Monday, March 17, 2008

Battle royale: Do the gains of remittances outweigh the pain of brain drain?

Afronet published an interesting debate on the real advantages and disadvantages of immigration abroad and brain drain.

The primary argument for immigration to rich countries is the amount of money these people send home, which in per capita terms often rates higher than any development assistance the country may receive. Another issue that’s often ignored is that when people can spend their own money (or money from family members), they often find more productive things to spend it on. You could say that people know what they need more than a foreign government or development institution. Or, one could argue that grants often feel like “free money,” so people aren’t going to take the money so seriously.

Anyway, here’s the pro-immigration side.

Africa needs a large middle class to build a large tax base, which, in turn, will enable the continent to build good schools and hospitals and provide constant electricity. What few people realize is that Africans who immigrate to the United States contribute 40 times more wealth to the American economy than to the African economy. According to the United Nations, an African professional working in the United States contributes about $150,000 per year to its economy. It will be impossible to achieve an African renaissance without the contributions of the talented Africans residing outside Africa.

…The economic impact of remittances has been considered beneficial at both the micro and macro levels. The value of migrant remittances can significantly exceed that of national export earnings. For instance, Eritrea receives about 40 percent of its gross domestic product through remittances, whereas exports contribute about 4 percent to the G.D.P. Available estimates indicate that there has been rapid growth in the volume of global remittances in recent decades, from less than $2 billion in 1970 to $70 billion in 1995, surpassing official development assistance.

On the other hand, what happens when a majority of a country’s professionals leave? How many work hours are wasted as people wait all day long to see a single doctor who must treat 150 patients? What happens to those who are truly sick?

Those who argue against the issue of remittances often emphasize their unproductive nature. They say remittances are insufficient to compensate for human capital losses, and what’s more, they increase dependency, contribute to political instability, engender economic distortions, and hinder development because they are unpredictable and undependable and encourage the consumption of goods with high import content. The remittances fail to enhance development because they are not spent on investment goods but mostly on unproductive purposes—housing, land purchase, transport, repayment of debt, or, to a smaller degree, wasted on conspicuous consumption or simply saved as insurance and old age pension funds.

It is worthwhile to note that there is a need to eliminate poverty in Africa, and not merely to reduce it by sending money to relatives. Indeed, in any country of Africa, human capital is much more valuable than financial capital because it is only a nation’s human capital that can be converted into real wealth. Under the status quo, Africa would still remain poor even if we were to send all the money in the world there. When we give our money to a doctor, that physician helps us to convert our money into health—or rather wealth. Money cannot teach our children, but teachers can. Money cannot bring electricity to our homes, but engineers can. Money cannot cure sick people, but doctors can. When the medical doctors immigrate to the United States, the poor are forced to seek medical treatment from traditional healers, while the elite fly to London or New York for their routine medical checkups.

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