Jan 25th 2007 From Economist.comHow to vote no confidence, with your feet
FORGET, for a moment, the headline stories from central and eastern Europe―the pipeline politics, the corruption scandals, the treasonous tycoons. The big story in the ex-communist world is people. Too few are being born. Too many are dying. And tens of millions have changed country.
A recent World Bank report on outward migration from the former communist countries makes broadly comforting reading. For poor countries, it says, the benefits of remittances slightly outweigh the disadvantages of losing the brightest and best. As home labour markets tighten, fewer people will leave.
The report recommends that governments make “circular” migration as easy as possible. People who know they can come and go again freely are more likely to take the chance of returning home.
That may well be true. And the bank probably understates the benefits of migration to those who migrate, for example, in dispelling neuroses and learning new skills and languages. But the report—and much of the discussion around the issue—fails to deal adequately with the darker possibilities: chiefly, what happens if the exodus continues.
As the bank rightly argues, it is not the prospect of higher wages alone that makes people move abroad. Quality of life plays a big role. Most ex-communist states neglect their customary duty to provide dependable health-care, good education, and the right sort of law and order (honest bureaucrats, friendly policemen, speedy justice).
Bad public policy brings slow growth, less foreign investment, and worse public services. More people leave, making things even worse.
Work is no refuge. Even if the pay is good, a job in an ex-communist countries can still be a pain when it comes to relations with bosses and colleagues. Cronyism, trickery and bullying are rampant.
In all these respects, “old” Europe is far from perfect. But it is a lot better, especially for the young and ambitious.
The big danger is a toxic circle in which migration and bad demographics combine with slow reform and bad government, causing failures in the labour market. The wage needed to persuade a Moldovan to come back from Italy or a Pole to come back from Britain may be too high for his putative employer to pay and stay in business.
The wage needed to persuade a Moldovan to come back from Italy or a Pole to come back from Britain may be too high for his putative employer to pay and stay in business
Eventually, of course the migration will stop, when the pickings for those that remain become sufficiently lucrative for them to stay. (It is not the last person to leave who turns off the lights, but those that remain, melting down the cables for their copper.) As talent drains away, brutality and cunning are what really counts. Whether democracy, a pro-Western orientation and a functioning market economy still survive by then is another question.
Labour-market protectionism in western Europe won’t avert this gloomy outcome. Migrants will still come, and work illegally; or they will divert elsewhere. Better government at home is the right answer.
That means rethinking what is meant by competitiveness. In the early post-communist years, it chiefly meant making things nice for employers, through flexible labour markets and business-friendly taxes.
All that is still necessary. But so is something else: making things nice for workers, so that emigrants return and foreigners come in. That means not merely better public services, but a political elite that inspires trust and optimism. People will put up with a lot if they think the future looks bright.
Thursday, January 25, 2007