How we can best help refugees

JDN 2457376

Though the debate seems to have simmered down a little over the past few weeks, the fact remains that we are in the middle of a global refugee crisis. There are 4 million refugees from Syria alone, part of 10 million refugees worldwide from various conflicts.

The ongoing occupation of the terrorist group / totalitarian state Daesh (also known as Islamic State, ISIS and ISIL, but like John Kerry, I like to use Daesh precisely because they seem to hate it) has displaced almost 14 million people, 3.3 million of them refugees from Syria.

Most of these refugees have fled to Lebanon, Jordan, Turkey, and, Iraq, for the obvious reason that these countries are both geographically closest and culturally best equipped to handle them.
There is another reason, however: Some of the other countries in the region, notably Saudi Arabia, have taken no refugees at all. In an upcoming post I intend to excoriate Saudi Arabia for a number of reasons, but this one is perhaps the most urgent. Their response? They simply deny it outright, claiming they’ve taken millions of refugees and somehow nobody noticed. They

Turkey and Lebanon are stretched to capacity, however; they simply do not have the resources to take on more refugees. This gives the other nations of the world only two morally legitimate options:

1. We could take more refugees ourselves.

2. We could supply funding and support to Turkey and Lebanon for them to take on more refugees.

Most of the debate has centered around option (1), and in particular around Obama’s plan to take on about 10,000 refugees to the United States, which Ted Cruz calls “lunacy” (to be fair, if it takes one to know one…).

This debate has actually served more to indict the American population for paranoia and xenophobia than anything else. The fact that 17 US states—including some with Democrat governors—have unilaterally declared that they will not accept refugees (despite having absolutely no Constitutional authority to make such a declaration) is truly appalling.

Even if everything that the xenophobic bigots say were true—even if we really were opening ourselves to increased risk of terrorism and damaging our economy and subjecting ourselves to mass unemployment—we would still have a moral duty as human beings to help these people.

And of course almost all of it is false.

Only a tiny fraction of refugees are terrorists, indeed very likely smaller than the fraction of the native population or the fraction of those who arrive on legal visas, meaning that we would actually be diluting our risk of terrorism by accepting more refugees. And as you may recall from my post on 9/11, our risk of terrorism is already so small that the only thing we have to fear is fear itself.

There is a correlation between terrorism and refugees, but it’s almost entirely driven by the opposite effect: terrorism causes refugee crises.

The net aggregate economic effect of immigration is most likely positive. The effect on employment is more ambiguous; immigration does appear to create a small increase in unemployment in the short run as all those new people try to find jobs, and there is some evidence that it may reduce wages for local low-skill workers. But the employment effect is small temporary, and there is a long-run boost in overall productivity. However, it may not have much effect on overall growth: the positive correlation between immigration and economic growth is primarily due to the fact that higher growth triggers more immigration.

And of course, it’s important to keep in mind that the reason wages are depressed at all is that people come from places where wages are even lower, so they improve their standard of living, but may also reduce the standard of living of some of the workers who were already here. The paradigmatic example is immigrants who leave a wage of $4 per hour in Mexico, arrive in California, and end up reducing wages in California from $10 to $8. While this certainly hurts some people who went from $10 to $8, it’s so narrow-sighted as to border on racism to ignore the fact that it also raised other people from $4 to $8. The overall effect is not simply to redistribute wealth from some to others, but actually to create more wealth. If there are things we can do to prevent low-skill wages from falling, perhaps we should; but systematically excluding people who need work is not the way to do that.

Accepting 10,000 more refugees would have a net positive effect on the American economy—though given our huge population and GDP, probably a negligible one. It has been pointed out that Germany’s relatively open policy advances the interests of Germany as much as it does those of the refugees; but so what? They are doing the right thing, even if it’s not for entirely altruistic reasons. One of the central insights of economics is that the universe is nonzero-sum; helping someone else need not mean sacrificing your own interests, and when it doesn’t, the right thing to do should be a no-brainer. Instead of castigating Germany for doing what needs to be done for partially selfish reasons, we should be castigating everyone else for not even doing what’s in their own self-interest because they are so bigoted and xenophobic they’d rather harm themselves than help someone else. (Also, it does not appear to be in Angela Merkel’s self-interest to take more refugees; she is spending a lot of political capital to make this happen.)

