Saturday, January 28, 2023
HomeOpinionThere’s a way to make immigration great again, writes Raghuram Rajan

There’s a way to make immigration great again, writes Raghuram Rajan

Left unchecked, populist nationalism will undermine the liberal democratic market system that has brought developed countries the prosperity they enjoy.

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When the community is dysfunctional, alienated individuals need some other way to channel their need to belong. Populist nationalism offers one such appealing vision of a larger imagined community — whether it is white majoritarianism in Europe and the U.S., the Islamic Turkish nationalism of Turkey’s Justice and Development Party, or the Hindu nationalism of India’s Rashtriya Swayamsevak Sangh.

Populist nationalists identify minorities and immigrants — the supposed favorites of the cosmopolitan elite establishment — as usurpers, and blame foreign countries for keeping the nation down. Left unchecked, populist nationalism will undermine the liberal democratic market system that has brought developed countries the prosperity they enjoy. It risks closing global markets down just when these countries are aging and need both international demand for their products and young skilled immigrants to fill out their declining workforces. It is dangerous because it offers blame and no real solutions, and it moves the world closer to conflict rather than cooperation on global problems.

The world can ill afford such shortsighted solutions. At the same time, the populist nationalists do raise important questions. There are costs associated with rising diversity. These include the burden of absorbing poor immigrants initially, which falls disproportionately on poorer domestic communities, and the lower mutual empathy between communities once the nation becomes more diverse, which leads to less support for a national safety net. Ethnically homogenous countries also fear a loss of their cultural heritage.

Populist nationalists recognize that citizens benefit from national borders. Borders protect the rents citizens get from the country’s wealth, institutions and power. In effect, nations are the last of the guilds. By restricting decision-making largely to those living in the demarcated land, borders give citizens a sense of self-determination and political control over their lives, and an ability to protect their cultural traditions.

By only allowing people in who share something in common, such as values or ethnicity, borders allow for collective national efforts and engender the mutual empathy that allows the country to create support structures such as public schools, safety nets and disaster relief. While borders get in the way of productive efficiency, they may be necessary for the structures that help citizens manage modern life.

Difficult economic conditions make the prospect of managed immigration particularly fraught. Surveys of values across developed countries suggest that people tend to have greater trust and affinity for strangers, as well as more concern for the wider world beyond their immediate families, when they are economically secure. As their economic security and social status become more fragile, the moderately educated become less able and willing to accommodate change.

Yet, we also have to recognize that immigration may be necessary in ageing countries, and the associated costs lower if they are already ethnically diverse. What might a country which wants to accommodate both populist nationalists and immigration look like?

First, in such a diverse nation, ethnicity and cultural continuity should be expressed at the community level. If more powers are delegated from the state to the local community, it can shape its own future better and will have more control. Some communities will have a specific ethnic concentration, and community culture will gravitate toward that ethnic group’s culture. A strong local community could satisfy people’s need to live in a cohesive social structure and preserve, celebrate and pass on their heritage.

An interesting historical study by University of Chicago finance professor Luigi Zingales and others highlights the long-term benefits of decentralizing power back to the community. They find that Italian cities that achieved self-government in the Middle Ages have higher levels of social capital today — as measured by more nonprofit organizations per capita, the presence of an organ bank (indicating a willingness to donate) and fewer children caught cheating on national exams. They conclude that self-governance instilled a culture that allowed citizens to be confident in their ability to do what was needed and to reach goals. Localism, that is, decentralizing powers to communities, may thus reduce apathy and force their members to assume responsibility for their destinies rather than blaming a distant elitist administration. It also allows each community to respond to its specific challenges.

Decentralization doesn’t mean communities are on their own. The state would monitor community governance lightly, investigating and prosecuting grand corruption, and ensuring civil rights are protected. Conversely, communities, aided by new communications technologies, will come together through the democratic process to influence the state and its policies. Finally, the state will provide some central support to communities, not just during periods of widespread economic distress when community resources are overwhelmed, but also to prevent any community from falling too far behind.

This does raise the specter of a country dotted with segregated communities, each with its own race, national origin and cultural traditions, and totally barred to outsiders. We must prevent this, not by forcing people to mix, but by emphasizing — if necessary, through laws — that in a nation, all communities are open to flows of people, goods, services, capital and ideas. While nations have the right to control the inward flow of people, communities should not have that right, else that risks perpetuating inequality and segregation within the country.

