Some Unpleasant Thoughts: Refugees and Wealth
By Kwok Ping Tsang
- A book review of The Wealth of Refugees: How Displaced People Can Build Economies by Alexander Betts (Oxford University Press, 2021)1
A key idea in Adam Smith’s The Wealth of Nations is that people have a persistent and ever-present drive to “better their own conditions”. Leave people alone, and prosperity and other improvements of life follow, despite “a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations.”2 In nearly 400 pages, Alexander Betts from the University of Oxford makes essentially the same point in his new book, The Wealth of Refugees: let refugees make their own choices and pursue their own interests, and the outcome is likely to be good for both the refugees and the host country. But just like in Smith’s time, different “obstructions” get in the way, and refugees all over the world today are often hindered from making full use of their potential.
Based on evidence from extensive surveys and case studies, Betts is inclined towards a refugee system under which the neighboring countries of the refugees’ origin provide the territory for settlement, while rich and far-away countries provide the funds. Refugees should be allowed to work as much as political constraints allow, and that freedom will not only improve their quality of life but also benefit the host economies.
How Much Does the Evidence Tell Us?
Betts is laudable for supporting his claims with lots of data and facts collected on the ground, but as an empiricist from another field I cannot resist asking: how much does the evidence help in making better refugee policies?
The Refugee Economies Dataset, of which Betts is a co-creator, comes from surveys done across several countries in Africa for over 9,000 refugees and nearly 8,000 people from the nearby regions of the host country. We learn about the interviewees’ income and employment status and views on their own wellbeing, mental health, and physical health. We also get a glimpse at how welcome the refugees feel in their host country and whether the refugees would rather move to Europe or return home (if there is one). Case studies for Uganda, Kenya, Ethiopia, and other locations dig deeper into the evolution of policies and the interactions between economics and politics.
We certainly get a lot of facts, some expected and some surprising, through the evidence-based approach taken by Betts. He is eager to derive clear policy suggestions from them. For example, after a long discussion of the dataset, he claims that “our analysis suggests that enhancing socio-economic entitlements —and particularly the right to work —for refugees may lead to improved welfare outcomes for refugees and host communities, improved social cohesion, and reduced onward migration.” (Pages 100 and 101) Does it? While becoming a refugee is often not much of a choice, the destination, job type, and the number of hours to work are all decisions made by refugees. Refugees try to “better their own conditions” subject to the political, cultural, and economic constraints they face. A different set of constraints will lead to different behavior, and varying constraints can change the composition of refugees as well. A host country with a booming economy tends to attract younger, more productive, and better-educated refugees; a community that is already in distress is likely to be matched with refugees that may well make the problem worse. Policies also are not randomly assigned but are the results of complex political deliberation and bargaining subject to other constraints.
Yes, it is the old “correlation is not causation” critique that probably only economists are obsessed with. The patterns described by Betts cannot reliably predict what will happen if certain policies are transplanted to another region. While I appreciate the author’s effort to combine advocacy and evidence, I think the research question should be asked in a slightly different but much less ambitious way: why are the kind of refugee economies that the author prefers possible in some places and not others?
The Limits of Sympathy
Despite the homage in the title, it is Adam Smith’s other major work, The Theory of Moral Sentiments, that better fits the main theme of Betts’ book.
For most of us in developed countries, refugees are a distant problem. Indeed, as pointed out by Betts, some 85 percent of refugees in the world are in low and middle-income countries, and only a small proportion are in Europe or North America. We rarely meet them in person and mainly read about them in the news or see them on television, and we are likely to know little about the political background that created the displacement problem in the first place.
Smith imagined a similar and horrendous example: “Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity.”3 According to Smith, that man of humanity in Europe will feel bad about the calamity, but only for a short while; and it would not take long for his focus to go back to all the trivial things inside his little world. It is not that the man is selfish and heartless. “When the happiness or misery of others, indeed, in no respect depends upon our conduct, when our interests are altogether separated and detached from theirs, so that there is neither connexion nor competition between them, we do not always think it so necessary to restrain, either our natural and, perhaps, improper anxiety about our own affairs, or our natural and, perhaps, equally improper indifference about those of other men.” If we are actively choosing between the calamity and some personal benefit, we cringe at that choice. But if the calamity does not depend on us, and it is not up to us to prevent it, we naturally care less. Compassion is a scarce resource and does not travel far. Perhaps this is just an unpleasant fact we need to acknowledge.
