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The economics behind closed borders

Does it help or hurt domestic workers if we open borders?

Thursday 25 May 2017, by mond


Should we open our borders, or should we close them? The question is often discussed as an ideological issue, where some times the people who hold one or another position have long forgotten why they are on certain side of the issue. It is also sometimes discussed as a moral issue. Indeed it is an outrageous scandal that we let thousands of people drown in the mediterranean sea. And this scandal should give us some insight into the inhumane core of our current neo-liberal, capitalist society.

But let us take a closer look at the economic interests behind the border regime. The common narrative goes something like this:

By opening borders workers will have to compete against immigrants. And this will result in lower wages. So the neo-liberal agenda is to open borders in order to maximize profits and exploitation.

But there is a lot wrong with this simple narrative. If the above is true, why would the EU (which currently is ruled by neo-liberal forces) would invest so much money and effort into securing the boarder. And why is nationalism so important for the fascist right (keep in mind: behind fascism there is capital)?.

In order to understand this we need a more elaborate model:

We need to differentiate between goods and services. Goods can be easily shipped around the globe and manufactured where ever labor cost are lowest. Services can not be shipped. You need people on site to produce and deliver them.

So the Capital behind service has an incentive to root for open borders while the Capital behind manufacturing is only interested in open borders for goods but not for people. To see this lets assume you are a software engineer in India and you are really good. You know that if you would move to Europe or the US you could earn 2 or 3 times as much as you do. Well if you could just move you could just ask for that money or threaten to leave the country. This would lead to wages for high-skilled workers to drastically rise in India.

This would also pull the wages for medium-skilled workers, etc. All the super high profits that western companies can rip off by producing in countries with low wages and selling their products in richer countries would evaporate. So keeping up the fences for people is crucial for their business model.

So for capital the optimal solution is to have enough open borders to be able to get enough people to fill service jobs and keep them closed enough to keep up the high differences in wages for production and manufacturing.

In the EU this compromised is maintained by opening the borders within the EU and closing the outside. Now the open borders within the EU would help to level the wages. It seems, that in order to prevent this as much as possible the fiscal policy of the ECB is used to strangle poorer countries, instead of helping them. This is, what we have seen with hideous blackmailing of Greek banks in the summer of 2015.

If possible capital would explicitly limit which jobs migrants can take. This e.g. happened in Austria with the "Bartenstein-decree", which limited jobs for Asylum Seekers to work in selected Seasonal Service Jobs.

On the other end, we see the so called "Free Trade" Agreements, for the most part those agreements are not about trade at all but their intent is to weaken the state and establish direct jurisdiction of global corporations. Where the agreements deal with trade, those agreements are not about quite protectionist in nature: Where, within the WTO negotiations the poorer countries already realized that things like "protection of so called intellectual property" are not in their interest and these countries started to demand some fair trade, the newer treaties like TTIP, TTP, CETA are protectionist agreements by the capital interests of richer countries.

Now let us focus on the Digitalization. Within the next few years a lot of Jobs will become obsolete due to automatization and artificial intelligence (AI). Both in the goods as in the services industry. Even in low paid countries like china some companies have announced that they will plan to replace $5/h jobs with robots.

This will change the equation of open vs closed boarders. For the most part it will make it more and more irrelevant to capital. Where it usefulness to the capital interests remains is, that it might still be useful to keep people riles up against immigrants and to prevent international solidarity. So it will remain a tool that is useful to prevent the voters to go to the left. So we should expect that the narrative of the "immigrants take your jobs" will be upheld for as long as possible.

Meanwhile the question in the digital world is mainly, how to secure the control over production. So this is at the core of the so called "trade agreements" mentioned above: how to secure the so called "intellectual property": Capital does not care where the factory is and where the software development takes place as long as they can own and control it.

So what should the left do?

For anyone who wants to change this absurd system, it should be obvious that we must never stop to scandalize the atrocities of the capitalist border-regime and the capitalist wars that created the migration crises in the first place.

We also need to explain to people the mechanisms outlined above: That the closing the borders is not in our interest and that only through international solidarity we will be able to fight the interests of global capital.

What we have to focus on most of all is the ability to control the production and this is, and will increasingly be, through so called intellectual property". This is something we need to fight against, tooth and nails. And this again, is only possible through international solidarity. Tear down these walls.

Franz Schäfer, Mai 2017

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