People are a resource.
Much attention has been given to the political economy of Negan, the charismatic villain from the most recent story arc of television’s The Walking Dead, and to that of the show more broadly. Negan is a cruel tyrant, and it would be tempting to write that he is a murderer and a torturer on top of that. But that would not be quite correct: Negan isn’t a highwayman — he’s a prince, as Machiavelli would have understood the term. He rules with the consent of the governed (albeit very loosely defined consent) and his violence is directed at the maintenance of physical security and community order, material prosperity, and — in spite of his brutality — peace. Like any ruler — including modern liberal governments — he inflicts suffering on those who violate important community rules, and, like some of the governments of these United States, he uses the death penalty. Of course he can be arbitrary, capricious, cruel, and unfair, but no one is suggesting that we disincorporate the City of Los Angeles because its police officers sometimes rob banks or that we dissolve the municipal powers of New York City because its enforcers have been known to act as hit men for organized-crime syndicates — to say nothing of their involvement in extortion, labor racketeering, illegal gambling, obstruction of justice . . .
In the final episodes of the most recent season, Negan is enraged that one of his top lieutenants has overseen the extermination of an entire community that had been incorporated into the federalist architecture of Negan’s proto-state. “People are a resource!” he insists. “People are the foundation of what we are building here!” Those with an economic cast of mind will appreciate that what Negan enables is the division of labor — he provides protection so that farmers may farm, bakers may bake, doctors may practice their profession. It is under Negan’s regime, and not that of the series’ purported heroes, that organized industrial activity begins to reemerge. (Inevitably, it is the manufacture of munitions.) Negan provides stability — which of course is the boast of every tyrant, strongman, and junta. But stability matters — it is what makes possible trade, the division of labor, and other forms of social cooperation. Mark Tovey considered the economics of The Walking Dead in a very amusing essay for the Mises Institute:
Murray Rothbard, in Man, Economy, and State, systematically explains the deterrents that can serve to dissuade an individual from violence in a stateless society. These deterrents include moral compunctions, consideration for the risks of defeat, and, most importantly for our purposes, the long-run losses incurred by violent action. These long-run losses refer to the future goods and services that a companionship with the victim could have provided, had he not been killed or otherwise rendered disagreeable to the prospect of trade. Notably, as the long-run losses incurred by violence consist of future goods and services, they are subject to a diminution in value by increases in individual time preference [i.e., the preference to receive a good now rather than later].
In a world overrun by murderous zombies, one’s existence is defined by incredible uncertainty. Thus, the notion of a distant future is regarded with understandable scepticism, to the detriment of the value of goods promised therein; i.e., time preferences are high.
. . . As the group expands, however, and more specialization of labor is enabled, newcomers are tasked with the role of providing for increasingly marginal wants.
Which is to say, at first the division of labor enables physical security and food production — the essentials. But as communities grow and become more complex, more activities — ones less essential to physical survival — are enabled. In William the Conqueror’s time, practically the entire population of England was divided into two occupations: farming and soldiering. Modern Afghanistan isn’t so different: Agriculture is its single largest economic sector, but when the U.S.-led military forces drew down during the Obama administration, Afghanistan’s GDP growth rate dropped by 75 percent. At the time, a third of its population lived within five miles of a coalition military base.
Writing in National Review, Jonah Goldberg argued that Negan represented an archetypal “stationary bandit,” referring to Peter Kurrild-Klitgaard and Gert Tinggaard Svendsen’s excellent 2003 Public Choice essay “Rational Bandits: Plunder, Public Goods, and the Vikings.” The “rational bandit” thesis expands on Murray Rothbard’s argument that all states have their origin in plunder and conquest. (It was William the Conquerer, not William the Politician.) At some point, the bandit figures out that he is better off leaving the villagers alive and able to continue producing whatever it is the bandit is inclined to take from them, rather than massacring them all and burning their seed corn. Eventually, plunder becomes tribute and tribute becomes taxation, and the bandit learns that his interests are best served by protecting his subjects from other rival bandits. “Predictability and non-violent extortion are preferable to anarchy and violent extortion every time,” Goldberg writes. In other words, the bandit decides that people are a resource.
Just how appropriate that comparison is can be illuminated by studying the case of one of the most successful stationary bandits of our time: Xi Jinping.
China’s economic miracle followed a more or less familiar pattern: The modernization of some farming practices allows an overwhelmingly agrarian work force to go to work in more-productive industrial and services enterprises, producing enormous economic gains. Sometimes that happens gradually and organically, as in the cases of the United Kingdom and the United States. Sometimes it happens rapidly and dramatically, often with the assistance of a ruthless police state. For all the Potemkin villages and Communist agitprop published by Walter Duranty and Lincoln Steffens, there was genuinely dramatic economic progress in the Soviet Union for a period of time. Going from farming to manufacturing is a kind of economic adolescence: It can produce rapid growth, but it happens only once.
