Sunday, October 29, 2006

The Values of Free Movement: Lessons for Globalization From the E.U.’s Experience With Free Movement of Capital and Labor

The European Union is a model for the ability of a group of states to come together under a system in which the free movement of goods, people, capital and services is privileged. Perhaps more than the United States, the E.U. suggests a pattern for cooperation among political communities for the facilitation of movement among their respective citizens.

Three recent experiences on a trip to London have brought home to me both the reality of free movement of goods and people as an everyday lived experience, and the way that experience has something to say about the development of economic globalization in the coming decades. I use these experiences here not because of their uniqueness (indeed in many ways they are each quintessentially ordinary). Nor am I attempting to use them as a substitute for the kind of careful empirical work for which academics are sometimes known. Consider these experiences as an intertwined parable, expressing the essence of today’s lived experience among people increasing thrown together in new and sometimes destabilizing ways.



1. A Lithuanian man in his 20s works as a waiter in a London hotel, serving breakfast most mornings to a diverse group of global (mostly business) travelers. In the evenings he works as a waiter in one of the local restaurants whose business success is made possible in large part by the steady stream of visitors from all parts of the European Union. He speaks four languages and finished university. Remaining in Lithuania was out of the question. Life was both too hard and too predictable. It would have provided substantial protection against abject hardship but also a certainty of little in the way of opportunity. Life was a well-planned and relatively painless excursion from university through death. He wanted more. He would have been happier in Germany, but there were no jobs. In England, life is far more uncertain but there is more opportunity and he is planning on venturing into business for himself once he saves up enough money.

2. A Greek business lawyer in his 40s is in London negotiating private funding for the business expansion of several industrial clients based in Greece. These clients have extensive factory operations in Greece that they are intending to sell or close down after they build new facilities in Bulgaria. The new facilities will manufacture the same products but be cheaper to build, operate, maintain and staff. The Greek industrialists are also planning joint ventures across the Turkish frontier to take advantage of an even cheaper labor market in a state that bridges the E.U. and the Middle East.

3. The U.K. government announced plans to limit the number of guest workers it would allow in from Bulgaria. Though Bulgaria is a member of the E.U., its accession agreement permits a gradual integration of its population into the labor markets of the E.U. and the U.K. is taking full advantage to limit the flow of cheaper labor into Britain. But these efforts have merely changed the composition of the low wage foreign labor pool rather than affected its numbers very much. And indeed, it is not uncommon for these rules to be evaded.

What is interesting enough about these three events that make them worth thinking about? Well, I do not mean to suggest the usual: the difficulties of immigration policies, the uneven distribution of wealth within the E.U., the difficulties of avoiding xenophobia in migration policies, the contradictions of free movement especially as a function of welfare policy, and the complexities of regulation in a context in which the regulatory framework does not correspond to the location f the problems.

Instead, I want to point out several other possibilities. I admit to their tentative nature, as well as to the need for empirical work to flesh these ideas out. But each makes sense to me in the context in which they arose and each provides a point from which larger insights might ne usefully drawn.:

1. The low wage labor market is quite dynamic. It does not cut in one direction. On the one hand, it thrives in low worker expectation countries—like Lithuania (a Western form of underdeveloped states). Yet on the other, it thrives in the U.K. as well. And indeed, the substratum of immigrant based low wage work seems to be quite important in developed economies, even those that tend to foster entrepreneurial impulses. Thus, people move to find work, but the availability of work tends to be important in determining where a migrant winds up, not whether the migrant will choose to leave his home state. And even the availability of work (or support) may not be the sole factor in determining whether (or which) person decides to go.

2. The perception of a climate favoring entrepreneurship seems to be important. People don’t leave Lithuania because they are afraid they will starve to death or be put out of a house. The Western European welfare state sees to that. They leave Lithuania, when they do because they do not believe they have the same “opportunities” in Lithuania as they have in the U.K. Note that I am not suggesting that their perception is correct—the correctness of their perception is indeed irrelevant. They move because they believe. And they believe that they have greater freedom to engage in economic activity that might produce greater rewards in the U.K. The possibility for entrepreneurship may be a key for movement of this type of law wage laborer. Note that the emphasis is on the possibility. It may be that our Lithuanian waiter in London never actually gets around to making the most of his perceived opportunities. That doesn’t matter. He came because he thought it might be possible.

