Vladimir Popov: EU – Nationalism and Inequalities

I am grateful to Vladimir Popov of TsEMI, the Central Economics and Mathematics Institute of the Russian Academy of Sciences, Moscow, for contributing this guest post to our Blog as an extended comment on my previous post on Seismic Faults in the European Union.

Vladimir Popov on: EU – Nationalism and Inequalities

             “Imagine there's no countries ... And the world will be one.

             It may happen, if the current rise in inequalities is reversed.

Mario Nuti predicts new difficulties for the EU and believes Lenin was right, when stated that United States of Europe are either impossible or reactionary (post of January 8, 2017).  He may well be right, as he has been so many times, but I wish he wasn’t.

In the EU for the first time in history member countries voluntarily decided to eliminate borders – a dream of many since ancient times. It was by the way also one of the staples of the communist ideology – nations eventually, after the full victory of communism, will merge, borders will disappear, a brotherhood of men will share the whole world.  As the best poet of Soviet era Vladimir Mayakovsky put it,

“For we want this world to be a common earth

Without Latvias and without Russias”.

Many of those born and raised in the USSR cherish this dream and admire the EU that seemed to have been able to achieve this goal without coercion and violence. It would be most regretful, if EU project will not succeed.

This is the moral argument in favor of the EU that does not prove, of course, that Mario is wrong. Many inevitable trends may be undesirable for large groups of people. Below, however, are some “hard core, material” arguments, why current centrifugal forces in the EU and the world may be only a temporary phenomenon.

Nationalism and inequalities

Conservative politicians all over the world have recently spoken against globalization. As former French Prime Minister Dominique De Villepin put it recently, ”globalization, on the one hand, promotes cooperation, on the other hand, brought new mutual exclusion, isolation and radicalization”. And Donald Trump wants “Americanism, not globalism”.

It would be wrong, however, to blame globalization for all the disasters and misfortunes, from non-growing real incomes to the rise of nationalism. History does not repeat itself, but it rhymes. Those who blame globalization today for economic and social misfortunes are similar to the luddites of the XIX century that believed that the use of machines leads to the rising unemployment and falling wages. 

There are cases when globalization works leading to rising incomes of the masses. Theoretically greater international flows of goods, ideas and technology, capital and labor should increase productivity, but in reality this happens only if these flows are carefully managed (Popov, 2014, Chapter 5)..

Why in some countries greater economic interaction with the world was accompanied in recent several decades by rising income and its relatively even distribution (China and other East Asian countries), whereas in other countries modest growth of income coupled with rising inequalities left large masses of  population worse off (many Western countries, including the US, Eastern Europe and former Soviet Union)? The answer is that policy matters a great deal and many good policies that allow gaining from globalization are often non-orthodox and counterintuitive (Polterovich, Popov, 2005). If globalization is accompanied by the increase in income and wealth inequalities within countries, so that gains from globalization are appropriated by the few better off, whereas the masses get nothing or very little, it is only too easy for the interested political forces to blame globalization for the negative developments.

The central argument of this post is that the reversal of the previous trend towards the decline in income inequalities in the last three decades in most countries created favorable grounds for the rise of nationalist and anti-globalization feelings (Popov, 2016). Lindert and Williamson (2016) claim that income inequalities breed populism and attribute the rise of inequalities to globalization (especially in the two periods of American history – Gilded Age of the late 1800 and recent three decades since the 1980s). My argument is that income inequalities indeed contribute to the rise of populism and nationalism, but that globalization does not necessarily lead to the rise in inequalities.

Trends in nationalism are explained, among other factors, by both between the countries and within the countries inequalities. If the gains from globalization are distributed evenly, the public is willing to embrace it, but if the gains are appropriated by few, it is easy for nationalist political forces to turn the public against globalization.

Hence, there are several globalization models, depending on the trend in inter and intra- country inequalities in recent three decades:

·        Great gains from globalization for the country as a whole and relatively small rise in within the country inequalities (Japan, China, SEA, Scandinavian countries, the Netherlands);

·       Small gains from globalization for the country as a whole, but decline in domestic inequalities (some LA countries, including Brazil);

·       Large gains from globalization for the country as a whole, but increase in domestic inequalities (Britain and some continental European countries);

·       Small gains from globalization for the country as a whole and increase in domestic inequalities (US, Russia in the 1990s).

The worst conditions for the rise of nationalism would be in the first group of countries, the best – in the last, fourth group, with the 2^nd and 3^rd group falling in between.

The rise of nationalism in recent decades in the EU and many other countries seems to be associated with the increase in within the country income inequalities. In some countries income inequalities did not increase and nationalist and anti-globalist feelings are more related to the slowdown of growth and other reasons, but in most countries there was an increase in income and wealth inequalities since the 1980s – a reversal of the trend of over 50 years that created a fertile ground for rise of nationalism (Popov, 2016).

Recent trends in income inequalities in EU

The fall of the Berlin Wall, collapse of the USSR and the conversion of Eastern Europe and former Soviet republics to capitalism, added additional push to the growing income inequalities trend due to both – the disappearance of “socialist counterbalance” for the Western capitalism and the rise in inequalities in the transition countries of Eastern Europe and former Soviet Union themselves (Jomo, Popov, 2016).

In most European countries income inequalities increased since the beginning of the 1980s – the reversal of the trend that predominated since early 20^th century (fig. 1). This increase in inequalities may be the single most important reason for the rise of nationalism. In Eastern Europe there was a transformational recession of the 1990s associated with the transition to the market economy – output fell by 20-50% in the course of 2-5 years (Popov, 2000), which certainly contributed to the rise of nationalism. But in Western Europe there was no major recession (except for Greece). Even though economic growth was not very strong, it was  rather stable, recessions of 1993 (per capita GDP fell by 0.4%), 2009 (-4,7%) and 2012-13 (-0.4%) were overcome and average incomes, unlike in the US,  by 2016 were way higher than in the 1980s. However, the progressing unevenness in income distribution undermined real incomes and social status of large groups of European population making them an easy target for the nationalist politicians.

Britain may be the case in point. The rise in nationalism is often explained by unfairness and humiliation experienced by the whole nation (for instance, Germany after the First World War or developing countries where costs of globalization are often higher than benefits).  In Britain, however, the recent rise of nationalism did coincide with the relatively successful economic development and with the improvement of its economic positions versus the major competitors. Britain was falling behind continental Western Europe in terms of its per capita income and this trend was reversed only a decade after Britain entered the EU (fig. 2).