We could follow Germany’s example, and Obama’s plan would move us in that direction.

But the fact remains that we could go through with Obama’s plan, indeed double, triple, quadruple it—and still not make a significant dent in the actual population of refugees who need help. When 1,500,000 people need help and the most powerful nation in the world offers to help 10,000, that isn’t an act of great openness and generosity; it’s almost literally the least we could do. 10,000 is only 0.7% of 1.5 million; even if we simply accepted an amount of refugees proportional to our own population it would be more like 70,000. If we instead accepted an amount of refugees proportional to our GDP we should be taking on closer to 400,000.

This is why in fact I think option (2) may be the better choice.

There actually are real cultural and linguistic barriers to assimilation for Syrian people in the United States, barriers which are much lower in Turkey and Lebanon. Immigrant populations always inevitably assimilate eventually, but there is a period of transition which is painful for both immigrants and locals, often lasting a decade or more. On top of this there is the simple logistical cost of moving all those people that far; crossing the border into Lebanon is difficult enough without having to raft across the Mediterranean, let alone being airlifted or shipped all the way across the Atlantic afterward. The fact that many refugees are willing to bear such a cost serves to emphasize their desperation; but it also suggests that there may be alternatives that would work out better for everyone.

The United States has a large population at 322 million; but Turkey (78 million) has about a quarter of our population and Jordan (8 million) and Lebanon (6 million) are about the size of our largest cities.

Our GDP, on the other hand, is vastly larger. At $18 trillion, we have 12 times the GDP of Turkey ($1.5 T), and there are individual American billionaires with wealth larger than the GDPs of Lebanon ($50 B) and Jordan ($31 B).

This means that while we have an absolute advantage in population, we have a comparative advantage in wealth—and the benefits of trade depend on comparative advantage. It therefore makes sense for us to in a sense “trade” wealth for population; in exchange for taking on fewer refugees, we would offer to pay a larger share of the expenses involved in housing, feeding, and ultimately assimilating those refugees.

Another thing we could offer (and have a comparative as well as absolute advantage in) is technology. These surprisingly-nice portable shelters designed by IKEA are an example of how First World countries can contribute to helping refugees without necessarily accepting them into their own borders (as well as an example of why #Scandinaviaisbetter). We could be sending equipment and technicians to provide electricity, Internet access, or even plumbing to the refugee camps. We could ship them staple foods or even MREs. (On the other hand, I am not impressed by the tech entrepreneurs whose “solutions” apparently involve selling more smartphone apps.)

The idea of actually taking on 400,000 or even 70,000 additional people into the United States is daunting even for those of us who strongly believe in helping the refugees—in the former case we’re adding another Cleveland, and even in the latter we’d be almost doubling Dearborn. But if we estimate the cost of simply providing money to support the refugee camps, the figures come out a lot less demanding.
Charities are currently providing money on the order of millions—which is to say on the order of single dollars per person. GBP 887,000 sounds like a lot of money until you realize it’s less than $0.50 per Syrian refugee.

Suppose we were to grant $5,000 per refugee per year. That’s surely more than enough. The UN is currently asking for $6.5 billion, which is only about $1,500 per refugee.

Yet to supply that much for all 4 million refugees would cost us only $20 billion per year, a mere 0.1% of our GDP. (Or if you like, a mere 3% of our military budget, which is probably smaller than what the increase would be if we stepped up our military response to Daesh.)

I say we put it to a vote among the American people: Are you willing to accept a flat 0.1% increase in income tax in order to help the refugees? (Would you even notice?) This might create an incentive to become a refugee when you’d otherwise have tried to stay in Syria, but is that necessarily a bad thing? Daesh, like any state, depends upon its tax base to function, so encouraging emigration undermines Daesh taxpayer by taxpayer. We could make it temporary and tied to the relief efforts—or, more radically, we could not do that, and use it as a starting point to build an international coalition for a global basic income.

