Monday, September 19, 2016

Why hasn't the politics of immigration in Australia gone feral?

As one contemplates the rise in anti-immigration parties in Europe, and the fraught politics of immigration in the US, it is very striking how little political angst Australia's very high level of immigration has caused. True, the nationalist One Nation Party recently scored 4 Senators in the 2016 Federal Election, but that was on 4.3% of the national vote.

With the collapse of socialism as a serious alternative to capitalism, and the consequent convergence in the economic policies of the (centre-left) ALP and the (centre-right) LNP Coalition (part of a wider pattern across Western democracies), there has been a floating "not them" vote in Australian politics which has latched on to various vehicles over the years: this is just another iteration.

The ALP and Coalition still scored almost two-thirds of the Senate vote, and over three-quarters of the House of Representatives vote: that the result was so close said much more about the Coalition campaign and incumbent PM Malcolm Turnbull's Premiership than something deeper.

So, the question is why does Australia's high immigration levels (much higher than the US, for example) cause remarkably little political angst?

The why can be understood by focusing on three individuals.

Talking it out, thinking it through
The first is Arthur Calwell (1896-1973) Immigration minister from 1945-49 in the postwar Chifley Labor Government. A good Labor man, Calwell was a staunch advocate of the White Australia policy (famously saying, over a wrongful deportation case, that "two Wongs don't make a White").

Calwell was the primary political architect of Australia's postwar immigration policy. The crucial element being that Australia had a serious and open debate among migration policy: it was not an ad hoc response to various pressures, but a considered (and publicly debated) national strategy.

There were considerable adjustments along the way (notably the abandonment of White Australia) but, as the original political architect of Australia's postwar immigration policy, Calwell openly embraced the notion that Australia would deliberately look beyond the British Isles for migrants, famously coining the term New Australians. The Australian national identity was set up as something people not only could join, but were being deliberately recruited to join.

Because it was a deliberate national strategy, over time, Australian pragmatism was applied to the operation of the strategy. Including sensible things such as interpreter services and seeking to have a broad range of migrants selected by criteria that suited Australia's national interests.

Moreover, the key elements were debated in a period when views could be much more openly expressed on such matters. One of the aspects poisoning the politics of immigration in contemporary countries is the willingness to point-and-shriek (racist! xenophobe!) at anyone who expresses any negative concerns about immigration. It inhibits many people from expressing their concerns, drives the politics of concern over immigration towards those more willing to put up with the abuse (typically, the more ideologically passionate) and seriously inhibits responding intelligently to issues about patterns and operation of migration.

It is not that Australia is entirely immune to this deeply pernicious trend, it is that much of the key issues regarding migration were thrashed out before the rise of the use of the rhetoric of denunciation (racist! xenophobe! Islamohpobe!, etc) to poison public debate. And such rhetoric, and the pointing-and-shrieking that goes with it, does poison public debate; not least because the point of said rhetoric is to block engaging with the concerns of those subject to the rhetoric of denunciation. (As, by definition, "racist" and "xenophobic" concerns are not morally legitimate.) Identifying such "moral untouchables" also identifies them as people not "fit" to take part in the national conversation, so not "fit" to have a say in public policy.

Avoiding economic stress
The second individual is Bernie Fraser, Governor of the Reserve Bank of Australia (RBA) 1989-96. It was while he was Governor that the RBA adopted the monetary policy of:
keeping underlying inflation between 2 and 3 per cent, on average, over the [business] cycle
which has resulted in Australia having avoided a recession (defined as two consecutive quarters of negative economic growth) since 1993. Having an economy which has produced steady economic growth without a major crisis makes it much easier to avoid immigration and migrants becoming a focus of resentment and concern.

