Immigration, society, and the limits of knowledge

Last night the Goethe Institute and the New Zealand Initiative hosted a panel discussion on aspects of immigration.  The focus was not on the economic aspects  –  my arguments that our immigration policy has acted as a drag on economic performance got a mention only in the question time –  and I found it something of a challenge to pull together some moderately coherent thoughts around the implications of large scale movements of people, and what that means for cultures and societies –  indeed, whether those concepts themselves have much meaning or instrumental value.

Two of the speakers were themselves immigrants –  one had first come as a student in the late 1980s, and the other as a refugee from Rwanda after the mass murder of 1994.  They spoke from their experiences, and both offered interesting, if somewhat contrasting, perspectives.

Rob McLeod, former chair of the Business Roundtable (and countless other boards and committees) made what is probably best described as an in-principle case for open borders, although he pulls back from that in practice.  We had only a relatively short time each to present our own perspective, so I hope I’m characterising him fairly.  His principles for shaping immigration policy were

  1. Diversity is good; prejudice is bad. Exclusion and restriction are costly.
  2. A high premium on liberty and freedom to choose
  3. An obligation on everyone to obey the law.

His proposition was that the scope of the market should be extended as far as possible, and that those countries that had been open to immigration had generally benefited from it.  In the cases of possible exceptions, such as South Africa and Fiji, the roots of the problem had rested in coercion.

McLeod went on to note that more liberal immigration would generally enhance world welfare, and that world welfare should count for something in domestic policy setting.  He briefly made a case for immigration as one tool to counter terrorism, which he observed had (some of) its roots in poverty.  (My mind kept running towards Baader Meinhof, the Red Army Faction, and the IRA –  and that scion of a wealthy Saudi family, Osama bin Laden.)     I wasn’t quite sure how much more liberal McLeod would be in practice if he were in charge of immigration policy, but he did suggest that perhaps immigration quotas and targets might be something that should be negotiated multilaterally.

I was more sceptical.

My approach over recent years has been shaped by increasing doubts as to whether large-scale immigration has ever done very much economically for those who were in the country before the immigration began.   There is an arguable case in respect of the European migration to the United States, Canada, Australia and New Zealand.  Average incomes of the indigenous populations of those four countries are plausibly higher than they would have been if the colonies of large scale settlement had never been established.  But, even to the extent that is so, it is mostly because a new and more economically productive set of institutions  and people came in and largely displaced or replaced what was already there.  That might be the historical basis for modern New Zealand, but it isn’t a particularly attractive model to shape immigration policy debates today.  It was, essentially, a phenomenon of imperialism.    Mass migration generally was.

In my own remarks last night, I put a lot more emphasis on the part that cohesive cultures play in enabling societies –  state, clubs, churches or whatever –  to function effectively.  Cultures  –  broadly defined – develop, and are sustained, for a reason –  they encapsulate the tacit knowledge and understanding that help societies to work better.  They capture the things that unite people, in ways that strengthen the ability of those societies to manage the inevitable differences and difficult choices.

It isn’t clear to me that democratic societies can function very well in the longer-term without a reasonably strong common culture, or as a fall-back a single very dominant one.  Authoritarian ones might –  one could think of the Ottoman Empire.  Of course, we haven’t many strong and stable democracies at all (so the sample is small) but they seem particularly uncommon in the minority of states where there are major divides along racial or religious grounds.  Perhaps the only example I can think of at present is Israel –  and who would really be surprised if for one reason or another that experiment did not last many more decades.

The issue here is not about denying the gains from trade or the benefits of difference.  And since are no human clones, we all interact with (marry, work with, play sport with) people who are different than us.  And we gain in the process.  The question is more one about human nature, and the way in which strong well-functioning communities tend to form among those with whom we have important things in common.    And those strong common bonds enable communities to better do the things they exist for.  In the case of the state, we might think of that is mutual protection (external defence, law and order), mutual support (whatever form a society’s welfare system takes), and all the decisions states and communities take that affect the allocation of property rights.

In small communities –  eg families    the commonality might result from blood ties.  I might disagree forcefully with my brother but nothing changes the fact that he is my brother.  At the level of large communities, blood ties don’t bind us together.  It has to be about shared values (eg religions, including secularism) and, at very least, shared experiences and shared historical reference points.  Maintaining that commonality is perhaps never easy, but it is likely to be relatively easier with a relatively stable and homogeneous population, not one constantly displaced by large inflows of people from often quite different backgrounds (not better or worse, but different).  The challenge seems likely to be particularly great for free and democratic societies.

