Economics and politics - comment and analysis

Do immigrants put pressure on wages? An exchange with Alberto Bagnai

Do immigrants put pressure on wages? The great majority of scholars find a small negative effect on the lowest wages. Bagnai thinks the effect is bigger (without providing proof) and adds he wants to see a Marxist analysis of it. This is also meant as a critique of my position. If I have to admit that even Marx contradicts me, it is time, as Jacques Sapir said, to learn a lesson in political realism and stop talking about the need for EU-wide policies against social dumping and the introduction of a European-wide minimum wage. This is considered to be hilarious. It will never happen. Well no, certainly not as long as nobody is trying.

Marx had very little to say about migration. There is, basically, one letter and one interview. Neither Capital I or II contain an analysis of migration. In Capital III, Marx explains the theory of the tendency of the rate of profit to fall. This trend – “the law as such” – is not directly observable because capitalists do everything in their power to restore it. The following chapter provides an analysis of these “counter-tendencies.” It speaks to reason that migration, if it puts pressure on wages, increases the rate of exploitation.  But there is no analysis of migration here either. Why would that be the case?

Let’s see what Marx did write. In a letter to Sigfrid Meyer and August Vogt from April 1870, Marx writes that the English aristocracy and the bourgeoisie conspired to turn Ireland into pasture land for the English by clearing the estates (the evictions), thereby making certain that Irish revenues flow to England. However, the English bourgeoisie had “much more important interests in the present economy of Ireland”: the forced immigration of Irish workers into England. He writes:

“Owing to the constantly increasing concentration of leaseholds, Ireland constantly sends her own surplus to the English labour market and thus forces down wages and lowers the material and moral position of the English working class” (see here).

So Marx holds that migration puts pressure on wages. But wait, he is not done yet:

“And most important of all! Every industrial and commercial centre in England now possesses a working class divided into two hostile camps, English proletarians and Irish proletarians. The ordinary English worker hates the Irish worker as a competitor who lowers his standard of life. (…) (The English worker) cherishes religious, social, and national prejudices against the Irish worker. (…) The Irishman pays him back with interest in his own money (…). This antagonism is artificially kept alive and intensified by the press, the pulpit, the comic papers, in short, by all the means at the disposal of the ruling classes. This antagonism is the secret of the impotence of the English working class, despite its organization. It is the secret by which the capitalist class maintains its power” (see here – all emphasis in original).

The pertinence and relevance of this text for the world today is amazing. What should Meyer and Vogt do with this analysis? Marx urges the American proletariat to organise and work together as a matter of the highest priority:

“(In America), a coalition of German workers with the Irish workers (and of course also with the English and American workers who are prepared to accede to it) is the greatest achievement you could bring about now” (see here).

Marx came back to the issue of migration in an interview with the New York World in July 1871. Marx says:

“To give an example, one of the commonest forms of the movement for emancipation is that of strikes. Formerly, when a strike took place in one country it was defeated by the importation of workmen from another” (see here).

But now there is a solution:

“The International has nearly stopped all that. It receives information of the intended strike, it spreads that information among its members, who at once see that for them the seat of the struggle must be forbidden ground. The masters are thus left alone to reckon with their men. In most cases the men require no other aid than that. Their own subscriptions or those of the societies to which they are more immediately affiliated supply them with funds, but should the pressure upon them become too heavy and the strike be one of which the Association approves, their necessities are supplied out of the common purse. By these means a strike of the cigar makers of Barcelona was brought to a victorious issue the other day” (see here).

Marx did not elaborate on his reasons for writing that Irish immigration reduced English workers’ wages. The evident implication is that the cause lies in an oversupply of manual labourers. That is where he left it. But there is a further point. The letter to Meyer and Vogt leave no doubt: while Irish immigration may reduce workers’ wages, it is the English xenophobia and the resulting antagonism among workers that is the bigger problem. It is this factor, more than the pressure on wages itself, which contributes to the continuation of the colonial system that drives the Irish to England and, consequently, results in the exploitation of all workers.

Marx sees the International as a solution. The International is nothing else than workers gaining power because they unite, organise, cooperate and fight the enemy everywhere, instead of letting the establishment divide them on the basis of “religious, social, and national prejudices.” Try to explain this to the trade unions anywhere today. In theory, the trade unions are an international movement. In practice, they only stand up for “their” workers who work in “their industries.”