Right now a global $5,000 per person per year would not be feasible (that would be almost half of the world’s GDP); but something like $1,000 would be, and would eliminate world hunger immediately and dramatically reduce global poverty. The US alone could in fact provide a $1,000 global basic income, though it would cost $7.2 trillion, which is over 40% of our $18.1 trillion GDP—not beyond our means, but definitely stretching them to the limit. Yet simply by including Europe ($18.5 T), China ($12.9 T), Japan ($4.2 T), India ($2.2 T), and Brazil ($1.8 T), we’d reduce the burden among the whole $57.7 trillion coalition to 12.5% of GDP. That’s roughly what we already spend on Medicare and Social Security. Not a small amount, to be sure; but this would get us within arm’s reach of permanently ending global poverty.

Think of the goodwill we’d gain around the world; think of how much it would undermine Daesh’s efforts to recruit followers if everyone knew that just across the border is a guaranteed paycheck from that same United States that Daesh keeps calling the enemy. This isn’t necessarily contradictory to a policy of accepting more refugees, but it would be something we could implement immediately, with minimal cost to ourselves.

And I’m sure there’d be people complaining that we were only doing it to make ourselves look good and stabilize the region economically, and it will all ultimately benefit us eventually—which is very likely true. But again, I say: So what? Would you rather we do the right thing and benefit from it, or do the wrong thing just so we dare not help ourselves?

Just give people money!

JDN 2457332 EDT 17:02.

Today is the Fifth of November, on which a bunch of people who liked a Hollywood movie start posting images in support of a fanatical religious terrorist in his plot to destroy democracy in the United Kingdom a few centuries ago. It’s really weird, but I’m not particularly interested in that.

Instead I’d like to talk about the solution to poverty, which we’ve known for a long time—in fact, it’s completely obvious—and yet have somehow failed to carry out. Many people doubt that it even works, not based on the empirical evidence, but because it just feels like it can’t be right, like it’s so obvious that surely it was tried and didn’t work and that’s why we moved on to other things. When you first tell a kindergartner that there are poor people in the world, that child will very likely ask: “Why don’t we just give them some money?”

Why not indeed?

Formally this is called a “direct cash transfer”, and it comes in many different variants, but basically they run along a continuum from unconditional—we just give it to everybody, no questions asked—to more and more conditional—you have to be below a certain income, or above a certain age, or have kids, or show up at our work program, or take a drug test, etc. The EU has a nice little fact sheet about the different types of cash transfer programs in use.

Actually, I’d argue that at the very far extreme is government salaries—the government will pay you $40,000 per year, provided that you teach high school every weekday. We don’t really think of that as a “conditional cash transfer” because it involves you providing a useful service (and is therefore more like an ordinary, private-sector salary), but many of the conditions imposed on cash transfers actually have this sort of character—we want people to do things that we think are useful to society, in order to justify us giving them the money. It really seems to be a continuum, from just giving money to everyone, to giving money to some people based on them doing certain things, to specifically hiring people to do something.

Social programs in different countries can be found at different places on this continuum. In the United States, our programs are extremely conditional, and also the total amount we give out is relatively small. In Europe, programs are not as conditional—though still conditional—and they give out more. And sure enough, after-tax poverty in Europe is considerably lower, even though before-tax poverty is about the same.

In fact, the most common way to make transfers conditional is to make them “in-kind”; instead of giving you money, we give you something—healthcare, housing, food. Sometimes this makes sense; actually I think for healthcare it makes the most sense, because price signals don’t work in a market as urgent and inelastic as healthcare (that is, you don’t shop around for an emergency room—in fact, people don’t even really shop around for a family doctor). But often it’s simply a condition we impose for political reasons; we don’t want those “lazy freeloaders” to do anything else with the money that we wouldn’t like, such as buying alcohol or gambling. Even poor people in India buy into this sort of reasoning. Nevermind that they generally don’t do that, or that they could just shift away spending they would otherwise be making (warning: technical economics paper within) to do those things anyway—it’s the principle of the thing.

Direct cash transfers not only work—they work about as well as the best things we’ve tried. Spending on cash transfers is about as cost-effective as spending on medical aid and malaria nets.

