Analysis 2017/9: Reviewing the mechanism of refugee quotas: lessons from an economist’s point of view

December 29, 2017

Gyorselemzés 2017/31: A menekültkvóták mechanizmusa nem jelenthet megoldást

Analysis 2017/9: Reviewing the mechanism of refugee quotas: lessons from an economist’s point of view

Reviewing the mechanism of refugee quotas: lessons from an economist’s point of view

Interview with Salvatore Villani

What do you think, how is it possible that some of the NGO’s are financed by the organized crime and Islamist groups? In such a situation what kind of legal action can be made by the decision makers? Is it possible at all?

The hypothesis that some non-governmental organizations (NGOs) are funded by organized crime or by groups of Islamic extremists is not just a conjecture, but a hypothesis supported by concrete evidence gathered both by law enforcement agencies and by some independent intergovernmental bodies which promote public policies to prevent and contrast the use of the global financial system for money laundering and international terrorist financing. Here I can refer to the Annex to the Communication of the Commission of the European Communities of 2005 on the policies to prevent and combat terrorism. In this even the European Commission recognizes the existence of this evidence and provides recommendations to the EU Member States to prevent terrorist financing and other forms of criminal activity through the use of NGOs and non-profit organizations (NPOs) in general. The Commission suggests, for this purpose, the adoption of a code of conduct by the non-profit sector aimed at promoting best practices in terms of transparency and accountability. This vision is also represented by Recommendation no. 8 of the FATF (Financial Action Task Force), an intergovernmental body created by the OECD countries to develop and promote international strategies to counter money laundering. This paper recognizes the vulnerabilities of the non-profit sector to pressure from terrorism and other criminal groups, suggesting a series of measures to the 34 OECD countries to avoid the “improper” use of NPOs – and NGOs – to finance terrorism and to hide the hijacking to terrorist organizations of funds originally addressed for legitimate purposes.

What does all this mean in practice? We experience a great laxity in this issue and relating it to the question of human rights and freedoms so that, in the end not much is done to prevent such financing operations.

Some countries translated the above-mentioned strategic guidelines into an organic system of rules and measures. However, a universal solution that is feasible, in the same way, in all countries cannot be easily found. In some cases the simple application of these measures would be enough; in others, severe reforms of financial regulation and payment systems would be needed. An example for all: Kosovo, a country with very fragile institutions and a “cash based economy”. An economic system of this type greatly facilitates money laundering and terrorist financing through the interposition of NGOs or corporate vehicles with an opaque financial structure.

How effective are the measures taken by Italy in the past two years?

Compared to 2016, illegal migrants disembarked in the first 10 months of this year have decreased by 30%, while if we only evaluate the month of October the decline was as much as 78% compared to the same month last year. In the flows coming from Libya there is a decrease which could reach even 93%. However, a new increase in the landings of illegal immigrants that occurred in the first days of November has fueled the doubts about the effectiveness of the measures taken by Rome in agreement with the government of the recognized Libyan premier, Fayez al-Sarraj. In particular, the revival of massive flows from Libya demonstrates the attempt by traffickers to circumvent the Italo-Libyan agreements.

How do you see, is it possible to decrease the number of migrants arriving from Africa to Italy by bilateral agreements?

Bilateral international agreements with the countries of destination and transit of migratory flows can only produce a temporary drop in boat departures from the African continent. In my opinion, now more than ever a radical change in approach to the issue of migratory flows towards Europe would be necessary and this important change should primarily aim at achieving lasting results. That is to say effective not only in the short term, but also in the long period. In some of my papers I have called it “resilience approach”, as it should aim at the security and welfare of European citizens through the activation of an institutional adaptation process aimed to eliminate – or, at least, to reduce – vulnerabilities, as well as the increased exposure to risks which could result from an eventual intensification of the migratory waves. Europe should quickly prepare itself to face these phenomena and should do this before the loss of credibility and legitimacy of its institutions become irreparable. The answer should be shared and should result in a comprehensive reform of the Union’s public policies.

