The downside of remittances

People from developing countries, who work in developed countries, send home a lot of money each year, $167 billion in 2005 for example.  An infusion of cash like that can give the home country a boost.

But, Bob Davis reports in today's Wall Street Journal reports (Migrants' Money Is Imperfect Cure for Poor Nations, November 1 - subscription required), there is a downside:

But Ciudad Barrios [a town in El Salvador Davis uses as a case study - Ben] also demonstrates why reliance on remittances may turn out to be the latest development fad that fails to live up to its hype. The downside: a cycle of continued poverty, as dependence on remittances turns the town into a kind of ward of the U.S. Those with entrepreneurial ambition head north, emptying out the town of its talent. Only a tiny fraction of the money they send home is invested in industry or agriculture that could produce jobs. And with the breadwinners away, organized thugs pounce on a place where money pours in from outside. All of that leaves little opportunity for the next generation except to follow their predecessors north, if they can.

Many of the people sending home the remittances are working hard and making difficult sacrifices:

Francisco Membreño, once a Ciudad Barrios coffee farmer, left his pregnant wife in 2000, worried that he wouldn't be able to support his newborn. He hasn't ever been back to meet their son, Ronald, who's now 6 years old. Mr. Membreño works two jobs cleaning offices in Washington, D.C., making $575 on a good week, and sharing an apartment with another Salvadoran.

Each month he sends home about $300 to his wife, Ernestina Argueta, who moved with Ronald to her parents' sweltering concrete house lit by a single light bulb. The money goes for food and medicine mostly, says Ms. Argueta, with a little left over to save to expand a tiny plot of land her husband purchased and hopes someday to cultivate. Though her elderly mother dreams of a new sewing machine, Ms. Argueta says, "For now, we're not buying anything, until he comes back."

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[John Konop]

Economists Are Destroying America

Economists, politicians, and executives from both parties have promised American families that “free” trade policies like NAFTA, CAFTA, and WTO/CHINA would accomplish three things:

• Increase wages
• Create trade surpluses (for the US)
• Reduce illegal immigration

Well, their trade policies have been in effect for about 15 years. Let’s review the results:

• Declining real wages for 80% of working Americans (while healthcare, education, and childcare costs skyrocket)
• A record-high 46 million Americans who don’t have health insurance (due in part to declining wages and benefits)
• Illegal immigration out of control
• Soaring trade deficits, much with countries that use slave and child labor
• Personal and national debt both out-of-control
• Global environments threatened by lax trade deal enforcement

Economists Keep Advocating Policies That Aren’t Working

Upon seeing incontrovertible evidence of these negative trade agreement results, economists continue with Pollyannish blather. Some say, “Cheer up! GDP is up and the stock market’s doing fine.” Others say, “Be patient. Stay the course. Free trade will raise all ships.”

Even those economists who acknowledge problems with trade agreements offer us only half-measures—adjusting exchange rates, improving safety nets, and providing better job retraining. None of these will close the wage gap in America—and economists know it.

Why Aren’t American Economists Shouting From Street Corners?

America needs trade deals that support American families and businesses in terms of wage, environmental, and intellectual property abuses. Why aren’t economists demanding renegotiation of our trade deals? There are three primary reasons:

• Economists are too beholden to corporations and special interests that provide them with research grants.
• Economists believe—but refuse to admit—that sacrificing the American middle class is necessary and appropriate to generate gains in third world economies.
• Economists refuse to admit they make mistakes.

Economic Ambulance Chasers

Now more than ever, Americans need their economists to speak truth and stand up to their big business clients. Instead, economists sound like lawyers caught chasing ambulances: they claim they’re “doing it for our benefit”.