Other than in experiments (the largest of which I’m aware of was a town in Canada, unless you count Alaska’s Permanent Fund Dividend, which is unconditional but quite small), we have never really tried implementing a fully unconditional cash transfer system. “Too expensive” is usually the complaint, and it would indeed be relatively expensive (probably greater than all of what we currently spend on Social Security and Medicare, which are two of our biggest government budget items). Implementing a program with a cost on the order of $2 trillion per year is surely not something to be done lightly. But it would have one quite substantial benefit: It would eliminate poverty in the United States immediately and forever.

This is why I really like the “abolish poverty” movement; we must recognize that at our current level of economic development, poverty is no longer a natural state, a complex problem to solve. It is a policy decision that we are making. We are saying, as a society, that we would rather continue to have poverty than spend that $2 trillion per year, about 12% of our $17.4 trillion GDP. We are saying that we’d rather have people who are homeless and starving than lose 12 cents of every dollar we make. (To be fair, if we include the dynamic economic impact of this tax-and-transfer system it might actually turn out to be more than that; but it could in fact be less—the increased spending would boost the economy, just as the increased taxes would restrain it—and seems very unlikely to be more than 20% of GDP.)

For most of human history—and in most countries today—that is not the case. India could not abolish poverty immediately by a single tax policy; nor could China. Probably not Brazil either. Maybe Greece could do it, but then again maybe not. But Germany could; the United Kingdom could; France could; and we could in the United States. We have enough wealth now that with a moderate increase in government spending we could create an economic floor below which no person could fall. It is incumbent upon us at the very least to justify why we don’t.

I have heard it said that poverty is not a natural condition, but the result of human action. Even Nelson Mandela endorsed this view. This is false, actually. In general, poverty is the natural condition of all life forms on Earth (and probably all life forms in the universe). Natural selection evolves us toward fitting as many gene-packages into the environment as possible, not toward maximizing the happiness of the sentient beings those gene-packages may happen to be. To a first approximation, all life forms suffer in poverty.

We live at a unique time in human history; for no more than the last century—and perhaps not even that—we have actually had so much wealth that we could eliminate poverty by choice. For hundreds of thousands of years human beings toiled in poverty because there was no such choice. Perhaps good policy in Greece could end poverty today, but it couldn’t have during the reign of Pericles. Good policy in Italy could end poverty now, but not when Caesar was emperor. Good policy in the United Kingdom could easily end poverty immediately, but even under Queen Victoria that wasn’t feasible.

Maybe that’s why we aren’t doing it? Our cultural memory was forged in a time decades or centuries ago, before we had this much wealth to work with. We speak of “end world hunger” in the same breath as “cure cancer” or “conquer death”, a great dream that has always been impossible and perhaps still is—but in fact we should speak of it in the same breath as “split the atom” and “land on the Moon”, seminal achievements that our civilization is now capable of thanks to economic and technological revolution.

Capitalism also seems to have a certain momentum to it; once you implement a market economy that maximizes wealth by harnessing self-interest, people seem to forget that we are fundamentally altruistic beings. I may never forget that economist who sent me an email with “altruism” in scare quotes, as though it was foolish (or at best imprecise) to say that human beings care about one another. But in fact we are the most altruistic species on Earth, without question, in a sense so formal and scientific it can literally be measured quantitatively.

There are real advantages to harnessing self-interest—not least, I know my own interests considerably better than I know yours, no matter who you are—and that is part of how we have achieved this great level of wealth (though personally I think science, democracy, and the empowerment of women are the far greater causes of our prosperity). But we must not let it forget us why we wanted to have wealth in the first place: Not to concentrate power in a handful of individuals who will pass it on to their heirs; not to “maximize work incentives”; not to give us the fanciest technological gadgets. The reason we wanted to have wealth was so that we could finally free ourselves from the endless toil that was our lot by birth and that of all other beings—to let us finally live, instead of merely survive. There is a peak to Maslow’s pyramid, and we could stand there now, together; but we must find the will to give up that 12 cents of every dollar.