3. Perversely, entrepreneurs are drawn to non-entrepreneurial communities. The Greek industrialists are likely to relocate to Bulgaria not only because state policies tend to insulate low wage labor markets, but because they tend to keep and produce low wage workers with little expectation of substantial changes in their working conditions. The Greek industrialists are drawn to Bulgaria for the same reasons that the Lithuanian man left for England. Thus there may be a qualitative difference between places that are heavily centered on low wage work, and those that also provide other opportunities. It seems also clear that places that acquire a reputation for docile populations of low wage workers tend to invite behavior that deepens those characteristics.

4. What seems so easy to mimic tends to be difficult to implement. There are likely not only cultural differences but differences in communal risk aversion that may play a part. The more risk a society permits, the greater the likelihood of success (and failure). The result might be greater social (and economic stratification). This could lead to resentment, exploitation and instability. It may be impossible given the mores of a particular political community. Political communities may accept a substantially lower but more uniform aggregate in return for reducing risk of adversity or of economic stratification. Do a people wish to be more like Russia (or Brazil) or more like Slovakia (or Lithuania)? And the aggregate efforts themselves may be stymied by foreign intervention. The Greek industrialists may do more harm than good—at least in the long term.

5. There is thus a substantial space for the cultural in economic analysis. And cultural politics plays a large role even within wealthy systems in the role that each portion fo the political community plays. At the same time, individual members of the community may seek to exit systems that extract too large a personal price for the aggregate benefits they purport to provide. The Lithuanian I ran across will always choose to leave his homeland, even if he winds up spending his entire life in low wage work. It is the thought that counts—for a lot more than the public policy community believes. And the thought counts as well for the Greek industrialist, but cutting in the opposite direction—they would prefer to deepen a commitment to lowered expectations in return for a perception of safety and economic leveling among the members of the political community. And thus, bad policy is more likely to spring from cultural antipathy to crediting cultural values in economic policy decisions. Ironic.

6. State intervention may actually intensify the effect. The easier migration, the lower the transaction costs (and risks) of migration, the greater the likelihood that more people who do not feel strongly about the benefits or need for migration will be tempted to give it a try. It would follow that the greater the risk (and costs) of migration, the more likely that only those with the strongest feelings (and the greatest risk taking ability) will actually migrate. And migrate they will. The consequence is that the low wage foreign labor pool will contain a greater proportion of those seeking to take advantage of perceived (and notice that it is the perception, not the reality, that counts) possibilities for advantageous economic risk taking. But this benefits the regulating state. It winds up with a greater number of risk takers. And this intensifies the aggregate cultural views toward risk taking.

7. Thus, my three experiences are really only three different facets of a single experience—the experience of competition for labor and capital in an environment increasingly characterized by free movement. And restraints on free movements have a positive effect precisely because they do not prevent migration, they just make it more likely that a class of migrants more compatible to the economic culture of the host state will self select successfully for migration. Competition for low wage work thus splits low wage workers by quality—in terms of cultural amenability to different forms of engagement with economic risk. And that split terms to be deepened by the choices made by economic actors across political boundaries. The cultural politics of economic policies thus becomes crucial.

These lessons from within the E.U. have some relevance to the functional differentiation among and the qualitative distribution of low wage workers between the nations participating in emerging systems of economic globalization.

5 comments:

Saam said...

Prof.

I hesitantly disagree with your assertion that an immigrants workers perception is irrelevant. Maybe I missed something, but if this natural labor selection is to work, the flow of accurate information seems key, at least to some degree.

On one hand you have the immigrant from a less developed nation, Lithuania, the "have-nots" and on the other you have the Nation-State and the Trasnational Corp, the "haves."

The Haves have excellent information. they know wage rates, living conditions, level of gov cooperation, defined source of capital, developed markets for their products, etc. The Haves have no need to perceive because they have a clear picture of what they have, what they need, and how to get it and who to get it from.

The Have-Nots, on the other hand, have seemingly far less sources of information. knowing a culture and whether or not they will fit in based on popular media, e.g. "hip-hop," is often a misconception. I'm not saying that these people do not have the common sense to seek better info, just that often time the info available may not be accurate. I think of the popular saying in the early development of th US when Europeans were told that the streets were lined with gold. Other misconceptions could be the ease to save, to invest, to integrate, to educate, to avoid abuse, and, in general, a misconception about a wealth of opportunity.