I argued that large scale immigration programmes are best seen as social engineering (and about as likely to prove useful as most such large scale government interventions).    Rather than allowing societies to evolve organically, negotiating their conflicts from a base of shared experience and mutual common destiny, immigration programmes put the government hand on the scales and tilt things, often rather sharply, one way or the other.   Our history was like that –  every Anglo immigrant who arrived in the years when Britons had fairly open access, tilted the scales, and the balance of power in society, further away from Maori.  The same went for Canada and Australia.   That may have suited the majority, but what of the minority that had once been the majority?   The limits of knowledge should forcefully confront all putative social engineers, who all almost always well-intentioned but (being human)  rarely recognise the long-term consequences of the choices they foist on us.

I’ve argued that we would be better off economically if we cut back quite severely our immigration programme.  But I think that if we did so, we’d also be better positioned as a society to build and sustain a degree of cohesion, drawn from shared experience and commitment, that would enable us to confront future challenges more effectively, and to deal with the permanent tension between the interests of Maori in New Zealand and those of the rest of the population.

Here is a fuller version (only five pages or so) of what I said last night.

The Sharing Game

And, yes, I did see the Prime Minister’s comment that recent record migration was “a reason to celebrate”.  I (mostly) disagree with him, but am out of time today, so will offer some rather narrower economic observations on his claim tomorrow.

15 thoughts on “Immigration, society, and the limits of knowledge

  1. For the life of me I cannot even imagine how a tiny population of 4.2 million on land mass the size of Japan can even be considered having a migration issue as a drag to the economy. I would look at other reasons like,

    1. this crazy notion that NZ is highly indebted and the end result is the lack of properly debt funded infrastructure spending because we all believe NZ debt is too high, that is the real reason for this drag on our economy
    2. that the Allan Bollard would be crazy enough to force a strong economy into a deep recession to contain inflation when it is the very act of raising interest rates in the first place that is inflationary in nature and in the process decimated the building industry and decimated NZ manufacturing with a high NZD and caused the collapse of 60plus finance companies


      • Michael, that was a tasty read, thanks. Perhaps the supply benefit of positive net migration will come through in due course – fingers crossed!

        I still find NZs external position fascinating and perplexing especially the ‘gross’ external position. From my reading, the stock of external liabilities is dominated by ‘portfolio’ and ‘other’ which history suggests can be a bit flighty: perhaps this is a reason real rates have to stay relatively high? i.e. to reduce the risk of self fulfilling capital flight – per RBNZ, non resident holding of NZGB is circa 69%?? (nb: take your point on NIIP and risk premium, hence, emphasis on the external ‘gross’ composition).

        The low saving rate is a brain ache but is there any link on the ‘form’ of saving undertaken and the lack of ‘productive business investment’ – especially via SMEs?. I think the evidence suggests housing continues to dominate household wealth and maybe this will change with KiwiSaver but even there, the statistics indicate much of those funds are invested offshore with only a small proportion heading for NZ equities. Maybe limiting the number of properties one can own as an investment could create a larger pool of funds for unlisted NZ companies e.g. via equity crowdfunding? Emphasis on the ‘maybe’…..!!


      • Quin

        Interesting questions. On the gross vs net issue, remember that the NZ grosses are small relative to the nets (in international comparisons). Portugal, for example, has an NIIP position similar to ours as % of GDP, but their gross liabilities and gross assets are both much larger than NZ’s. Same is true, on a smaller scale of Australia (lots of debt and equity liabilities, but also lots of (super) assets, but a large overall negative NIIP. As you imply, it is grosses that have to be rolled or repaid, not nets.

        In terms of savings and the asset mix, work that has been done previously suggests that NZ has built fewer houses than one might expect given its population growth rate (over multiple decades). so if anything too few houses not too many, for the population. the revised financial account work the RB has done suggests that houses don’t make up more of private wealth here than in other countries, altho the ownership structures may be different – eg more individual small landlords and fewer corporates with large (eg apartments) complexes to manage). Some of that is about tax – often overseas pension funds are tax-preferred, which makes asset more valuable if held in those vehicles. Here we have a more level playing field.

        My story is still the one that high interest rates result, on average, from the population pressures interacting with modest savings rates. that in turn boosts the exchange rate, and has kept it high. in combination, high interest rates deter all return-sensitive investment (ie we all need somewhere to live, but an industrial plant is entirely discretionary) and the exchange rate effect skews what productive investment there is towards the non-tradsables sector rather than tradables. Any economy needs both to function well, but the rest of the world is where most of the market is, and if you skew your real exchange rate you make it really hard to prosper. It is all in the 2011 paper I linked to yesterday, on the RB website.