But Australia having a thought-out migration strategy should also get credit, as importing migrants with relatively high level of human (and other) capital means that the labour/capital balance of the Australian economy has not shifted against labour, allowing (along with targeted welfare policy: indeed, the most downwardly redistributive [pdf] welfare policy in the OECD) Australians in general to share in the benefits of economic growth. This a balance that, for example, the US has spectacularly failed to achieve. (See this post on a paper on differences in average competence of migrant flows.)

Pro-migration folk often point out that migrants raise domestic demand for goods and services. That is true, but that still leaves open who supplies that demand and with what return. Importing lots of low-skill workers reduces the return to resident low skill workers (due to reduced relative scarcity) but increases the return to capital (due to increased relative scarcity). Badly structured migration flows can increase inequality in a society and adversely affect the interests of significant numbers of resident workers. (Historical demographer Peter Turchin puts together a striking model incorporating such effects here.)

Yes, increased population means a larger economy. But what matters much for political effects are the per capita effects, particularly the distribution of benefits. The US, for example, has managed a pretty stable rate of overall per capita economic growth during both high and low migration periods. But it is not likely to be entirely a coincidence that is after the post-1965 broadening in the number and sources of migration that US economic growth became increasingly decoupled from wage growth. During the later C19th, the level of migration was so large, that the average height of US-born men fell, a strong indicator of negative effects on their standard of living from mass migration.

Increasing diversity in a society also makes it harder to reach agreement over contentious issues,* hence it is important to have migration policy itself be well grounded in broad interests. Particularly as there is good reason to think that the content of the migrant intake matters for a country's longer term prospects. It is, after all, deeply paradoxical to claim both that (1) migration has major effects on a country and (2) that any concern over those effects are somehow morally illegitimate. Pretending that all migrant inflows are wholly beneficial to everyone may make for good Virtue-signalling, but it pretty dumb as a public policy position. Just as it striking for people who tend to be obsessed with "bad ideas" to suggest that the cognitive baggage migrants bring with them doesn't matter.

A sense of control
The third individual is John Howard, Australian PM from 1996-2007, whose government had to deal with the second wave of "boat people".

Historically, Australia's migrant policy has, due to Australia's geography as an island-continent, not had to confront people coming other than by commercial travel (via ships, later also planes). While visa over-staying can be an issue, it is a not very public one and applies to people already specifically accepted for (at least temporary) entry.

There have been two significant waves of "boat people" coming by (essentially black market) transport to Australia. One was after the Vietnam War, as the victorious North Vietnamese drove the Chinese minority into the sea and others fled an oppressive (and economically-repressive) regime. The Vietnamese boat people, part of the Indochina refugee crisis, caused political friction: particularly as many folk were invested in the notion of the Viet Cong and North Vietnamese as "national liberators" and the continual exodus of desperate people was, to say the least, confronting. (The boat people were often sneered at by "progressive" folk as "economic refugees".)

Faced with a series of boat arrivals, Australia pro-actively accepted refugees, seeking to discourage the flow of boats. Moreover, it was a local regional crisis (Vietnam is closer to Darwin than is Hobart), Australia's involvement in the Vietnam War generated some sense of obligation and Australia had previously accepted many refugees from Communist rule in Europe. Australia took in 185,700 Indochinese refugees, more than any other Western countries except Canada and the USA.

The second significant wave was of boat people from the Middle East. This was not a local regional crisis (indeed, Middle Eastern boat people had to travel long distances to specifically target Australia), was generated by a region with endemic conflict and was (since Middle Eastern boat people were overwhelmingly Muslim) inevitably tainted by jihadi violence. Precisely because Australia is a high migration country, there are real dangers to social and political cohesion in migration becoming a fraught issue.

