World governments now face a bigger predicament than the economy, stupid

There are no easy solutions in the war between globalisation and nativism

JEREMY WARNER

17 December 2023 • 12:00pm

“The economy, stupid”. This was the slogan emblazoned on the desk of James Carville, one of Bill Clinton’s strategists, during the 1992 presidential election to remind everyone of the primacy of the economy as a campaigning issue. It’s been a political touchstone ever since; focus on the economy, and you are more likely to win.

Only these days, perhaps not so much. With rampant inflation, much higher interest rates and sluggish growth, you’d expect the economy to be everyone’s number one concern. Yet in almost all “high income” countries, it threatens to be eclipsed by a still more potent worry – immigration.

Dissatisfaction with incumbent governments is today as much driven by perceived failure on migration as it is on the economy. The electoral pushback is universal. Republicans have voted against more aid to Ukraine not out of sympathy for Putin, but as a way of highlighting the Biden administration’s seeming inability to get a grip on illegal migration.

Even in Australia, notorious for its hardline immigration policies, the still relatively young Labour government has been forced by a growing public backlash to reverse a loosening of visa rules that had caused immigration to spiral out of control.

Similarly in ultra-liberal Canada, where the government has deliberately encouraged relatively high levels of immigration to boost growth, but is now fast backtracking in the face of a collapse in its poll ratings. 

Visa quotas are being trimmed and moves are afoot to crack down on so-called “puppy mills”, second rate educational establishments used by migrants as a backdoor into the country’s labour market.

It’s the same in continental Europe, where high levels of migration are proving fertile ground for the populist Right, threatening to torch the traditional centre ground, which is strongly associated with the globalist policies of the past.

For obvious reasons, Downing Street has focused its attention on the high visibility tip of the immigration issue – small boats and bogus asylum seekers. 

Yet this is in fact only a comparatively small part of the “problem”. In the year to June, there were 97,390 individual asylum applications, but an estimated 1.2 million new arrivals. The vast bulk of this influx is entirely legal.

Let’s for the moment leave aside the traumas of the UK government’s Rwanda bill, which even if it eventually becomes law will likely prove ineffective. Better ways exist for dealing with illegal migration, though they would require an even more autocratic approach that ignores wider civil liberties. 

Introducing a fully fledged system of national identity cards, and ramping up the criminal sanctions against employers, landlords and households that knowingly accommodate illegal migrants would soon destroy the incentives.

But it wouldn’t address the much larger part of the problem. The politicians kid themselves in thinking that voters make a distinction between illegal and legal forms of migration. 

When the numbers are as high as they are now, the differences get lost in the wash. Wherever it comes from, the pressures from unrestrained migration on public services, housing and national identity are little different.

Whether it be Australia, Canada or the UK, the underlying cause of the dramatic surge in numbers seen since the pandemic are much the same – a shortage of workers in key sectors such as social and health care, and – the biggest cause of the lot – overseas students entering on visas that allow them to bring dependents and work full time for some years after completing their studies.

We’ve not yet seen the details of the Government’s “five point plan” for curtailing the numbers, so it is hard to know how much of a difference it will make. Early analysis by the Migration Observatory suggests it won’t be as impactful as the Government claims.

The truth is that if significant inroads are to be made, something rather more dramatic has to be done about the “graduate route”. Inevitably, there will be trade-offs.

The Government’s post-Brexit immigration regime was deliberately designed to encourage an influx of foreign students as a way of both subsidising domestic students and enriching the economy with overseas talent. 

Yet the policy has run out of control, with the numbers already far exceeding the Government’s target of hosting 600,000 overseas students by 2030.

In its annual report published last week, the Government’s independent Migration Advisory Committee (MAC) commented: “The introduction of the graduate route, with its attached post-study work rights and ability to bring dependents, likely made the UK a significantly more attractive destination to international students”.

This has in turn made relatively inexpensive, short postgraduate courses in the UK the most appealing route for those coming basically for work purposes rather than study, with the big growth in numbers taking place at less selective, second tier, non-Russell Group, institutions.

In other words, the graduate route may not be attracting the global talent anticipated, with many students and their dependents entering low-wage roles which add little to the country’s skills base.

Dependents are also likely to consume public services for which they have paid no tax, while contributing nothing to the finances of the chosen college.

The economic justification for immigration always used to be that by introducing new ways of doing things into an economy, migrants improve overall productivity and therefore living standards for everyone. 

Sadly, this is not supported by the experience of the last 20 years. Unprecedented levels of net immigration have coincided with an equally unprecedented hiatus in productivity growth. High net immigration has failed to shift the dial.

In the event, growth in international students since 2018 has been largely in lower cost courses at less selective institutions. There has also been a significant shift in nationality away from Europe and towards the developing world, in particular India and Nigeria. 

Fears that graduate visas would incentivise demand for short Master’s degrees based on the temporary right to work, rather than primarily on the value of the qualification, seem to have been born out. 

The policy has been hugely successful in attracting overseas students, but as the MAC observes, if the objective was to attract top talent that would subsequently work in high skilled, graduate jobs, then it is not really achieving its purpose.

Instead, it’s more like a “bespoke, youth mobility scheme”.

Policymakers face a particularly awkward choice. The influx of foreign students has allowed ministers to keep domestic fees frozen at relatively low levels.

Do they significantly raise tuition fees for British students so as to compensate for a reduction in the numbers of higher paying foreign students, or do they allow a large number of second tier universities to go to the wall?

Higher education finds itself just another battle ground in the war between globalisation and nativism, or between the relative merits of open and closed borders. There are no easy solutions. It’s the defining political battle of our age, and its ultimate winner is still far from clear.