Barriers to Entry
How opening borders gives economies a lift.
Americans spent much of this summer arguing over immigration reform, and South Africans spent much of it contemplating Nelson Mandela’s legacy. But the link between the two went unnoticed: One of Mandela’s biggest legacies was to show that immigration reform — on a scale hugely more ambitious than anything proposed in the halls of the U.S. Congress — can benefit everyone, in real economic terms.
One of the earliest acts of South Africa’s first post-apartheid government was to break down borders within the country that had prevented members of the black African majority from choosing where they worked and lived. In economic terms, this reform created a true single market, equivalent to what would happen if the United States pulled down the border fence with Mexico and gave all comers citizenship. To many Americans, that’s a terrifying thought — as it was to white Afrikaners, who predicted economic collapse. But, instead, virtually everyone got richer after borders were opened within South Africa — and in relatively short order. Mandela’s government demonstrated that large-scale border dismantling can be good for people on both sides of the fence.
Among its litany of evils, the white South African government had declared that blacks were nationals of particular "homeland" states, or Bantustans, based on their ethnicity. The apartheid regime drew up the borders of these supposed states with little regard to economic rationality or practicality, let alone the views and concerns of the proposed residents. In 1970, black South Africans were issued papers for one of the 10 Bantustans, and many were stripped of their South African citizenship. Millions of blacks were forcibly resettled to their new homelands, desperately poor places like Transkei and Bophuthatswana that relied on cash transfers from the South African government to function at all. Those who remained outside the Bantustans clustered in slums around the edges of the country’s major cities or its mines — employed, if at all, as "guest workers" ineligible for the legal and financial protections accorded South African citizens. (The process was not dissimilar to the U.S. government drawing up reservations and forcibly relocating Native American tribes in the 19th century.) Given the gross inequalities fostered by the apartheid system, it is no surprise that, in 1993, white South African households enjoyed an average income almost five times higher than that of black households.
Days before Mandela became South Africa’s president in 1994, the homeland system was rapidly dismantled. According to South African government statistics, about 12 percent of the country’s population moved between 1996 and 2001, the considerable majority to large cities like Cape Town and Johannesburg. Beyond ending one of apartheid’s most toxic institutions, the shift was a huge experiment in what happens when barriers to labor mobility fall, as economist and immigration expert Michael Clemens has argued. What were essentially different "countries," with race-based quotas and employment rules, all became a single (officially colorblind) labor market. A black population that today is about nine times the size of the white population was at last free to compete for the same jobs — and even benefit from some positive discrimination in the labor market.
Consider this parallel for scale: Brazil, China, and India have a combined population nearly nine times that of the United States — the same ratio of blacks to whites in South Africa. Now imagine if the citizens of those three countries were not only right next door to the United States, but suddenly had the legal right to move in and compete for American jobs on an equal basis with U.S. citizens. (It’s probably fair to say that support in Washington for this kind of immigration reform would be low.)
As it turned out, what happened was that South Africans as a whole got richer over the next 15 years. Economists Murray Leibbrandt of the University of Cape Town and James Levinsohn of Yale University report that average household income in South Africa more than doubled between 1993 and 2008. For black South Africans, incomes rose an average of 61 percent, but far more dramatic was the 275 percent average increase in white South African incomes. Even poor white households, those potentially most at risk from the influx of cheap labor, got richer. In the end, everyone benefited from an economy made stronger by the free movement of people and labor.
It’s a lesson that also emerges from other experiments in dismantling barriers to migration. In 1993, citizens of European Union countries were given the right to work in any other member state. Once again, the doomsday predictions proved false. Overall migration increased, but it didn’t cause Denmark’s economy (with a per capita GDP of $20,410 at the time) to collapse under the weight of Portuguese immigration, despite the fact that the Iberian pipsqueak had a per capita GDP of only $12,327. In fact, both countries had a long run of reasonably good growth until the eurocrisis and austerity ended the party. Denmark’s annual GDP growth in the 15 years after 1993 averaged 2.2 percent; Portugal’s averaged 2.3 percent. And subsequent expansion of the European Union to countries like Poland gave a boost to Western economies, particularly Britain, where tens of thousands of Poles flocked in search of work.
These real-world experiments in opening borders suggest that poor, less-skilled workers in a privileged region shouldn’t fear an influx of even poorer workers from outside. That holds true for the United States and Mexico, too. South Africa demonstrates that the practical benefits of open borders — when compared with the selfish interests of those on the "right" side of the line — outweigh the concerns. When the levee breaks, the rising tide lifts all boats. So perhaps it’s time to think big and loosen that most peculiar and outdated institution: the right to work only where you’re born.