31 October 2022
Before examining the economics of mass immigration, meaning open borders, we must take note of the fact that advocates of this destructive policy largely fall into two groups: There is the extremely wealthy self-appointed globalist elite of which the self-righteous Sir Evelyn de Rothschild and Lady de Rothschild are prominent members.
According to the super rich Sir Evelyn any person who has the temerity to oppose this gallant knight’s love of open borders is a racist, particularly if his name is Trump1. Rest assured, however, that Sir Evelyn would not for a moment allow a mass of third-world ‘immigrants’ to invade his beautifully manicured 3,200 acre Buckinghamshire estate. Instead he and his ilk would damn well make sure that these people would be herded into the crowded streets, schools and hospitals of the working class, thereby driving down their wages and rendering their lives miserable.
What is being deliberately ignored is that a policy of unrestricted immigration is deeply anti-democratic because it nullifies the will of the people. The lovely Lady de Rothschild, the Marie Antoinette of the Davos set, made it clear what she thinks of the will of the people, meaning democracy, when she said that she hates “those control immigration mugs”2. It is no wonder she helped bring together about 100 of America’s so-called top corporate leaders and CEOs3 for the sole purpose of attacking attempts to strengthen and defend America’s voter integrity laws. All in the name of saving democracy! Needless to say, Lady de Rothschild is a big Democrat Party supporter. Globalists are about control, not free trade.
The second group of miscreants consist of libertarians who preach that abolishing borders is not only a moral imperative but an unquestionable economic benefit. Australia’s Professor Sinclair Davidson who supports4 “open borders (subject to controls),” an argument I find incoherent, is one such libertarian. America’s Professor Donald Boudreaux, who thinks borders are “grotesquely arbitrary”5, is another libertarian who believes abolishing borders and using mass immigration to drive down the wages of American workers is an absolutely super-duper idea. He argues that there is no such thing as an illegal immigrant, which also means there is no such thing as citizenship, and that those who use the term “illegal” are hiding their “hostility to freedom of movement, to freedom of association, and to foreigners”. In other words, if you question this moral poseur’s support for open borders then you are nothing but a xenophobic bigot.
However, it seems that Boudreaux’s fervent support for unrestricted immigration may have created a dilemma. When it comes to the minimum wage he is emphatic that it creates unemployment by preventing the law of supply and demand from clearing the market6. Now two arguments are generally used to support minimum wage legislation. One has it that it increases consumer spending and that this means it would pay for itself. The other argument asserts that the minimum would force employers to invest in machinery which in turn would create additional demand thereby making the minimum wage pay for itself.
Professor Boudreaux would rightly ridicule these ideas as dangerous nonsense. Yet when it comes to mass immigration rapidly increasing the supply of labour relative to the capital structure he finds that wages can actually rise rather than fall!7 So even though a minimum wage creates unemployment mass immigration can raise the demand for labour. What happened to the law of supply and demand? Elsewhere Boudreaux tries to extricate himself from his dilemma by accusing critics of open borders of failing to account for the fact that spending by these immigrants would expand demand and that this would prevent a drop in wages8. He points out that in the past immigration and wages rose in tandem9. Boudreaux, like Adam Smith, puts excess importance on the division of labour, arguing that that a larger supply of workers (meaning immigrants) will create “greater specialisation” of labour and that this would raise real wages10.”
First, it is an unfortunate fact that Adam Smith gave the division of labour a importance it most certainly did not deserve. Professor Boudreaux appears to be making the same mistake. What Smith overlooked is that no significant extension of the division of labour can occur without an increase in capital accumulation11. However, he also stressed that for an increase “of useful labour” to be employed then an increase in capital is necessary12.
Second, he noted that if the population exceeded the capital stock wages would fall13. Smith also made it clear that wages in the American colonies exceeded those in England because the ratio of labour to land was much higher14. Boudreaux’s open borders fetish is in no way supported by the work of Adam Smith, though Richard Cloward and Frances Fox Piven would probably have loved it15. Professor Boudreaux’s globalist approach to borders amounts to this: American labour has nothing to fear from a continuous mass influx of foreign labour because it could lower wages only if nothing else changed. In other words, increased investment will ensure that the demand for labour will always exceed the supply. This is hogwash and no classical economist would have tolerated it. Smith, for example, would not have considered it for a moment.
Professor Davidson16 seems to be in full agreement with Boudreaux, fallaciously stating that not only does immigration boost economic growth but any “restriction on immigration is a restriction on economic prosperity” and that the “case for free trade…is also the case for immigration17”. (His argument that free trade justifies open borders would have mystified every classical economist, none of whom he seems to have read.) Then we have Dr. Chris Berg who heartily endorsed the preposterous opinion that abolishing borders would “increase global GDP by $US60 trillion”18. The concept of global GDP is not a meaningful construct and I can only wonder at the mentality of any person who thinks it justifies flooding the West with scores of millions of third world peasants.
Some of the damaging effects of this destructive policy were made clear by Alan Greenspan, former head of the Federal Reserve, when he proposed a policy of importing masses of skilled labour to force down the wages of skilled American workers19. At least, unlike libertarians he is forthright about the consequences of mass immigration. It is a fundamental truth that free trade rests on the simple fact that trade between nations must be mutually beneficial or it will not take place20. But there are absolutely no mutual benefits from abolishing national borders.
Professor Bryan Caplan is another ardent disciple of open borders. In a futile attempt to defend his pernicious fantasy he inadvertently destroyed it. In his hypothetical example the citizens of country A earn $50,000 per year without mass immigration but $60,000 per year with mass immigration. In neighbouring country B men earn on $2,000 per year but could earn $10,000 per year in country A. These men now move from B to A, doubling its population. The result, according to Professor Caplan, is that average incomes in country A drop to $35,000 while “per-capita income declines”. Caplan exclaims that the idea that the standard of living has fallen in A is an illusion. The reality, his reality, is that “both natives and immigrants are richer”[!]21
(50+10=60. Half of 60 is 35. The arithmetic is correct but the economic reasoning is lousy.)
