Roderick Long and the Tiny Gnomes from Neptune
By Bryan Caplan
When I was flying to Singapore I kept thinking about Roderick Long‘s Cato Unbound piece on “Corporations versus the Market.” Now that I’ve returned, I see there’s been a ridiculously lively followup discussion. I’m sorry to have missed it, but this passage in Rod’s last post gives me a great entry point:
So if there is “nothing special or different about government
privileges for corporations,” they ask, why have I chosen to “single
them out” (especially since I have not chosen to challenge the
legitimacy of the corporate form itself)? My answer is that the primary and disproportionate beneficiaries
of government privilege tend to be corporations, particularly large
corporations. If the primary and disproportionate beneficiaries of
government privilege were tiny gnomes from Neptune I’d be complaining
about pro-Neptunian-gnome favoritism instead.
Well-put. But I’m afraid Rod overlooks much more important beneficiaries of government privilege than corporations: Lower-skilled workers in the First World. Lower-skilled workers in places like the U.S. earn several times as much as equally-qualified people in the Third World. The reason is clearly immigration restrictions – with modern transportation and credit markets, there’s no way that price differentials of that size could long persist. In fact, as a recent paper by Clemens, Montenegro, and Pritchett points out, the “price wedge” between the First World and the poorest Third World countries is the largest that has ever been measured. When you recall that labor earns about 70% of GDP, it should be clear
that we’re talking about a massive distortion in a massive market.
Now of course I’m the first person to point out that immigration hurts lower-skilled Americans less than most people think. But there are literally billions of lower-skilled workers who would love to move to the First World. That is more than enough to sharply reduce the wages of lower-skilled workers lucky enough to be born in a more-developed country.
Back in 1993, I spent a joyful summer conversing with Rod. I’m confident in his support for free immigration. My point is that compared to immigration restrictions, government privileges to corporations are barely worth mentioning – and yes, that includes the unprecedented bailouts of 2008.*
This has awkward implications for thinkers like Rod who want to build bridges between libertarians and the left. To put it mildly. Sure, an ultra-philosophical leftist might say, “Free migration would vastly help the world’s poorest, so let’s do it.” But almost no leftist outside a philosophy department will see it that way. Alas.
* Consider: If the only effect of immigration restrictions were to double the earnings of 70,000,000 Americans from $10,000 per year to $20,000 per year, the annual effect of immigration restrictions would equal the cost of the notorious $700 billion bailout!