Welfare and international aid: two sides of the same coin
If you don't do redistribution everywhere you aren't going to be able to do it anywhere.
There is some underappreciated irony in the Trump Administration’s demolition of USAID: the right may be hostile towards immigration, but eliminating international aid from the United States will only accelerate it. USAID may have all kinds of sinister programs, but even those programs routinely create jobs and tranfer wealth to other countries. Here for example are some of the things the agency was doing in Guatemala:
Promoting loans to Guatemalan companies;
Improving access to credit in Guatemala for smallholder farmers; and
Reducing poverty, food insecurity, and malnutrition among small-scale resource-poor farmers.
Are initiatives that lure Guatemalan companies into subsidized loans or farmers into credit arrangements ways of integrating the Global South into the exploitative international capitalist system? Of course. But these programs also represented capital’s relentless expansion into new markets which would predictably raise (some) standards of living in agrarian societies. This, in turn, would relieve some of the economic pressures that compel tens of thousands of Guatemalans to migrate to the United States every year. With USAID axed, that pressure will almost certainly increase, particularly since it is not being replaced by anything at all.
So it is ironic that the very drawdowns in international aid they’ve agitated for will only create further immigration problems for the American right. But immigration also, of course, creates complications for the American left. As Branko Milanovic puts it in Capitalism, Alone:
Globalization…has led, in most Western countries, to a decline in the share of the middle class and its relative income. This has produced income polarization: there are more people at the two ends of the income distribution and fewer around the median. With income polarization, the rich come to realize that they are better off creating their own private systems [of welfare] because sharing a mass system with those who are substantially poorer…would lead to sizable income transfers from the rich…Once these private systems are created, the rich are increasingly unwilling to pay high taxes because they benefit little from them. This leads to erosion of the tax base. The bottom line is…[a society that] cannot easily maintain an extensive welfare state. (p.51-52)
We should reject, of course, the reactionary argument that immigration puts a racial strain on the welfare state — that it creates problems because immigrants tend to be unproductive and lazy and don’t deserve government assistance anyway. But that is different from the point Milanovic is making here, which is that immigration, in a capitalist economy, puts a structural strain on the welfare state. The same problem would exist if every poor immigrant entering the United States were white: you still get a polarized economy from suddenly adding a lot of poor unemployed workers to it, and this ends up destroying the tax base.
There are a few ways that rich nations can deal with this problem. One strategy, of course, is to try to keep your generous welfare state by choking off immigration and letting the rest of the world starve. Another is to let your economy polarize and your welfare state shrink by maintaining relatively open borders. So far rich nations have generally been vacillating between these two options, which unfortunately gives you the worst of both worlds: limited immigration and a shrinking welfare state.
But the fate of USAID under Trump reminds us that there is a third solution: international aid. If rich nations transfer enough money to poor nations they can hypothetically alleviate the economic pressure to immigrate without creating the domestic polarization that destroys the welfare state. This is one reason why I have spent so much time in the past advocating for the US to send trillions of dollars to the Global South for green development: not only would it save our planet, it would also save welfare in the US.
This point should cast international aid in a very different light than it is often understood. Since budgets are finite, it is tempting to see welfare and international aid as existing in a kind of zero-sum relationship where one can only come at the expense of the other. But really, the opposite is true: in the long term you can only have a robust welfare state if you ensure an equitable redistribution of wealth abroad, too. And you can only do both at once, of course, if you are willing to get serious about expropriation from the rich.
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