Queensland's pursuit of population growth is a Ponzi scheme

Below are excerpts taken from chapters 7 and 8 of Mark O'Connor's 1998 book This Tired Brown Land. In these chapters, O'Connor exposes the fallacious economic arguments used to justify high immigration and reveals the real economic costs of immigration. On the claim that immigration "stimulates" the economy: The immigration lobby argues that since migrants create a 'demand' for goods and services, they benefit the economy. As one commentator remarked, if things were as simple as that, we could do the economy a power of good by burning down our suburbs at regular intervals. Unfortunately, much of the 'demand' created has been of the sort that sucks in imports rather than generates export industries. The years of high immigration in the late 1980s were plagued by current account problems. The battle between nations today is to create exports, or import-replacements, not to stimulate internal demand. In a sense we are locked in a friendly but fierce trade war in which our assets are the things we can export (or can do without, or can produce at home) and our liabilities are the imports our population demands. After years of boosterism by the [former] BIR, the BIR's Lyn Williams finally summed up its research and conceded that the economic advantages of immigration were at best minimal or possibly neutral. Hardly the sort of economic bonanza you'd risk ruining your country for! *** ... boomers often justify high immigration on the grounds that it 'stimulates' the economy. The Sydney Institute, for instance, is a privately funded 'think tank' which is strongly immigrationist. In one guest article in The Canberra Times Anne Henderson, Deputy Director of the Institute, suggested that those who can't see the benefits of higher immigration are irrational Hansonists. By contrast, she tells you, "The rational mind know [that] added numbers of people in a country create jobs in the housing and retail markets, and so on. ... Australia's state premiers (Bob Carr is an exception) are on to this. ...They want immigrant numbers based on population needs (read economic needs) not ad hoc political decisions (read populist prejudice). ...The tide could be turning. Growth in Australia needs people. Industry leaders such as Tony Berg, at Boral, agree. ...National interest in the benefits of immigration in Australia could be making a comeback." Henderson spends half her article 'poisoning the wells' by talking about 'racism'. Replying, in a letter to the editor, the Canberra environmentalist Colin Samundsett remarked "Anne Henderson rides a Trojan Horse constructed out of race to assail her target of having our immigration increased. While wearing the cloak of scholarship woven by the Sydney Institute, in this instance she is attired more like Lady Govina. ...This latest text seems to be a political handout rather than a seriously assembled critique for Australia." Anne Henderson is only one of many who confuse an increase in 'demand' or in GDP with a better quality of life. In fact, unless a per capita growth in GDP (or better, in real quality of living) can be demonstrated, most individual Australians do not benefit at all financially. In other words, whether we are talking jobs or pay or wealth, few us of benefit from a slightly bigger cake if there are far more people than before to divide the cake up among. This fundamental truth, pointed out repeatedly in the [former] Coalition government's own Mortimer Report, Going for Growth, has been hidden from the Australian people in a propaganda effort supported by sections of the media and by both the major political parties. On the costs of immigration: According to Swinburne University's Katherine Betts, the likely negative effects of immigration include: * Adverse effects on the balance of payments. * The diversification of resources to infrastructure. * Diseconomies of scale in the cities that have passed their optimal size (considered to be around 500,000 people). * Waste of human resources by the neglect of local training. * Pressures toward capital widening at the expense of capital deepening. (We can ill afford to be a nation that invests mainly in real estate.) The last point is most important. On average, in all big and small businesses in Australia in 1995, it took about $117,000 of capital to provide one job. This means that billions of dollars of additional capital will be required to get our unemployed into the workforce. As we have no surplus savings in Australia, the capital for new jobs will have to be borrowed from overseas, thus further worsening our balance of payments. In 1989 Stephen Joske, an economist with the Parliamentary Research Library, estimated that immigration had produced a $7-$8 billion shortfall in investment capital (at then-current immigration levels) for public infrastructure. In other words, the amount of money, which might otherwise have been used to improve existing infrastructure (e.g. schools, public transport) had gone instead into providing basic infrastructure (e.g. roads, sewerage) for immigrants. Joske calculated that the necessary capital investment was some $80,000 (in 1989 dollars) per immigrant. Some of this money the migrants bring with them, but most of it must come either from within Australia or from overseas borrowings. Either way this increases Australia's foreign debt and foreign liabilities. This also puts pressure on interest rates by causing Australia to be seen as a less attractive or riskier borrower, and thus impacts negatively on many sections of the economy. Properly controlled experiments are rare in economics; but Colin Teese, former Deputy Secretary of the Department of Trade, has pointed out that First World countries over the past forty years have in effect carried out one: a control experiment on the effects of population growth on per capita wealth. The four countries that deliberately sought to increase their populations through immigration - Australia, New Zealand, Canada and the U.S. - all slipped