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November 22, 2007

« Why I Love My Job | Main | The Death and Life of Hollywood »

According to an article in yesterday’s New York Times, transfers from emigrants to their home countries is an enormous economic phenomenon.

Posted by Kevin Stolarick for Alison Kemper

The World Bank, the main tally keeper (in the form of a careful economist named Dilip Ratha), only counts transfers recorded by central banks. Last year’s sum came to $208 billion. Bank officials estimate that the global total is about 50 percent higher — $300 billion or more.

Last month, the International Fund for Agricultural Development, an arm of the United Nations, and the Inter-American Development Bank released a set of numbers culled from additional sources, including private survey data and records of money-transfer companies. (The research was led by Manuel Orozco of the Inter-American Dialogue, a Washington research group.)

By any accounting, the amounts involved are big and flow worldwide: migration truly is global. The new study found that 60 countries received $1 billion a year or more last year. In 38 countries, remittances accounted for more than 10 percent of the gross domestic product.

The hardest working, brightest, healthiest and most ambitious leave for cities abroad where they can drive the creative economy.

What happens at home without them? What is happening at the other end of the road—the geographic sources of artists, software engineers and LGBT people?

There’s been some research on Kerala, the state that once held great promise to be the leader of Indian development. It’s the state with the greatest equality for women, public education for all, egalitarian reforms. That promise was not realized: economic development has gone instead to Mumbai, Delhi, and even Kolkata. They export well educated people—the creative class.

Maybe it’s not all a loss for Kerala. Here’s an excerpt from a 1999 paper from K.C. Zachariah, E.T. Mathew,  and S. Irudaya Rajan at the Centre for Development Studies in Thiruvananthapuram.

Migration has contributed more to poverty alleviation in Kerala than any other factor, including agrarian reforms, trade union activities and social welfare legislation. The study shows that nearly 1.5 million Keralites now live outside India. They send home more than Rs.4,000 million a year by way of remittances. Three-quarters of a million former emigrants have come back. They live mostly on savings, work experience, and skills brought with them from abroad. More than a million families depend on internal migrants' earnings for subsistence, children's education and other economic requirements.

More recently, The NY Times (again) found this:

Remittances from global capitalism are carrying the whole Kerala economy,” said S. Irudaya Rajan <snip>. “There would have been starvation deaths in Kerala if there had been no migration. The Kerala model is good to read about but not practically applicable to any part of the world, including Kerala.

Local lessons would matter less if this were a section of Mexico or Manila — places known for the hardships that make migrants flee. But Kerala’s standing as the other way — the benevolent path to development, a retort to globalization — makes the travails of its 1.8 million globalizing migrants especially resonant. The debate about Kerala is a debate about future strategies across the impoverished world.

Does immigration to American and Canadian cities impoverish or enrich the cities these immigrants have left?  Is this a zero sum game, or does migration benefit both ends of the road?

On a day when Americans gather their families to remember their identity as migrants and to give thanks for their prosperity, we might take a moment to consider the ways in which immigrants make the world more connected, more prosperous, and more creative.

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Comments

Michael Wells

I'd guess the benefits outweigh the disadvantages. Just as in the US, the Kerala creative class moves to the cities. Unlike the US, according to this study, many of them move back with new skills. In addition, the money transfers from Indian cities and abroad help maintain the local economy.

What this piece doesn't mention is that much of the money transfer from the US to the Latin American and other countries pays not only for food but for business startups, new houses, education for children. It's probably much more efficient in getting money directly into the hands of poor and working class people and local economies than any government foreign aid program.

uk visa

It's a very interesting question - I think money is transferred home for the first few years. After that, people become more established and think about building families themselves and thus less money is transferred to the original home.
Only my 2c...

Jake Harrington

From a purely US perspective, importing talent and exporting social surplus = no change in net exports. Add all studies proving the benefits of a diversified talent base into the GDP calculation and, ta-da! real growth.
From a global perspective, intellectual capital's mobility allows for real growth wherever said capital chooses to land.
It's a win-win by my calculations.

mikle

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