Working Papers

Don’t Blame Migrants for Home Grown Problems

I had an op-ed in yesterday’s Canberra Times (‘Migrants add to growth hopes’) arguing that politicians are using migrants as scapegoats for the many public policy problems they have been unwilling or unable to tackle themselves. No link, but full text below the fold (text may differ slightly from published version).

The highly readable Chris Berg made similar arguments in a piece for ABC The Drum Unleashed.

‘Migrants add to growth hopes’, Canberra Times, 26 April 2010.

Population growth has become a political issue, with the federal government establishing a population portfolio tasked with developing a ‘population strategy,’ while the opposition has threatened to reduce net migration. 

However, it would be a mistake to tailor population policy and the size of the migration intake to domestic policy failures in areas such as housing, infrastructure and the labour market.  The pressures of a growing population should instead be seen as adding to the case for the much-needed structural reforms that have been neglected by successive governments at both the state and federal level.

Although the government has disavowed the notion of a population target, there is still a persistent view that the task for government is to find the correct level or growth rate for the Australian population. 

Official projections for population growth have often been mistaken for ‘targets’ in the current debate.  Yet these projections are very sensitive to underlying assumptions.  The dramatic revisions to the official population projections resulting from changes in these assumptions frequently capture the headlines and the attention of commentators. 

However, these revisions only serve as a reminder that the government’s ability to plan for an inherently unknowable future is very limited.  Why would we expect the same governments that have done such a poor job of planning for the present to do any better at planning for Australia’s future in the year 2050?

It was not so long ago that the treasurer in the former Howard government was enjoining Australians to have one child for mum, one for dad and one for the country.  Natural population increase was seen as a good thing and politically-motivated handouts such as the baby bonus were given a pro-natalist veneer of respectability.

Few politicians or commentators point the finger at natural population increase as a source of current or future problems.  By contrast, migrants are easy scapegoats for those who are unwilling or uninterested in facing-up to the need for structural reforms that would, for example, make housing more affordable and provide the right incentives for investment in productivity-enhancing infrastructure.

Opposition to immigration has a long and disreputable history in Australia.  Traditionally, this opposition was motivated not so much by racism as by trade and labour market protectionism.  More recently, it has become closely associated with misanthropic environmentalism.  There is little daylight between Pauline Hanson and Bob Brown on the question of immigration. 

Much of the debate has been predicated on the mistaken view that population growth and immigration policy should be conditioned on existing capacity constraints, whether it be in the areas of housing, infrastructure, water or the environment.  Taken to their logical extreme, many of these concerns would have ruled out the founding of the colony of New South Wales in 1788, when the infrastructure to support the first European settlers was non-existent.

A growing population adds to demand for existing resources, but also supplies the incentives and additional human capital that are essential to overcoming temporary resource constraints.  Dick Smith has absurdly suggested that Australia might run out of food if population growth is not contained.  Yet it is from the ranks of new born Australians and migrants that we will find the future Dick Smiths, the successful entrepreneurs who will rise to the challenge of these and other problems. 

Cross-country differences in livings standards have less to do with population size, growth or density than with the freedoms, incentives and opportunities enjoyed by the resident population.  Human ingenuity in solving resource constraints is limitless and population growth only adds to the supply of that ingenuity.

To condition population policy on existing capacity constraints is to deny Australia’s enormous future potential.  It would mark a return to the parochialism and insularity of Australia’s protectionist past.

While the Prime Minister has declared himself in favour of a ‘big’ Australia, he seems incapable of articulating or defending what this might mean in policy terms, creating a political opportunity for the opposition. 

If population growth, including migration, forces politicians to confront the need for structural reform and greater flexibility in areas such housing, infrastructure and the labour market, that is all for the good.  The danger is that we allow them to scapegoat immigration for all the home-grown problems they had neither the imagination nor the guts to address themselves.

posted on 27 April 2010 by skirchner in Economics, Population & Migration

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Off topic:  Talking of highly readable, you guys really need to find yourself a Matt Taibbi equivalent.  Humour is a powerful weapon.

So Goldman Sachs, the world’s greatest and smuggest investment bank, has been sued for fraud by the American Securities and Exchange Commission. Legally, the case hangs on a technicality.

Morally, however, the Goldman Sachs case may turn into a final referendum on the greed-is-good ethos that conquered America sometime in the 80s – and in the years since has aped other horrifying American trends such as boybands and reality shows in spreading across the western world like a venereal disease.

When Britain and other countries were engulfed in the flood of defaults and derivative losses that emerged from the collapse of the American housing bubble two years ago, few people understood that the crash had its roots in the lunatic greed-centered objectivist religion, fostered back in the 50s and 60s by ponderous emigre novelist Ayn Rand.

While, outside of America, Russian-born Rand is probably best known for being the unfunniest person western civilisation has seen since maybe Goebbels or Jack the Ripper (63 out of 100 colobus monkeys recently forced to read Atlas Shrugged in a laboratory setting died of boredom-induced aneurysms), in America Rand is upheld as an intellectual giant of limitless wisdom. Here in the States, her ideas are roundly worshipped even by people who’ve never read her books oreven heard of her. The rightwing “Tea Party” movement is just one example of an entire demographic that has been inspired to mass protest by Rand without even knowing it.

Posted by .(JavaScript must be enabled to view this email address)  on  04/27  at  11:21 AM

Sorry to be humourless, but the legal process is not meant to serve as ‘moral referendum’.  It is a pity he can’t see that the Goldman Sachs case is a politically-motivated abuse of process.

Posted by skirchner  on  04/27  at  11:34 AM

On topic:

I’m all for economic growth and improving living standards, but economic growth that constantly requires more people, more land, and more resources, has downsides that are not counted in the GDP numbers.  In the year to Sep 2009 our population grew 2.1%.  From memory our GDP grew a similar amount (perhaps less) so in GDP per capita terms we stood still, but with significant negative externalities:  More housing demand, higher house prices, traffic congestion, overcrowding, further degradation of the natural world, more bushland and agricultural land used for housing.

I understand the pressures on the labour market in the resources sector, and I understand we have a greying population, but Australia (and the world) can’t solve these problems by endlessly growing our population.

There has to be a better way.  We have to price these negative externalities.

Posted by .(JavaScript must be enabled to view this email address)  on  04/27  at  12:46 PM

Pricing negative externalities is a preferable alternative to reducing the net migration intake.  Get the price signals right and the migration intake can take care of itself.

Posted by skirchner  on  04/27  at  01:05 PM

I didn’t say Taibbi was entirely accurate, I said he was funny, and humour is a powerful weapon in the war of ideologies.

The term “Vampire Squid” has now entered the public’s consciousness.  It will take a lot of very expensive PR for Goldman to reverse the damage done to their public image.

Posted by .(JavaScript must be enabled to view this email address)  on  04/27  at  01:41 PM

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