Remitting the Market
In reading Karen Lee Ziner’s summary of a report about immigrants’ financial remittances to their home countries, it’s tempting to muse about the use of public universities to generate content for political think tanks:
The report, “Many Happy Returns: Remittances and their Impact,” by political science professor Kristin Johnson, was released Tuesday by the Immigration Policy Center, a nonpartisan research and policy arm of the American Immigration Council in Washington. …
Among the report’s conclusions: remittances — whose recipients are among the most impoverished sectors of the population in developing countries — increase the consumer capacity of those individuals; help build financial infrastructure and provide otherwise unavailable micro-financing for small businesses.
Remittance outflows also dramatically increase the pool of possible foreign consumers for U.S. goods; contribute to economic stability in developing countries; and increase profits of financial companies and banks through increasing reliance on electronic fund transfers.
Having read the report itself, it’s difficult to characterize it as anything other than an extended opinion piece. At no point does it provide a straightforward table of remittances to particular regions corresponding with changes in product exports to the same regions. Instead, the reader gets such factoids as this:
Remittances to Mexico reached their peak in 2006, at nearly $6.2 billion dollars, and in 2007, Mexico was one of the top three global remittance recipients.
Which contrasts peculiarly with this, later in the document:
Export increases from three states that comprise over half of U.S. trade with Mexico also increased substantially from 2005‐2008; Texas realized $50 million in exports to Mexico in 2005 which rose to $62 million in 2008, with an increase of 10.9% from 2007 to 2008 alone.
Apart from the huge disparity in the dollar numbers, themselves, it’s curious that money transfers to Mexico began to decrease after 2006, but Texan exports to the country increased in subsequent years. Where’s the correlation?
In a general way, it makes an intuitive sense that money sent to poor countries might help the global economy. Residents in developed nations might waste or store away wealth, whereas the residents of poorer nations have incentive to make the most of every dollar — whether being judicious in their expenditures or finding ways to compound the value of resources through investment and business activity. But those sending the money out of the wealthier nation are not likely to be among its wealthier workers. Moreover, to the extent that increases in the immigrant population decrease the wages of low-end workers, the domestic effect is likely to be an upward flow of wealth away from Americans who share the incentive to use their income efficiently.
These are all mere considerations; there are a number of ways to adjust the balance in a reasonable way. The clincher, for me, is from a global perspective: There’s a reason some nations export their workers and derive significant portions of their national income from remittances. They aren’t, themselves, conducive to economic activity, whether for reasons of corruption or a lack of regional resources (most often the former, I’d wager). In other words, on a larger scale, remittances are a poor investment propping up social structures that deserve to fail and to be refigured.