However. only a minority of the population benefited from the acceleration of economic growth since the early 1980s – income inequalities increased (fig. 1) and so did wealth inequalities (fig. 3).

From the point of view of economic efficiency and future growth, Brexit is bad for the EU and especially bad for Britain. But the majority of British voters apparently blamed economic difficulties not on policies that allowed inequalities to increase, but on the European integration and globalization.

Future

There may be at least two scenarios for the EU and the world. First, if the rise of income inequalities would continue, social tensions in some countries will become unbearable and will produce a social turmoil and anti-globalisation, nationalist sentiments. And the rise of nationalism may lead to conflicts, if not wars, between countries, with the collapse of the international trade and capital flows, like in the 1930s. Then the world may once again get into the familiar 20^th century historical track and there may be a pause in or even the reversal of globalization, like during the Great Depression, when the outburst of protectionism led to the decline of the international trade and capital movements. This is the worst scenario: the world degrading into social and national conflicts.

Second, countries that carry out successful policies of limiting inequalities would become more competitive, driving other countries “out of anti-globalisation business”. Even small countries, if they are successful, may create a counterbalance through the demonstration effect to the tendency of unconstrained capitalism to cut welfare programs and increase inequalities. These countries may regulate the functioning of the market mechanisms through direct interventions and high progressive taxation to reduce bubbles and windfall profits. Besides, the crucial way of lowering inequalities is public and collective property, so it could be expected that state enterprises, non-profit institutions, labour managed enterprises and coops, operating not for profits, but for public good would become more common. Such a more optimistic scenario implies that social upheavals within countries and national conflicts between countries could be largely avoided. EU in this case would have a bright future.

References

Facundo Alvaredo, Anthony B Atkinson, and Salvatore Morelli (2016). Top wealth shares in the UK over more than a century, Working Papers Department of Economics Ca’ Foscari University of Venice No. 01 /WP/20.

Alvaredo, Facundo, Anthony B. Atkinson, Thomas Piketty and Emmanuel Saez (2012). ‘The World Top Incomes Database’, http://www.wid.world/#Introduction

Jomo, K.S., V. Popov (2016). Income Inequalities in Perspective. Develoipment, No. 2, 2016.

Lindert, P. and Jeffrey Williamson (2016). Unequal Gains: American Growth and Inequality since 1700. Princeton University Press, 2016.

Maddison project (2013). http://www.ggdc.net/maddison/maddison-project/home.htm, 2013 version.

Polterovich, V., Popov, V. (2005). Appropriate Economic Policies at Different Stages of Development. NES, 2005 - http://www.nes.ru/english/research/pdf/2005/PopovPolterovich.pdf.

Popov, V. (2000). Shock Therapy versus Gradualism: The End of the Debate (Explaining the Magnitude of the Transformational Recession) – Comparative Economic Studies, Vol. 42, No. 1, Spring 2000, pp. 1-57 (http://www.nes.ru/%7Evpopov/documents/TR-REC-full.pdf);

Popov, V. (2014). Mixed Fortunes: An Economic History of China, Russia and the West. Oxford University Press, April 2014.

Popov, V. (2016). Is Globalisation Coming to an End Due to Increase of Income Inequalities? -  MPRA paper №73094 , August 2016.

World Wealth and Income Database. http://www.wid.world/#Database:

Mario Nuti’s reply:

I agree with Vladimir that a world without borders would be very attractive, as a realisation of both human freedom and economic efficiency. However it is no accident that it was part of communist utopia only after the expected universal diffusion of communism. For a world without borders involves - as I pointed out in my previous post - global communism in access to national social capital (however defined, whether as physical infrastructure, social cohesion and trust, or welfare state institutions and provisions). This is neither feasible nor desirable nor sustainable in a world where private ownership is globally prevailing and fully protected. I take it that Vladimir would not support unrestricted full communism – in the sense of abolition of both private and national social property – on a global scale or even in a single country or just in the European Union. I regard Vladimir’s unconditional endorsement of the Schengen Area abolition of internal borders (and neglect of external ones) not as a cogent argument in favour of a world without borders but merely as evidence of his generous nature.

I particularly like Vladimir’s characterisation of the relationship between globalisation and inequality, with his four country cases: (a) large gains, small rise of inequality; (b) small gains, inequality decline; (c) large gains, [significant] rise of inequality; (d) small gains, inequality increase. The first case would make people approve of globalisation; the last case would be associated with strongly nationalistic, anti-globalisation feelings and policies; while the two intermediate cases also would be somewhat nationalistic and anti-globalist but to a lesser extent. And at the global level, I would add even more positively and forcefully than Vladimir, globalisation has halved the incidence of poverty in the last twenty years – lifting hundreds of millions of Chinese from starvation to obesity – and achieved the reduction of inequality among the citizens of the world.  

However, globalisation, including migrations, does not lead to “gains … appropriated by the few better off, whereas the masses get nothing or very little benefit”, as Vladimir conjectures. It does yield net benefits, as I readily recognised, but it actually makes a non-negligible number of people worse off. In theory we can imagine a redistribution of gross gains to gross losers so as to make everybody better off - which is how Vladimir would be able to achieve a win-win situation. But such Paretian redistribution is not possible, because it would have to be international and/or regressive. International redistribution is presently impossible for lack of political globalisation, i.e. global governance by institutions capable of global taxation and expenditure. Regressive redistribution from gainers who tend to be poorer to losers who tend to be richer would be undesirable, as I trust Vladimir would agree.  

And even if everybody gained from globalisation, inequality in the distribution of gains would legitimise some opposition to unrestricted, raw globalisation. Vladimir’s comparison with the Luddites is very apt, but with opposite implications with respect to the one he draws: technical progress in the early 19^th century (and today’s automation) also yields net benefits but makes some people worse off, just like globalisation and migrations, therefore justifying – unless there was compensatory income redistribution from gainers to losers – resistance and even forceful opposition by the losers.

