The rise of welfare feudalism?

Support for the welfare state is often based more on chauvinism than a desire for justice, says Will Wilkinson. He argues that if first-worlders really care about improving the lot of the poor we should open up our economies to trade and allow more poor foreigners to cross our borders in search of work.

One of problems of allowing free immigration is that it threatens to undermine the welfare state. When Milton Friedman was asked whether the United States should open its borders, he replied : "Unfortunately not. You cannot simultaneously have free immigration and a welfare state." As Jason Soon explained , "the open-ended availability of welfare is the main reason most libertarians don’t take a purist ‘open borders, free movement of labour’ line on immigration."

Will’s solution to is to allow foreign workers access to the labour market, but deny them access to welfare entitlements. And if that isn’t possible, then he argues that the next best solution is to promote illegal immigration.

Not surprisingly, this kind of talk alarms conservatives. In a recent post Daniel Larison attacks Will for indulging in "morally bogus debates about whether caring for the poor means abolishing borders and swamping our country with millions of immigrants." But aside from insisting on a distinction between patriotism and nationalism and stressing the need for loyalty among those who share a common national identity, it’s not clear exactly why Larison thinks Will’s argument is bogus.

Even Milton Friedman seemed uncertain about this issue. According to Bryan Caplan, Friedman was once asked whether immigrants might be given a legal right to work, but not the right to claim welfare benefits:

Q: Instead of a green card [resident alien status], can the USA issue a blue card which does not give welfare?

A: If you could do that, that would be fine. But I don’t believe you can do that. It’s not only that it is not politically feasible, I don’t think that it is desirable to have two classes of citizens in a society. We want a free society. We want a society in which every individual is treated as an end in themselves. We don’t want a society in which some people are in there under blue conditions, others are in there under red conditions, others are in there under black conditions. We want a free society.

This seems clear cut, but it may not have been Friedman’s final word. According to some sources, Friedman also argued that illegal immigration from Mexico was a good thing. In Will’s opinion: "Anyone really committed to Friedman’s stated view about welfare and immigration should by no means try to restrict immigration, but instead should try to enable illegal immigration."

There’s a similar debate in egalitarian circles. Some egalitarians argue that it’s unfair that people who are lucky enough to be born into first-world countries have access to high wages and generous welfare system, while those born in other countries do not. They say that the first-world has a moral obligation to equalise opportunities across the globe.

The liberal philosopher John Rawls argued that inequality is unjust unless it is created by arrangements that benefit society’s least advantaged (this is known as the ‘difference principle‘). Some egalitarians want to apply the principle globally. But in ‘The Law of Peoples‘ Rawls wrote:

Although I think the difference principle is reasonable for domestic justice in a democratic society, it is not feasible as a way to deal with the general problem of unfavourable conditions among societies. For one thing, it belongs to the ideal theory for a democratic society and is not framed for our present case.

As Canadian philosopher Joseph Heath argues, the only way Rawls’ theory would allow the difference principle to be applied on a global scale would be the creation of a world government.

Egalitarians who follow Rawls can plausibly argue that restrictive immigration policies are consistent with social justice. But what about illegal immigration? In his book The Decent Society, the Israeli philosopher Avishai Margalit wrote:

For Rawls the just society is founded on a contract among its members, which guarantees just institutions for the partners to contract. Even those with the most inferior positions in the just society are still considered members of the society. But the worst problems of humiliation in the modern world are often those of people who are not members of the society they live in — people who do not belong. Perhaps the least advantaged people in the United States today are the illegal Mexican immigrants whose lack of a work license turns them into serfs, if not degraded slaves, of the employers who keep them and hide them. These Mexicans are not members of society. They are not American citizens, and are not taken into account when considering who is the least advantaged in American society (p 274).

Margalit’s observation highlights a contradiction in the views Will attributes to Milton Friedman. If Friedman was opposed to a society where different categories of resident are treated as if they belong to separate castes, he could hardly support a society that turned a blind eye to illegal immigration.

