Go South Young Man (and Woman)! How to stop worrying about your job and embrace Western decline

Politicians warn darkly that a horde of illegal migrants will bust our borders. But the supposed crisis reveals deeper currents — and new opportunities.

Donald Trump speaks of against Mexican ‘rapists’ and David Cameron warns of a coming ‘swarm.’ But trying to build fences to keep migrants from entering our countries will probably accomplish little. As I wrote last week, in a world in which a Swedish bus driver earns fifty times what Donald Trump announcing his candidacy for US Presidencyan Indian does for doing much the same job, who wouldn’t come here looking for work? As I also pointed out then, it’s not like we can claim we deserve our higher wages: they are in large measure a consequence of our imperial history. The waves of migrants piling up at our borders are really no different from the build-up of black townships on the edges of South Africa’s white suburbs in the late stages of apartheid: You can try to inflate wages with influx control, but it’s not just workers who want to come to greener pastures, it’s their prospective employers who are begging them to do so. Trump should know; he employs them his luxury properties.

King Canute gives us a lesson on simply saying no to natural tides

King Canute can gives us a lesson or two on the futility of trying to resist natural tides

Apartheid fell for the same reasons the Western empire is falling: because underpaid workers from the townships wanted to improve their lives in the cities while employers there wanted to drop influx control and job reservation to get their hands on them. The same crumbling of the walls shoring up apartheid, which was evident by the 1980s, has started appearing at the edges of our own ‘white suburbs.’ We use passports instead of passbooks, but we’re finding it ever harder to keep the workers out. Besides, there’s a sub-plot to this story which is more compelling than the dominant tale of poor people moving to richer hunting-grounds. Although we don’t hear much about it, because we don’t see images of police beating them back, migration from rich to poor countries has also been on the upswing. In 2006, for example, the Angolan government issued 156 visas in Lisbon; in 2010, it issued nearly 25,000, many to entrepreneurs with university degrees, going to cash in on the oil-rich country’s economic boom.

Really? You mean we’re swapping low-skill for high-skill labour? In the first post in this series, I pointed out that for decades now, economic growth has been slowing in the Western world just as it has been rising in the South. As returns on capital have been diminishing in the West, investors have been shifting money to the Third World to take advantage of the opportunities there. Some of this is new foreign investment, and some is the money of rich Third-World investors who had been parking their money in offshore accounts and are now putting it to work back home. Since the turn of the century, the net global flow of capital has shifted in favour of the developing world, an epochal transition that has received little attention outside the business press.

So university graduates who follow this money-trail south are just adding human capital to the financial capital that is already going South. Given the concentration of universities and research institutions in the developed countries, the rich countries still  produce the bulk of the world’s human and intellectual capital — and will continue to do so for the foreseeable future. Unfortunately, given the slowing of the Western economies, there’s not enough demand for all these graduates.

This problem had been brewing for decades but governments and households alike maintained economic growth rates, and thereby employment, by running up debts. Looking at the chart below, which illustrates the growth of private-sector debt in the developed OECD countries over the last half-century, one can see how the rise in debt roughly corresponds to the slow-down in growth described in my first post in this series. Throughout the baby-boom decades, we kept ourselves in the standard of living  to which we’d grown accustomed by living beyond our means — and ironically, a good deal of the money we borrowed came from the poor countries, whose governments and billionaires (and not a small number of despots, hiding behind Swiss secrecy laws) parked their reserves in the Western financial system. This model came to a shuddering halt in the 2007-2008 financial crisis, when the weight of non-performing debt in the Western financial system brought it to its knees. Not surprisingly, given the ‘re-balancing’ and deleveraging which has followed, the curve below finally appeared to level off. Lenders looking for opportunities, facing less demand for credit in the West, have thus gone searching for new opportunities in the developing world.

Domestic credit to private sector, developed OECD countries

So must ambitious young people with talent.This won’t be an easy transition, but it could produce widespread benefits. The knowledge generated in the West, when applied in a Third-World setting, tends to produce higher returns because of the productivity gap that still exists, owing to the long concentration of capital in rich countries. And while the new jobs will be largely entrepreneurial, as opposed to salaried positions, it appears that opportunities will abound for the foreseeable future. You can see this effect at work in any Shoreditch café here in London: the baristas typically come from poor countries, and the clients are self-employed university graduates tapping away on their laptops and networking with colleagues who are often — especially if they’re engaged in any form of manufacturing or IT work — in Lagos or Bangalore.

If you’re young, skilled and underemployed, these worst of times may well therefore turn out to be the best of times. If you’re retired, you may well already be heading south to take advantage of low-cost, high-quality health care. The opportunities abound, and we should welcome those migrants who will continue to help Western countries produce the human capital that powers the world economy — just as we should welcome and support students from Third-World countries who come to study here, since they help forge the networks that will enable us to ride this tide. Life at the new frontier of the world economy will be very different from what we have known, a topic I’ll write more about another day; but that doesn’t make it any more frightening than life at any frontier has ever been.

We are in the early stages of a convergence between the core and periphery of the world economy of the sort that signals the end of any empire. In  And our convergence looks to be more civilised and promising than the convergence which ended, say, the Roman Empire, when barbarians came and took the loot. Such economic convergence is a natural process which we have as much chance as resisting as any of the previous empires of history ever did. Which of them are still around? Rather than resist this change, we should embrace it. The end result could be a global political-economy that is more just and sustainable, with opportunity for far more people.

But does that mean we can just lie back, think of our empire, and let happiness wash over us? Well, no, it’s not that simple. As with any good tale, this one has a twist that could upend everything. Go back to the experience of apartheid. Believe it or not, since the fall of apartheid, the vast chasm that existed between rich and poor has not diminished. It’s actually got worse. A standard measure of income inequality is the Gini coefficient, an index from perfect equality of 0 (everyone in a society earns exactly as much as everyone as else) to 1 (one person earns everything, everyone else gets nothing). Estimated to be around 0.62 on the eve of apartheid’s end in 1994 — already among the worst in the world — it now stands close to 0.70. All you have to do is spend a bit of time in Johannesburg and you can see why: most whites held onto what they had, a small proportion of whites fell into poverty, an even smaller proportion of blacks rose into the ranks of a corporate elite and are now fabulously wealthy, and everyone else has been left to make their way on their own.

This tale is more than a tonic. As Thomas Piketty points out in his recent best-seller on inequality, this is part of a global trend. In fact, this is more than a moral issue. If we ignore this challenge and just leave it to market-forces to sort things out, we will find ourselves in a dangerous situation similar to what followed the collapse of the Roman Empire. It is among the existential threats of our time, and to confront it, we need to stop worrying about illegal migrants and turn our attention to the real foe: an emerging global oligarchy which is proving itself quite prepared to weaken states and democracy everywhere. And such oligarchical emergence, it bears noting, is just what destroyed the Roman Empire and, instead of ushering in an era of greater peace and inequality, gave us the Dark Ages.

For more on that story, and the parallels to our age, tune in later for another edition of adventures at the new frontier!



  1. Margaret Mair · August 7, 2015

    It seems a dark and interesting tale we are characters in, full of movement, hope, deceit… I look forward to the next edition.


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