China had the good fortune to have its economic miracle coincide with changes in the global economy that helped to amplify it: The United Kingdom has long been very open to oceangoing trade and it once staked its claim to being a great power on the prowess of its extensive navy, but the emergence of standardized-container shipping represents a genuinely radical change in the world’s economic infrastructure. Free trade on paper is important, but it is Maersk and CMA CGM — not NAFTA or the WTO — that have powered globalization in fact. When the United States industrialized, international cargo ships still had sails.
China is not a country blessed with many natural resources. It doesn’t have a great deal of naturally arable land, generous supplies of fresh water, or vast petroleum deposits. Damien Ma of the Paulson Institute told Bloomberg in a 2013 interview: “No matter which way you slice it, China just has a low natural resources–to–population ratio to begin with. You could say that China’s ‘default setting’ is resource scarcity — about the only thing it has in abundance is coal, which is also why it uses so much of it.” But that isn’t quite right.
The other resource China has in abundance — long mistaken for a superabundance — is people. And the extent to which China’s economic miracle has been powered by people rather than policy is seldom appreciated. Bradley M. Gardner in his recent book, China’s Great Migration: How the Poor Built a Prosperous Nation, makes a persuasive case that the single most important factor in China’s dramatic rise from poverty to prosperity was the simple fact that Beijing got out of the way — that Bejing was forced to get out of the way — and allowed people to connect with more-productive uses of their labor.
From the 1970s until now, 287 million workers left the Chinese countryside to work in the cities, according to Chinese-government figures that may very well understate the scale of internal migration.
Most did not have permission to do so; the Chinese hukou registry — a kind of residency-based caste system — was intended to keep country people in the country and city people in the cities, making both populations easier to control. Chinese outside their home provinces could be arrested, and internal migrants were denied social services outside their assigned homes. At times, the hukou system was enforced ruthlessly — under Mao, it was illegal for urban merchants to sell food to refugees from the countryside. But the people came nonetheless. “The early reforms to China’s economy that led to the Great Migration,” Gardner writes, “were pushed on the political leadership by a series of extreme circumstances, the inability to enforce collective farming after the Cultural Revolution, the return of the sent-down youth from the countryside, and the insolvency of the country’s state-owned enterprises after decades of mismanagement. Even then, China struggled to reform the institutions that immiserated its population and pushed the government to the brink of bankruptcy.” But the people came, so many that the government was obliged to loosen up the laws until, as Gardner puts it, “the costs associated with disobeying hukou laws were overcome by the benefits.”
By way of comparison, consider that China has more internal migrants than the world has international migrants. In Shanghai, about 10 million immigrants from the countryside leave the city to return to their agrarian communities during the annual Spring Festival holiday; the total number of European workers who have moved across a national border for work under the European Union’s single labor market is only 9 million — less than 3 percent of China’s internal-migrant population.
People are a resource: During the reform period, the number of Chinese people living in absolute poverty declined by 753 million — a population that would constitute the third-largest country on earth, with the fourth-largest (the United States) having less than half that population. “Besides the straightforward gains from expanding the industrial work force,” Gardner writes, “migrant workers learn new job skills, compete for jobs, and share information. Their farmland is redistributed to the workers who stay behind.” Division of labor, specialization, gains from trade, more-productive utilization of scarce resources — the entire economy becomes more productive simply by allowing labor markets to work. Gardner finds that this is a very large piece of the Chinese puzzle — and it is a puzzle: On paper, China shouldn’t work. Scarce resources, gigantic and gigantically inefficient state-run enterprises, a nightmare financial system, corrupt and brutal government, insecure property rights — how does a country grow so dramatically with all that dead weight? Gardner’s answer is, essentially, that people are resources:
These economic gains are what the economist Michael Clemens calls the “trillion-dollar bills on the sidewalk.” In his paper of the same name, Clemens found that the gains from eliminating global barriers to migration would be in the realm of 50 to 150 percent of global gross domestic product (GDP). Most of this money would go to the people who need it, the poor, who would be able to sell their labor in places with better technology and higher wages. Clemens estimates that emigration of less than 5 percent of the population of the poorest countries would increase global GDP more than the elimination of all barriers to trade and financial flows combined.
One of the simplest explanations for the Chinese economic miracle is that someone decided to pick up these trillion-dollar bills. The consensus estimate among economists is that labor reallocation — that is, the transfer of workers from agriculture to industry — accounted for more than 20 percent of Chinese GDP growth between 1990 and 2010, a period when the Chinese economy grew from USD 400 billion to USD 6 trillion. In other words, simply allowing Chinese people to move to cities where they could find factory jobs added USD 1.1 trillion to the Chinese economy over twenty years — growth equivalent to an economy roughly the size of Mexico’s.
What’s especially interesting about Gardner’s account is the direction of historical causality: It wasn’t economic reforms that lured people into the cities, but the opposite. With the Great Migration already under way and probably unstoppable, even for a brutal regime like the one in Beijing, the Chinese government knew that it had to create 25 million jobs a year — that was the estimate of Xi’s predecessor, Hu Jintao — to absorb those workers and keep the peace. That, and not any ideological evolution, forced the broader liberalization of the Chinese economy and the political and policy reforms that enabled it. “The Great Migration has forced the Chinese government to take action on problems that it could have otherwise ignored,” Gardner concludes.
