The New Zealand Initiative, the business (and Wellington City Council) funded think-tank, is on record as strongly in favour of allowing high levels of non-citizen immigration. Indeed, some of their senior staff seem quite strongly influenced by the “open borders” strand of libertarian literature that, in principle at least, favours allowing in almost anyone who wants to come. But very little of what they have had to say thus far has been very New Zealand specific at all – the presumption seems to be that whatever might be true and valid in some places abroad will also apply here.
The Initiative has indicated that it will shortly (later this month?) be releasing a major report on immigration policy as it applies in New Zealand. They ran a seminar on a draft of the report late last year and I was no doubt only one of many people who gave them fairly extensive comments on the draft.
Over the last couple of years I’ve been highlighting that there is no modern empirical analysis focused on New Zealand indicating that New Zealanders have benefited, in economic terms, from the large scale non-citizen immigration policy that has been run over the last 25 years or so (as a reminder the net inflow of non-citizens is about three times that in the United States, both in per capita terms). Champions of large scale immigration to New Zealand – including well-resourced public agencies like Treasury and MBIE, MBIE-funded academics, and think-tanks/lobby groups like Business NZ and the New Zealand Initiative – all rely either on overseas research about other countries (often much more central ones, like the US or various northern European countries), or relatively simple theoretical arguments about possible gains to New Zealanders. And mostly they do not seriously engage either with the specifics of the continuing economic underperformance of New Zealand, despite the large scale non-citizen notionally-skills-focused immigration programme, or with the continuing natural resource orientation of this specific economy My challenge has been along the lines of “show us the evidence”. After all, if a policy has been run for a quarter of a century, on a relatively large scale, and it really has material economic benefits to New Zealanders as a whole surely it shouldn’t be too hard to demonstrate those gains?
I had hoped that in the forthcoming report the New Zealand Initiative might take up that challenge and do some New Zealand specific research that would support their enthusiasm for high rates of inward non-citizen immigration. If they had done so, no doubt there would still be plenty of room for debate – no one study is ever definitive on any topic – but at least there would then be a marker out there for sceptics to look at,be challenged by, and be forced to engage with.
But the other day a reader – who is, I think, generally sceptical of my immigration analysis – forwarded me a link to a tweet from the Initiative’s head of research, Eric Crampton.
In it, Eric was retweeting something from Erik Berglof, a professor at LSE, who in turn was linking to what proved to be a two year old piece by a Bulgarian sociologist who had (a) asserted that the academic evidence of the impact of immigration (to the UK) was overwhelmingly positive and (b) debunked a few of the dubious claims sometimes made about the impact of immigration in the UK (eg on social housing demand). There was no evidence on the wider economic impact advanced at all – and in fairness to the Bulgarian sociologist, hers was only a two page piece.
But what really struck me was Eric Crampton’s own strong language – aimed, I assume, at people like me. We apparently “insist the null hypothesis is that NZ migration is terrible unless proved otherwise” and then “That shouldn’t be the null”. A lot turns on that second sentence.
I’m quite open to the possibility that large scale immigration to New Zealand might have little or no long-term net economic impact on New Zealanders. If so, that wouldn’t make such immigration “terrible”, but it would rather undermine the assertions of academics and officials that there are material gains for New Zealanders as a whole – in MBIE’s terms that our immigration programme is, and has been, a “critical economic enabler” for New Zealand. If it was all a wash – and there were no material economic gains or losses for New Zealanders as a whole – we might still keep an immigration programme going if we wanted to offer that opportunity to the immigrants (who clearly expect to benefit or they wouldn’t move) but if New Zealand voters preferred not to do so, economists and officials would have no good reason to gainsay that preference.
My own suspicion is that our immigration programmes – since World War Two, but particularly in the last quarter century, have been more damaging than that. I’ve advanced a story – which hangs together, even if it may not finally be the correct story – which explains our continuing deterioriation in relative productivity performance in terms of the continuing rapid growth in population (mostly immigration policy driven) into a location with relatively few strong natural economic opportunities, reinforced by the pressure that rapid population growth (in an economy with a modest savings rate) has put on our real interest and exchange rates. My story has never been that immigration is always and everywhere bad for natives, just that at times it could be, and that modern New Zealand could be one of those times places. We see enough moribund towns, here and in other settler countries, to realise that where settlers arrive isn’t always where they can generate good returns over the longer-run.
Do I have robust formal empirical evidence for this story? Well, no, I don’t. And I don’t have the resources, or technical skills, of our leading government agencies to do such empirical research – even if there were an easy or obvious way to formulate the test. I’ve tended to rely on a “competing narratives” approach – looking for stories that can best explain the various stylised facts of New Zealand’s disappointing long-term economic performance, and assessing how well each of those narratives do.
Eric Crampton proposes that the burden of proof be reversed from the traditional one. In his story, we should welcome large scale immigration – probably even larger than we have now – unless there is clear proof that the immigration programme is harming New Zealanders. It seems a lot like a concession that the alleged economic gains to New Zealanders can’t easily be shown – and won’t be shown in the forthcoming Initiative report. That point alone should be telling – it defies the repeated rhetoric from politicians, officials, academics etc.
But how reasonable is the argument? In some markets, and some products, I think it is a quite reasonable approach. I don’t think we should be banning, or differentially taxing, trade in goods or services without pretty clear evidence of harm to New Zealanders as a whole. I don’t think we should typically be regulating domestic markets in this, that or the other thing without clear evidence of harm – and it is a test that is too little applied, at least with any rigour. But non-citizen immigration is different.