As the populations of many first world nations age, the idea of allowing guest workers will become more and more attractive. But it also raises the possibility of a world where citizenship becomes less about geography and culture and more about membership of a much more abstract kind of society — a society which exists primarily to provide its members exclusive access to welfare entitlements and other forms of social protection.

Conceivably, this could lead to a kind of ‘ welfare feudalism’ — a situation where the sick, unemployed and ageing citizens of wealthy developed nations increasingly live off taxes paid by non-citizens. Instead of being a pact between generations, the welfare state would become a kind of hereditary property right. As the supply of working age citizens declines, opposition to migrant workers would also decline. But in return for access to the labour market, non-citizen workers would be required to pay a form of rent — they would pay taxes to support the welfare state, but would not be entitled to draw on it themselves. Only the most productive and qualified immigrants would be granted citizenship status — those who pay more in tax than they draw in welfare.

In the nightmare world of welfare feudalism, old and sick immigrants would be detained and then deported. High rates of taxation combined with the lack of welfare entitlements would create incentives for illegal immigration. As a result, much effort would go into policing the borders and prosecuting employers who hire undocumented labour. Any feelings of guilt that citizens might suffer could easily be alleviated by promoting the idea that all foreigners are potentially dangerous.

At least two things will prevent this nightmare from becoming a reality. The first is that developed nations will increasingly require citizens to fund their own education, healthcare and retirement. The second is that large parts of the developing world will turn into new parts of the developed world. Wages and living standards will rise and novel welfare state arrangements will develop. Exploitation depends on a large gap between the wages and living standards available in today’s developed countries and those countries that supply migrant labour. If this gap diminishes, so too will opportunities for exploitation. Mobile capital, free trade and the global exchange of knowledge could all help to shrink the gap.

Welfare feudalism mightn’t be much good as an exercise in futurology, but it could be a great idea for a dystopian novel.

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Niall
13 years ago

For once I find myself in agreement with Soon. I’m all in support of a guest worker scheme which sees both potential workers and the society they work within benefiting. Developed nations can best aid those developing nations in this manner, rather than simply shelling out foreign aid or providing a free ride

Mark Hill
13 years ago

Don, you are way off target here. Please give an explanation of manorialism when you use a synonym of it in your title.

Don Arthur
Don Arthur
13 years ago

Mark – Are feudalism and manorialism really synonyms? I’m not sure. But it’s an interesting comment because manorialism might be a better metaphor for what I had in mind than feudalism.

Since I enjoy looking things up, I’m happy to oblige with an explanation of manorialism. According to economist John McDonald:

Manorialism regulated the contract between lord and peasant and greatly influenced work practices on the estate. The estate consisted of two parts: the lord’s demesne and the peasants’ land. The lord’s demesne, or home farm, produced output for the lord, whereas the peasants’ land was used to sustain the peasants and their ploughteams. In return for protection, housing and the use of land to grow their own crops, the peasants supplied work on the demesne. The estate relied on a residential workforce, the peasants being bound to the lord and the manor.

The peasants weren’t free to move between manors. If they didn’t like the way their lord treated them, then there wasn’t much they could do about it. Obviously migrant workers are not bound to the beneficiaries of the welfare state the way peasants were bound to their lord.

So if this is your objection then I assume you’ll also object to nuns being referred to as ‘brides of Christ’. Obviously, there are some important aspects of the husband wife relationship that don’t apply to the relationship between nuns and God.

We can argue about this more if you’d like. I’ve looked at the TV guide and there’s nothing very interesting on tonight.

fxh
fxh
13 years ago

Ive looked at the TV guide and theres nothing very interesting on tonight.

don my son – theres a veritable popefest on sbs. three hail mary’s and an our father for you

hc
hc
13 years ago

Its an interesting post like so many you do.

Its not just public goods that immigrants can rob preexisting people of but also the costs attributed to environmental externalities that having extra people but not having these things priced impose.

The more you can make people pay there own way (minimise freebie public goods) and charge for congestion, pollution etc the freer the migration intake you can have. Its a message I have been trying to argue since 1990.

