Migration and the Wealth of Nations

Migration and the Wealth of Nations
By Alcides Hernandez
Adam Smith, a classic economist, wrote a book that he called “The Wealth of Nations”. His legacy to the economical theory was the “growing theory”. The main thesis being that the wealth of nations had its origin in the quantitative increase of the economy. And for there to be growth, the specialization of work, the accumulation of capital, and the free market were necessary. According to Smith, to achieve the welfare state, a society should hope for changes that originated in the individual. Meanwhile man, in the context of the economical process, should be selfish in his relationships with each other nobody should interfere in the life of other persons. Then, progress would depend on the individual initiative and in the empathy between buyer and seller in their trading relations.
The migration from Europe to America, which was intense, and that could be considered the elongated arm of the industrial revolution due to the big support it had given to the process, was never mentioned as a resource to achieve the improvement of the economy. This being because the theory supposed that wealth only came from the industrial production in the internal market. It is interesting to see that is was the same migrants that moved thousands of tons of marvelous metals (gold and silver), from California, Central America, Mexico, Colombia, Peru, and other countries, with destination to Europe. And there were also tons of raw materials and food products. All those flows were useful to decrease costs and increase profits of the capitalists the industrial revolution.
Migration became a turning point at the summit of the industrial revolution, with a big global impact, a great support to achieve and improve the levels of accumulation of capital. This was never considered in the study of the social relations of production, in Smith´s theory and followers. They ignored migration, as something supplementary of the object of study of political economics. Nevertheless, history shows that migrants have given and made big changes where they have gone. They are an example of hard work, they have contributed with a creative culture and are motivated and willing to archive big and successful projects. But, as was mentioned before, the theory ignored those contributions to the real world.
The neo-liberal theory, which has been supported by the principles of Smith’s theory, maintains that the growth of the economy is a result of the intensification of international trade, the free market and the individual initiative. Earlier in history it was supposed that for the prosperity of a country it was necessary to have more overseas exports, which would increase foreign currency in the central banks and consequently the generation of employment all around the world. On the other hand, the increase in imports would signify more movement in commerce and local services. They deduce that, in the process, it should fill the barrel of economics until it spilled over and with it, the government could make policies for a welfare state, addressed to the poor people. All of this is possible with the liberalization and unregulated economics, more free market and private initiative.
In this modern version, the issue of migration is too forgotten, never considered as an object of study. The evidence of recent researches shows that the migrants are the people who have saved the economic model. When they left their countries, they reduced the employment pressure in the internal markets. When they found a job overseas they began to remit money. The financial system was favored and supported because it had received the consignments in foreign currency that workers send annually to their families. The evidences in Latin America are more than enough. According to IADB (Inter American Development Bank), the level of foreign currencies in some countries is more important that the domestic product. In six countries they exceed 10 percent of the Gross Domestic Product (GDP): Haiti 17%, Nicaragua 14.4%, El Salvador 12.6%, Jamaica 11.7%, Dominican Republic and Ecuador 10%. The same source has reported that migrants send annually to Latin America around US $40 Billion, being Mexico the most benefited country. If this represent a 10 per cent of their total wages, then they spend in the internal market where they are working, around US$ 400 Billion.
Then again, they work from sunrise until nightfall at farms, plantations, constructions, factories, commercial and service industries and do all the unattractive tasks that the citizens don´t want to do. All of these are contributions that migrants are doing to support the accumulation of capital in the rich countries.
When the theory is compared in history, without a doubt, the theorists have ignored the migrants. With the difference that actually the problems for them are more complex than historic migration. They have few opportunities in the employment market. It has been made worse by the economic crisis. Rejection and racial discrimination are always a constant. Some politicians have criticized this issue considering that governments are insensitive in refusing the migrants. President Calderon from Mexico, on May 19, 2010, addressed The Congress of the United States, and said: “..Mexico is in disagreement with the Arizona Law because it introduces the terrible idea of using racial profiling as a base for law enforcement…”.
This is migration, a problem that hasn´t been resolved in developing countries and rich countries; but as always, it has been ignored by the economic theories as an important issue to produce and increase the wealth of nations. And now this issue has even been forgotten by the politicians.
June, 2010