      • The first thing we have to make clear is that the RB and the OCR drives interest rates. The key 90 day bank bill rate is almost a mirror image of the OCR. The 90 day bank bill rate is the key bench mark rate from which all the other rates are set. From the 90 day bank bill rate then we get the banks deciding what margin they want to make and what the government treasury bonds would be pitched at.

        There is a tendency to gloss over and mislead the public that interest rates are a consequence of our own actions like poor savings. It is not a consequence of any of the publics actions. Interest rates are set at the whims of the Reserve Bank governor. And you correctly have indicated the RB governor acts alone and with impunity.


      • Here I put on my “totally orthodox former senior Rb official” hat and argue that even if inflation gets a bit away from target at times (too high under Bollard, too low now) in the end real interest rates are determined by real forces (supply of savings, demand for physical investment etc). The RB can set the nominal interest rate anywhere it likes, but the real rates will over time be determined by the things that shape savings, consumption, investment etc behaviour.


  2. I think you are a bit misleading. It is not high migration that is the issue for you. It is NZ population growing at all. Your clear indication is for a population decline. It is already very clear to you that immigration policy is a replacement policy, ie for every New Zealander that leaves immigration policy is to replace. NZ population growth is by Natural Birth and not from migration. But you do not want replacement you want population decline. Lets be clear about this.

    John key and you are not talking the same subject. John Key is taliking about population growth from natural birth numbers. Immigration as a replacement policy. You are talking about population decimation perhaps just leave the old folk to beg and fend for themselves with no young to generate future tax dollars.


    • No, you are mischaracterising me. I have always been clear that the number of children NZers have isn’t a matter for policy, and neither is the choice of NZers to go to Australia (or not). My interest is the policy interventions. Had we kept on with the 1980s level of immigration, the population would still have been growing in the 90s and well into the 2000s – and I’d have had no problem with that. Indeed, in the longer-term I would like to think that NZ’s population will grow because NZers regard the opportunities here as sufficiently good that (a) they want to stay, (b) they are confident enough about the future to want to continue to at least reproduce themselves (unlike the situation now in much of Europe or Asia).


  3. Hi Mike

    Enjoyed your talk last night. I share many of the same thoughts.

    I was talking with a very good friend over the weekend on this topic, Tore Hayward (whom I think you’ve worked with). We both related the importance of the ties that bind a community. Tore mentioned a key idea in one of Jared Diamond’s books about recourse to tribal groups in times of pressure or resource constraints, which appears to be an almost innate human behaviour.

    Among the cultural norms that characterise New Zealand people in a way that is different from many other cultures is a presumption trust on meeting a new person. It may be a function of isolation or relatively small population groupings, but New Zealanders tend to start an interaction with a stranger on the basis that the stranger can be trusted and is probably an ok person until signs to the contrary emerge. It is a norm that makes social interaction feel easy and generally warm. In my experience of living and travelling overseas, the presumption tends to the reverse in many countries. Sadly, this is the kind of positive tacit understanding that may well be drowned over time by immigration (among other things).

    I’ve just been reading some material by Mary Beard of Cambridge University –

    She has just put out a new book on Rome – “SPQR” –

    Recently review in the NY Times –

    Rome is perhaps another example of an autocratic regime that seems to have prospered (for quite a long time) with an ever expanding (more open) approach to immigration. To be a citizen of Roman was to be a member of an immigrant city. I understand that this is a key idea in her new book “SPQR”.




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  4. Michael
    Im enjoying following your very candid rumination on immigration. I confess to not finding them persuasive but at least they represent the thoughts of someone thinking quite hard about a defining feature of our society.
    Leaving aside the issue of whether mass immigration raises the living standard of both residents and immigrants, a feature of NZ seems to be the ease with which we have accommodated a massive influx. I am constantly surprised by the scale of increase in non-European people who are now Kiwis and the great ease with which this has happened. I cant help but wonder if we have the good fortune to live in a society where a high percentage of its people actively invest in it, by participating in all manner of socially enhancing activities. And as people arrive here they willingly sign-up to this. Balkanisation is not a common feature here and as long as that remains the case, new entrants add to our society by investing in it, while making life more interesting by adding their own flashes of colour.


    • I think we have to reconsider taking any muslim refugees. It is almost impossible to vet refugees as there is no reliable police infrastructure available to vet against. I have known some muslims and have worked alongside them and I am constantly surprised with some of the vehement comments from these muslim chaps even though they come across as your usual everyday peaceful person and nice enough personalities and suddenly wham bam angry and dangerous rhetoric being spouted and cheers whenever a muslim terrorist is able to cause destruction and death.


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