A possible counter-argument is that, today, there is no working class properly speaking and so it is useless to promote cooperation. I don’t agree. For the moment, there is one social democratic party which is not losing elections in the whole of Europe. It has become Europe’s biggest political party, or close, and it is certainly the fastest growing. Today, the Labour Party has more members than all other parties in the UK together. This is not due to Corbyn’s Brexit stance – which divides the party. The Labour party is so popular because its program sets out investment, rebuild the welfare state, build social housing, increase the tax for the rich and re-nationalise former public services. These policies are popular with a wide range of the UK electorate. This proves that there is ample potential for electoral gain on the basis of a Leftist program.

Let’s now return to the original question. I am going to keep this short. The question had received ample interest. In the UK, not one single study found a negative effect, except on the lowest wages, those of the lowest skills. Several reports (for example the one of the London School of Economics – which I referred to on several occasions) finds positive economic effects of migration (the study deals with unemployment, the effects on the welfare state, taxes, housing, health care and ethnic entrepreneurship).

As said, the majority of scholars agree that migration has put some pressure on wages on those with low educational attainment – with high school drop outs being affected the most. But there is no consensus and by how much is far from clear. For example, George Borjas (a conservative) from Harvard wrote in 2013 that from 1990 to 2010 immigration “reduced the average annual earnings of American workers by $1,396 in the short run,” while Giovanni Peri (a progressive) from Davis, California argued in 2010 that the total immigration to the United States from 1990 to 2007 would be expected to bring about “an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars.” As Wilson writes, they are, most likely, both wrong because they both ignore certain factors, such as legal status, discrimination and social dumping in setting wage levels (see here).

The bottom line is that this discussion is not going to be set on the basis of science. Politicians arguing for workers’ solidarity and international cooperation are going to win less votes than those who tell people that immigrants decrease their wages. I suppose it appeals to their “common sense” – itself the result of the internalisation of the neoclassical fantasy of a labour market based on supply and demand – as well as growing xenophobia.

The discussion is not about what Marx had to say about migration 150 years ago. It is about the euro zone. That the euro zone is not working is not a secret and neither is it a secret who is responsible for it. No one explained this more thoroughly than Heiner Flassbeck. There is no disagreement here with Alberto Bagnai.

The question is where to go from here. Bagnai and Sapir figured it out: the way forward is to leave the euro zone, or better still, to blow it up altogether. Once EU economic governance ends up where it should be – in the dustbin of the history of refuted and discredited economics (I absolutely agree) – the countries can reintroduce their own policies and return to growth. Bagnai may well be right about these policies. He may also well be wrong. The truth is that no knows with certainty what the consequences of leaving the euro zone are. This, at least, is the conclusion of a peer-reviewed article by Bagnai. Bagnai et al. write that:

“(T)he results of our simulations show that the short-term costs of the breakup, while non-negligible, would be manageable, and in the case of active policy intervention, the advantages over a five-year horizon would be substantial.  (…) Although exit from a currency union involves further technical and political challenges, our results confirm the historical experience of these events summarized by Rose’s (2007) statement: “there are typically no sharp macroeconomic movements before, during or after exits”. The results also confirm, as was the case with entry into the single currency area, that exit from the single currency is not a panacea and considerable uncertainty surrounds its consequences. If the monetary union should eventually prove politically unsustainable (…), re-adoption of a national currency would only be a necessary condition for recovery and definitely not a sufficient one” (see here).

So, we are not sure. And how does Rose reaches this conclusion in his article which has nothing to do with the euro zone or its crisis? His article is about colonies becoming “larger (? – WD) richer and more democratic” after their independence. By gaining independence,  the colonies ‘drop out’ of the former currency union with the core country. But is this really relevant for a discussion of the euro zone today?

The expectation is that returning to growth (Bagnai also provides figures on his blog (here)) will take the wind out of the sails of the right and the far-right. It is logical to assume this, but I doubt its veracity. Society is not a petri dish where the correct agent, when added in sufficient quantity, kills off the pathogens. It may also go wrong and southern Europe may end up with more economic dysfunction. If this would happen, I expect that, this time, the populace will not revolt against “the EU” (demanding sovereignty, as in the UK, where the most right-wing government in living memory is eager to deliver). This time, the foundations of the institutions itself will be at stake.

