Why the economic benefits of immigration usually don't happen

Picking a fight with Bryan Caplan

Most of the authors that I read on a regular basis nowadays are what Richard Hanania has termed ‘enlightened centrists’. For about a decade, I principally read material from the Dissident Right, but over the course of the last year, I gradually became less interested in what they had to say. Partly, this is because eventually you run out of new things to learn from any given faction, but there’s no point denying that the entire culture of the Online Right is vitiated by ceaseless malicious innuendo, crude anthropomorphic theories of complex social dynamics, and the hypostatization of personality disorders into elaborate ethical-political theories. I used to think that things like Scott Alexander posting his predictions for the year with confidence ratings was lame and dorky, but I’ve come to appreciate how important these kinds of things are for avoiding a descent into epistemic masturbation.

That’s not to say that the enlightened centrists are right about everything. (That would be impossible since Unqualified Reservations was already right about everything.) One of the things they are most wrong about is the issue of immigration and this is one of those issues you can’t really ignore and scroll past because it genuinely does imperil the entire future of civilization. On top of that, the arguments of the enlightened centrists on this topic are often really bad, as if at some level they know it’s crap. Hanania’s article on why declining social cohesion is good (no, this isn’t a caricature, it’s the subheading) isn’t just one of the worst articles he has written, it’s one of the worst articles anyone has ever written. Simply writing a brief precis of the article feels like you are lampooning it, until you go back and check that, yes, he really did write that.

I’m not going to take the mick out of all the crazy arguments that have been used to support infinity immigrants though. Others have done this at length, and it’s important to engage with the core of the issue. The dark lord of the enlightened centrists’ Open Borders dogma is Bryan Caplan, whose case goes like this:

1. Restricting the ability of people to cross national borders is a massive restriction of their liberty, which is obvious if we imagine how people would feel if they were suddenly not allowed to cross state lines.

2. Allowing people to cross national borders whenever they want will create a massive economic boost, which is a trivial consequence of the application of basic economic reasoning. 

3. All of the supposed problems with immigration are hypothetical and contingent. Most of them don’t happen in practice, and even if they do, you can just solve them through directly targeted policies.

Most of the debate around this thesis gets bogged down on (c), and it’s tempting to get stuck there. It’s perhaps understandable that Open Borders advocates to cherry pick evidence to support their case (though one would hope that, given the gravity of the issue, they would take a more disinterested approach), but it’s important to pick them up when they do. However, I think it’s important to make something else very clear, namely that, as a rule, (b) doesn’t actually happen in reality. It is not, as Caplan would have it, a case of certain benefits and uncertain downsides. The latter are, in reality, far more regular and predictable accompaniers of mass immigration than the former.

A brief case study

The history of immigration to the United Kingdom can be summed up very simply. There was very little of it, then, following 1997, there was a lot of it. 

This was partly a result of a deliberate policy decision (never announced, of course) by the New Labour government to permanently change the demographic composition of the United Kingdom, but it was made much easier by the admission of Eastern European countries to the European Union, giving their much poorer workers automatic right of free movement. However, famously, since leaving the European Union, UK immigration has increased even more. 

According to Bryan Caplan, then, we should expect that, following 1997, British economic growth skyrocketed. Did it? Did it s**t:

Since the completely unprecedented expansion of immigration, economic growth in the UK has cracked 5% per year precisely once, and that doesn’t count because it was a post-Covid bounce that, you will observe, wasn’t even enough to compensate for the prior economic contraction. The post-Brexit immigration turbo-boost of 2023 gave Britain zero point one percent annual economic growth. 

Now, the enlightened centrists aren’t stupid and they have a ready response: ceteris paribus biznatch! We don’t compare economic growth with a million immigrants per year to some magic number we think it should be, but to what it would have been absent the million immigrants. The implication of the position, to be clear, is that, without this unprecedented boost to immigration, the British economy would not have chugged along at roughly 2% a year growth, it wouldn’t have grown at all. In fact, in most of the years, it would have contracted. I asked Bentham’s Bulldog whether he believed that in Canada - another country where record immigration has led to lower economic growth than in the decades preceding it - the economy would have contracted sans all the immigration. He said yes (repeatedly! with lots of exclamation marks!). To be clear, this is actually a straightforwardly crazy thing to believe. Years of sustained economic contraction is something that happens in countries that fall apart, and not even fall apart a bit, but have actual civil wars like Yemen. Normal basket case countries like Argentina usually manage at least hit evens over a 10 year period.

