The truth about mass migration
//SUMMARY//
I'm Andres Acevedo, and this is The Market Exit. During the migration crisis 2015, the small country of Sweden admitted many. What effects did this surge of migrants to Swedish have on the Swedish economy? To find out, I met professor Peo Hansen, author of the book "A Modern Migration Theory" and from our conversation, I realized that many of the economic models we use for assessing our economy and society are deeply flawed.
In the conversation, we discuss the field of research called the fiscal impact of migration, the difference between real resources and financial resources, the so-called brain drain within the European Union, and why politicians are so afraid of speaking the truth about migration.
1)
00:01
In 2015, the Libyan civil war, the Syrian civil war and the war against ISIS in Iraq unleashed a massive humanitarian crisis that forced millions of people to flee for their lives to Europe.
This created the 2015 European migrant crisis, which had immense political ramifications. During the crisis, a large number of refugees fled to my home country, Sweden.
2)
00:30
In 2015 alone, Sweden took in as many as 163,000 asylum seekers, around 17 refugees per 1000 inhabitants. That same year, the United States took in 70,000 asylum seekers, around 0.2 refugees per 1000 inhabitants.
This surge of refugees to Sweden triggered alarm among Swedish politicians, experts, and international media, like the Economist, who all predicted that the migrants would cause substantial economic problems for Sweden.
3)
01:05
The predictions from the government itself and the European Commission said that Sweden would be economically hurt by admitting so many refugees because Sweden is spending too much. Predictions were that this would end badly.
You could say. This is Peo Hansen, a professor of political science at Linköping University in Sweden and the author of A Modern Migration Theory.
4)
01:32
"In his research, Professor Hansen looked at what happened to Sweden's economy during the migration crisis and compared that to what politicians and establishment experts worldwide predicted.
"They were all wrong. What happened was that economic activity grew very strongly, and economic growth in Sweden was almost Chinese at this time."
5)
01:56
"At the end of 2015, it grew by about 4.5% because the government spent straight into the economy. The best and the brightest in the macroeconomic field were all wrong."
I wanted to understand why the politicians' and experts' predictions were so bad, so I travelled from Stockholm to Norrköping to meet Professor Hansen.
6)
02:25
From our conversation, I realized that the useless predictions about the economic effects of the migration crisis were not isolated errors.
Instead, these errors expose deep flaws in the financial models that politicians rely on. Models that fundamentally misunderstand how migration affects our economy and society.
7)
CHAPTER1: A Weird Science - THE FISCAL IMPACT OF MIGRATION
02:58
This is downtown Stockholm. The Swedish Ministry of Finance is in that building. The Swedish National Financial Management Authority is next. And here is the National Institute of Economic Research.
What do these government agencies have in common? They employ Sweden's best and brightest macroeconomics.
8)
03:22
Another thing they have in common is that they, together with the European Commission, predicted in 2015 that Sweden's economy would suffer badly because of "increased costs of migration."
But what does the cost of migration even mean? When politicians talk about the cost of migration, where do they get their numbers?
They come from research and the tradition within economics called "the fiscal impact of migration."
9)
03:55
What they do, if you put it very simply, is to take the cohort of migrants and compare that to those who are born in the country, let's say, Sweden.
Then, they measure how much the migrants pay in taxes and how much they get out of the welfare system. And from there, they get a number: a cost or a benefit.
10)
04:17
That's how simple it is. And here's another way we can explain this method visually: These economists sort the population of, say, Sweden based on how much everyone pays in taxes, which, naturally, follows from how much they earn.
Then, these economists draw a line where the average is and conclude that everyone below the average is a burden or a cost for those above the average.
11)
04:43
Since migrants are overrepresented among people who earn below average, economists conclude that they are a cost.
And that's a weird science because you can do that for any group in society. You could take women and say, well, women make less than men in terms of income.
12)
05:02
They also pay less taxes. But can we conclude that women are a burden on men based on that? Yes, we can if we apply this literature and economic research.
Anyone below the average would be a cost to the people above the average, and thus, the CEO of a casino would be a cost and a burden.
13)
05:26
A kindergarten teacher would be a cost to a banker. A cleaner will be a cost to an advertising executive. Why? Simply because these people earn below the average. You have an average.
That means, mathematically speaking, some people will be above average, others below average, and some just average.
14)
05:47
In this research, you almost feel that the message is "Get over average" to everybody. But that's impossible.
I am a professor of political science, so during the COVID pandemic, which people did we want more? Professors in political science or nurses? Well, it's obvious, but who is paid more? Well, professors are, but they are not more important.
15)
06:13
They're not more valuable. And there's a large European study done that could show very clearly that the most essential workers during COVID were disproportionately low-skilled, low-paid migrants.
And that's the only statistics you need to understand how absurd this accounting is. This strange science of considering half the population as costs contributed to faulty predictions about the fiscal impact of the migration crisis.
16)
06:45
But another reason we got our predictions wrong is that we often confuse symbols with reality.
CHAPTER2: The map is not the territory - REAL VS FINANCIAL RESOURCES
We humans are masters of symbols. We've built empires, technologies, and economies thanks to symbols like countries, laws, and money.
However, as the British philosopher Alan Watts has noted, "The peculiar and perhaps fatal fallacy of civilization [is that] all too easily we confuse the world as we symbolize it with the world as it is."
