This "study" into the economics of immigration, reported in the Guardian today, is a good example of the systematic dishonesty of our ruling class. Almost a caricature of Guardianista liberalism, it claims refugees are almost magic prosperity-induction machines. Like almost every other study that purports to show the economic benefits of immigration, it isn't really a study at all. It's a projection based on a number of unverified assumptions.
Refugees who arrived in Europe last year could repay spending on them almost twice over within just five years, according to one of the first in-depth investigations into the impact incomers have on host communities.
Refugees will create more jobs, increase demand for services and products, and fill gaps in European workforces – while their wages will help fund dwindling pensions pots and public finances, says Philippe Legrain, a former economic adviser to the president of the European commission.
Simultaneously refugees are unlikely to decrease wages or raise unemployment for native workers, Legrain says, citing past studies by labour economists.
Most significantly, Legrain calculates that while the absorption of so many refugees will increase public debt by almost €69bn (£54bn) between 2015 and 2020, during the same period refugees will help GDP grow by €126.6bn – a ratio of almost two to one.
The IMF calculates that additional spending in the EU on refugees of 0.09% of gross domestic product (GDP) in 2015 and 0.11% in 2016 will raise its GDP by 0.13% by 2017. Add in the boost to the economy from refugees working and GDP could be 0.23% higher by 2020: a total increase of 0.84% of GDP between 2015 and 2020.
The full report can be found here (link).
Here is the corresponding extract from it:
The IMF estimates that government spending on asylum seekers and refugees in Europe will rise from 0.08% of GDP in 2014 to 0.19% in 2016 (see Table 1).55 The biggest rise is projected to be in Sweden, from 0.3% of GDP to 1%. Germany’s spending is forecast to increase from 0.08% of GDP to 0.35%. The European Commission also proposes to reallocate €1.7 billion ($1.8 billion, or 0.01% of EU GDP) from the EU budget to address the refugee crisis, bringing total spending to €9.2 billion ($9.9 billion, or 0.07% of EU GDP) in 2015–16.
It's important to understand that what is being described here has nothing to do with refugees per se. It is a simple Keynesian boosting effect. For the uninitiated, John Maynard Keynes was an economist who argued that governments could prevent or reduce the severity of recessions by managing aggregate demand. During times of high unemployment, they could inject money into the economy by increasing government spending or reducing taxes while keeping government spending constant. This was the model that prevailed in the western world up until the 1970s. So what the IMF is describing here is the obvious fact that increased government spending boosts economic activity, ignoring the long-term implications of the higher sovereign indebtedness that must result. But this same Keynesian effect would be produced by spending on anything, not just refugees. The government could spend it on swimming pools or golf courses or street parties, all to the same effect.
After the simple Keynesian boosting effect, they claim the refugees will contribute more once they start working.
In addition to this demand dividend, refugees can provide further economic dividends once they start working. The IMF calculates that EU GDP could be about 0.25% higher by 2020, with Austria, Germany and Sweden experiencing a GDP increase of 0.5–1.1% (see Box 3).
How great a return does an initial fiscal investment in asylum seekers and refugees yield? IMF estimates of the economic impact of asylum seekers and refugees on the EU suggest it can be considerable. Calculations based on data kindly provided by the IMF suggest that funding through borrowing the initial costs of welcoming refugees together with ongoing social transfers and unemployment benefits for those who remain out of work would increase public debt by €68.8 billion (in 2014 euros) between 2015 and 2020.
Cumulative GDP over that period would be €126.6 billion higher (in 2014 euros). Thus, investing one euro in refugee assistance can yield nearly two euros in economic benefits within five years (see Appendix for calculations). This is likely to be an underestimate of refugees’ economic contribution, since it does not include their dynamic contribution to enterprise and growth.
Looking specifically at Germany, Marcel Fratzscher and Simon Junker of the German Institute for Economic Research (DIW Berlin) use a simple investment model to project refugees’ economic contribution. On the basis of conservative assumptions about refugees’ potential contribution to labour supply and economic demand, they calculate that within five years refugees will provide a net benefit to the German economy (see Chart 1) and that by 2030 they will have boosted the average income of the existing German population by 0.5% (see Chart 2). Even in a pessimistic scenario, refugees provide a net benefit within ten years and a fractional boost to German incomes by 2030. All these calculations are likely to be underestimates of refugees’ economic contribution, since they omit their broader dynamic impacts.Of course these assumptions about the level of public spending are ridiculous underestimates. An article I quoted yesterday (link) showed that German local governments alone are spending around €3 billion per month on "child" "refugees" alone, a tiny percentage of the total numbers of "refugees". Even this expenditure on its own, from only one level of government in one country on one small segment of the total "refugee" population, would far exceed the the total of 68.8 billion euros of public spending on "refugees" that is assumed for all EU governments by 2020.
So let's look at these figures. Germany took in 1.1 million refugees by 2015. With a total population of 80 million, that's a population increase of 1.375%. It will probably be another 1 million per year this year. So even the maximum claimed economic benefit after 5 years (even including the Keynesian effect) isn't proportionate to the increase in the size of the German population in even one year, never mind the 5 years being considered till 2020.
The absurd assumptions that underlie this claim of an economic boost become apparent when we look at the German study cited (here). To call it a "study" is actually to dignify it unduly. It's more like a back-of-the envelope calculation based on numbers pulled out of the air. A child could come up with something like this in 5 minutes.
The most important thing to note is that it is not based on any actual data, only assumptions. Highly questionable assumptions. For example, he assumes that 40% of "refugees" will gain employment in the first year, 55% by year 6, 70% by year 11. He assumes, across the board, that "refugees" will have two-thirds of the productivity of German workers.
Of course if you make this ridiculous assumption it is almost impossible to arrive at any other conclusion than that immigration produces an economic benefit. If you let in a million immigrants who incur no public spending whatsoever and even one of them gets a job then you can show a net economic benefit. But no one in their right mind could consider this a realistic scenario. On the contrary, each "refugee" is likely to be far more of a cost burden to the government than the average German.
This "study" is nothing but a work of disgraceful, Soviet-like propaganda. The fact that so many of our universities and institutes are filled with people willing to churn out this kind of rubbish in support of official ideology is frightening. Filled with verbiage and terms of art the average person cannot understand, many people are impressed enough by these "experts" to take their projections seriously. It is actually surprising how many people still believe immigration produces an economic benefit. It is perhaps the Greatest Lie Ever Told.
No one ever asks why almost all of these studies are projections and theoretical models. "Refugees" didn't start coming in 2015. So why not do actual studies, looking at hard data, of the contributions "refugees" have made in the past? For the simple reason that they would undoubtedly show that "refugees" are an enormous cost burden, catastrophic for the countries forced to endure their presence. That is why abstraction predominates and reality is shunted to one side.