The Howard Government decided that it would do whatever was required to retain border control, using the famous line "we will decide who will come to this country". It is worth quoting from Howard's 2001 campaign speech:
It is also about having an uncompromising view about the fundamental right of this country to protect its borders. It’s about this nation saying to the world we are a generous open hearted people taking more refugees on a per capita basis than any nation except Canada, we have a proud record of welcoming people from 140 different nations.
But we will decide who comes to this country and the circumstances in which they come.
Australia would remain a high migration country, but a high migration country as a deliberate national strategy. More specifically, confronted with a populist-nationalist challenge (such as the previous One Nation surge), the trick is not to steal the insurgent's policies, still less adopt their framings (that just suggest that they have things right); the trick is to steal their issues while incorporating them in your framings. In this case, easier to do as migration was already established as a national strategy.

An open border approach is a no-say approach--no say on the part of the existing electorate, the existing citizens. And if there is an approach which more or less guaranteed to cause politics to go feral, it is make significant numbers of voters, significant numbers of citizens, feel they have no say. An open border approach also undermines the very elements which make for a successful migration policy--keep the intake diverse (no "lumps"), keep the labour/capital balance from shifting against labour. (There is also the issue of black market transport being unsafe, leading to drownings at sea.)

Avoiding triggers
The key feature is to stop the politics of migration triggering authoritarian responses within the citizenry. The very diversity of Australia's migration policy is helpful in this, as it is less likely to develop problematic migrant "enclaves". Given the wide range of sources of migrants, so every migrant group is a relatively small minority, there is a much broader interest in "fitting in".

Conversely, importing large "lumps" of particular migrants can be both more confronting to the existing residents and creates more possibility of developing oppositional cultures. Thus security forces in Canada, Australia and the US, where Muslims are still small minorities, are successful at breaking up local jihadi plots, because they get cooperation from within the Muslim communities. Security forces in Europe have less success, because the significantly larger Muslim communities provide more "cover" for jihadi networks.

In considering the politics of migration in specific countries, how prone local political cultures are to triggering such authoritarian responses will vary, as will what the local triggers are. This complicates cross-national comparisons. Generally, however, it is those pushing social change who are most likely to trigger such authoritarian responses, as their policies and rhetoric act to undermine existing social equilibria. Hence, for example, the behaviour of the local Left being so important in whether, and to what degree, authoritarian political responses were triggered in the interwar period. In our times, the penchant of the Virtuous for insisting upon great respect for other cultures, but contempt for Western ones, is very unhelpful.

More specially, considering the places where migration policy has become fraught, it is clear they violate all the above-identified general principles. There is a lack of a sense for many citizens of having a say, there are identifiably large (and problematic) "lumps" of migrants and a lack of preservation of the labour/capital balance.

Conversely, Canada, which also has a large migration policy without its migration politics going feral, has a very similar approach to Australia. The Trudeau Government's approach to Syrian refugees--women and intact families only--is very much the policy of a country which thinks through migration policy, which takes it seriously.

But a lot of folk don't care what works, they only care that they seem Virtuous. Worse, the politics of migration going feral suits them fine--it gives them so many more citizens to feel morally superior to and a greater sense of moral urgency for their favoured moral concerns.

If any concern about the extent and content of migration intake is subject to point-and-shriek, then migration policy is likely to tend towards the stupid (as relevant factors will not be seriously considered) and migration politics to the feral: another "triumph" of Virtue over fact and function.

* Demographer Peter Turchin's simple model includes a "cultural" factor, using the minimum wage as a proxy. The more diverse the society, the less "social solidarity" policies are likely to operate.

[Cross-posted at Skepticlawyer.]

Sunday, September 11, 2016

Are we heading towards peak globalisation? The ages of trade, globalisation and IT

This is based on a comment I made here.