BTW the revenues that accrue from such things as tolls on congestion etc need to be paid to the original residents or they will almost certainly be worse off with immigration.

You could charge an entry fee to new mirants that reflects all the extra costs they will impose on original residents and pay that as a lump sum to the original people and then make veveryone (migrants plus originals pay all charges).

It always suprises me that liberals love to claim that free immigration will make the world a better place but it won’t. The people left behind in countries of emigration are worse off as a consequence of free migration for brain drain reasons – exactly the reasons those in destination countries get gains from having more people to trade and have social (and other) intercourse with.

skepticlawyer
13 years ago

There are more wrinkles in Wilkinson’s proposal than appear at first sight (even though I’m sympathetic). Immigrants don’t just receive direct welfare support – which may be easier to abolish – but very considerable wealth transfers, such as free education in countries like the UK and the US. This is very expensive.

I do not think it is possible to argue for ‘free immigration but no welfare’ unless one seriously considers wealth transfers, and whether we want to live in a society that denies illegals, say, access to schooling while permitting access to the Labor market.

fxh
fxh
13 years ago

Following on from what Harry says; A few medical organisations have resolved not to recruit to Australia from a bunch of developing countries on the basis tha this actively deprives those countries of the very skills they need.

I’d be keen to see any writings by economists on this matter of skills poaching vs free skills trade by the developed world.

Harry – Don – can you point me to anything substantial?

Don Arthur
Don Arthur
13 years ago

SL – I think you’re right about this. It’s actually a very complicated issue.

When I was in California I met an American woman who wanted to go to a California university. But she could only afford it if she qualified as a California resident. She told me that were in-state and out-of-state tuition fees and that the in-state fees were a lot less.

A few years ago a group of out-of-state students filed a lawsuit against the University of California because it allowed illegal immigrants to pay in-state tuition rates.

But despite these anomalies, some experts argue that US taxpayers get very a good deal from having illegal immigrants. In the Harvard Latino Law Review, Francine Lipman wrote:

Despite the historic and strong American opposition to taxation without representation, undocumented immigrants (except in rare and unusual cases) have not enjoyed the right to vote on any local, state or federal tax or other matter for almost eighty years. Nevertheless, each year undocumented immigrants add billions of dollars in sales, excise, property, income and payroll taxes, including Social Security, Medicare and unemployment taxes, to federal, state and local coffers. Hundreds of thousands of undocumented immigrants go out of their way to file annual federal and state income tax returns.

Yet undocumented immigrants are barred from almost all government benefits, including food stamps, Temporary Assistance for Needy Families, Medicaid, federal housing programs, Supplemental Security Income, Unemployment Insurance, Social Security, Medicare, and the earned income tax credit (EITC). Generally, the only benefits federally required for undocumented immigrants are emergency medical care, subject to financial and category eligibility, and elementary and secondary public education. Many undocumented immigrants will not even access these few critical government services because of their ever-present fear of government officials and deportation.

Undocumented immigrants living in the United States are subject to the same income tax laws as documented immigrants and U.S. citizens. However, because of their status most unauthorized workers pay a higher effective tax rate than similarly situated documented or U.S. citizens. Yet, these workers and their families use fewer government services than similarly situated documented immigrants or U.S. citizens. Moreover, unauthorized workers have been denied remedies by the U.S. Supreme Court under the National Labor Relations Act and may be challenged to receive protection under wage and hour, anti-discrimination and workers’ compensation laws. As a result, undocumented immigrants provide a fiscal windfall and may be the most fiscally beneficial of all immigrants.

melaleuca
13 years ago

I’ve said it before and I’ll say it again, Australia’s status as the only developed country with plenty of wide open spaces (if you ignore the frosty nether regions of Canada) is something I cherish. I’ve traveled enough in densely populated parts of Asia like Vietnam to deeply value what we have. I don’t want immigration levels to ever change that. I’d therefore prefer guest worker schemes that target poorer countries. If some of the money remitted back to the home country is used to start up businesses etc it could even be considered a decentralised form of foreign aide. I wonder if this has been the experience with other guest worker programs?

