The Economics of Migration

In the current debate surrounding refugee migration, most people seem to fall into one of two camps: those who favor hosting refugees, and those who oppose it. But many seem to have forgotten that human migration has supported human progress and contributed to global development for centuries.

For opponents of migration, the large influx of foreign born laborers seeking jobs, education, and security is something to be feared. They fear that refugees and other migrant groups are low skilled workers hoping only to benefit from social welfare programs and decrease the standard of living in their host country.  Evidence suggests, however, that on average over a third of migrants entering the workforce have completed post-secondary education, and that in most countries, migrants contribute more in taxes and social contributions than they receive in individual benefits.

We must rise above this seemingly instinctual reaction and consider the benefits that migration has had in those countries that migrants and refugees leave behind. Not only does migration increase wages for workers that stay behind, but migrant workers often remit money to their families back home. This supplementary income is, in turn, invested in education and health care, important indicators of a country’s development that can lift people out of poverty. The Migration and Remittances Factbook 2016 suggests that total remittances were estimated to have reached $601 billion in 2015, of which $441 billion went to developing countries, a total that is almost three times larger than official development aid flows. These remittance flows to developing countries have grown significantly in recent years, from $325 billion in 2010, to $372 billion in 2011 and $401 billion in 2012.

Nevertheless, the high financial costs of international migration and the transmission of remittances are inhibiting the benefits of migration. The 2015 Sustainable Development Goals (SDGs) address these issues. Target 8.8 notes that labor rights, including those of migrant workers, should be protected, and Target 10.7 calls for the facilitation of the orderly, safe, regular and responsible migration of people through the implementation of planned and well-managed migration policies. In addition, Target 10.c strives to reduce the costs associated with remittances to 3% by 2030. Taken all together, these innovative targets would reduce the cost of remittances and encourage sustainable and profitable international migration.

As the Sustainable Development Goals suggest, we need to recognize what technology can do today and use it to redesign the world for a more inclusive and prosperous tomorrow. Modern technology requires specialized knowledge, and the easiest way to gather such knowledge is to recruit from outside of the system. It is easier to move brains than it is to move knowledge and expertise. As such, migration is key to the diffusion of knowledge and its long-term positive impact on worldwide development. In short, we cannot have global markets, trade, products, and services without global migration.

India’s Corporate Social Responsibility Revolution

Last year, India passed the Companies Act, a revision of outdated business practices that resulted in a stronger commitment to corporate social responsibility (CSR). The Act mandates companies worth more than $92.5 million, or with yearly profits exceeding $78 million to:

The Companies Act strives to eliminate corruption and increase public trust in the business community
The Companies Act strives to eliminate corruption and increase public trust in the business community
  • Spend at least 2% of their profits on CSR
  • Establish a CSR committee overseen by a minimum of three directors
  • Noncompliance with the mandate can result in government sanctions and jail time

The government heralds the law as a huge step forward for the Indian business community, with Sachin Pilot, the Minister of State for Corporate Affairs, proudly describing India as the “first country to mandate corporate social responsibility through statutory provisions.”

Supporters of the law are encouraged by the potential for business development, claiming it creates an opening for smaller businesses to grow. The Companies Act discourages one-time monetary donations as a form of CSR and encourages the formation of long-term projects and relationships between large corporations and social sector businesses. The law has created a niche for CSR consulting firms to help corporations develop long-term CSR projects. Consulting firms can increase business while also advertising the projects of small social enterprises. This business development is especially critical in light of India’s recent stagnating financial growth.

Increased corporate social responsibility also has the potential to transform India’s philanthropic culture. According to the World Giving Index, India ranked 134 out of 153 nations based on monetary donations, volunteerism, and willingness to help strangers.

World Giving Index 2010
World Giving Index 2010

But the Center for Global Prosperity showed in the Index of Global Philanthropy and Remittances that 80 percent of Indian citizens donated money annually. India does not lack generosity. What is missing is a long-term commitment to philanthropy at the corporate level. The government hopes to improve corporate involvement in philanthropy through this law.