Some communities will be thoroughly mixed, especially in cosmopolitan cities, because of the myriad advantages of mixing. At the same time, many neighborhoods, even within cities, will be more representative of a certain religion or national origin, simply based on the choices of who moves in and out, without any overt discrimination. The economic costs of being too narrow and parochial, especially given the possibility of benefiting from the flows of trade and people across its borders, will limit how unproductive or oppressive the community will get.

The communities where the majority group is concentrated will be ones where the populist nationalists can emphasize the ethnic aspects of nationalism that they care about. None of this implies exclusion — having monocultures that satisfy the tastes of those who want monocultures is as important as having multi-cultures.

Unlike ethnically homogenous countries such as Japan that still have a choice of whether to become more diverse or not, civilized democratic countries with sizable immigrant and minority populations really do not. For nations where the majority, because of differential birth rates, is slated to become a minority, populist nationalism is a tempting but mistaken diversion. The real goal should be to decentralize powers to the community, even while encouraging flows of trade and people between communities so that through contact, they eventually appreciate and welcome their differences. Inclusive localism should be the new creed.

This is the second of three essays adapted from “The Third Pillar: How Markets and the State Leave the Community Behind.” Read the first one here.

Also read: Coming soon, breeze through immigration in just 60 seconds


Raghuram Rajan is professor of finance at the University of Chicago Booth School of Business. He was previously governor of the Reserve Bank of India.

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  1. Today’s world is closely interconnected by ease of travel and communication, therefore boundaries of the thinking of different peoples are porous. Jumping of photons of thought from one mind to another across all geographies is happening all the time. In such a world, any nationalism almost by definition has to be narrow minded. And all narrow minded nationalisms thrive on bigotry. The leader of such minds, as a corollary, has to be a bigot. I don’t know about other parts of the world, Turkey etc as mentioned in this article, I am talking specifically of the nationalist surge we have seen in India in the last five years.

    But that’s only half the story. In the above I mean the nationalism based on the superiority of a race as perceived only by the members of that race, as espoused, for example, by the RSS and its affiliates in India. There is yet another type of nationalism which is based on resource crunch and has its own dynamics. Dr Rajan’s very well written and thought provoking article pertains to this kind of nationalism. He very rightly says here:
    “Surveys of values across developed countries suggest that people tend to have greater trust and affinity for strangers, as well as more concern for the wider world beyond their immediate families, when they are economically secure. As their economic security and social status become more fragile, the moderately educated become less able and willing to accommodate change.”
    With this we can understand President Trump’s election and Brexit.

    Dr Rajan sets too much store by the research done by one of his Chicago colleagues. I find it puzzling that professor Luigi Zingales had to study “ancient” Italian society (Athens?) to conclude that Democracy inculcates confidence due to freedom of choice, and thereby a sense of responsibility, and a capacity for a community to look after itself better with …”The state would monitor community governance lightly…” (Quote from Dr Rajan’s present article). It is a correct observation by prof. Zingales, but why couldn’t he draw the same conclusion from studying the present American society itself? A few hundred years old democracy is a good enough sample; in fact a millenniums-old society couldn’t be a good example because decadence too sets in with time. (I think we can safely postulate that only wine becomes better with age!)

    But either way, we are talking about a democratic milieu that is tens or thousands of generations old. It would be too much to expect the same group behavior in shorter time spans from people of real flesh and blood who live a FINITE lifetime marred throughout by shortage of resources. For that reason Dr Rajan’s article appears to be dreamy… in a utopian sort of a way. For such people, there’s a constant tug between what I would call, “this wish to be good, yet win”. Kindly allow me to slip in a Haiku I wrote long ago:
    “This wish to be good
    Yet win; conscience like a dim
    Bulb in a flour mill.”
    But win we must! The ultimate challenge for an individual and the society is to find the delicate balance between the interests of the self and compassion rather than sulk into the second type of nationalist cocoon. A balance must indeed be striven to be found — that in the final analysis is the touchstone of our courage and culture. That, despite all odds, we have managed to emerge as good humans!

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