Ideas: Fixing the World July/August 2009

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Kerry Howley is a contributing editor at Reason.
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Say you’re a Bangladeshi taxi driver struggling to survive on your daily wage in Dhaka. A couple of nongovernmental organizations have offered you help, but you can pick only one form of assistance: access to microcredit, or a chance to work in the United States. What’s the better deal? According to a recent analysis by the Center for Global Development, microcredit loans might net you an extra $700 over the course of a lifetime. Working stateside, you’re likely to make the same amount in a month.

Nothing rich countries can send the global poor—not loans, not textbooks, not fair-wage campaign materials—will boost the income of the average worker nearly so much as letting him walk among the wealthy. Transported from Haiti or Nigeria to the United States or Canada, a low-skilled worker will watch the value of his labor jump more than 700 percent—instantly. Wage gaps of that magnitude have some economists, notably Harvard’s Lant Pritchett, supporting a small but potentially revolutionary shift in the nature of economic cooperation: a global guest-worker program, run by rich countries in the interest of the poor. Every wealthy country would hand out enough work visas to increase its labor force by 3 percent, and the visas would be temporary, allowing the benefits to be broadly shared among successive waves of foreign workers.

Because border control stifles so much potentially beneficial cooperation, even a modest easing of immigration restrictions produces huge payoffs. In 2005, the World Bank estimated that a 3 percent program could yield $300 billion annually for the citizens of developing countries. That’s $180 billion more than what the major Organization for Economic Cooperation and Development member countries dished out in foreign aid last year. So while aid is a transfer that leaves wealthy countries slightly poorer, a global guest-worker plan would leave the countries of the OECD slightly better off.

Admittedly, this moment of recession-fueled panic may not be the most politically expedient time to roll out the Pritchett plan for global economic justice. But those shocking wage differentials will still be around when rich countries are feeling flush. Pritchett says he has a model of how game-changing ideas are received over time, and it works something like this: “Crazy. Crazy. Crazy. Obvious.”

Kerry Howley is a contributing editor at Reason.
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