Mexico Remittances and the End of Fascism

Fascist tendencies -- xenophobia, intolerance and the desire for a strong leader -- tend to peak when the economy finds itself in a prolonged downturn.  With fewer resources and an uncertain outlook, citizens feel they can ill afford to extend themselves for outsiders.  At times like this, in the last several years as well as during the Great Depression of the 1930s, people want to close the border and expel foreigners.  

But it doesn't last.  Sooner or later, the economy recovers and the need for affordable labor overwhelms the fear of strangers.

We can see this dynamic in remittances (including both legal and illegal migrants) from the US to Mexico.  From 1990 to 2007, remittances to Mexico grew at an annualized rate of 13% and declined only once, during the 1991 recession.  The 2001 bust barely registered for migrant Mexicans, with remittances up 9% that year (and 50% the following).  

All this ended in 2007.  With the Great Recession, remittances fell, and fell hard, bottoming in mid-2013 at 25% below the 2007 peak in real terms.  Indeed, remittances only recovered their 2007 inflation-adjusted value this past summer -- eleven years later. 

Population changes parallel remittances.  Pew Research estimates that that the unauthorized Mexican population by 2016 was 19% below its 2007 peak (and probably not much recovered to the present).  If the Great Recession was bad for US citizens, it was a disaster for the undocumented Mexican community.  Indeed, as we have argued before, had the US southern border been completely unenforced during the last decade, the undocumented Mexican population would be lower than it is today.  More Mexicans would have taken advantage of the opportunity to get out, confident in their ability to return in better times.

Sources: Bank of Mexico, FRED, Pew Research, Princeton Policy analysis

Sources: Bank of Mexico, FRED, Pew Research, Princeton Policy analysis

For the purposes of migrant policy, there are a few important conclusions:  

First, as during the 1930s, a prolonged downturn will generate resentment of foreigners and hostility from the host population.  When the economy is doing poorly, immigrants are likely to take a disproportionate share of the blame.  On the other hand, when the economy recovers, the will to act harshly towards migrants dissipates as labor shortages capture the public's attention.  Hatred and conflict are exhausting and hard to maintain when objective conditions improve.  Conditions have improved, and with it, the moment has passed for those hoping for a wall or large scale deportation.  

Second, remittances are growing quickly, rising at a 10% annual pace.  This suggests that wages are again above the Relocation Wage.  This explains the surge in border apprehensions in August and September.  Coming to the US is a business proposition again.  

For President Trump, this is all bad news.  In 2019, he is likely to preside over the highest level of illegal immigration since the Great Recession even as voters -- and with them, Congress -- show an increasing indifference to entire matter.

Third, the window is closing on a market-based approach as well.  The default policy for illegal immigration in the US is, ultimately, indifference and the blind eye.  The costs and benefits are asymmetrical, with the Mexicans taking most of the cost.  The extraordinary pathology of illegal immigration across the US southwest border — second only to Venezuela as a humanitarian crisis in our hemisphere — is entirely stable and condoned.  We have lived with this invisible human tragedy for fifty years and, as a matter of policy and public taste, are willing to live with it for another fifty. Those of us who value order and decency above ideology are in hardly better shape than our more conservative colleagues who long for a wall.  The window is closing.

But the window is not closed yet.  Trump will do a deal.  If asked, he will sign a bill to put migrant labor on a market basis.  It would be his crowning achievement.  

If he's asked.