. If ordinary people both gained financially and learned something about the humanity of foreigners, their opposition to immigration would decline. Eventually the number of migrants could be expanded if no serious social problems were encountered and the program were popular.

To be sure, the increase in migrants would likely suppress wages for some jobs. In this sense, our proposal is not different from proposals to open borders or to increase the number of visas. The key difference is that in our proposal, many of the people who might be hurt by wage suppression would also gain by participating as sponsors, reducing political opposition.

Furthermore, the large increases in migration would likely make activities that are currently uneconomic in OECD countries viable again. Factories that have moved abroad could return, offering new jobs for natives if abundant migrant labor were available.

The fears of the effects of migrants on wages are actually more justified at our current, low levels of migration. In GCC countries, where migration is much higher, migrant wages are so low and migrant labor so plentiful that migrants engage in activities (domestic service, low-skilled manufacturing, etc.) that are clearly uneconomic for employing natives. Such activities are usually large enough in scale that they require native employers and supervisors, offering employment to natives.

In some ways, the effects of large-scale migration would be similar to those of women’s entry into the labor force over the mid-20th century, as economist Michael Clemens argues in a forthcoming book, The Walls of Nations. Yes, women competed with men in the workplace, causing some dislocation and resentment. But because most men had close relationships with women as family members, they benefited from greater opportunities for women more than they were harmed at work — and thus were reconciled to the competition.

Our proposal to tie the economic fate of hosts and migrants would gradually reduce conflict between the workers of the developing and developed worlds and benefit both.
 

Similarly, our proposal to tie the economic fate of hosts and migrants would gradually reduce conflict between the workers of the developing and developed worlds and benefit both. VIP would be less disruptive to the identity of host country workers than women’s entry into the workforce because it would not directly affect existing hierarchies in the highly intimate sphere of the home.

The greater fairness of VIP can be seen by comparing it to the present arrangement. Under the H1-B program, only the Googles can sponsor migrant workers. It’s as if wealthy women were allowed to enter the workplace, while poor women were prevented from doing so “for their own good.”

One might worry that Google would try to take advantage of our program by encouraging its employees to sponsor programmers and contract them to Google. But now, serving as middlemen, individual sponsors would obtain a cut of the profits.

Who would come? Most likely a mix of skilled and unskilled workers. The illegal economy is currently dominated by lowskilled workers — nannies, gardeners, slaughterhouse workers. VIP would put this work on a legal footing, while channeling some of the surplus from employers to ordinary people otherwise inclined to oppose immigration.

Probably the most important concern is that VIP would increase inequality in host countries. Host-country working classes would benefit, while a new class of very poor (by American standards) migrant workers would form a new subordinate class — which might seem intolerable under liberal norms.

However, there are reasons for resisting this conclusion. First and most important, it is crucial to recognize that such migration would not create inequality (in fact it would reduce it). It would merely make more visible the inequality that is currently obscured by national borders.

Second, the disruption caused by proximity of inequality would be greatly mitigated by the temporary nature of migration in the VIP. The new class would consist of a constantly changing flow of foreigners who come here voluntarily to obtain wealth and skills, and then return home. Such circular migration does not create the social pathologies normally associated with class divisions, where the lower class consists of people who are born into an involuntary status they can never leave.

Third, while inequality within the United States would rise, both inequality among United States natives and global inequality would decline. Fourth, we need to acknowledge that we in the United States already have a subordinate class of low-wage workers — illegal aliens. Americans have exploited this class for decades, and this exploitation has been tolerated by the government because of its importance for many industries. By bringing this underground economy into the open, our approach would allow it to be regulated and allow the benefits to be shared by more citizens.

The nature and extent of these concerns would depend on the volume of migrants. If most citizens, rather than just a third (as we envisioned), chose to participate, migration could nearly double the population of the host country. However, VIP would be selfregulating. As more migrants arrived, the gains to natives would fall, and fewer natives would choose to sponsor them.

The VIP program, if adopted in multiple countries, would create a vast and fluid international market in migrant labor. Immense benefits would flow both to the poorest of the poor in the developing countries, and to the left-behind, alienated, angry working classes of developed countries, who have been the locus of so much political conflict. It is not unreasonable to hope that as foreigners cycle through developed countries, the local populations would not only gain income but also develop empathy for other cultures.

This is not to deny that there is something disquieting about the patronized and subordinate position in which VIP would naturally place migrants. We would expect some hosts to develop a sense of paternalism and condescension toward the migrants. While such an outcome is far from true equality, it is probably the best that can be hoped for in the near term.

The VIP program would move the desperation of the world’s poorest out of the shadows, offer a real path to opportunity, and turn the indifference and hatred of the rich world into benevolent condescension or real sympathy. This is a moral gain relative to the hypocrisy of our current system and perhaps the only plausible way toward a more just international order.

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