The idea that immigration did significantly boost the UK economy and that, therefore, if its immigration levels had stayed steady after 1997, Britain would have underperformed Argentina is not something to be taken seriously. The parsimonious explanation is that the benefits of immigration never actually happened. The question is why?

Mechanism 1: Californication

The most common objection to the Caplan model is that it looks at immigrants only as economic inputs and not as political actors, specifically as voters. However, immigrants do vote, and almost everywhere they vote en bloc for the left. If you believe that left-wing policies are bad for the economy then, at least in principle, their negative economic effects via political participation may outweigh their contributions as workers. 

The prime example of this dynamic is California, which, in the space of three decades, went from being a competitive state that elected Reagan as governor, to a one-party Democratic monopoly and an advertisement for every form of left-wing lunacy from indefinite masking of children to letting homeless drug addicts literally just poo everywhere. The American political system is very dependent on local Republican politicians in heavily liberal states being able to clean up the mess after each round of left-wing exuberance. New York was rescued from a spiral of crime and disorder by two decades of Republican mayors who were given an informal license to break the rules of race-liberalism by arresting and harassing as many thugs as it took to get the place back into shape. Had the Democrats in New York been able to draw on limitless immigrant votes to secure their power (as indeed they did in the 19th and early 20th century), then New York would probably have gone more or less the way of Detroit. California hasn’t got that bad because of the Silicon Valley money-printing machine (the child of eugenicist William Shockley, for those who like historical irony), but there is general agreement that it has got progressively generally crummier, and this is reflected in the Calexit migrations statistics.

This mechanism is real, it absolutely can happen, and the handwaving response of the enlightened centrists to a well-documented phenomenon that is happening where many of them actually live is not impressive, but it has no relevance for explaining our particular case study. Immigrants in Britain vote either Labour or for some other weirder Left party, but the Conservatives have been in power for 14 years. Before that, Labour won three successive victories, with only 2005 having the kind of margin in which immigrant votes (of which there were then much fewer) might have made any difference at all. Similarly, in the next election, even if every immigrant votes for the George Galloway Grooming Gang Workers Party or whatever it’s called, Labour will still get a 200-seat majority. So, let’s move on.

Mechanism 2. The banlieue 

The second important critique of the Caplan model is that it ignores the way in which immigrants are not like other economic products one might import, namely that they have agency and you can’t just send them back and demand a refund when they are faulty. An immigrant might contribute to the economy by working, or he might decide to just get money by robbing people, either on his own, or by using the benefits system as his proxy. Since crime has a very bad effect on the economy, not only directly, but by imposing limitless quantities of security costs and deterring investment, even a minority of immigrants who live by crime could potentially outweigh the economic benefits of those that work.

Again, this is not only a possible consequence, it has actually happened, this time in France where over 50% of the criminals in prison are Moroccan or Algerian immigrants or their descendants, even though detection rates for crimes committed by the magrebian are certainly much lower than the general population. Everywhere they live in large quantities is poor, dirty and a massive money sink and no serious person denies that they are just a burden and if there was some way of quietly getting rid of them then France would be immeasurably better off. 

However, again, this mechanism does not appear to be relevant to Britain. There are some groups of immigrants, such as Somalis, who are certainly a major net economic burden, but, on average, as Noah Carl shows, immigrant populations do not commit more crime than the general population and, indeed, crime has declined along with the massive rise of immigration. There are all sorts of reasons you might not want to live among Pakistanis, especially if you have a daughter with self esteem issues, but fear of being subject to the kind of endemic crime that ruins economic life is not one of them, at least relative to the general population.

Mechanism 3. Resource Curse 

The first two mechanisms by which increased immigration fails to provide economic benefits have been argued for by others, though these discussions tend to get lost in the weeds, allowing the Open Borders crowd to retreat to their safe space of abstract economic theory and/or million–page micro-economic studies that are future museum exhibits for the failure of the peer review system. I want here to offer a third mechanism that I have not seen specifically argued, but I think is implicit in some critiques of immigration: resource curse.¹ 

Resource curse is a well-attested phenomenon that has attracted much academic study, and therefore reams and reams of crap. However, the basic concept is that a regime that has, say, lots of oil, has less incentive to make the difficult and usually highly unpopular (at least with key stakeholders) decisions that lead to long-term economic growth. 

