The Welfare State, Migration, and the Global Race to the Bottom
By Bryan Caplan
I’m now reading the 3rd edition of David Friedman’s Machinery of Freedom. From the new material:
The argument against
immigration takes the level of redistribution as given and points out its effect on who
migrates where and why. One should also consider causation in the opposite direction, the effect of migration on levels of redistribution. The harder
it is for people to move from one country to another, the more politically attractive
redistribution is. The possibility of redistribution tends to
increase inefficient migration, but the possibility of migration tends to
decrease inefficient redistribution.
Consider a government in a world of free migration that is trying to decide whether to
increase or decrease the level of welfare. Giving people money may be
politically attractive, but collecting the taxes to pay for it is not. A ten
percent increase in levels will attract indigents from abroad, swell the
welfare rolls, and increase costs by much more than ten percent. A ten percent
decrease will cause some indigents presently on welfare to migrate to countries
with more generous policies, reducing costs by much more than ten percent. The
existence of easy migration makes welfare state policies less attractive, with
the result that levels of redistribution are likely to be lower.
While I have not seen this argument used in discussions of international
migration, it is a commonplace in discussions of interstate migration. American
supporters of the welfare state routinely argue that welfare ought to be federal rather than state, precisely because state welfare is held down by the
threat of interstate migration. Indeed, one possible explanation for why the
U.S. moved more slowly than European countries towards a welfare state is that
European redistribution was by national governments with control over
immigration, whereas American redistribution was largely by state governments
without such control. [emphasis mine]
Personally, I’ve long been skeptical that the interstate “race to the bottom” heavily constrains state-level redistribution. I almost never hear non-economists complaining that out-of-state residents are taking advantage of their state’s poverty programs. Why don’t they? Because modern Americans are Americans first, residents of their states second. Getting really angry at out-of-state Americans is unAmerican. The race to the bottom probably operates at a subtle level and in extreme cases, but that’s about it.
If my story is right, though, the “race to the bottom” should be much more powerful at the international level. Non-economists routinely complain that foreigners take advantage of America‘s poverty programs. And getting really angry at people from other countries is very American. No offense, Americans; getting really angry at people from other countries is also very French, German, Swedish, British, Danish, Russian, Chinese, and Indian. Friedman’s conjecture should trouble multicultural social democrats. Libertarians, however, should cheer the misnamed “race to the bottom,” because the welfare state is a giant mistake and a grave injustice.