backward badly relative to the rest. A likely reason, Teese suggests, is that too much of these countries' investment has gone into housing, services, and speculative real estate buying (because immigration produces continually rising real estate prices) rather than into capital-intensive production to produce exports and replace imports. *** In 1996 Oliver Howes revealed in the Canberra Times that the BIR had published, but had failed to publicise the crucial conclusions of two 1992 books which itemised the costs of immigration to federal and state budgets. Despite the expense of these major studies, the BIR (which had never been accused of lack of diligence in publicising research that could justify high immigration) failed to add up the costs itemised in these books and thus show the total average cost per migrant - a figure one might have thought of some interest to taxpayers and government. In particular, the BIR failed to adequately publicise the implications of the study Immigration and State Budgets by Professor Russell Mathews, which painstakingly calculated and disaggregated the various immigration costs to the taxpayer in the average migrant's first five years. When his itemised per capita costs are added up they come to around $16,762 per migrant at state level. When one adds to this the figure of $8,962 at federal level (provided by the other BIR study), the result would seem to be a total cost of $25,724 per immigrant at State and Federal levels combined. Costs at local government (never properly established) may be relatively minor, but an overall cost of $26,000 per immigrant can be considered conservative. The BIR failed to publicise either the total state costs figure or the combined state plus federal figure. It was only some years later that Oliver Howes did this calculation and published the results in the Canberra Times. The situation then turned out to be even worse. The BIR had failed to ensure the two studies were compatible. In counting all the monies that migrants contribute to state government budgets, Professor Matthews had meticulously included a per capita share of Commonwealth Funding Grants to the States. (These are essentially a return to the states of a share of the income tax which the federal government collects.) But the authors of the study of costs and benefits at federal level had failed to count these payments as a deduction from the federal budget. When adjustment is made for this inconsistency, the per capita cost per migrant turns out to be $34,500. *** The former BIR conceded that there might be long-term environmental and economic costs (especially with balance of payments) caused by immigration-fed population growth, but it denied that state or federal governments could reap budgetary benefits by cutting immigration. This seems to be completely wrong. Mathews' figures (available to the BIR since 1992, yet oddly neglected by them) leave no doubt that reducing immigration would provide large savings in both the short and medium term to both state and federal budgets. His figures also leave little doubt that to use immigration as, in effect, a form of 'industry subsidy' cannot be defended as being in the public interest. On the alleged economic benefits of a larger population: Some have claimed that a larger population is better for the economy. In an 'Occasional Monograph' (May 1993) titled Ten of the Most Dangerous Myths in Australia Phil Ruthven, chairman of Ibis Business Information, commented: "Rubbish! Twelve of the Top 20 standard of living countries have lower population levels than Australia; and Australia once had the world's highest standing of living with four million people." On immigration, wages and jobs: Despite the prevalence at its public conferences of people claiming that "immigrants create jobs", even the Bureau of Immigration Research did not normally claim this. Its formal papers usually argued simply that the economy would adjust to an increased workforce. Wages would fall (an assumption that was tactfully not emphasised) and this would enable employers to put on more staff. The BIR's final word was in an in-house publication by Lyn Williams, already referred to. After turning the evidence this way and that she concluded the effects of immigration upon the economy and unemployment are close to neutral (or, as the pseudo-medical jargon of economists puts it, "benign"). Even the distinctly slanted fact-sheets provided by the Department of Immigration merely claim that "Research over recent years shows that immigration does not have an adverse effect on the overall unemployment rate" and "The consistent result of research is that immigration does not adversely impact on thhe aggregate unemployment rate." The last claim, as we shall shortly see, is untrue. It seems unwise for the present Department of Immigration to lean so heavily on the authority of the former BIR, an organisation which awkwardly combined public relations and research functions. As sociologist and immigration expert Katherine Betts puts it, the BIR commonly assumed that adding to the labour force, even in a time of unemployment, would produce a fall in wages that would lead to more jobs being created and thus to no long-term increase in the percentage of the population unemployed. This logic, she points out, ignored both the long-term disappearance of demand for manual labour (important because so many immigrants seek manual work) and the 'stickiness' of wages which (because of factors like unions and wage agreements) do not automatically fall according to the law of supply and demand. *** It is claimed that more people (whether immigrants or native-born babies) create 'demand'. But do they create a job's worth of demand each? Perhaps only if their demands become more 'frivolous'. Otherwise economies of scale will mean there is less work to be done. Consider, for instance, how much work it would be in an isolated community of just 1,000 people to provide shoes, boots, sandshoes, sandals and slippers in all the styles and