As Erik Swyngedouw and others have argued, the origins of the EU as a political project go back to the crisis of the 1970s. Confronted with a crisis of profitability (according to Swyngedouw), the capitalists decided that if it was not possible to destroy the power of the labour movements well and fast enough on the national scale, it was time to create a new supranational one. Today, some proponents of dropping out confuse scale with power. Why should we assume that, once we get rid of the euro, national elites will implement efficient growth policies (cf. “in the case of active policy intervention”)?

If we want reform, we should start with our own. The first election for the European Parliament took place in 1979. Until 1994, the social democratic block had the majority in the European parliament. At no point they stood up against the Commission. It did not happen once. These people had all been elected by their respective national electorates. Will the Left win the elections in Italy once the country gets rid of the euro? I hope so, but I see little sign of it.

The thesis that the Brexit was caused by migration makes no sense. Remain won in all major cities – where most of the immigrants live. Some of the areas where the leave won belong to the most affluent in the country, others belong to the poorest. The political class, Tories and New Labour alike, with UKIP breathing in their neck, have been telling the population that their problems are caused by immigration for well more than over a decade. The Brexit was the opportunity to “take back control.” What else do you expect? The elites are not going to admit that the whole model of neoliberalism is radically wrong, that their own policies are responsible for the lack of investment and innovation (hence the deplorable state of English manufacture), that all the talk about labour activation was and is one way among others to destroy the welfare state. The Tories created a social housing crisis, a housing crisis, a healthcare crisis, an education crisis, a food bank crisis, a homelessness crisis, a crisis for the poor in general and the elderly and the disabled in particular, a credit crunch, a wage crisis, a crisis in manufacturing, a crisis in research and development. Their policies created more public debt than ever before (that the public “has to pay back”). All of this and more, while in the meantime Britain’s richest 1% own as much wealth as the “bottom 55%” (see here). Is it a coincidence that Theresa May talks about barely anything else than migration? It is simply sowing division on the basis of “religious, social, and national prejudices.” Social democracy has also been playing this blame game. Looking at its electoral results on the continent, it cannot be called an inspiring strategy.

Bagnai tell us that he is very interested in radical ideas. Here is one: calling into question the nation-state system. If the political scale of the nation-state can be used to formulate or implement progressive policies, by all means, let’s use the nation-state. And if the nation-state stands in the way, let’s do it anyway. The same holds for the supranational institutions. It sounds incredibly utopian and politically naive (read: stupid), except that it is happening. All over the world, new alliances are being made – is it the 21th Century International in statu nascendi? People crowd-fund businesses and support initiatives, regardless of location, beyond “religious, social, and national prejudices”. Medical doctors are not permitted to treat illegals within the mainstream health care system, but they do it anyway. Professors are not supposed to supervise Masters and PhD students who are not enrolled, but some of them do it anyway. Trump can rant and shout utter stupidity all day long, governors and city mayors are implementing climate change policies anyway. Black civil rights groups organise their own system of protection in their communities – granted, this is nothing new (it is the origin of the Black Panther movement). People all over the world support LGBT rights in countries where their human rights are being violated. Nothing of this is any new, except its cumulative momentum. At this historical moment, these initiatives are laying bare the lack of legitimacy of – and hence support for -the mainstream political system in the core nations (as Wallerstein says here; see Streeck here). While the political speeches never stop, more and more people are leaving the room. But this is not exit. It is not dropping out of politics. It is not egoism. As of now, no one knows where this will exactly lead to, as Wallerstein explained in his discussion of the Porte Alegre project (see here). Only one thing is sure: the way in which politics is being done in the world will change. It changed already. More change will come.

One last point. Charles Geisler et al. just published a paper predicting that, because of the impacts of climate change, the world will see 1.6 billion displaced people by 2060. What is going to happen when (not if), at one point, millions of immigrants – without any rights (legally speaking, they are not refugees) knock on our door, while cities all over the world are running under water and food prices spike to levels never seen in peace-time before, if there is peace? Ultimately, it will all depend upon the potency of the “religious, social, and national prejudices” and the “resulting antagonism among workers” that is “the bigger problem” than just pressure on wages. If you oppose pressure on wages, fight the current phase of capitalism, not immigrants – in or out the euro zone.