If readers think this is a real doozy of an argument, then they are spot on. What would really happen is that employers would immediately start replacing native workers with immigrant workers. The result would be a shift in incomes from labour to capital. On the other hand, a great many people think the result would be heavy unemployment. But so long as labour markets are allowed to clear and there is still sufficient land and capital to employ people, no matter how low the wage, then large-scale unemployment would not emerge — but mass immiseration of the workers would.
Advocates of mass of immigration correctly point out that it raises GDP. But they deliberately ignore the fact that it does this by lowering productivity and hence wages, which means per capita incomes fall. Every classical economist warned that if any population increases faster than the increase in the capital stock then real wages will fall and mass destitution will emerge. Hence doubling the population relative to the size of the capital structure would result in a terrible drop in the standard of living of the masses. Professor Caplan’s open borders fetish would turn America into a low-wage country. Caplan overlooked the fact that open borders also means flooding labour markets with skilled and semi-skilled labour from low-wage countries. Needless to say, this would drive down the wage rates of American skilled labour in just about every sector of the economy, the very thing Greenspan proposed.
4Davidson open borders (subject to controls). He also supports mass immigration because he thinks it would undermine the “welfare state”. He considers this a “feature and not a bug”. https://catallaxyfiles.com/2016/08/10/immigration-is-theft/comment-page-1/
In addition, he believes Australians oppose mass immigration because the country “has a deep and ugly xenophobia running through its Psyche”. I can only wonder at the company he keeps.
5Donald Boudreaux, A Geopolitical Border Is an Arbitrary Reason to Prohibit Freedom of Association.
6Donald Boudreaux, Manifest Idiocy’ of Robert Reich’s Minimum Wage.
7Donald Boudreaux, It Is, After All, Supply-and-DEMAND Analysis.
8Donald Boudreaux, Why restrict immigration at all?
9As an afterthought Boudreaux also argued that having the government protect wages by restricting mass immigration means it should also use that power to “impose controls on the number of children each woman is allowed to have[!]” Professor Boudreaux made three things clear: 1. He fully understands that an open borders would drive down the standard of living of the great mass of Americans. 2. That he has nothing but contempt for American sovereignty and the concept of citizenship. 3. That he has a callous attitude with respect to the political, social and economic consequences of an open borders policy.
Donald Boudreaux, That’s Where the Logic Leads.
10Donald Boudreaux, It Is, After All, Supply-and-DEMAND Analysis.
11Nassau W. Senior, Political Economy, Richard Griffin and Company, 1854, pp. 73-4, 78. 119. 158. 176, 178.
Charles Babbage, On the Economy of Machinery and Manufactures, John Murray, 1846, pp. 174-75, 202, 211-13, 335.
Jean-Baptiste Say, A Treatise on Political Economy, Transaction Publisher, 2001, pp. 40, 75.
Thomas R. Malthus, Principles of Political Economy (1836), Augustus M. Kelley, 1974, p. 36.
John Rae, The Statement of Some New Principles on the Subject of Political Economy (1834), August M. Kelley, 1964, p. 352.
12Adam Smith, Wealth of Nations (1776), LibertyClassics, 1981, p. 677.
13Vol., 87, 98.
15Cloward-Piven Strategy. It was a plan to overthrow America’s capitalist system by overloading the welfare state bureaucracy with demands that were impossible to meet, thereby precipitating a revolution.
Bob Sutcliff and Andrew Glyn were two Marxist Cambridge economists and the scions of two very upper class British families. These boys bravely took it upon themselves to stand in the vanguard of the British working class. As a young man in the 1960s I took offense at the condescending attitude of the likes of this pair towards the rest of us. Sutcliff and Glyn’s plan was simple: bring on the Revolution by bankrupting industry. I found their book to be thoroughly outrageous.
Bob Sutcliff and Andrew Glyn, British Capitalism, Workers and the Profits Squeeze, Penguin, 1972.
16Davidson, posted on August 10, 2016
I’m happy to concede the point that high levels of immigration will undermine the basis for a highly regulated economy, high minimum wage- unionised, welfare state. To my mind this is feature and not a bug.
Libertarians seem to never give a thought to the political, social and economic consequences that flows from their dogmatic creed.
17And then there is this gem from Sinclair Davidson: Immigrants boost the economy and should be welcomed
Australian Financial Review
Feb 24, 2017
18Chris Berg is another libertarian Cloward and Piven would love, In A Truly Globalised World, Immigration Must Be Free.
Classical liberals should support the free movement of people,
Centre for Independent Studies, Policy, Vol. 26, No. 1, Autumn 2010.
It is pretty hard to imagine how utterly sanctimonious, dogmatic and thoughtless these libertians are.
19Alan Greenspan, Let more skilled immigrants in, Bloomberg News, March 14, 2007.
20Ricardo wrote that under free trade
… each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
This is a sentiment Professor Boudreaux would heartily endorse, as would the great majority of his fellow economists. It’s a pity, however, that they didn’t read what Ricardo and his contemporaries had to say about trade, the exchange rate and the gold standard. According to their thinking a stable exchange rate maintained by a self-regulating gold standard was the only possible means by keeping the patten of international trade consistent with the principle of comparative advantage. If Professor Boudreaux thinks they are wrong then he is free to make his case.
David Ricardo, Principles of Political Economy and Taxation, Pelican Books, 1971, p. 152.