Openness to migration better predictor of economic growth than trade
Openness to migration is a better predictor of economic growth than openness to trade, according to Prof. Ken Schoolland, an Associate Professor of Economics at US-based Hawai’i Pacific University.
Headlining a recently-concluded public forum in Sri Lanka, entitled “Open Borders: Trade, Migration, Entrepreneurship and Prosperity”, which was hosted by the local Bastiat Society, at the Ceylon Chamber of Commerce auditorium last week, Prof. Schoolland also added that migration was the ‘sieve’ that filtered out all the people who were “comfortable”, while spurring on the risk takers, investors, entrepreneurs, etc.
Commenting further, he noted that those who migrated were also responsible for much of the remittances taking place worldwide, also indicating that remittances were typically responsible for 8 per cent of a country’s GDP in low income countries, which is often more than six times the amount contributed by foreign aid to those countries.
Pointing to the examples of Hong Kong and Singapore, amongst other historically open ports, he opined that it was because of migration that these countries saw a significant rise in per capita over the years, while neighbouring countries, with more restrictive migration policies, often stagnated.
Prof. Schoolland also countered the argument that migration occurs, into the US, because of social welfare payments, by arguing that, per his research, the most migration was directed at US states that featured the smallest welfare payments, but the greatest opportunities. He concluded his remarks by signalling that human beings were the “ultimate resource” and that openness to migration and trade, by a country, was not only ethical and humanitarian, but also the most practical approach for economic growth.
Also speaking at the event, W.A. Wijewardena, a former Deputy Governor of the Central Bank, commented that local economic policy was bringing another “Greece” to Sri Lanka. Elaborating further, he noted that commercial borrowing by this country was growing, to 52 per cent in 2014, from 15 per cent in 2008.
He also added that, formerly, the country borrowed more from foreign sources, but the new trend was to borrow more domestically. It also emerged that exports as a percentage of GDP substitution has dropped significantly from 2000, when it was 33 per cent, to 14.8 per cent in 2014 (2015 estimate: 12 per cent).
Mr. Wijewardena also cited figures that indicated that the Central Bank had recorded a loss of Rs. 39 billion in 2013, and Rs. 22 billion in 2014, while it was also his opinion that there would be losses this year too, which would be substantial.
Additionally speaking at the event, renowned economist and Verite Research Executive Director Dr. Nishan de Mel highlighted three key challenges, going forward, for the Sri Lankan economy, namely the country has literacy with skills, it has growth without jobs, and it has politics without hope.
Adding to this, he opined that literacy, in which Sri Lanka showed high indicators, was not the same as having applicable skills that could be used to grow production and even, ultimately, spur growth in household consumption. He also reiterated that he was not just talking about up-skilling as it pertained to universities, etc, but also regarding vocational training, as well as investing in education and research.
Dr. de Mel noted that Sri Lanka has not seen any real jobs’ growth since 2005, with the private sector only being responsible for 1 per cent of jobs’ growth, while the public sector is where most jobs’ growth has occurred, meaning that overall jobs’ growth has been stagnant. He also added that unemployment indicators were no longer the figures to watch, since many have moved out of the workforce as a result of a lack of jobs. As an example, he compared the percentage of women working in Sri Lanka (35 per cent) to Vietnam (78 per cent) and other Asian tiger economies.
He also stated that politics in Sri Lanka had become more about rent seeking and gate keeping measures than about value creation and productivity, and that the local culture had become more about pleasing gate keepers than working on increasing production.