So far so the only answer they came up with is the quota system.

The redistribution of asylum seekers’ quotas is certainly an attempt to deal with this problem with greater seriousness and in a cooperative manner. However, it was found that this system does not discourage at the departure of migrants and that the current emergency situation cannot be yet considered resolved. Further unresolved issues, such as the destabilization of Europe’s areas of proximity and the growth of inequalities in the world, lead us to conclude that the phenomenon of migration is a fact that we will have to deal for a long time in the future. Therefore, we cannot think to instantly solve the problem by reforming only the “Dublin rules” and redistributing “fairly” the refugees. We have to find a way to “cure the plant starting from the roots”, because the situation and the context are embedded in our structures and therefore require structural solutions.

The political debate keeps evolving around some so called solidarity.

It was focused principally on the sharing mechanisms of burdens or responsibilities among the EU Member States rather than on the common strategy for increasing of the socio-economic resilience. It is for example known that the generosity of the welfare state (i.e. overall public expenditure for social insurance, social benefits and investments in public services) can act like a magnet for unskilled migrants (“welfare magnets hypothesis”) and can influence the composition of the immigrants’ skills in a different way, that is the self-selection of potential migrants (supply side), depending on the tax and immigration policies adopted by the destination country (which operate on the demand side). A common European strategy which really aims at solving the problem should at least consider the possibility of interaction of these policies and try to predict their effects.

In one of your article you wrote that the region called Mezzogiorno can slowly become a “desert” in the sense of work force and economy. Can Mezzogiorno be also a possible home for the people who arriving from the African continent and want to settle in Europe?

The real problem is not whether the Mezzogiorno can be a possible home for Italian citizens who already reside there or for those who come from other continents and want to settle in Europe. There are factors of weakness in the Italian economy that increasingly force young and more qualified people to emigrate to the North of Italy and abroad. The economic structure of the country, as well as the economic and social policies, continue to be inadequate to provide a coherent and effective response to the size of the problem: in all the southern regions families  have fewer children and young people are going away; in this way, the population is aging and progressively reduces itself, while a less young working population must also bear a huge and growing social security burden that inevitably subtracts resources for productive investments aimed at improving the productivity and competitiveness of the local economic system. All this risks triggering a dangerous vicious circle: greater social burdens, lower competitiveness of the economic system, lower incomes and less accumulation capacity, growing dependence on the outside. Therefore, the situation of delay in the development of Southern Italy cannot and must not be underestimated, because it is producing an automatic increase of the economic imbalances already existing within the country.

How are these internal inequalities affected by migration?

Recent studies have shown that the migration of human capital can have negative effects on the welfare and economic growth. For this reason, a solution must be found as soon as possible. There is a real risk of consolidating and accelerating the above mentioned process of human and industrial desertification in the Mezzogiorno, as well as its degree of underdevelopment and economic dependence on the rest of the country. A context of this type cannot offer opportunities to and cannot be home for anyone. At most, if the reform of the law on citizenship (A.S. 2092) was unfortunately approved, this area could be an easy landfall point for all people wishing to enter and circulate freely in the Schenghen area.

Are there good migration policies?

Here I have to clarify that migration policies are inevitably complicated and therefore diverse. So, from an expert’s point of view, at least three elements must be considered. First, it is only the native population of the host countries that has the power to control migration. The question is whether that group can act only taking care of his own interests or whether it should seek a balance among the interests of all actors. Second, the choice to migrate is a private action usually made by the migrant himself, sometimes with the contribution of his family, based on an assessment of the expected effects of this choice. However, this private decision produces effects both on the host society and on the people living in the country of origin, which the migrant does not take into account. These effects, which economists call “externalities”, could harm the rights of others. Therefore public policies must take into account the effects that migrants do not take into consideration. Third, the intensification of migratory flows increases the ethnic and cultural heterogeneity of contemporary societies; cultural diversity, on the one hand, can act as a stimulus for innovation, productivity and entrepreneurship, bringing significant benefits to the economic system, both national and local; on the other hand, it can be a source of costs, or in any case of deleterious effects (violence and conflict), which are increased by the fact that sometimes migrants come from countries with inadequate or incompatible social systems, to which they are still linked. Since the incremental costs of diversity may outweigh its incremental benefits, the correct question about this issue is not whether diversity is good or bad, but what is its “right” degree for a specified society in a definite time. Taking into account the described elements of complexity, we must recognize that migration cannot be left to individual decisions by migrants, but must be managed by governments. Further, these latter have every right to control and restrict the migration flows towards their territories to maximize the incremental benefits of cultural diversity and to minimize its costs.

