Migration 1870-1925 and international economic inequality

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DeLong's Grasping Reality, 24 August 2019

What did matter for inequality and upward mobility in the pre-World War I era was not trade but migration. The descendants of those who lived in Ireland at the start of the nineteenth century are, today, one of the richest groups in the world: less than half of the descendants of the Irish of 1800 live in Ireland today; instead, they are spread throughout America, Britain, and Australia, and they have prospered.

The half century before 1925 saw perhaps one hundred million people moved from one continent to another in search of a better life. About fifty million left Europe, largely eastern and southern Europe, for Australia, and the Americas. Perhaps fifty million (although we are not really sure) left China, India, and other Asian countries for destinations in the Americas, in lands surrounding the South China Sea, and in east Africa. Peru in the late twentieth century could have a President surnamed Fujimori. The author V.S. Naipaul was born not in India but in the Caribbean. The redwood forests of northern California contain shrines to the boddhisatva Guan-Yin.

Tension between descendants of peoples whose ancestors had resided in the areas for somewhat longer (after all, ultimately all humans are indigenous to Africa) and descendants of migrants from China and India has dominated the politics of many countries in the twentieth century. And since World War I migration has been tightly restricted by national governments, and population flows have been much smaller as proportions of the total world population.

But the roughly one hundred million migrants of 1870-1925 made up one-twelfth of the world’s population in 1870. Because the migration stream contained relatively few children and few old people, the 1870-1925 intercontinental migration stream amounted to perhaps one out of every seven people of working age.

One of the most popular causes in late nineteenth century America was the restriction of immigration from China and Japan. Railroad barons wished to continue the expansion of the Asian-born population in America. Workers and populists wanted the Chinese, Japanese, and (Asian) Indians kept out of California and on the other side of the Pacific. The plutocrats like Leland Stanford (the railroad baron and governor of California who founded and endowed Stanford University in memory of his son) favoured immigration; the populists favoured exclusion – and “Chinaman go home.”

By and large, the populists won before World War I in one narrow aspect: with respect to making and keeping settler colonies “European”. Asian immigrants were largely kept out of what Arthur Lewis calls the “temperate countries of European settlement” – the United States, Canada, Argentina, Chile, Uruguay, Australia, and New Zealand. The flow of migrants out of China and India was directed elsewhere, to the tea plantations of Ceylon or the rubber plantations of Malaysia. Arthur Lewis believes that this redirection of the migration stream had enormous consequences for the distribution of income in the twentieth century world. Europe had escaped the Malthusian trap of low living standards and populations high relative to agricultural resources and technology at perhaps the end of the eighteenth century. The availability of resource-rich settlement areas like Canada and Argentina with Europe-like climates provided a further boost to European living standards: industrializing European countries at the turn of the twentieth century found their land/labour and capital/labour ratios, and thus their productivity levels and living standards, rising as migrants left for America.

India and China, through ill-luck and bad government, had not escaped the Malthusian regime. Technology had advanced: the population of China in the late nineteenth century was some three times what it had been at the start of the second millennium, and living standards were no (or not much) lower. But improvements in productive potential had been absorbed in rising populations, and not in rising living standards. So potential migrants from China and India were willing to move for what seemed to Europeans to be starvation wages.

Thus the large populations and low levels of material wealth and agricultural productivity in China and India put downward pressure on wages in any of the areas – Malaysia, Indonesia, the Caribbean, or East Africa – open to the Asian migration stream. Workers could be cheaply imported and employed at wages little above the physical subsistence level. These workers would be very happy with their jobs: their opportunities and living standards in Malaysian or African plantations would be far above what they could expect if they returned to India or China. Low wage costs meant that commodities produced in countries open to Asian immigration were cheap. And competition from the Malaysian rubber plantations pushed down wages in the Brazilian rubber plantations as well. The late nineteenth century saw living standards and wage rates become and remain low (although higher than in China and India) throughout the regions that were to come to be called the third world.