The dividing line between populism and democracy is very thin. It is no accident that today we talk of right wing and left wing populism. "The accusation of populism can easily become an instrument to maintain and extend the power of oligarchies, and their influence on public life and decisions, reducing any protest attempt from below to irrationality or intellectual or moral laziness.  Anti-populism therefore can become a weapon in the hands of the élite, a weapon that jeopardizes the essence of democratic coexistence. While populism, if properly articulated, may be useful to democracy" (my translation from Lorenzo Del Savio e Matteo Mameli, "Il populismo è democratico: Machiavelli e gli appetiti delle élite" 2014), whose conclusions are based on a recent debate on Machiavelli's theses in his Discorsi sopra la prima deca di Tito Livio. http://ilrasoiodioccam-micromega.blogautore.espresso.repubblica.it/files/2014/02/machiavelli-populismo.pdf.  Though growing support for populist parties is also due to non-economic factors, such as the feeling of marginalisation, of a falling standing in society, of having lost control over one’s condition, determined by the establishment élite; there are also cultural, ethnic and religious diversities coming into play. When these factors determine electoral choice there is no reason to dismiss the results as expression of populism instead of an integral part and parcel of a democratic system.

Vladimir offers two alternative visions of the future. A pessimistic scenario involves rising inequalities and anti-globalist policies, the rise of nationalisms with possible commercial or even hot conflicts, a pause or even reversal of globalisation. An optimistic vision, favoured by Vladimir, involves the containment of inequality, the restoration of the welfare state funded by progressive taxation, the build-up of public and collective enterprises (including self-managed non-profit cooperatives). “The EU in this case would have a bright future” – he writes. Unfortunately there are other fault lines in the EU today, which I tried to spell out in my post and are left unscathed by Vladimir’s reflections, which do not alter my fundamental pessimism.  

R.E.Rowthorn on "Schengen and the European Migration Crisis"

Robert E. Rowthorn, Emeritus Professor of Economics in the University of Cambridge (England) has written an extensive comment on my previous post, which clarifies, strengthens and develops my argument. He has kindly agreed to publish it as a follow-up guest post on my Blog, which I am delighted and grateful to do:  

In his  stimulating post, Mario Nuti considers Schengen area migration policy under three headings:

1.     Free internal travel requires strong external controls,

2.     Free internal travel requires convergence of living standards within the area  (including welfare provisions),

3.     Any attempt at a fair redistribution of immigrants among countries requires the re-establishment of national borders.

He points out that the fair redistribution of immigrants, as demanded by Germany and the Pope, is inconsistent with free travel as laid down by the Schengen agreement. This may not be such an important issue, since the Schengen agreement may be on the verge of collapse.  According to a new survey by French pollster IFOP, 72% of French, 66% of Germans and 60% of Italians are now in favour of repealing the Schengen agreement and reintroducing border checks at least temporarily (Süddeutsche Zeitung, 5 April 2016).   Even if the agreement is not formally repealed, it may become a dead letter as more states unilaterally re-introduce border controls.

Nuti also makes the point that effective control of EU external borders requires the cooperation of neighbouring countries, such as Turkey.  Where this cooperation is not forthcoming effective control may be impossible within normal moral and legal constraints. This is most evident in the case of Libya, where the state is too weak to prevent the departure of migrants to Italy and the country is too unsafe to permit the return of rejected immigrants.  In my own country, the UK, the control of immigration relies heavily on support from nearby countries. The reason we do not get flotillas of migrant boats heading for our shores is not because the UK is hard to reach by sea – it is only 33km from France = but because nearby countries prevent their departure.   The future ability of the EU to control immigration from poorer countries will depend on the ability of the Union to gain and retain the cooperation of its neighbours in North Africa and the Middle East.

Immigration controls, like all forms of legal constraint, involve either compulsion or the threat of compulsion.  Immigrants who have no legal right to remain must be either persuaded to leave or forcibly deported. Failure to remove them will only encourage others.  This is why amnesties are counter-productive.  The need for removals is inversely related to the difficulty of illegal entry.  The easier it is to gain physical entry, the greater must be reliance on removals. This is not a message which liberal-minded people want to hear. As Nuti points out, rejection and forced repatriation are unpleasant and sometimes brutal. But they are a logical consequence of excluding people who have a strong desire to live in Europe.  

The feasibility of repatriation depends on the ability to identify the country of origin of a prospective deportee. It also depends on cooperation of the country of origin. Legally speaking, a country is supposed to accept its nationals who are deported from another country, but this may not always be the case in practice. Thus, it will be important in the future to gain the cooperation of the countries to which migrants are to be repatriated,

The recent agreement with Turkey involves the compulsory return of all migrants entering Greece from Turkey, who are not applying for asylum or whose application is judged to be unfounded or inadmissible. This policy may be illegal under international law but the EU is powerful enough to disregard this provided its own internal courts acquiesce. If it works, the agreement with Turkey may act as a template for future agreements regarding the control of migrant flows and repatriation.

Nuti cites an interesting analysis by Branko Milanovic in Social Europe  (May 2015).  This analysis indicates the difficulty of coming up with a workable policy towards migration from poor to rich countries.  Milanovic calls for a coordinated quota system for allocating would-be migrants between emitting and receiving countries.  He concedes that such a system would not be able to deal with random events such as the war in Syria, but he argues that it should be able to deal with economic migration: “With an orderly quota system, a person from Mali who is considering migrating to France may prefer to wait several years and get an official permission to settle there rather than to pay a people smuggler for an uncertain entry to France”.  

Although at first sight plausible, this proposal does not address the central issue, which is the potential scale of migration under such a scheme. If a quota scheme is to deter illegal migration, the expectation of getting a permit must be high and the expected waiting time must be relatively short. This means that the number of permits given out must be roughly commensurate with the number of people wishing to migrate. The suggested scheme might deter illegal migration but it would be unlikely to reduce the total number of migrants.  Indeed, the scheme might actually encourage migration by eliminating the need to rely on dangerous and costly modes of travel.

To implement even a slimmed down version of the scheme proposed by Milanovic it would be necessary to change public opinion. Even before the refugee crisis, there was widespread concern in Europe about large scale immigration.  According to an international poll taken in the period 2012-14 some 52% of Europeans thought that immigration should be reduced.  Only 8% thought it should be increased (How the world views migration, IOM 2015). The British Social Attitudes Survey reports that immigration has been consistently amongst the five most important topics of concern.  In 2013 of those questioned 56% thought that immigration should be reduced a lot and a further 21% thought it should be reduced by a little.  Such concerns have been around for a long time, but have been ignored by politicians.  However, politicians are now being forced to respond to public disquiet by the rise of anti-immigration parties.

