Immigration: Evidence and Opinion

Following-up on my extensive post last week, some more evidence of the ongoing ‘reappraisal’ of the positive growth consequences of immigration that is taking place among economists: Immigration, Jobs and Wages Theory, Evidence and Opinion by Christian Dustmann and Albrecht Glitz.
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Changing Perspectives On Immigration.

Views of immigration are changing. Back in the mists of time, when I first came to the conclusion that ongoing demographic changes were going to be important, the voices in favour of a reconsideration of immigration policy were few and far between. Perhaps the first and most notable of these voices was the UN population division. Now things are different, and a series of recent international conferences and reports highlighting the positive advantages of immigration as an economic motor only serve to underline the fact that discussion of this important topic is very much back on the agenda.
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German Wages War Hots Up

While Volkswagen’s long cold summer trundles on relentlessly there is more news on the wage reduction/increasing hours front.

Following the decision by workers at Siemens and DaimlerChrysler to work longer hours announced earlier in the summer, Volkswagen itself and construction company Bilfinger are looking for similar deals. (The Economist this week has a profile of VW’s head of personnel Peter Hartz – he who gave his name to the Hartz IV law – and a summary of the background to all this).

The numbers of workers likely to be affected are now no longer small: any VW deal would involve 100,000 workers, and the Bilfinger negotiations are said to be liable to affect up to 800,000 construction workers (similar moves are also in evidence elsewhere in Europe, the case of Alitalia pilots being only the most recent).

My take on all this is that while I feel there is an inevitability about it – many EU labour markets clearly need a shake-up – I do not share the rather ‘rosy’ picture most analysts are painting of the likely short and mid term consequences. These deals are clearly deflationary in the classic sense. They will affect consumption in the short, and possibly not so short – term. So when you add the wage reduction effect to the spending reductions implied by the need to reduce government deficits, and the likely 2005 slowdown in global growth which can affect exports, it becomes hard to see where exactly growth in an economy like Germany’s will come from.

What’s It All About Alfie?

Well I suppose it’s better to end the week on a bang rather than a whimper, so here I go with another of those posts. What really ended the week on a high note (or should I say a low one) was the US labour market. And since I am arguing that the euro-dollar parity is being driven at the moment by US labour market data, this news can only mean one thing: more upward pressure on the euro. Which makes me only want to re-iterate, and even more strongly, that an important opportunity was wasted yesterday to take some remedial action by lowering the interest rate. Remedial action which would also have supplied a much needed lifeline to Germany’s beleagured economy. But this, like so many things, was not to be.
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Going Into Business

“Madam Wang Haiyan, who runs a pre-school class from her home, reckons that she would have been earning half of what she is now and be less happy to boot if she had stayed in her job at a state-owned firm. “

Any one else round here old enough to remember Dustin Hoffman’s ‘Little Big Man’, with the character who insisted on riding his horse back to front? I feel a bit like that sometimes: with my back-office for India and China right here in Barcelona. Of course this makes life pretty surreal, people waltz in on the messenger at all times of the day and night: from all the strange corners of the planet.

This morning it was the turn of one of my ‘sources’ in China: he came in over the messenger to tell me he’d left his job. He has had a ‘new’ idea. He is going to set up a company to do guess what? Outsourcing. He is dead set on it since he tells me he can get university graduates in China to work for him for ‘just’ 150 dollars a month.

Actually in his case no one is going to accuse him of destroying western jobs: he wants to design and put up websites for Western clients who want to sell to Chinese customers. We might well ask ourselves however, if he is succesful in this how long it will be before he leverages his position to start offering those websites in more distant climes. And good luck to him.
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Free movement of labor, redux

On the previously mentioned subject of Europe’s “free” movement of labor (and the possibility of a massive influx of cheap labor from the east come EU accession time) here’s an article I wrote on the topic in November for Czech and Slovak Construction Journal (for some reason the article’s not posted online).

If you’re too lazy to read the whole thing… It talks about the onset of “EU fatigue” in the east, plus it cites a bunch of studies that discredit the fear of a massive influx of eastern workers wrecking havoc on Western European job markets. And this is really about Polish construction workers already living illegally in Berlin, not Czech IT geeks in London (nor British chefs in Prague). Enjoy.
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Book Review: “European Integration 1950-2003: Superstate or New Market Economy?”

Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.

Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.

And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.

In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.

In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.

But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.

Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
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Welcome To The World Of Kofi Annan

While EU politicians over at Davos have been mulling over the possibilities of Turkey’s membership of the EU, Kofi Annan apparently has things much clearer. In a speech to the European parliament he bluntly told MPs that Europe needs migrants to ensure a prosperous future and that Europeans should stop using immigration as a scapegoat for their social problems.
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Bedpans and boot-polish

Somewhere down below, Doug Merrill was perceptive enough to notice a remark – easily overlooked but of fundamental importance – by Renate Schmidt, Germany’s Minister for Puppies and Sad-Eyed Children (or something like that). In short, the minister signalled, in a roundabout way, that the end is nigh for conscription to the Bundeswehr. The German Kommentariat is not as quick on the uptake as Doug, but they’ve twigged at last, and this has become a Big Issue. (It is eclipsed somewhat, of course, by the question whether we shall all go to prison for having a Putzfrau come in for a couple of hours a week.)

The quick version is this: Germany’s post-war constitution enshrines the right of conscientious objectors to refuse armed service. And the flower of German youth is keenly attached to this right; huge numbers of young men refuse military service. Instead, they perform civil service, most of them in hospitals and old-age homes, or deputed to care for individual handicapped persons. The minister intimated that care institutions and charitable organisations are going to have look elsewhere for their workers. Without obligatory civil service for COs, a compulsory stint in uniform for the non-shirkers starts to look constitutionally dicey.

In other words, the end of substitute civil service is likely to mean the end of the call-up. Now, that is very interesting. Because if you had asked me at any point during the last ten years or so, I would have said that, if civil service ended, it would be because conscription had been done away with first. What’s more, I would have said that the spectre of an end to civil service would ensure that conscription went on forever.
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