JC
JC
13 years ago

Umm sorry please delete the first 10 as I forgot the quotes.

Excellent post Don. Very good.

Friedman’s views may not as confused as it may seem at face value.

I think Friedman was suggesting that the formalized choices he discussed (immigration/the welfare state issue or citizenship stratification) were extremely difficult to cut through socially, politically and morally. He may have seen illegal immigration as the best way to cop out of the hard decision making….. like turning a blind eye to someone committing a minor illegality like smoking in an empty train.

His support of Mexican immigration may have a lot to do with the historical context and his age. He may well remember the time when there was an open border between the US and Mexico until the 30’s when FDR closed it down as a result of pressure from big labor. It may also have to do with fact that he felt the US should do more to help the Mexican people and the best way to do that was to tolerate illegal Mexican immigration (in other words you may feel a morally obliged to help the struggling neighbor next door but not as much for the person living 3 blocks down).

Any of these factors would make it less confused than it seems at first.

As the populations of many first world nations age, the idea of allowing guest workers will become more and more attractive. But it also raises the possibility of a world where citizenship becomes less about geography and culture and more about membership of a much more abstract kind of society a society which exists primarily to provide its members exclusive access to welfare entitlements and other forms of social protection.

I think this could be looked at from another angle. You could of course eliminate the welfare state and the argument would then be mute. You could also say that no one is forcing people to move from one side of the world to another without expecting them to have made some calculations in terms of whether their lives will be improved.

These Mexicans are not members of society. They are not American citizens, and are not taken into account when considering who is the least advantaged in American society (p 274).

Not in a relative context they are not. Its certainly not hard for them to return to their native land: in fact the US government will happily fund a one-way ticket back to the country of origin. Furthermore its a bit rich making such a statement when these people crossed the border illegally and are there without any formal welcome.

Lets also not forget the big elephant in the living room when it comes to US illegal immigration. By some estimates there are around 11 million illegals in the US. It is beyond question that the labor wage rates of the bottom quintile of the US labor market numbering around 25 million unskilled workers have had their wages pulled down in a relative sense by the sheer weight of illegals. For that reason alone it is also not fair to suggest they are treated any less than US citizens. Illegals are allowed in most instances free medical care at hospitals and their kids receive free education at the local school. What they arent allowed is to benefit from social security transfers in later life.

I also think the idea of welfare feudalism is taken to extreme. You are implying that immigrants will always remain at the bottom rungs of the society, which is a laughable proposition when one considers how immigrant groups have done in Australia even in the first generation.

One thing to face up to is that human history is basically about the inexorable movement of people and no amount of laws will ever stop that.

One last thing is we shouldnt totally discount the idea of return emigration as the Irish Diaspora and eventual return home has shown. When things get better at home lots of immigrants will go home.

Will Wilkinson
13 years ago

fxh writes “Id be keen to see any writings by economists on this matter of skills poaching vs free skills trade by the developed world.”

My friend Michael Clemens of the Center for Global Development has done extensive work on this subject.

http://www.cgdev.org/content/publications/detail/13123

Michael points out that the possibility of earning higher wages for skill abroad creates an incentive to gain skill domestically. He finds the available data do not indicate that places where a lot of medical professionals emigrate are left with any fewer than they would have had emigration been more tightly controlled. This is actually pretty intuitive when you think about it. The larger the market for a skill, and the higher the possible wage for developing it, the stronger the incentive is to develop it. There are so many Filipino nurses abroad because their chances of getting higher wages abroad is good, which provides a strong incentive to become nurses, not because the Philippines have been “poached” of its static stock of human capital.

Will Wilkinson
13 years ago

Don, Singapore is basically what you have in mind, isn’t it? Over 40% of the population are foreign-born guest-workers. It’s worth asking how much a nightmare it really is, especially given the relevant alternatives for the guest workers.