Public disquiet about immigration is intensified by the perception that immigration is out of control. It is not simply a belief that the present level of immigration is too high that motivates this disquiet, but also a fear that the government has no means of cutting back on immigration should the need arise. In countries like Australia, where the government has a firm grip on migrant flows and can raise or lower them as the need arises, the public is willing to accept a high level of immigration.  If Milanovic’s quota scheme is to be politically acceptable, it will have to be accompanied by effective enforcement. Even then, it will be an uphill task to persuade Europeans to accept immigration on the implied scale.

Schengen and the European Migration Crisis

The Schengen Area. The Agreement signed on 14 June 1985 on a boat on the Moselle near the small town of Schengen (Luxembourg), by five of the ten states that formed the European Community at that time, effectively abolished passport controls and any other border control among the signatories thus treating the area as a single country. The Agreement was supplemented by the Schengen Convention of 1990, establishing a common visa policy. Initially the Schengen Area was separate from EU structures, as at that time the initiative lacked general consensus, but its rules and procedures were incorporated into European Union law by the Amsterdam Treaty of 1997, coming into effect in 1999. The five initial signatories (the three Benelux countries, France and Germany), were gradually followed by another 17, thus encompassing all EU member states except Ireland and the UK that opted out, and four others – Bulgaria, Croatia, Cyprus and Romania – who wish to join and are obliged to join eventually but are not yet deemed to be ready. All four EFTA member states – Iceland, Liechtenstein, Norway and Switzerland – are also associated members of the Schengen Area although they are not members of the EU. In addition, three European microstates – Monaco, San Marino and the Vatican City – are considered de facto participants. Today the Schengen Area has a population of over 400 million people.

Net gains. The creation of the Schengen Area was - in principle – an excellent decision. The effective elimination of internal borders within the Area generated considerable savings in terms of travel time and convenience for passengers, expenditure on custom officials and equipment, higher speed and lower cost of commodity transport. A recent study by Germany's Bertelsmann Foundation estimates the cost of the possible breakdown of the Schengen area at between €470bn and €1.4 trillion over the next decade, (roughly 10% of the 28-members EU bloc GDP) due to an increase in import prices of between 1% and 3%. Germany would lose between €77bn and €235bn and France between €85.5bn and €244bn under the two scenarios. The breakdown of the Schengen Area would also inflict a heavy burden on other countries, with a combined loss for the United States and China over the next decade estimated by the same study at between €91bn and €280bn. The European Commission estimated that the permanent reintroduction of border controls would cost between €5bn and €18bn a year because of lower tourism and transport delays. These estimates perhaps may be slightly exaggerated, but there can be no doubt that in the current, long and severe depression of the European economy, the impact of a Schengen breakdown, even if partial, would worsen significantly the growth prospects of the Union, with global reverberations.

Migrations. In the half-century 1960-2010 the ratio of the population working in countries different from that of their birth over the world population (corrected for the displacements which occurred at the end of World War II in 1945) was relatively stable around 3%, though with a clear tendency to accelerate that was much more marked for South-North migrations (see the figure below, where the value of that ratio in 1960 is taken as equal to 1).  

Source: Docquier, Frédéric and Joel Machado (2015), “Revenu, Population et Flux Migratoires au 21ème siècle: Un défi sociétal pour l’Europe” in Studia Oeconomica Posnaniensia, October 2014.

In subsequent years the acceleration continued. In 2015 migrants entering Europe mostly from the Middle East and Africa turned into a veritable flood – the largest flows to take place since 1945 – that put the Schengen arrangements to a most severe test: EU states received 1.3 million asylum applications, especially from Syria. On 24 August 2015 Angela Merkel announced that all Syrian asylum-seekers were welcome to remain in Germany regardless of which EU country they had first entered. She adopted this “open door” policy unilaterally, without EU agreement, after consultation solely with the Austrian Chancellor Werner Faymann; subsequently there were signs of intended policy reversal but tightening up was only slight (for instance preventing relatives joining migrants for at least a year) thus provoking an intensification of the inflow because of the migrants’ expectation of harder times; a recent poll found that 81% of the German population thought that the government had lost control over migration policy. The Bertelsmann Stiftung estimates that by mid-February 2016 an even larger number of Syrians alone had found their way into Jordan (640,000), Lebanon (over 1 million) and Turkey (2.6 million); Pakistan and Iran have taken several hundred thousand migrants from Afghanistan and Iraq respectively. In 2015 migrants crossing the sea from Turkey to Greece increased 20 times with respect to 2014. Last November the EU granted €3bn to Turkey as an inducement to hold migrants there at least temporarily, but three months later 2,000 migrants still cross daily into Europe: in order to take back non-Syrians the Turks are negotiating for more aid and other benefits such as visa-free travel to Europe, which in turn would generate a significant inflow of Turkish Kurd asylum seekers into Europe. Arrivals in Italy decreased slightly in the same period, from 170,000 to 154,000, which still represent a very large intake. For an up to date survey see Breugel, 12 February, and The Economist, interactive graphics, 6 February.

In May 2015 Branko Milanovic wrote a post in Social Europe, “Five reasons why migration into Europe is a problem with no solution”: 1) deep-seated and permanent factors such as political chaos in the Middle East and extraordinarily huge and increasing income gaps between Europe and Africa, with sub-Saharan population poised to increase almost by six times by 2100; 2) lack of an immigration tradition in Europe; 3) European political blunders due to a combination of incompetence and arrogance, such as overthrowing Gaddafi, the ultimatum to the previous Ukrainian government, and the handling of the Greek crisis; 4) the increasing influence of right-wing, populist anti-immigration parties in several European countries, even when they are not in government; 5) the total lack of strategies, policies and ideas at the European level, while the crisis calls for a multilateral solution involving co-ordination among member-states and with African countries and the European recognition that an influx from Africa is dictated by demographic and economic gaps: “Unfortunately, neither of these two conditions is close to being satisfied. So the problem, among permanent political improvisation, will continue to worsen” – he wrote prophetically. (In a post in the same series last January Branko stressed the economic positives and negatives of migrations; see also his forthcoming book Global Inequality - A New Approach for the Age of Globalization, Belknap Press).