The policy implications are interesting to consider. As Gardner notes, China’s internal migration topped out in 2007, and urbanization is slowing down considerably. “The change has already contributed to an economic slowdown, where growth has declined from over 10 percent a year to under 7 percent a year,” he writes, adding that internal migration “is also a finite resource.”
Who would have thought that the brake on China’s economic growth would be its not having enough people?
What are the policy implications of these insights for the United States?
The most obvious one would be that Gardner’s work, taken together with that of Michael Clemens, makes a pretty good case for open borders. The consensus view among economists has long been that immigration into the United States — including the entry of low-wage workers and illegal immigrants — raises the real incomes of native-born workers. But there’s less to that claim than it seems: There are millions of workers in the United States who are not native-born, and additional immigration, especially low-wage immigration, puts downward pressure on their wages. Account for this group and the gains to real income are reduced.
And the mechanism for those gains is poorly understood: In the U.S. context, immigration raises real wages not by generating economic activity that helps to drive demand for additional labor, putting upward pressure on the wages of other workers, but by contributing to the decline in the inflation-adjusted prices of certain goods and services, thereby raising effective wages even if the numbers on any given worker’s paycheck stay the same. That being said, those who advocate liberalizing U.S. immigration laws have the better part of the argument — as an economic question. The main arguments against increasing immigration to the United States are not economic but cultural and political, and there are some particular policy problems, too: While China was converting its farmworkers into factory workers, the United States was importing a fair number of farmworkers. Not as many as you’d think: About one-quarter of the agricultural work force is composed of illegal immigrants, but agriculture accounts for only about 4 percent of illegal-immigrant employment, which is dominated by hospitality, services, and transportation jobs. It is not obvious that what ails the U.S. economy is a dearth of low-wage immigrants picking avocados in California.
But there is the question of internal migration within the United States.
As has been noted in these pages and elsewhere, Americans are moving for work less than they used to. As Michael Barone has written, Americans today are moving at less than half the rate Americans moved 50 years ago, and at a substantially lower rate than they did as recently as the 1990s. “You can see in the statistics similar movement away from the Rust Belt in response to factory closings during the recessions of 1979–83,” Barone writes. “Laid-off auto workers in Detroit bought copies of the Sunday Houston Chronicle to scan help-wanted ads. Steelworkers in Pittsburgh and coal miners in West Virginia rented U-Hauls for points south and west. You haven’t seen similar mobility in the slow-growth years of this century. There is heavy domestic outmigration from high-cost, high-immigration metro New York, Chicago, and Los Angeles to the interior. But people in the Rust Belt have been staying put.”
(Those domestic refugees from California and New York City are, it bears noting, comfortably exceeded by international immigrants, many of them to Silicon Valley and Manhattan, where the taxes and cost of living look insane compared with Houston but not compared with London or Tokyo.)
There are things we could do to encourage internal mobility, such as repackaging some unemployment benefits as relocation assistance. We could encourage businesses to fill in some of the vast gap in preparation for middle-skilled jobs, which both colleges and conventional job-training programs largely ignore. We could, as I have argued here before, resurrect some of what was attractive about the old “company town” model of employer–employee relations, encouraging firms to take a stronger role in helping relocated workers with things such as securing housing and child care and easing the transition of their children into new schools. Easier portability of health insurance, a perennial conservative favorite, might do some good. Those are some reasonably tasty carrots. If we’re looking for a stick, we could radically tighten up the much-exploited disability system that functions as supplementary welfare.
But, in the end, this isn’t about policy. We are not going to have much success developing government programs to help people do things that they do not wish to do and cannot be made to do in a free society. This is about culture.
Many Americans in economically moribund communities simply weigh the opportunities that are available to them elsewhere against the comforts of home and family and decide to stay put. As Joan C. Williams of the Center for WorkLife Law at the University of California, Hastings, told Harvard Business Review:
The issue of mobility starts at college, and then it goes far beyond that. If you’re in the professional and managerial elite, you leave home with college. And you basically establish your friendship network that’s going to take you through your whole life. . . . Among working-class families, the clique network is intensely geographical. And it’s typically composed of family, friends, and neighbors. . . . Working-class folks tend to have this tight, deep network of family, friends, and neighbors who they’ve known all of their lives. Definitely, it’s the center of emotional life. But it’s also part of economic life.
Which is to say: People are a resource. And people are entitled to calculate their own trade-offs. But if people in Ohio and Kentucky don’t want those jobs in California and Texas, somebody does. And those jobs need doing. Which makes the contradictions of our current strange populist moment all the more absurd: On the one hand, we have agrarian traditionalists and Rust Belt sentimentalists insisting that people shouldn’t be forced or pressured to leave behind their communities to go where the jobs are. On the other hand, the same people are demanding that we prevent immigrants from entering the country and “taking our jobs.” We’re going to have to decide whether we want to protect jobs for Americans or protect Americans from jobs. We talk a lot about the former but do a great deal in the service of the latter.
It may take a crisis — something short of a zombie apocalypse, one hopes — to bring home the truth: Negan was right.