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Aid that jumps the border

July 31, 2007|Gregory Clark | Gregory Clark is a professor of economics at UC Davis and author of the forthcoming "A Farewell to Alms: A Brief Economic History of the World."

About 160 million people with incomes a fifth or less than the average U.S. income now reside less than 1,500 miles from our southern border. Given this huge income gap, more border agents and more miles of fence cannot prevent substantial illegal migration. But such migration is actually the United States' most effective foreign aid program, helping some of the poorest people in the world. Some believe such migration should be tolerated, not fought to the death.

A look at history suggests that even as illegal migration ebbs and flows, it will remain a problem for the United States. Before 1800, incomes per person varied by small amounts across borders. Consequently, there was modest pressure for illegal migrations. But since then, the world economy has experienced a process called the "great divergence." Paradoxically, as barriers to the flow of goods and information have declined, the differences in living standards between the rich and poor economies have widened.

The U.S. happens to be located on one of the stark fault lines of the great divergence. Despite the liberalization of the Mexican economy since 1982 and trade liberalization measures such as the North American Free Trade Agreement of 1993, income per person in Mexico has recently declined compared with that in the U.S. Per capita income in Mexico now averages 22% of that in the U.S. -- the biggest gap since 1950. But Mexico is rich compared to Central America and the Caribbean. Other countries have seen more dramatic declines and have incomes per capita less than 10% that of the U.S.: Honduras and Haiti at 6%, Nicaragua at 9%. Mexico now has its own problem of illegal migration from Guatemala, Honduras and El Salvador.

Not only have incomes of our southern neighbors declined relative to those in the U.S., their populations have increased. In 1950, the population of Mexico was only about one-sixth that of the U.S.; now it is more than one-third. The people of Mexico, Central America and the Caribbean are not just poorer than the U.S., they are also more numerous than before.

This divergence of incomes between the U.S. and its southern neighbors makes the enforcement of border controls increasingly difficult. As long as there are huge potential gains, illegal immigrants will be willing to endure more -- and to try more often -- to enter the United States.

Across such a long border, more agents and better technology can slow the inward march of migrants, but it cannot halt it.

Can the U.S. forestall the relative decline of the economies on its southern fringe? No. The evidence from history again is that the rise and decline of economies is beyond the reach of economic policy. The British ran India from 1857 to 1947 with a set of economic policies that would have brought pride to the heart of the most pro-market modern economist: free markets, absolute security of property, price stability, low taxes, free mobility of capital and entrepreneurs. Yet, in that same interval, Indian income declined relative to that of Britain. Quite possibly the income gap between the U.S. and its southern neighbors will further widen.

In such a situation, recognizing that there will be some flow of labor across this wealth divide, and periodically legalizing those who manage to find their way to the U.S. labor market, is not a bad option. The United States' biggest foreign aid program is not the $19 billion that it sends through official aid channels (a mere 0.14% of GDP) worldwide. Instead, it is the employment it provides for the many millions of illegal immigrants in the U.S. from the Third World, mainly Latin America. The earnings of these migrants, which some estimate at more than $200 billion a year, easily dwarf the official U.S. aid contributions.

Furthermore, the remittances these immigrants send back to relatives in their home countries -- more than $25 billion annually just to Mexico, according to the World Bank -- far outweigh official aid. And unlike that aid, a large share is not absorbed by bureaucrats and consultants but goes directly to the poor.

So a little live-and-let-live when it comes to immigration is not just prudent, it is also compassionate.

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