17)
07:23
"Money is a way of measuring wealth, not wealth itself. A chest of gold coins or a fat wallet of bills is useless to a wrecked sailor alone on a raft."
In his book, Professor Hansen shows that our inability to distinguish between symbols and reality is also one reason we fail to assess migration's effects properly.
18)
07:47
Professor Hansen notes that we constantly fail to distinguish between real, reality, and financial resources and symbols.
I get the distinction between real resources and economic resources from modern monetary theory and scholarly tradition. We are told that financial resources are scarce and that we must be cautious with how the government spends.
19)
08:17
Otherwise, we can have insolvency, bankruptcy, and so on.
But modern monetary theory flips that and says, "No, where we have real constraints are within the real resources, meaning people, workers, knowledge, and real resources."
We know we have those constraints, but we care less about them than the false constraints we say we have with fiscal resources.
20)
08:43
I think John Maynard Keynes said that what is technically possible to do is always financially feasible.
You can do things if you have the skills, the workers, and the resources. If you don't have them, you can. And it doesn't matter how much money you throw on that, it won't do anything.
21)
09:07
COVID showed that we needed more people in the healthcare sector, much more people. And so governments threw money at that.
"We've decided to lend up to 500 billion SEK to the banks." "The interest rate for these loans is zero." "This is, essentially, free money." get off this panel. But that was not enough.
22)
09:34
The real constraint was that we didn't have the real resources. So we had the money but didn't have the real resources, which is crucial to understand.
Migrants are a real resource. Any country that receives real resources is a winner. That's just how crass reality is.
23)
09:58
Now we have it backwards and think that we, who have a net inflow of migrants, are the losers.
Here in Sweden, where we have a net inflow of migrants, 51% of the bus and tram drivers are foreign-born, 60% of the cleaners are foreign-born, and 30% of the doctors are foreign-born.
Could anyone argue that Sweden would be better off without these people? The mainstream view that it's costly for countries to receive migrants is misguided.
24)
10:30
But does this mean that migration is always possible and always desirable?
CHAPTER3: The real constraints on migration
I'm very often attacked by people who say, "With your reasoning, Sweden could take all the migrants and refugees in the world."
And I say, "No, that's not what I'm saying. That's not possible."
25)
10:56
But it's not due to financial constraints. It's due to real constraints. How many people can a country accommodate? That is related to housing, our healthcare sector, schools, and real resource constraints.
So that is the limit to how many people a country can receive. Profess Hansen's work shows that even during the migration crisis, when Sweden admitted many refugees, Sweden didn't even come close to its real resource constraints.
26)
11:29
However, Professor Hansen also raises another often-overlooked question that we need to consider when discussing migration: What effect does migration have on the countries that the migrants are leaving behind?
It used to be that the EU was the EU, and the rest of the world wanted to come in. Now, the EU has 27 countries.
27)
11:53
Many of those countries are emigration countries and have suffered what researchers would call "demographic collapses."
So, the Baltic countries, foremost Lithuania and Latvia, but also Romania and Bulgaria, have some of the highest emigration rates in the world, with approximately 3.6 million people, since Romania joined the EU in 2007.
28)
12:18
Six million people have left the country, around 16% of the population. It has gone so far that the former Romanian Finance Minister, Eugen Teodorovici, proposed that Romanians shouldn't be allowed to work in other EU countries for more than five years.
A few years ago, I had a Romanian PhD student in a course. He mentioned that there was a fire in the discotheque in Bucharest some years ago, and he said that even in Bucharest, the hospitals could not take care of those with burn wounds.
29)
12:51
So they had to be flown to Germany and other places. He said they were flown to Germany to get treatment and were probably getting treatment from Romanian doctors.
That's the situation. There are hardly any doctors or nurses in many places in Romania, Bulgaria, and other areas.
30)
13:11
That's part of the internal EU logic. Brain drain is an EU issue. It's not the EU versus the rest of the world.
I left Professor Hansen's conversation feeling that the public discourse about migration is weirdly one-sided and unintelligent.
But why is that? How come politicians try to outcompete each other in restricting migrants while ignoring the actual benefits and drawbacks of migration? There are many reasons for that.
31)
13:48
I would point to the fact that migration has become a toxic issue and that very few politicians can say anything positive about migration. Employment rates for foreign-born people have increased dramatically.
So, foreign-born people in Sweden now have a higher employment rate than the general employment rate in the EU.
32)
14:14
That is very significant and very positive. At the same time, unemployment has decreased dramatically for the foreign-born group in recent years.
Interestingly, no one is taking credit for this very positive development, which I think says much about where we are with this issue.
33)
15:39
I will let Professor Hansen say a few more words about his book: "A Modern Migration Theory".
This is "A Modern Migration Theory." It also came out in Swedish, and there, it's called "Migrationsmyten," which means "The Migration Myth."
The book is my attempt to change the conversation on the economics of migration, disprove the assumption that migration is somehow a cost, and show that that is not the case.
34)
16:02
It's not a fiscal issue or an affordability issue. Instead, it's an addition of real resources. I just wanted to make that very clear. Once we get that affordability stuff out of our way, we can talk about migration objectively.
The truth about mass migration
https://www.youtube.com/watch?v=QoFLHx-t-Yk