Smith’s concept of sympathy also applies to the question of where refugees ought to go. When people speak the same language, have close cultural backgrounds, or share similar experiences, it is much easier for them to project themselves into each other’s situations and empathize. The further apart people are culturally, the more difficult it is for them to help others and the easier it is for them to mistrust others. This helps explain why refugees are such a fraught issue in Europe, but it also supports the idea that neighboring countries have a comparative advantage in hosting them. Being closer physically, historically, and culturally, people in the host countries are more able to understand the problems refugees face, and they are also less likely to be suspicious and antagonistic towards their unfortunate guests. Or as Betts puts it more carefully: “cultural proximity may support positive attitudes.” (page 89) Knowing better what the refugees need and how they can contribute to the community, neighboring countries may well be in a better position to come up with more sensible policies and approaches. But again, this can be an unpleasant point to make. It is not easy to acknowledge that people are different, and that rich countries are not good at hosting refugees due to cultural distance.
Neither does it sound good to suggest they should keep footing the bill, which is what they are relatively good at, leaving the job of hosting to the (usually poor) neighboring countries that are closer in both geographical and cultural distance.
Much as we see with Smith’s “invisible hand,” the host countries that end up adopting better policies towards refugees may not have the noblest intentions. Indeed, leaders with “illiberal motives” may have their own incentives to support a more progressive model under which refugees have more freedom to work. Betts brings up a surprising example: “It was in fact (Idi) Amin who was the architect of many of Uganda’s now-celebrated refugee settlements, and he did so both because they offered opportunities to nurture loyalty and recruitment and also because he received high international praise—and money—from UNHCR and others for doing so.” (pages 222 and 223) In a related discussion, Betts points out that the right to work for refugees “is more likely in semi-authoritarian regimes”, the reason being that “the political costs of creating legislation on the right to work are likely to be lower at central government level with lower levels of electoral accountability.” (page 219) Bluntly put, when people and interest groups in the host countries have less say in policies, they are less able to prevent refugees from getting work. Such an unpleasant thought.
A Political Persuasion
Whether you agree with it or not, Bett’s message is simple, pragmatic—while sometimes unpleasant—and he has expended a tremendous amount of effort to support it with evidence.
But I must warn you that getting the message from the book is no easy task. Perhaps as an effort to make it more palatable, the message is carefully hidden behind a large amount of dry and sometimes repetitive discussion of data, case studies, and historical events. Some sections of the book remind me of browsing a tedious article from some academic journal, and other pages read like an uninspiring press release from some non-governmental organization. Occasionally you see the author getting out from behind that façade and speaking directly to the reader, but those are rare moments that are quickly replaced by yet another exhaustive and exhausting exposition.
Chapter Three of the book provides many such examples. “The more years of education a refugee has, the higher their earnings. The better their health score, the higher their earnings. In other words, public services matter. Identity also matters: men and older refugees tend to earn more… Finally, geography matters: living in a city or in a country that allows refugees to work, for example, are associated with higher incomes.” (pages 84 and 85) Such findings are obvious even for non-economists, and the bland writing style does not help to make them more interesting. A few pages later, I come across a passage that truly tests the reader’s patience: “Business owners who employ or sell to refugees appear to have positive perceptions, while people of lower socio-economic status felt more threatened by competition for informal sector work. Put simply, the economic ‘winners’ of refugees’ presence appear to have more positive attitudes; the economic ‘losers’ appear to have more negative attitudes.” (page 92) I think you see my point.
For more on these topics, see
- Ran Abramitzky and Leah Boustan on Immigration Then and Now. EconTalk.
- Richard Davies on Extreme Economies. EconTalk.
- “The Double Life of Adam Smith,” by Kwok Ping Tsang. AdamSmithWorks, September 8, 2021.
Now we know why it takes the author almost 400 pages to make a simple point; and that brings me to my own unpleasant thought: maybe the book is not written for a common reader like me after all. Says Betts, “… the politics of refugee rights are messy and ambivalent, they involve a series of linked interests only tangentially related to refugee assistance”, and “if countries are to adopt the right to work for refugees, policy-makers need to understand and engage with those politics.” (page 363) To be an active and effective advisor to governments and organizations (which I believe the author is), the tone, choice of words, and style of argument must all be carefully crafted and packaged so that none of the political interests involved are displeased or disturbed—a daunting task. The book is an exemplary effort of persuasion, but it is the political leaders, donors, policy-makers, technocrats, researchers, and NGOs that Betts is trying to inform and convince. The general audience is not welcome here, and they must go elsewhere for a more approachable treatment of the issue.
 Alexander Betts, The Wealth of Refugees: How Displaced People Can Build Economies. Oxford University Press, 2021.
 Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, Book IV, Chapter V, “Of Bounties.” Library of Economics and Liberty.
 Adam Smith, The Theory of Moral Sentiments, “Of the Foundation of our Judgments concerning our own Sentiments and Conduct, and of the Sense of Duty.” Library of Economics and Liberty.
*Kwok Ping (Byron) Tsang is an Associate Professor of Economics, Virginia Tech. He is also Affiliated Faculty at the Kellogg Center for Philosophy, Politics, and Economics at Virginia Tech and a member of the Economic Research Centre at the Hong Kong Institute of Asia-Pacific Studies, and is a Co-editor of Contemporary Economic Policy.