The Schengen Area rules include provisions for temporary border controls to be re-established in case of urgency, for up to 2 and 6 months, and for outright suspension for up to 2 years in the case of threats to public order. Since the 2015 summer temporary measures have been already implemented unilaterally by several countries. Hungary closed its borders with Serbia, Romania and Croatia, allowing its army to use rubber bullets, tear gas and barbed wire against migrants. In November Slovenia started building its own fence along the Croatian border; its Parliament recently approved the deployment of the country’s army to manage the migrants’ flow at its borders. An increasing numbers of migrants have been cutting through these barriers to enter the EU.

Warren Richardson, Hope for a New Life. A man slides a child under barbed wire at the border between Serbia and Hungary at Röszke, Hungary, 28 August 2015. (World Press Photo)

Sergey Ponomarev, Russia, The New York Times, The European migration crisis: Refugees arrive by boat near the village of Skala on the Lesbos Island, Greece, 16 November 2015 (World Press Photo)

The closing of Sche­­ngen internal borders has accelerated since the beginning of 2016. In Denmark the government extended passport checks on the German border for the third time, with Sweden keeping similar checks for travellers arriving from Denmark. France is in the process of closing down the so-called “Jungle” migrant camp at Calais, whose estimated 5,500 residents were waiting to smuggle themselves to the UK on ferries, or through the Chunnel in trucks, trains or even on foot; the closure was violently resisted. Belgium reintroduced border controls on its frontier with France, hiring 290 extra-police officers to try and stop the Calais migrants from moving to its coastline. Austria has built a wall at its frontier with Slovenia; in under two months in 2016 it received 101,000 migrants compared with 4,000 in the same period last year, and has introduced a cap of 80 asylum applications per day.  Borders have been tightened between the Republic of Macedonia and Greece, allowing Syrians and Iraqis through but barring Afghans, who then were banned also by Croatia. Towards the end of February over 22,000 migrants were stranded in Greece and were expected by the Greek Migration Minister and Vice-premier to treble by the end of March; the UN estimates their number to be increasing even faster, at the rate of 3,600 per day. The Greek border with Macedonia has been nearly sealed off, threatening to turn Greece into a giant refugee camp – a “warehouse of souls” (Tsipras). 

The EU is planning to provide Greece with €700mn over 3 years (of which 300mn in 2016 for emergency assistance to migrants); reasonable proposals to trade off migrant assistance for Greek debt cancellation have been rejected as a moral hazard risk. On 24 February in Vienna ten eastern European countries – with the much resented exclusion of Germany, Greece and Italy – agreed on tightening up their own border controls with a view to stop the Western Balkan route into Europe, which of course will shift the flow back to the Mediterranean route into Italy. On 29 February at the Macedonian-Greek border “crowds of migrants were beaten back from storming a fence with a salvo of tear gas” (FT, 1 March). The current migration assault is even more serious than the Euro crisis, as Angela Merkel recently acknowledged.

Last November Jean Asselborn, Luxembourg’s Foreign Minister, declared that Europeans had “only a few months” to save the Schengen system. On 21 February Thomas de Maizière, Germany's Interior Minister, stated that EU member states must agree a common approach to tackle migrations ­“within two weeks” if they wanted to avoid the system’s complete collapse. On 4 March the European Commission unveiled a plan, Back to Schengen, “to lift all remaining border controls by December 2016, so as to return to a normally functioning Schengen Area before the end of the year”. The options considered involve sharing out asylum seekers across the EU on a quota basis regardless of where they first arrived, either as a general procedure or only if a country is overwhelmed by a sudden influx. The IX Report on European Security reveals that a poll conducted in early 2016 among 1000 respondents each in Italy, Spain, France and Germany gives a majority of over 75% in favour of the reintroduction of border controls either unconditionally (56% in Italy) or in special circumstances (Repubblica, 7 March).

The Schengen crisis should not take anybody by surprise. The writing has been on the wall for a long time. The introduction of the Euro as a common currency had equally been an excellent idea, which however failed because it was premature before political, fiscal and banking integration; incomplete due to the ECB lacking powers as Lender of Last Resort to the EU and the member states; and because the Eurozone was subject to increasing divergence in the member states’ fundamentals. The Euro crisis was also made worse by austerity policies perversely enforced by the German-led European authorities. Precisely the same kind of criticisms apply to free internal travel within the Schengen Area: premature, incomplete and made worse by country divergence and recessionary austerity. On the impact of austerity on migrations and convergence see Michelle Baddeley, "Convergence, Divergence and Migration in an Age of Austerity", Seminar paper, Cambridge 2016:

“…(T)he ability for host societies and economies to adapt will be constrained by limits on government spending. Infrastructure investment is needed in the very short‐term, including emergency infrastructure to support the immediate consequences of migration e.g. within refugee and migrant camps. Infrastructure investment will also be essential in the medium to long term to ensure that growing migrant populations have proper access to social infrastructure including housing, schools, hospitals and other medical services. Without this investment, the prospects for growing inequality, deprivation and socio-political unrest are likely to be severe – exacerbating divergences at many levels: between the global South and North, between Northern and Southern parts of the EU, and within countries depending on how different regions’ populations are affected by migration and/or how much access they have to public finance for infrastructure investment.”

Three considerations are in order:

1.Free internal travel requires strong external controls. Just like a Free Trade Area requires a common external tariff barrier, free internal travel obviously requires a common external border, with a common Coast Guard, border guards and if necessary a common Army, all provided and paid for centrally. The Schengen external borders, on the contrary, are delegated to national, fragmented, uneven and inadequate controls (in spite of the rudimentary Frontex agency and the recent intervention of NATO ships patrolling the Aegean Sea). Moreover existing controls do not include brutal repression, and this humanitarian restraint is more labour-intensive. Shooting trespassers on sight, as East German guards protecting GDR borders used to do with attempted exits, is not yet reached but arrest and imprisonment in Hungary (and the extra-Schengen UK) have been, as well as the use of tear gas and rubber bullets elsewhere.