Kerry has written about this case in particular:

http://www.reason.com/news/show/123474.html

Ken Parish
Admin
Ken Parish(@ken-parish)
13 years ago

Australia also is now beginning to rely heavily on guest workers under the 457 visa scheme. 40,000 of them were issued in 2006-07, more than 50,000 457 visas were issued in 2007-08 and an even greater number is anticipated for 2008-09. They don’t get any access to social security, indeed they get deported if they lose their job and can’t find another sponsoring employer. However, they can bring their immediate family with them and the kids can attend public schools, and they can receive Medicare benefits if they come from a country which has a reciprocal medicare agreement with Australia (but not otherwise).

457 visas are issued for up to 4 years and quite a few apply successfully for permanent migration at the end of that time. It’s arguably quite a good solution because it matches immigration with demand in a flexible, market-driven manner, and the prospective migrant gets a chance to “test drive” Australia (and vice versa) before deciding to migrate permanently.

Don Arthur
Don Arthur
13 years ago

Will – That’s a great piece by Kerry Howley.

And you’re right — there are some elements of the nightmare in Singapore. The limited freedom of guest workers , the potential for abuse by employers, and the low birthrate. But what Singapore lacks, is a European-style welfare state.

If I was writing the dystopian novel, I’d create a welfare state of super-Nordic proportions. The crucial element of this imaginary world would be the way the entire native born communities are able to live of the labour of migrant workers — to live off their labour without lifting a finger.

Don Arthur
Don Arthur
13 years ago

If anyone’s interested in the Singapore example, check out Will’s Bloggingheads interview with Kerry Howley (where, incidently, he makes a disclosure that may or may not explain his enthusiasm for Kerry’s journalistic abilities).

Francis Xavier Holden
13 years ago

will – thanks for the Michael Clemens links at http://www.cgdev.org/content/publications/detail/13123

JC
JC
13 years ago

Don

Are the singaporean guestworkers better or worse off on the whole for having made the move?

hc
hc
13 years ago

fxh,

There is a huge literature on the ‘brain drain’.

I am suspicious of groups such as the AMA’s altruism – is it not yet another attempt on their part to raise doctor salaries?

Down and Out of S
13 years ago

Will: when I read the post, I was thinking of Arab welfare states like the UAE and Saudi Arabia. White collar guest workers do quite well – $100,000 (or more) a year tax free is nothing to sneer at. On the other hand, Blue collar guest workers on the other hand do not have the same rights, and can be abused with impunity. And women guest workers get it worse.

FDB
FDB
13 years ago

“I am suspicious of groups such as the AMAs altruism – is it not yet another attempt on their part to raise doctor salaries?”

Me too Harry. If they cared so much about quality of care in the developing world, why not do as my orthodontist uncle did and trot off to Vietnam and set up a clinic and work out what the system really needs and train young professionals and…

…meh. Too hard. Let’s just oppose recognition of foreign qualifications.

Francis Xavier Holden
13 years ago

harry – I’m not sure the AMA has the no poaching line. The people I know with the official line are more misguided hippies. Anyway most doctors aren’t on salaries anyway and a few imports don’t make any difference to fees and salaries. So tell me the Society of Academic Economists is actively supporting importing of economists to A /Prof positions through e-bay and opening up lectureships to dutch auctions by applicants.

hc
hc
13 years ago

FXH, The AMA has always maintained a tight attitude towards entry to the profession – both via immigration and the universities.

In the past you lost entry points if you wanted to come to Australia and had medical qualifications. many foreign doctors coming here have to start training from scratch.

Why do we suffer medical shortages? Do you really need a VCE entry score of 99.95 to misdiagnose antibiotics for the common cold or write 20 referrals to pathologists for unnecessary tests?

Academic markets are almost completely open in Australia. Almost all the economics departments in Australia (for example) try to recruit at the AEA meetings in the US each year partly because they seek good graduates, partly because they suffer enormnously from a cultural cringe and partly because they have US PhDs themselves which helps to bolster weak egos.

The recruits often remind me of the robots in Dr Who episodes.

The reason the recruiting efforts are so awful is the poor academic salaries in Australia.