The history of (long distance) trade can be divided into 4 eras, one of which is regional and transitional:
Continental-coastal: outside local areas, trade was limited to thin networks of high value items with some (highly fluctuating) upward tendency in the extent of such networks, but no significant link between Afro-Eurasian trade systems and American trade systems. 
Oceanic-global: Europeans link the globe via exploitation of routes their explorations opened up, with silver the dominant trade item and non-local trade still limited to thin (though expanding) networks of high value items. 
Atlantic-transition: Huge increases in the level of shipping (including through greatly expanded canal networks) creates an Atlantic economy on the cusp of mass trade, a matter of quantity having a quality all of its own. 
Globalised: From the 1820s onwards, steam (via steamships and railways) sets off an era of mass trade, which means Rogowski factor income (pdf) dynamics come to dominate the political economy of trade.
With mass trade (without which there is not globalisation worth the name), trade seriously impacts the income of general factors of production (land, labour, capital). Outside the Atlantic economy, there is no globalisation worth the name until the 1820s (pdf) because the technology did not support the required level of mass trade. According to Angus Maddison's calculations (pdf), in 1800, merchandise exports were about 1% of world GDP: by 1913 they were 8%.

One can tell that the Atlantic economy (particularly Britain) was on the cusp of mass trade as wheat prices converged (pdf)--wheat prices within the Atlantic economy (expressed in silver) narrowed from a range of 6.66:1 around 1400 to a range of 1.88:1 around 1750--and, in Britain particularly, free trade v protectionism starts becoming a political issue.

Before that, the political economy of trade was about fighting over the rents from thin trade networks of high value items because trade was not "mass enough" to affect general factor incomes. Though such trade was disproportionately important for state revenues. Trade was overwhelming non-competing items, because transport costs were so high, it was very unlikely traded items could compete with local production.

(As an aside, I have suggested that the change to mass trade and cheap communication matters for the history of monetary theory: in particular why the price-specie flow mechanism made sense to David Hume but rather less so later.)

Once transport technology advances enough for mass trade, then scarce factors of production want trade protection to protect their scarcity premium from foreign competition. If an economy is importing a factor of production (or its products), then that factor of production is scarce in the local economy. So, importing food implies land is scarce, importing capital implies capital is scarce, importing labour implies labour is scarce (in the local economy).

Plentiful factors of production want free trade to get access to wider markets, increasing their income (by increasing their sales and by reducing their costs through not having to pay local scarcity premiums). If an economy is exporting a factor of production (or its products) then it is plentiful in the local economy. So exporting food implies land is plentiful, exporting capital implies capital is plentiful, exporting labour implies labour is plentiful (in the local economy).

In an era of mass politics, two out of three factors of production wins (domestic) political economy fights. Hence the broad patterns of the political economy of trade in the first globalisation era from the 1820s until the Great War. Britain exported capital and labour and imported food. Capital and labour were plentiful and imposed free trade against the wishes of (locally scarce) land. Germany imported food and capital and exported labour. Capital and land were (locally) scarce and imposed protection against the wishes of (plentiful) labour.

The Anglo settler societies (Canada, US, Australia, New Zealand) exported food (and minerals) and imported capital and labour. Capital and labour were (locally) scarce and imposed protection against the wishes of (plentiful) land. Latin America had weak states, which relied on (easily imposed and collected) tariffs for revenue but also imported labour and capital, so moved to protection whenever powerful land interests could be overcome.

Very few countries exported capital in the period before 1913, and as the combination of having both plentiful land and plentiful labour is (to say the least) odd, the general tendency was towards protection among countries able to set their own trade policies. (Which European colonies, and various countries subject to European power, generally were not.)

There was retreat from, and stagnation of, globalisation in the 1914 to 1945 period, largely due to the huge shocks to the global trade system of the two World Wars and the Great Depression. There was also some interruption to the pattern of declining sea transport costs (though vastly increased uncertainty may have been a factor in that also by affecting research and investment decisions).

Over the long term, the 1914-1945 globalisation-retreat interlude turned out to be an interruption in the process of globalisation; though a major interruption, it took until the 1970s for world trade to recover to the level it would have reached if the pre 1913 trends had continued. (The latter observation is taken, as is much of the information in this post, from an excellent history of trade over the last millennium,  Power and Plenty: Trade, War and the World Economy in the Second Millennium by economic historians Ronald Findlay and Kevin O'Rourke.)

