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Tuesday, May 4, 2010

Interventionism, Immigration, and Nationalism

The welfare state breeds suspicion of foreigners.

I was born and raised in Arizona, so I’ve been following with particular interest that state’s recently passed immigration legislation as well as the ensuing public uproar.

People immigrate to the United States for many reasons, though typically to seek economic opportunity.  Those who do so legally are also eligible, like everyone else, for government subsidies for education and medical care.  Some claim these benefits attract too many immigrants, who then also “take” jobs away from native-born Americans.  But the last straw that has apparently driven a large majority of Arizonans to support the new legislation is the perception that illegal immigrants have been taking advantage of social services at the expense of legal residents.  The legislation can be seen as an attempt to more effectively prevent illegal aliens from competing with legal residents for jobs and these government benefits.

Economics teaches us that market exchanges take place only because both parties expect to gain.  Economists sometimes call this a positive-sum game.  This profit-motive is responsible for creating new goods and services as well as the jobs that produce them.  In a free market the number of these jobs is limited only by entrepreneurial ingenuity (much of it coming from immigrants, by the way).  Thus concern over foreigners taking a fixed number of jobs is utterly misplaced.

On the other hand, immigration may become a concern when the gains to illegal immigrants come at the expense of legal residents, which is indeed the case with government’s redistributive benefits – a zero- or negative-sum game.  The government is effective in redistributing wealth by taxing and spending — not creating — it. So every dollar of tax revenue spent on one person is a dollar someone else doesn’t get.

Interventionism Leads to Nationalism

Others have weighed in on the Arizona legislation and, while I have my own opinion about it, that’s not my primary concern here.

Rather, the situation reminds me of a passage from F. A. Hayek’s The Road to Serfdom in which he says:  “[S]ocialism, as long as it remains theoretical is internationalist, while as soon as it is put into practice … it becomes violently nationalist…” (p. 141, 1976 Chicago Press edition).  Internationalism here denotes inclusiveness, even liberality; while nationalism denotes the opposite.

I’m not suggesting that the Arizona government and its supporters on this issue are socialists – I’m sure they would be appalled by the suggestion.  But the logic behind Hayek’s assertion in this case extends to the interventionism of the capitalist mixed economy, which does characterize the political economy of Arizona and the rest of the country.

According to Hayek, socialism tends in practice to become “violently nationalist” for a number of reasons, besides the zero-sum factor already mentioned. A tried and true way for the political class to unite citizens around an otherwise irksome set of policies is to create a common enemy. An us-against-them mentality, which we see in times of war, can make people accept drastic restrictions on freedom and other privations that they would otherwise find intolerable.  (The same is true in other contexts, including so-called “economic warfare,” such as, Detroit versus Japan or Main Street versus Wall Street.)  To keep independent-thinking individuals from thwarting government intentions, any benefits accruing under theoretical socialism must be restricted to those under control of the State.  Nonconformists would be a nuisance, including unwanted foreigners.

It’s well-understood how legal, and especially illegal, immigration is to a certain extent the unintended consequence of welfare-state capitalism.  But my point is that what we see happening in Arizona is the “nationalist” response to interventionist policies intended, by men and women of good will, for the welfare of all.  Education and health care have been extended to illegal aliens not only because screening legals from illegals is onerous, but also because education and health care have been deemed “basic human rights.”  Of course extending these kinds of “rights” — essentially claims to the property of others — means increasing the burden to taxpayers (many of whom, by the way, are illegal aliens), and there’s the rub.

High-mindedness in theory, whether socialism or interventionism, always meets the zero-sum calculus in practice.  The reaction is predictable.

  • Sanford Ikeda is a Professor and the Coordinator of the Economics Program at Purchase College of the State University of New York and a Visiting Scholar and Research Associate at New York University. He is a member of the FEE Faculty Network.