Tel
Tel
13 years ago

In the nightmare world of welfare feudalism, old and sick immigrants would be detained and then deported. High rates of taxation combined with the lack of welfare entitlements would create incentives for illegal immigration. As a result, much effort would go into policing the borders and prosecuting employers who hire undocumented labour. Any feelings of guilt that citizens might suffer could easily be alleviated by promoting the idea that all foreigners are potentially dangerous.

So what about the nightmare world where shoe and clothing factories push their workers into long days, cramped conditions, low pay and no entitlements for the sick? Diamond miners working in the deep underground heat to bring back useless trinkets to amuse the children of their far away overlords? Third world resources exchanged for military hardware and unpayable loans… agricultural produce from the hands to peasant farmers (feudalism never went away in the cotton fields of Uzbekistan).

Oh yeah, that’s the world we already have, but the poverty is all offshore, so let’s blame welfare for that. After all, it was welfare at home that ensured our poor are not as badly off as third-world poor. The scary “nightmare world” is the possibility that we might have to face the consequence of our own consumption on a local street corner rather than in a five second TV snapshot. The list of places where the first world nations ride on the sweat of third world citizens is long and for the most part we call this a good thing because global trade is supposed to be making those nations rich. So if it’s such a good thing when it happens offshore, why is it a nightmare here?

I’ll ask, what is it that puts the first world nations in a dominant position? One thing only, that’s technology: particularly military technology, but also manufacturing and information technology. The only wealth the third world can offer in exchange is natural resources and humans. But humans are NOT in short supply (and as the population increases, the supply of humans continues to increase so their relative value decreases) and natural resources don’t last, so the only viable future path for these nations is technology transfer. China and India have both faced massive brain drain yet they have managed to achieve substantial tech transfer in the process (and their economic results reflect this). Africa is lagging behind but still moving forwards in this regard. Singapore has achieved a technology level equal to or better than most Western nations and they are starting to pull brain-drain out of their neighbours.

I would argue that reasonable numbers of the guest workers go back home with skills that they can use to improve their own country which is really the only useful currency they can bring back with them.

We want a society in which every individual is treated as an end in themselves. We dont want a society in which some people are in there under blue conditions, others are in there under red conditions, others are in there under black conditions. We want a free society.

It’s a nice fuzzy feeling to argue for, but on a global scale there are those with privilege and those without. That’s how it is now, and that’s how it always has been in any history book you care to inspect. There have been many attempts to create societies of equals and every time, it comes out unequal (with more or less violence on the way to get there). Now, you might decide that using caste and birthright (or coloured cards) to separate the strata of society is unfair and unreasonable, whereas using money and hereditary wealth to perform exactly the same function is much more reasonable and civilized. I would argue that being a slave to poverty and ignorance is no different for the slave than being a slave by feudal decree. A “free society” is a great idea but progress in that direction must be measured in real human terms, not measured by careful redefinition of terms.

Tel
Tel
13 years ago

And youre right there are some elements of the nightmare in Singapore. The limited freedom of guest workers , the potential for abuse by employers, and the low birthrate. But what Singapore lacks, is a European-style welfare state.

The limited freedom of, well just about the entire population. Singapore also lacks an opposition party that ever wins an election. Then we could go into the small (mostly related) group of people who own most of everything. But they get results. How can you argue with results?

If I was writing the dystopian novel, Id create a welfare state of super-Nordic proportions. The crucial element of this imaginary world would be the way the entire native born communities are able to live of the labour of migrant workers to live off their labour without lifting a finger.

H.G. Wells, “The Time Machine” ?

Do you regard investment returns and usury as “lifting a finger”?

Don Arthur
Don Arthur
13 years ago

Do you regard investment returns and usury as lifting a finger?

Tel – That’s easy. No.

That reminds of George Orwell’s plan to reform English society:

What is needed is that the ownership of all major industry shall be formally vested in the State, representing the common people. Once that is done it becomes possible to eliminate the class of mere owners who live not by virtue of anything they produce but by the possession of title-deeds and share certificates. State-ownership implies, therefore, that nobody shall live without working.

Isn’t it odd that left wingers are now attacked for being in favour of idleness? What happened?