Schengen external borders are a sieve that allows through indiscriminately legitimate refugees, escaping directly from persecution and war, and economic migrants, i.e. those refugees who had already reached a safe country, or other migrants who are simply seeking to improve their standard of living. The difference between refugees and economic migrants (both classed here as migrants) is elusive, as even refugees will tend to move towards countries with higher employment opportunities and/or income, thus abandoning their “first safe country” status. This difference is fundamental: refugees are protected by UN regulation on reaching their first safe haven, the others are still subject to national endorsement and control. And even if a policy of completely open doors was adopted towards economic migrants, the speed of the migratory inflow would still have to be subject to national control. In fact the capacity to absorb immigrants into any given territory is limited at any time by short term available resources, by the country’s capacity to integrate immigrants and, as well, by their own willingness and preparedness to be integrated.

Whether or not immigration brings net benefits to the host country is a controversial matter. On balance it probably does in the long term, but the case of very fast, concentrated mass migration should be considered in its own terms. The possibility cannot be neglected of a mixed distributional impact on workers and firms through greater competition in labour markets, both in the short and long term; of significant additional investment cost in new infrastructures, and - at least in the short term - welfare costs, making immigration a public investment competing with alternative forms of public expenditure. Immigration brings possible cultural enrichment but also possible cultural impoverishment, as well as potential cultural, political, ethnic and religious conflict – even leaving aside the possibility, not entirely implausible, of migration being a vehicle of health contagion and terrorist infiltration. These drawbacks have to be set against the benefit of rejuvenation of an ageing host population, which is associated with mass immigration.

Whatever the true net costs and benefits of immigration, the increasing electoral success of right-wing, populist, anti-immigration parties in most of the developed world signals unambiguously the widespread perception – right or wrong – that the current level and/or rate of immigration are excessive: from Matteo Salvini’s Lega to Nigel Farage’s UKIP, from Jimmie Åkesson’s Swedish Democrats to Geert Wilders’ Party for Freedom, from the German Alternative für Deutschland to Viktor Orbán’s Fidesz or Jaroslaw Kaczynski’s PiS, Heinz-Christian Strache’s FPO, Milos Freeman’s Civil Rights Party, Marine Le Pen’s Front National, the Finnish and Norwegian anti-immigration parties, as well as shifts in more standard political parties (see the anti-immigration stance of Boris Johnson, mayor of London and David Cameron’s probable successor). In the US the latest polls show that immigration is fourth or lower on public concerns: the anti-immigration vote is overwhelmed by the economy, anti-Elite feelings and security issues, although Donald Trump’s large-scale wall-building and deportation plans may have something to do with his unexpectedly strong bid for the US Presidency.

When existing external borders are not in a position to identify and register all migrants, to distinguish between refugees reaching their first safe haven (which the 1990 Dublin Convention rules, stricter than the UN rules, regard as the first EU country) and all other migrants, it is unavoidable that each Schengen member state will need to reintroduce effective border controls, including visas and passport checks.

The identification of immigrants has been likened to the marking of prisoners in Nazi concentration camps, but the comparison is improper, even if identification required the use of force. Identification is essential to verify both the right to residence and entitlement to benefits.

The almost 4,000 migrants that drowned trying to cross the Mediterranean Sea, the high monetary cost (steeply rising with the spreading of border controls and obstacles) and exposure to violence and other personal risks of migration make the desperate predicament of economic migrants – running away from famine, destitution, drought, environmental and cultural disasters – very close to that of refugees running away from persecution and war. But the difference is still there: refugees have a sacrosanct right to asylum sanctioned by the United Nations, while all others by migrating place themselves at the mercy of their countries of arrival: economic migrants can be refused entry or be repatriated.

Both rejection and forced repatriation are unpleasant and brutal, but an indiscriminate open doors policy would amount to the pretense that the world in which we live, dominated by private property and territory-based democracy, is instead a non-existing utopia of global democracy and universal communism, though limited to the collectivization of social capital. No wonder such a contradictory utopia was never proposed or theorized by anyone. In the world as we know it international solidarity is necessarily a discretionary concession by those who can afford generosity, which can only be exercised collectively if backed by a majority; it is not an automatic right of those who need international solidarity. 

Moreover a policy of indiscriminate open doors to all immigrants, while reducing international inequality across countries will increase internal inequality within countries because of the greater competition in the labour market in the host countries and the impoverishment of the emitting countries, thus leading to a possible and perhaps probable greater global inequality. (The case for repatriation is developed conclusively by Alberto Chilosi, “On the economics and politics of unrestricted immigration”, The Political Quarterly, 73-4, pp. 431–435, October 2002).

All immigrants, whether or not they can be classed as refugees, should be protected from the risks of their journey, in spite of such risks being to some extent the result of their own actions, just as cancer patients are entitled to treatment even if they are smokers (though some may disagree). Preferably the cost of protecting them should be a charge on all Schengen countries, as it is now for the EU Frontex operations, but even if such cost was born by a single country’s taxpayers as in the case of Italy’s Mare Nostrum scheme it would still be desirable.

The trouble is that repatriation is costly, and should be financed by the Schengen countries as it is part of the cost of abolishing internal borders; it requires the agreement of the country of origin or of the first safe country reached, which may be unknown or might no longer exist or might not honour such an agreement (e.g. Pakistan). Moreover it is doubtful whether “pushbacks”, whereby asylum seekers are returned to a country without their application having had a fair hearing, are consistent with both the Geneva Conventions and the EU asylum code. But the fact that repatriation will not always be possible is no reason for not attempting it at least in some cases, if nothing else pour encourager les autres.  Refugees are in a different position because with the settlement of conflict in their own countries they should return home.

On 27 January Sweden – that last year received 163,000 asylum applications, the highest number per capita in Europe – announced a plan to repatriate 80,000 migrants (subsequently reduced to 60,000 then left undetermined) “over  many years”, using aircraft chartered for the purpose, but the plan is still on paper. In the same week 308 economic migrants were sent back by bus from Greece to Turkey; however Turkey will not accept more unless Europe takes more Syrians off their hands – a vicious circle. Rejection looks like a more viable option: in his current visit of the Western Balkans ahead of the EU-Turkey summit Donald Tusk, on 2 March in Zagreb, said that “Member states should refuse entry to third-country nationals who do not meet the necessary conditions or who, although they were able to do so earlier, did not apply for asylum.” (European Council communique’ 3 March). However, the concentration of rejected economic migrants in border camps is bound to create other problems, while the prospect of future rejections can only speed up current migration flows.

