November 17, 2005 by AK
The standard pro-immigration argument in Russia is the same as overseas: “Who’s going to sweep your streets for this pay?” The answer is pretty much the same for Russia as for the West, with a few caveats. Economists have long complained about institutionally-imposed horisontal immobility of the Russian labor market. Russians also seem inherently less mobile than Americans (i.e., they do not respond as well to the same economic stimuli to move) but so seem Europeans.
It’s really a matter of policy priorities. Unskilled immigration is an easy short-term solution to the shortage of cheap labor in Russia’s big cities. It will probably help to keep Russia’s GDP growing relatively fast for two or three more years. But in the Russian economy, wealth creation is highly concentrated both sectorally and geographically. This wealth may trickle down to other sectors and places but largely (though not only) through centralized wealth transfers, which is not very healthy. If immigrants can be treated more or less like slaves, the average native could be made “better off” in the near future, provided there is an efficient wealth transfer mechanism. However, this verdict of “better off” results from an obviously unsatisfactory measure of welfare.
Since economic policies should be judged by their impact, expected or actual, a policymaker can’t do without a framework to evaluate this impact in advance of its onset. How to compare outcomes is, in general, a very complicated problem. It is hard to see how one can tackle it without understanding what makes an individual “better off.” Russian policymakers must have taken an extremely simplified view of human welfare.
Neither can one ignore externalities generated by individuals’ behavior. Whatever the contribution of immigrants to the GDP, if I have to endure ritually spilled sheep blood in the stairwell by my apartment, I’m not going to appreciate the economic side of my new neighbors’ arrival.
Putin’s government would see my newly created discomfort not as taking away from my welfare; instead, it would credit my problem to my “xenophobia” and write it off. Or worse yet, declare me an extremist if I take to the streets with thousands of other sufferers. (In this respect, Putin is no different from Bush, Chiraq, Blair et al.) They won’t tolerate any actions I take that don’t fit the government’s notion of me as a homo oeconomicus, which is the vulgar economist’s notion of man.
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