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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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