Conversely, the restriction of migration to temperate latitudes to European natives meant that the prices of temperate agricultural commodities – like wheat, beef, and wool – would be relatively high because wages had to be high enough to lure Europeans, with agricultural productivity levels three or four times those of China or India, off the farm and across the ocean. Save for cotton (grown by African-American sharecroppers living at standards closer to physical subsistence than the rest of America cared to know about or cares to remember), temperate economies simply did not produce any of the commodities that could be produced in regions open to Asian migration: they could not compete. Instead, the temperate settler economies concentrated on the resource- and technology-intensive agricultural and mineral products that could not be produced closer to the equator.

The politically set pattern of migration ensured that one set of countries would be relatively rich, and another set relatively poor, as of the beginning of World War I. Since 1900 destinies have diverged further. In most vicious and virtuous circles have acted to push them further toward the nearest edge of the world’s relative income distribution. But some have followed aberrant and surprising trajectories through the world income distribution. The countries in the southern half of South America were first world nations in 1900. They are not so today. Japan, with in 1900 a relatively poor developing economy, is now one of the leading industrial powers.

If there had not been substantial restrictions on poor people – Asians – moving to rich countries – Europe and its overseas settler colonies – throughout the twentieth century, California would certainly be very, very different. It might have been easier for poor people to move to rich economies than it has proven to be to transfer the political institutions and economic technologies from rich to poor economies in the twentieth century. If so, the world would today be a more equal and a richer place if not for the white Australia and analogous policies of the pre-World War I era, and for the tight restrictions on all kinds of immigration imposed from the 1920's on. Alternatively, the institutions of political democracy and the capitalist economy in the rich settler countries might have collapsed under the strain of coping with more massive immigration flows, and the resulting increased degree of internal inequality – or so has always been the argument of those favouring immigration restrictions.

Migration also made the British Empire a second-class power by 1850.

British salesmen saw what was coming. In the case of Britain and the United States, after 1815 the British government followed a durable policy that was rather odd for 19th Century Britain, whose SOP was usually: "we burn your fleet, and perhaps your capital, first, and negotiate later".

Britain acceded to the Monroe Doctrine in 1823; accepted a line of demarcation in the Oregon Territory that left the British-settler majority region that is now the state of Washington in American hands; did not intervene on the side of free trade in 1862; accepted American mediation on the Venezuelan border; supported American annexation of the Philippines; relinquished rights and interests in what became the Panama Canal zone; and acquiesced to the American position on where the boundary between Alaska and the Yuko actually was.

Britain, instead, gave scholarships to American wannabe aristocrats who wanted to study at Oxford and Cambridge; gleefully married off its own aristocrats with titles to American heiresses – Winston Churchill's parents became engaged three days after meeting at a sailing regatta on the Isle of Wight – and stressed common lineage, cultural, and economic ties; and, as the young Harold Macmillan unwisely, because too publicly, put it when he was seconded to Eisenhower's staff in North Africa in late 1942, became "the Greeks to the American Romans".

The result was that the United States became Britain's wired aces in the hole in the game of seven-card stud that was twentieth-century geopolitics.

The fundamentals tolled against Britain. One island cannot, they said, in the long run "Half a continent will, said economic historian J.H. Clapham speaking of the United States, in the end raise more coal and melt more steel than one small densely-populated island".

Yet perhaps Britain's supersession by America was not inevitable, or rather, such a rapid supersession was not inevitable. In 1860 the United States had a full-citizen population of 25 million, and Britain and its dominions had a full-citizen population of 32 million. By 1940 the full-citizen numbers were 117 and 76 million. But the pro-rated descendants of the full citizens as of 1860 were 50 and 65 million, advantage Britain and the Dominions.

As the Financial Times's Martin Wolf points out, his ancestors were some of the very few who made the much cheaper migration from the Ashkenazi Pale of Settlement to London than to New York.

Up to 1924 New York welcomed all comers from Europe and the Middle East, while London and the Dominions were only welcoming to northern European Protestants.

A Britain more interested in turning Jews, Poles, Italians, Romanians, and even Turks who do not happen to be named Alexander Boris de Pfeffel Johnson – who bears Turkish Minister of the Interior Ali Kemal's Y and five other chromosomes, and hence is, by all the rules of conservative patriarchy, a Turk – at turning them into Britons or Australians or Canadians would have been much stronger throughout the twentieth century.

Perhaps it would not be in its current highly undignified position.