sizes that different men, women and children would require. No wonder that craftnames like Shoemaker, Carpenter, and Taylor were numerous in early communities. A significant proportion of the population would have to be in the footwear trades alone, even with modern technology. But if we scale that population up to 100 million, then only a small proportion of it would need to make shoes. Increasing the population does not necessarily increase jobs at the same rate. The econometrician Matthew W. Peter has disproved the boomer's claim that for every job an immigrant takes another job is created for the existing population. He showed that this was based on a mis-use of the Orani computer model of the economy. When more fact-based assumptions were fed in, for instance that wages are 'sticky', the same Orani model gave the opposite conclusions: that bringing in immigrants does cause unemployment, as well as problems with balance of payments, and a string of other undesirable effects. Unfortunately, disinterested academics like Mathew Peter did not have the public relations expertise of the BIR, and the BIR's unreliable claims continue to be repeated as gospel by some defenders of existing levels of immigration, and in the media. A further problem is that many of the jobs migrants do create are unproductive. We pay a fortune for consultants and teachers to ameliorate the linguistic and other problems of immigrants; but only from the perspective of those so employed are these problems a boon. For the taxpayer they are a drain and an expense.* The Melbourne pyschologist and author Valery Yule has commented: "The jobs immigrants create are mainly ones which are profitable to builders and developers: raising the price of land, requiring more housing, resulting in more medium-density housing replacing our world-famous 'quarter-acre-blocks' and wrecking in Melbourne all hope of a Garden City. Requiring more schools, hospitals etc. is not a bonus because they have to paid for from the public purse. Immigration as a source of job creation is a non-ending job creator - it has to keep running to keep creating, and it puts more pressure on our resources. The way things are today, the more immigrants we take, the more imports we tend to buy, and the greater our foreign debt." *** Apart from failing to recognise that wages are 'sticky', the BIR's calculations also ignored the fact that the unemployment problems created by immigration are not spread evenly across the spectrum of occupations (which would make them easier to solve). For instance, immigrants help provide a great surplus of skills in areas like engineering and sewing. This does not only lead to massive and expensive unemployment (and disillusion) among recent immigrants, it also threatens the employment and salary prospects of anyone currently employed in these professions. (For some years in the 1980s we were actually importing more engineers than we were graduating.) *** William Mitchell, Head of Economics at the University of Newcastle, has recently raised a more technical objection. He points out that the claim made by many immigration lobbyists that immigration doesn't cause unemployment "completely ignores the question of whether the growth needed to absorb the higher population is sustainable, given the problems Australia has with external debt." Indeed, he points out that the claim is based on logically incompatible premises: "Unemployment is affected by two factors: increases in the productivity of labour and increases in its supply. Both of these factors could, in principle, be offset by strong economic growth. But, if the economy grows fast enough to accommodate both productivity gains and the addition of migrants to the labour force, it will draw in more imports and the balance of payments will deteriorate. Economic growth of around 2% per annum may be all that we can sustain without increasing our foreign debt. This level of economic growth is not enough to reduce unemployment in the face of any net immigration (or any growth in labour productivity)." On immigration and socio-economic inequality: ...unemployment is not the only way in which population growth penalises those most vulnerable. As the Sydney University economist Frank Stilwell points out "Economic inequality is fuelled by urban growth, because the inflation in the urban property market benefits existing wealth holders at the expense of new entrants. It also intensifies the fiscal crisis of the state because of the costs of infrastructure - providing the water and sewerage systems, the energy supply networks and so forth. The costs of such infrastructure tend to rise more rapidly than the capacity to fund them through taxation or user charges." Thus as population grows, whether by immigration or by natural increase, the poor cop it in a variety of ways. Stagnant wages, higher home costs and mortages, less certainty of keeping their jobs (and less chance of changing or choosing where they work). And as government budgets collapse, the social security net is ripped, or unravels. * Economist Stephen Rimmer noted in 1992, "The lack of English language skills in the workplace imposes substantial economic costs in the form of lost productivity and reduced international competitiveness. For example, in 1989 the OMA estimated the poor English language skills cost Australia A$3.2 billion each year in additional communication time needed in the workplace. This estimate was used to justify more government spending on English language training. In addition, it was claimed in a report published by the Federal government-funded Bureau of Immigration Research that lost output owing to unemployment caused by lack of English language skills could be as high as A$1.6 billion per year. ...In all, the lack of English language skills in the workplace could cost Australia over A$5.4 billion per year - equal to 1.5 per cent of Gross Domestic Product (GDP)." Source: Rimmer, S., "The Cost of Multiculturalism", The Social Contract, Volume 3, Number 1 (Fall 1992).