The application of this concept to Britain is quite simple. By general admission, one of the chief problems of the British economy is the enormous cost of commercial and residential property, particularly in economically productive areas, because of a sustained 40-year period of above-inflation house price rises. There are disagreements about whether this is more a monetary-policy issue, or a consequence of restrictive building regulations. However, the main reason that long after it has become clear how destructive it is, the trend has been allowed, nay encouraged, to continue is because of its huge popularity with a large section of the population, namely everyone who already owns at least one house, who happen to be the core voter base of the Conservative party. 

There is at, though, supposed to be at least one natural corrective. In a place like London, where house prices are most obscene, there is a constant need for workers to do stuff like make sandwiches at Pret all day so big shot bankers can focus on being big shots. However, they need to live somewhere and at a certain point, house prices and rents either have to come down or the economy shuts down. That is unless you have immigrants who live 10 men to a bedsit flat for six months at a time, using the massive differential in purchasing power between Britain and their home country to then recover the other half of the year back home with the wife and kids. Through various arrangements of this kind, house prices can rise forever without correction and every native under the age of 40 who dreams of a three-room flat within 4-hours drive of his workplace can go pound sand.

Another clear way that immigration acts as a source of resource curse is the problem of the permanently, generationally unemployed, whose numbers in Britain stretch into the millions. Obviously, having large numbers of people on benefits being fat and dysfunctional and doing nothing productive is a drain on the economy, but if there is another source of cheap labour, it does not present the sort of challenge that needs to be immediately addressed. Immigration advocates often argue that immigrants are more industrious and obedient than the domestic working class, but this approaches the issue from the wrong direction. It is precisely the abundance of cheap imported labour that allows governments to nurture a population of economic dead weights. 

Absent some very rare unlikely events, a high level of immigration is the only way a resource curse can hit a developed economy because it's practically part of the definition of a developed economy that there aren’t a bunch of really valuable resources lying around waiting to be exploited. This does raise the question, though, of what you should do if you are running a well-governed country and suddenly learn that there is a massive pit of diamonds hidden under the ground. I’ll bite the bullet on this one and answer that you should keep it a secret and covertly use the funds to support infrastructure projects.

Conclusion

I’ve been a good boy all article and not used any emotive language, but let’s not forget that opening the borders of countries that are not dumps to people from countries that are dumps has an absolutely massive tail risk:

According to the girl's account, P. began by asking her about her religion – her family is Jewish – and in particular why she had "hidden" it. "She said she wanted to protect herself to avoid any aggression," write the officers, who returned to the scene that evening with the victim. At that point, they began to hit and insult her. She told the police they called her a "dirty Jew."

According to the police report, she was thrown to the ground, her hair pulled back, a lighter lit next to her cheek, then a bag containing her identity documents was burnt and a bottle of water was emptied onto her body. At the scene, forensic investigators found a bottle and charred debris. She was undressed "by force" and raped several times. 

When I wrote the first draft of this article, I must admit that I entirely lost my chill and wrote some very intemperate things, which are now safely consigned to oblivion. I will say, though, that before you start advocating for Open Borders, you should really, really double check that the benefits actually exist. Yes, I know, Bryan Caplan, we don’t look at anecdotes, we look at the statistics, but we already looked at the statistics for North Africans in France: they stink.

[Deep breath]

So, to sum up, there are at least 3 possible mechanisms through which the economic benefits of large-scale immigration that are supposed to happen, don’t actually happen. These are not hypothetical, they are actually happening right now in different places, and it’s also quite possible that 2/3 or 3/3 could happen simultaneously, making immigration a massive net negative. Open Borders advocates should specify precisely which political jurisdictions they want Open Borders for and explain why they think none of the 3 apply, given the identity of the immigrants that will come, and the political system and culture of the country in question. If they fail to do so, they discredit themselves. 

1. I refer to commentators who talk about immigration being used to ‘paper over the cracks’ or equivalent. When I googled ‘immigration resource curse’ I found an article saying western countries had a duty to take in immigrants from countries suffering from resource curse, two articles saying resource curse is caused by immigration, and another article saying countries with resource curse have less immigration.