Globalisation continued to be driven by falling transport (mainly in air transport) and communication costs.* Which, along with other aspects of technology, began to have some unexpected effects on the patterns of mass trade. (Paul Krugman's Nobel memorial lecture is an excellent summary of that.) As factors of production became more internally differentiated, this tended to favour free trade interests by breaking up pro-protection coalitions. 

As the breakdown in international trade was strongly associated with the disasters of the 1914-1945 period, this generated increased public policy commitment among the developed democracies to liberalising trade as part of  a commitment to a more stable international order. (Capital-importing countries outside the developed world generally continued to tend towards protectionism.) Just as the dominant naval power of the 1815-1913 period, Britain, supported a liberal trading order, so, after 1945 did the succeeding dominant naval power of the US.

Also, if your income is not directly affected by trade, you will tend to favour freer trade as it broadens choices and tends to lower prices. So, electorates with large public sectors and more welfare-dependent or retired folk are likely to tend to be more favourable to freer trade.

As information technology (IT) develops, and communication costs become tiny, we start getting not merely wholesaling of films and TV but retailing of films and TV as well as huge growth in computer games. Intellectual property (IP) becomes a big deal as new forms of rents from trade become available. In the words of the post by econblogger Scott Summer that inspired this post:
Because the US is the dominant producer of intellectual property, the US government (both liberal and conservative administrations) will argue for low overseas taxes on multinational earnings, weak anti-trust laws to preserve the profits of US companies with patents, copyrights and/or large network externalities, and strong intellectual property rights, to extract money from non-American consumers of stuff developed in California.
You might wonder why even liberal American politicians would defend the robber barons of California. The answer is simple; these firms produce lots of tax revenue for the US, and for California. They don’t want to kill the goose that lays the golden eggs. Nor do they want to share eggs with Europe and Asia. It doesn’t matter if our firms exploit consumers in Asia or taxpayers in Europe, as long as they share 30% of the loot with public employees in the US.
And these industries are a very big deal, particularly for the US. Computer games are a multi-billion dollar industry, apparently overtaking films for export income. It is plausible to argue that it is precisely because we have global markets, that protection of IP by states in return for taxing the income therefrom has become a feature of international politics.

On the horizon, we can see the rise of artificial intelligence (AI) and 3D printing. This seems likely to make the IP issues more salient, not less; both in their use and as the two technologies may well undermine mass trade in goods and services.

Globalisation has been fundamentally driven by technology: in particular, falling transport and communication costs. Public policy certainly can affect (profoundly) how specific countries have interacted with the pressures and consequences of said falling transport and communication costs. Major breakdowns of the international political and economic order can even more so.

Nevertheless, those falling costs created pressures and expanding opportunities that public policy responded to.

If technology now starts to strongly favour localisation, then that pressure will be reversed as technology will no longer be encouraging global connections in production and distribution of goods and services. If that is so, at least in terms of mass trade in goods and services, we may be approaching peak globalisation.

* As air transport has increasingly bled off high value items (including people), this has tended to limit shifts in real sea transport rates, as technological improvement in sea transport is being applied to cheaper and cheaper (in aggregate) products.

ADDENDA. A dramatic effect of the European created Oceanic-global trade era was the Columbian Exchange; but that was, in the spreading across the globe of crops and animals, more a matter of changing local production patterns than trade as such.

One of the high value items tending towards mass trade in the Atlantic economy was the Atlantic slave trade, in itself partly a result of the population collapse in the Americas due to the importing of the Eurasian disease pool to the Americas as part of the Columbian exchange. The Atlantic slave trade manage to move across the Atlantic likely similar magnitudes of African slaves as the Saharan slave trade had across the Sahara (with likely similar death rates, particularly when the death rates from creating eunuchs are included) but in just over three centuries rather than twelve.

[Cross-posted at Skepticlawyer.]