The winners and losers of globalization, Branko Milanovic’s new book on inequality answers two important questions: Corak

Miles Corak’s review of Branko Milanovic’s Global Inequality: A New Approach for the Age of Globalization makes interesting reading, particularly  the section on immigration:

If we really can get into this global mindset that he is asking us to adopt, then we might think more creatively, and perhaps less dogmatically, about a series of challenges that we face as citizens of individual nations. There are a number of examples in the last chapter, but perhaps the most striking deals with citizenship and migration, examples that cut at the very core of the approach.

There remains a huge boost to incomes depending upon where an individual lives, and this creates big incentives for migration from poorer to richer countries. American politics has long been struggling with meaningful immigration reform, driven by the large inequalities between countries but also formed, informed, and misinformed by the large inequalities within the country.

The refugee crisis now afflicting Europe is partly geopolitical but also deeply economic. Better lives are to be had if one can make it to Germany or Sweden. “Physical walls between jurisdictions,” Milanovic tells us, “are being built, in part, because there is a huge financial wall between being and not being a citizen of a rich country.” In his view, this is because our national politics ties us to a binary notion of citizenship. He speculates that Americans and other citizens of the rich countries might be more amenable to immigration if there were what he calls an intermediate level of citizenship, a level that would have less economic value than full citizenship because it would entail higher taxation, less access to social services, or perhaps an obligation to return to the country of origin.

In other words, put aside the idea of a “path to citizenship” as a right. Americans have tolerated a de facto inferior form of residency, but in a way that keeps many immigrants and their children in the shadows. Milanovic is advocating bringing them out of the shadows through, for example, a legally administered program for temporary foreign workers, giving migrants the right to work in the country but also the obligation to return home.

This is something actually done in Canada, but the policy went afoul politically because it made the competition for jobs between natives and migrants more transparent. It may be a policy particularly appropriate to the European Union, where the walls are something more than metaphorical. This is context that Milanovic probably has in mind. But it is hard to imagine how much traction a temporary foreign-worker program, or the other variants he suggests, would have in the U.S., because the perception that immigrants compete for jobs and lower wages of the native-born will still bite.

Indeed, at the same time, Milanovic makes clear that he feels the “great middle-class squeeze” is not over, and will likely lead to more polarization in rich societies and their politics. This will not only ensure immigration policy will continue to be challenging, it may also be all the more troubling for policy directed to equality of opportunity.

In the coming years, the observed differences in the skills and abilities between the top echelons and everyone else will not be that great, with chance, family background, and inheritances playing a bigger role in allocating incomes. “The new capitalism will resemble a big casino, with one important exception: those who have won a few rounds (often through being born into the right family) will be given much better odds to keep on winning.” If this is so, then it will be harder and harder to sustain the story that inequality is somehow the precursor of opportunity, offering rewards and incentives for the more productive among us to contribute to higher growth and incomes for all. And the status quo will become politically less and less sustainable.

Source: The winners and losers of globalization, Branko Milanovic’s new book on inequality answers two important questions | Economics for public policy