2.Free internal travel requires the convergence of living standards within the area (including welfare provisions). Not unnaturally foot-lose migrants who do not have stronger ties (of language, religion, relatives, friends) to a particular country will tend to choose their ultimate destination on the basis of their perception of maximum improvement in their living standard resulting from migration. Employment prospects are likely to be paramount, indeed traditional migration theory (exemplified by the Harris-Todaro model, AER 1970, 60-1) relates the incentive to migrate to wage differences between the home and destination countries weighed by their respective probability of employment (taken as 1 minus the unemployment rate), to which of course one should add the net improvement in welfare benefits. Potential immigrants may well tend to overestimate their perceived income improvement prospects, as they seem to imagine themselves and their children gainfully employed at top salaries; this is one of the factors encouraging migrations beyond reason. When expected income gains diverge across potential destinations, the more attractive countries naturally will tend to be disproportionately vulnerable to migratory inflows. Hence the incentive for destination countries to raise national barriers, and/or discriminate in welfare benefits against immigrants, or dismantle the welfare state tout court for both nationals and immigrants. Even James Meade – a liberal and enlightened economist who proposed a generous generalised basic income – in order to prevent opportunistic immigration recommended that immigrants should be treated by the principle of reciprocity, i.e. enjoy the same benefits, if any, that our nationals might be granted in the migrants’ country of origin. (It has been objected that such a rule might be applied to countries of the same level of development, such as North-North and perhaps South-South, but not to South-North migrations).

The UK is a case in point. Relatively generous benefits granted to immigrants from other EU countries, including social housing, national health entitlements and payments to relatives resident abroad, have led to Cameron attempting to negotiate “emergency brakes” with the EU, subjecting benefits to time restrictions (excluding immigrants for the first four years residence), or to resident family members (possibly restricting family re-joining). Cameron succeeded in negotiating with the EU these kinds of restrictions only for future and not for existing immigrants, which therefore strengthened the conservative government resolve to reduce welfare benefits all round. Meanwhile non-European immigrants to the UK are subjected to a minimum income to be reached within the first 5 years of residence (which has just been raised from £21,000 to £35,000 from next April), under penalty of expulsion after one additional year. New rules will make UK landlords responsible for checking the documents of their tenants, making it harder to find accommodation not only for unauthorized immigrants but also for the 60% UK citizens who do not possess a passport.

3.Any attempt at a fair re-distribution of immigrants among countries requires the re-establishment of national borders. Last July EU Interior Ministers - outvoting Romania, Hungary, the Czech and Slovak republics strongly opposed to the scheme - imposed a plan to relocate 40,000 migrants (24,000 from Italy and 16,000 from Greece) across the EU. In September an additional 120,000 relocations (16,600 from Italy, 54,400 from Greece and 54,000 from Hungary) were added, raising the total to 160,000 in two years, of which 54,000 were postponed to the following year (FT, 25 September 2015). Viktor Orbán, Hungary’s prime minister, announced a referendum on whether the country should be forced to resettle refugees, on the ground that “Introducing resettlement quotas for migrants without the support of the people is an abuse of power”; he is unlikely to lose that referendum. On 28 February Pope Francis advocated “an equitable re-distribution of the burden of migrants” (thus accepting that immigration is a burden).  However, such kind of a re-location is futile, not to say idiotic, for under Schengen completely free and unrestricted internal travel any immigrant re-located to a country other than his/her preferred destination can at any time, and eventually will, just go there. Indeed we could argue that even the relocation of migrants within a given country might have to be subjected, in order to be done efficiently, to the introduction of internal passports and controls of the kind prevailing in the Soviet Union until 1991, in order to stop immigrants from settling in the capital city and in other metropolitan areas that are already overcrowded and congested and to divert them instead to less developed areas with an abundance of cheap underutilised housing and land.

On 29 February Angela Merkel said it loud and clear: “Migrants may not pick and choose where they are to be settled” (Daily Telegraph, 1 March). She referred to their choice of country, but Germany is indeed unusual in imposing constraints on where migrants can live, both in order to prevent the formation of ghettos in big cities and to direct immigrant flows to the underpopulated regions of the former GDR where there is plentiful social housing and a shortage of young workers. Such a policy had been introduced in the 1990s at the time of a large influx of ethnic Germans from the former Soviet Union and Romania. Immigrants have their welfare benefits cut if they move away from their assigned locations. In the UK immigrants who claim social housing and some other benefits are offered it only in the northern rust belt towns.

This kind of restrictions seem necessary to the smoother absorption of immigrants, but paradoxically the European Court of Justice, ruling on a complaint by two Syrians about their German residence requirements, at the end of February 2016 decided that EU rules “preclude” them even if they are aimed at “achieving an appropriate distribution of the burden connected with the benefits”, though it also said that people granted subsidiary protection could be subject to a residence condition “for the purpose of promoting their integration”. Nevertheless German ministers are preparing a law which would expand the existing residence restrictions to refugees whose asylum requests have been approved, in spite of objections from refugee associations (FT, 1 March).

Disintegration?  At present the EU is being subjected to four centrifugal forces (see Munchau, FT 28 February. and Javier Lopez, “Europe in Multiple Organ Failure”): a North-South divide over border controls; another North-South divide about austerity and the Euro; an East-West divide over migrant re-location; and the uncertain implications of Brexit with possible contagion effects on other member states.

It is difficult to disagree with Oxford political scientist Jan Zielonka (Is the EU doomed? Global Futures, Polity Press, London, 2014) when he argues that “Sadly… at present the EU does not facilitate integration, but impedes it”… “The European Union was widely regarded as the most successful modern integration project, but it has turned into an embarrassment”… “No wonder so many citizens lost trust in the EU, and that the process of disintegration is gathering pace.” But Zielonka’s expectation that “A weakening of the EU and its member states will strengthen other political actors such as cities, regions and non-governmental organizations (NGOs)” is utterly unconvincing: the solution or even the alleviation of both the Euro crisis and the migration crisis cannot rely on a network of de-centralised power centres but will require a deep degree of centralised initiative and commitment to greater integration. See “A Plan for Europe’s Refugees”, The Economist 6 February:

“Creating a well-regulated system requires three steps. The first is to curb the “push factors” that encourage people to risk the crossing, by beefing up aid to refugees, particularly to the victims of the civil wars in Syria and Iraq, including the huge number who have fled to neighbouring countries such as Turkey, Jordan and Lebanon. The second is to review asylum claims while refugees are still in centres in the Middle East or in the “hotspots” (mainly in Greece and Italy), where they go when they first arrive in the EU. The third element is to insist that asylum-seekers stay put until their applications are processed, rather than jumping on a train to Germany.” Unfortunately, “All these steps are fraught with difficulty.”