For this very idea expressed also by the Hungarian government it gets a lot of criticism, especially for its lack of so called solidarity.

The Hungarian government is fully right to claim this right, because it is first of all required to protect the security and welfare of Hungarian citizens, while it is not required to demonstrate solidarity or responsibility by accepting passively the quota allocation mechanism or the emergency relocation plan decided by the European Council. Each EU country has the right to contribute to common policies within the limits of its abilities and will, trying to maintain or achieve the degree of cultural and social diversity that it considers most appropriate to ensure the welfare and security of its citizens. As a liberal economist, I think that in the management of migratory flows a minimum of cooperation among the individual governments and a minimum of coordination among their migration policies are necessary otherwise negative effects may occur for some countries which cause a reduction in the overall level of welfare enjoyed in the area.

Are there any models for a balanced cooperation?

A possible alternative to the planned allocation mechanism of migrant quotas could be represented by an EU quota trading system for refugees as proposed by Jesús Fernández-Huertas Moraga and Hillel Rapoport in 2011. As a liberal economist, I think that this system, accompanied by a matching mechanism taking into account migrants’ preferences and by a system for assessing the degree of cultural diversity of them – in order to prevent the incremental costs of diversity from exceeding its incremental benefits -, is far preferable and may generate gains in efficiency and welfare for all parties involved. However, coordination and cooperation cannot be imposed by a superordinate institution, with authoritarian methods, but they must arise spontaneously.

So we can agree on that the EU institutions are not democratic.

The European institutions cannot continue to think of imposing them by law or by judgment, as recently happened with Cases C-643/15 and C-647/15 submitted to the Court of Justice of the European Union. As long as the European Union remains only a large common market, there will be no possibility of adopting cooperative behavior inspired by feelings of solidarity or altruism. A “qualitative leap” is urgently needed in the conception of the “European project”: it is no longer a matter of organizing a large market, but of coordinating economic policies, of harmonizing migration policies, harmonizing the various tax systems and, finally, bring together the budgetary and welfare policies of the EU Member States. Only a reform of the Treaties aimed at “democratizing the economic governance of the Eurozone” and the establishment of a Parliamentary Assembly of the Union, as recently proposed by Hennette, Piketty, Sacriste and Vauchez, could reorient the Union’s policies in the sense of fairness, solidarity and responsibility and could transform this “competitive game” into a “purely cooperative game”. The Italians, now tired of the empty promises of politicians, are aware of these problems and are ready to move forward on this path.

Salvatore Villani is Adjunct Professor of Public Economics at the University of Naples Federico II, Department of Political Sciences. He also taught Statistics for Economics, Theory of Fiscal Federalism and Tax Law in various European universities and was member of the SVIMEZ Working Group on the Implementation of Fiscal Federalism in Italy. He also gave lectures on the fiscal impact of migrations and their effects on the economic inequalities.

He published several articles and books on different topics among which the economic effects of migration, the economics of organized crime and optimal law enforcement, environmental conflicts, local finance and Municipal taxation. 

He is the author of I ritardi nei pagamenti delle PP.AA. e la riforma federalista (Late payments by public administration and the Italian federalist reform), Giannini, Naples, 2009. A forthcoming book: Resilience approach. A multidisciplinary framework to study the reactive, adaptive and transformative capacities of individuals and socio-economic systems, expected in spring of 2018.