Some argue the Companies Act does not prioritize sustainable development
Some argue the Companies Act does not prioritize sustainable development

Yet, the Companies Act has been met with more resistance than anticipated. Much of the criticism originates from the government mandating businesses participate in CSR. Mark Hodge, from the Institute for Human Rights and Business, argues that government involvement only reduces government accountability for providing social services. He believes increased CSR is the improper approach to sustainable development because it not only reduces government accountability but also counteract harmful business practices. He instead believes the government should direct its attention towards reforming business practices in a way that encourages sustainable development. This connects to Michael Porter and Mark Kramer’s concept of shared value, where the economic development of a company is strongly tied to the social development of its surrounding community. By eliminating harmful business practices, Indian companies could increase their profits while also improving the community’s quality of life

Other detractors criticize the mandated aspect of the law. Do governments have a right to mandate social responsibility from corporations? Pilot describes the goal of the Companies Act as “encouraging firms to undertake social welfare voluntarily.” But is it really voluntary when the consequences for not complying include sanctions and incarceration? According to Arun Maira, a member of the planning commission, the voluntary nature of CSR has the ability to earn companies public trust and loyalty, which is especially important in the Indian culture where general distrust of businesses is still high. Mandating CSR, however, might discredit the altruistic nature of public service and might create even more distrust of large corporations.

It remains to be seen whether the increase in CSR will promote business development and corporate philanthropy in India or whether it will create distrust and outsource the government’s social service responsibilities. If successful, would India’s corporate philanthropy translate into increased international philanthropy? If unsuccessful, however, this could be a set back for India’s future philanthropic development and general trust in the business community.

The Failures of Tea and Guns in Development

"Machine Gun Preacher" movie poster

On September 23, 2011, the world was introduced to Sam Childers, a gun-loving, motorcycle-riding, bad boy who found the light of God and went to Sudan to save the child soldiers of the Lord’s Resistance Army (LRA). Yes, the typical development crusade. Remember Three Cups of Tea? Different story, same concept. Some guy ‘unexpectedly’ finds himself in poverty and/or conflict, sees that nothing is being done and decides it’s up to him to put a stop to it.

For those of you who haven’t heard of Childers, he is a former member of the notorious Hells Angels biker gang and a drug addict who changed his life around after finding religion. Through a church mission trip, Childers traveled to Uganda and soon learned of the LRA’s use of child soldiers. Shocked by the lack of adequate aid response, Childers decided to take things into his own hands. His life is now being made into a movie, titled the “Machine Gun Preacher”. Continue reading

Methods of Development | Creating Cities to Create Growth

The City of Ambition (1910) | Source: Alfred Stieglitz, The Metropolitan Museum of Art

Once upon a time, cities grew organically, naturally. They developed in coastal areas, grew into hubs for trade and commerce, and served as departure points for exploration. Slowly they industrialized, inviting factories and businesses, blossoming from the added wealth of new resources and new venues for spending. While those characteristics are the fairy tale reality for some cities, others are hampered by rapid industrialization that leads the way to uneven development, slums, and inefficiency. In the developing world, cities have sprouted in places and ways not conducive to sustainable growth and development. In contrast, new proposals suggest harnessing a city’s potential for growth to increase development, innovation, and entrepreneurship—and even address humanitarian efforts at the same time.

According to prominent environmental author Bill McKibben in his book Deep Economy, if we expect developing nations to develop in the same ways as the developed countries did, we are setting ourselves up for an unsustainable project that will damage the environment and raise consumption and production levels to epic proportions. Furthermore, Mike Davis in Planet of Slums notes that rapid urbanization has caused slums to develop around megacities in the global South. The huge populations in these cities drain resources, leaving people with little means to survive.  Continue reading