What makes it different? I think it is the fact that migrants are people, not goods, services (or dollars). And the two categories are profoundly different. People aren’t a sofa or a holiday. People – immigrants, not holidaymakers – take up residence , and in time become citizens and voters, and that they embody a whole set of institutions/cultural norms etc. And people from other countries will often have a quite different culture etc from the people already here. And even if they don’t, the natural resources in a particular location might be limited – and if natural resources certainly aren’t everything, they aren’t nothing either, especially in remote locations such as this.
None of this is intended as a novel or particularly provocative observation. Norway (and Norwegians) are different than Portugese who are different than Argentineans or Singaporeans, and all of them are different from New Zealanders. And of course there is plenty of diversity among New Zealanders. The differences and similarities within and across countries aren’t easy to define, but there have to be some things that bind us together as New Zealanders – if “New Zealand” is to be any more than some arbitrary administrative boundary such as that between the Wellington City’s southern and eastern wards. We feel (by revealed preference of our political choices) some obligation to mutual support of fellow New Zealanders in a way that we don’t feel – or practice – for people in Iceland, Ireland or Malta. It doesn’t mean we think those people are inferior, but they simply aren’t our people.
I suspect every human society ever has maintained boundaries. Outsiders have never been totally free to join an alternative grouping (whether a national state, or some other), no matter how attractive the alternative might appear. No doubt there are various reasons for that, but it will include the intuited wisdom that communities with similar values and backgrounds tend to function more efficiently and effectively – trust, for example, is a key dimension of any well-functioning society, and trust is developed and maintained most easily among those with similar backgrounds and shared experiences. Yes, market insitutions can reduce to some extent the need to rely on trust, but only to some extent. If anything, there is probably a “diversity tax”more often than a diversity dividend (and I wrote last year about some suggestive work in that area).
None of this means that effective societies can’t or shouldn’t cope with any newcomers. But the capacity to absorb newcomers – especially if from quite different cultures – and still maintain the trust and intuitive understanding of each other – is likely to be quite limited: human nature isn’t likely to have suddenly changed in the last few decades after millenia of operating within relatively homogeneous groupings. If there are really big gains from welcoming lots of newcomers, those gains will offset any diversity costs. But that brings us back to the question of starting presumptions. The advocates of New Zealand’s large scale immigration programme simply haven’t been able to show such gains – whether it was in the 50s and 60s, where the bulk of the immigrants were from the UK, or more recently. There is a lot of wisdom embedded in established human institutions – they evolved for a reason, typically a good one. The libertarian conceit is that those institutions, or presumptions, can simply be demolished and all will be fine. Perhaps it will, but really the burden should be on them – and their fellow travellers – to show it, including in the case of large scale movements of people.
So perhaps there was a case to be made 30 years ago that we should give large scale immigration from an indiscrimate range of countries a go. Perhaps there really were large economic benefits to be had for New Zealanders. And since few people had ever tried the experiment, we’d never know unless we tried. But we did try, and have gone on doing so for at least 25 years now. At this point, the onus really should be shifted to the advocates to show that their policy – historically unusual, unusual in a cross-country context – is really producing benefits for New Zealanders as a whole.
I’ll look forward to the forthcoming Initiative report, and will no doubt comment further when I’ve had a chance to read it. I was struck however by two observations I’ve seen in the last few days. The first was the blurb for an old New Yorker article, in a newsletter that came through promoting a collection articles about Barack Obama.
Obama’s aunt told him that his father had never understood that, as she put it, “if everyone is family, no one is family.” Obama found this striking enough so that he repeated it later on in his book, in italics: If everyone is family, no one is family. Universalism is a delusion.
That sounded right, and uncontroversial (perhaps to all except libertarians). The family analogy isn’t perfect, but it isn’t without value either.
And the second was a piece on Canterbury university lecturer Paul Walker’s blog, with the salutary reminder – drawing on a piece from Nobel laureate Ronald Coase – about the limitations of empirical economic research, and the tendency of researchers – and one might no doubt generalise it to analysts more broadly – to find what they expect or want to find. In Coase’s words
I remarked earlier on the tendency of economists to get the result their theory tells them to expect. In a talk I gave…. I said that if you torture the data enough, nature will always confess, a saying which, in a somewhat altered form, has taken its place in the statistical literature. Kuhn puts the point more elegantly and makes the process sound more like a seduction: “nature undoubtedly responds to the theoretical predispositions with which she is approached by the measuring scientist.”
It doesn’t mean the work shouldn’t be done, but it is a caution, and a reminder that societies rarely make policy choices, especially about big issues that have the potential to change the character of the society, on the basis of empirical studies. All too often such studies offer support more than illumination.
Before stopping (for a couple of weeks):
Some readers might be interested in a 1990s piece from the late professor Ranginui Walker on immigration policy from a Maori perspective that a reader sent me the other day. The nature of what large scale immigration did to the Maori place in New Zealand – perhaps offering economic benefits but other losses – still seems too little discussed in the current debate.
And Radio New Zealand on Monday broadcast a prerecorded discussion on some of New Zealand’s economic challenges between me, Ganesh Nana of BERL, and Rod Drury, CEO of Xero. This was the discussion referred to in a pre-Christmas post on cities , in the context of the relative underperformance of Auckland.