What you might end up with is not those whose risk versus reward ratio matches that of their potential new home country, but someone who is sorely mistaken as to what they are getting into. Someone could ultimately feel as though the absence of free time, time to develop themselves in non-financial ways was ultimately not worth it.

As i type this i can also see the arguments against my point of view. The opportunity to return to one's hme country is relatively easy and those who leave the easy of a socialist state probably don't care as much about the nom-financial develop. Of course, as you said, empirical data necessary and these are merely a couple of people you met along your extensive travels.

Ultimately though, I believe that perception is important and that an inaccurate perception leads to disatisfaction as much as increased utility from life.

I'm tired. Off to bed. Good night.

Diana said...

To Saam:

A small correction: Lithuania is not a "less developed nation". It is a nation that for variety of historic and political reasons took a different path of development. Which path ended in quite rough manner some few years ago and the aftermath of it still remains. The same applies to the rest of the former Soviet Union republics and the countries in Eastern Europe. I always thought it is rather arrogant statement on the part of Western Europe or US to classify these countries as "less developed". Would you have qualified the US during the great depression as a less developed country?

By the way - the belief of the immigrant workers as to where it is possible to find jobs is fed by both first and second hand information. I find it a bit unrealistic that people who speak more than one foreign language would not be able to get accurate information from some kind of media source. Other immigrant workers who already have a job in the said country are also excellent source of quite reliable info.

Thanks.

Diana said...

It just occured to me. In my wild early twenties (which are unfortunately over..) I used to live in London for a while. With an exploration purpose. I've always wanted to see London and when finally had the opportunity, it didn't take long for me to decide. And I know that apart from Eastern Europeans and people from the former Soviet Union, London is full of people from all over the world. Interestingly enough there are plenty of people living and working in UK, who are from: Germany, France, Italy, Spain, the Netherlands, Sweden, Australia, New Zealand, South Africa, and also US. A lot of them work as waiters, bartenders, etc. However, it never occured to me (and I think to anyone else either) to qualify them as "immigrant workers". I just thought of them as people who at that moment liked to live and work in UK and so they did. I have a very good German friend who I met during my time in London. She used to live there for a while and worked in a bagel shop. She was in her "rebelious" early twenties and did not want to live in Germany. After I left London, she relocated to Scotland because she has met a very nice German boy. So they lived there for quite a while, working similar kind of jobs. I don't think however, that she ever thought of herself as an "immigrant worker". I've never thought of her in this way either. For her this was just gaining a life experience. The rest of the people from Western Europe I met there also thought this way. They were young, curious, full of energy and wanted to try new things. So, they moved from one country to another (obviously unrestricted by visas - unlike the unfortunate Eastern Europeans..) and gained life experience. My German friend and her boyfriend got back to Germany (after many years of residing in the UK), got married and now have a cute little daughter.

So, why is that when we see a Eastern European person (or one from the former Soviet Union) living and working in the UK, we immediately attach the label "immigrant worker"? Isn't it possible that this person, like their Western counterparts,just wants to explore the world while they are young and see and try new things? Well, it is a common logic that unless you are very rich, the exploration of the world while young would have to involve getting some kind of job, just to get by. So, what is that makes the Western youths different from the Eastern ones - the latter classified as "immigrant workers" and the former classified as just "exploring the world"? How much difference a document like visa makes in the eyes of the rest of the world? How much different are the young Western people from the young Eastern people?

Saam said...

Diana

I retract my description of Lithuania, a country I unfortunately know little about, as "less developed." I hope that you accept "differently developed."

I still hold that some place like Mississippi is "less developed" than Southern California, or that Bulgaria is less developed than the Congo... just kidding. This is without going into the definition of "development."

I'm not exactly sure how i would categorize the US during the early 30s, but if I had to guess, i'd imagine it was probably less developed than much of Western Europe. So, if that is the case, then Yes, I would categorize the US during the depression as less developed relative to Western Europe. Or maybe you prefer developed along a different path?

Diana said...

Saam,

Let's hope that US is not going to get through another "great depression" in our lifetime, because I am afraid that we will have to put it in the group of "less developed" nations in that case .

Yes, I prefer different path.The coin always has two sides. And there is always more than one point of view in life. Lucky are those who have only seen one path in their lives!