Prospects might become clearer soon, after the next EU-Turkey summit (7-8 March), the German regional elections (13 March) regarded as a test of Merkel’s immigration policies, and the EU Summit on migration (18-19 March).

There seems to be, however, a constitutional conflict between European and international rules about treaties, revealed by the recent agreement reached by the UK and all the other member states about the special terms negotiated by Cameron for the UK. That Agreement is said to have been deposited within the UN and is therefore subject to the jurisdiction of the International Court of Justice, which operates on rules different from those of the European Court of Justice competent to enforce the European Treaties. Downing Street has claimed that the EU-UK agreement is legally binding and enforceable, but it is not clear whether any country who did not like it might seek to challenge it in the International Court of Justice. A constitutional crisis of this kind is the last thing that Europe needs today.

Note: I thank Carmen de la Camara, Marilena Giannetti, Tonino Lettieri, Ruggero Paladini and Fabio Sdogati for useful comments on an earlier draft of this post. However they should not be held responsible for any errors or omissions, nor deemed necessarily to agree with any of the propositions put forward here.

UPDATE

The EU-Turkey summit of 7-8 March led to a draft deal whereby Turkey would take back immigrants coming from Greece unless they successfully applied for asylum there, while the EU would take in one Syrian refugee for every immigrant sent back. In exchange Turkey would receive €6bn aid instead of the €3bn already committed but not yet disbursed, accelerate its progress towards EU accession and obtain visa-free travel to the Schengen Area for its 75mn citizens.

In the three German regional elections of 13 March Ms Merkel’s CDU Party retained the possibility of forming coalition governments but lost ground heavily, while her PSD coalition Party that had backed her immigration policies performed even worse. The xenophobic right-wing AfD gained record support.

On 18 March after ten days negotiations the EU and Turkey reached a compromise deal that commanded unanimous support, effective from 20 March. Greece obtained 4000 new personnel to process asylum applications. There would be no collective pushbacks, but starting on 4 April Turkey (that received 2.7 million migrants to date) would take back applicants who did not qualify for asylum in Greece, while the EU would take from Turkey “one for one” as many Syrians up to a ceiling of 72,000. In exchange Turkey would receive €6bn instead of the anticipated €3bn, of which 3bn up front and 3bn at the end of the year; the process of EU accession would be tentatively reopened and EU visa-free travel for Turkish citizens would be granted from next June.

The Greek government’s migration spokesman Giorgos Kyritsis declared that implementation of the deal would require more than 24 hours; Turkey will not take back migrants before 4 April anyway. The 4,000 officials, translators, judges and security guards promised by the EU still have to arrive; eight ships with a capacity of 300-400 passengers each need to be provided by Frontex, together with 30 buses. Thousands of migrants (mostly Syrian, but also Iraqis and Afghans) have continued to arrive in Greece in spite of the agreement. Greece is still relocating migrants from its islands to temporary refugee camps on the mainland. From 4 April a number of failed asylum-seekers (750 in the first week, mostly North Africans, Afghans and Pakistanis) from Greek detention centres will board a vessel chartered by Frontex and be taken to Turkey. In return Germany will take an equivalent number from Turkish refugee camps. These deportations might be illegal and have sparked violent protests but will accelerate in April.

There were still strong objections from humanitarian groups, on the ground that the deal violated international law on the treatment of refugees; Turkey is expected to conform its regulations to international standards, but refused to accept a formal commitment to that effect. European reaction has ranged from welcoming “closed borders” to condemning the “shameful deal”. Wolfgang Munchau, FT 21 March: “The deal with Turkey is as sordid as anything I have seen in modern European politics… The EU not only sold its soul that day, it actually negotiated a pretty lousy deal.”  On 22 March the UN refugee agency announced the suspension of its involvement at all closed centres on the Greek islands, on the ground that so-called “hotspots” for the reception and registration of migrants had turned into “detention facilities” in violation of UN regulations. On 23 March Médecins Sans Frontières and the International Rescue Committee also scaled back their activities in the Greek centres. Following terrorist attacks in Brussels Poland now declared that it can now no longer honour the previous government’s commitment to take a quota of 7,000 refugees out of the 120.000 to be resettled across the EU. In the week following the EU-Turkey deal migration inflows to Greece were reduced drastically, though this might be due to adverse whether conditions in the Aegean.

In the last seven months, Hungary’s courts have held 2,189 trials for border crimes (including on 18 March a blind woman and a man confined to a wheelchair accused of interfering with Hungarian borders last November, FT 22 March) leading to an exceptionally high rate of convictions of 99 per cent. Hungarian judges have chosen expulsions and long entry bans from Schengen countries over prison sentences. On 22 March Frontex was reported saying that it was trying to recruit 150 policemen and 50 officials to be deployed on Greek borders, i.e. it had not succeeded yet.

The Greek-Macedonian border will remain closed, blocking the Balkan route to Northern Europe, leaving tens of thousands migrants stranded in Greece for some time, including Syrians who thought they had been invited by Angela Merkel to come and stay in Germany. It is not clear how the 72,000 asylum seekers would be distributed among member states; once that ceiling is reached the arrangement will be "reviewed", though Central-Eastern EU members are committed to stop at that ceiling. 

The closure of the Balkan route will induce desperate migrants and their smugglers to switch to different and more dangerous routes to Europe, via the Black Sea through Ukraine, via Albania and the Adriatic to Italy, via the South Mediterranean to Italy and Spain (the last two routes having continued to be used especially from Lybia; in the first three months of 2016 immigrants arriving in Italy from the Mediterranean route have doubled). France, Switzerland and Slovenia would then be bound to reintroduce border controls, thus cutting off Italy and possibly Spain from the Schengen area; Austria is already closing the Italian border at Brennero. Liberalisation of travel for Turks would lead to an additional inflow of Turkish Kurds. According to a German think-tank refugee flows this year will amount to an estimated range of 1.8m-6.4m (the higher figure being a worst-case scenario including large numbers from Northern Africa).

Incidentally, on the costs and benefits of mass immigration with special reference to the UK, see R.E. Rowthorn’s excellent Report, 2015.