I have long argued that the free movement of people would constitute a powerful means of enhancing economic growth while empowering people. In American Corporate Governance and Globalization I argued: "The one free market ideal that seems not to be on the agenda of globalization is quite telling: there is little provision for the free movement of people. The free movement of people would allow migration to wherever wages would be the highest, in accordance with free market precepts. Economists conclude that barriers to the free movement of people are costing the world economy 70 percent of world GDP in forgone output." My conclusion in 2007 was that our flawed system of corporate governance permits CEOs to harvest large compensation payments from short term profits; therefore CEOs only seek a globalization that is powerfully rigged towards cheap labor by stranding labor in low cost locales.
Recently, Harvard economist Lant Pritchett published the most compelling economic argument I have seen in favor of free movement of people in The Cliff at the Border, a chapter in the Growth Commission's newest volume Equity and Growth in A Globalizing World. Prichett states: "In contrast to these modest gains from further liberalization of goods or capital markets, estimates of the gains from the fanciful counterfactual of a complete liberalization of labor mobility are that the world GDP would roughly double. At current levels of GDP, this implies gains of $65 trillion." He further notes that: "The point is that, at the margin, the gains to poor people from relaxing the existing barriers to labor mobility are enormous relative to everything else on the development table."
The WTO exists to breakdown trade barriers, such as restrictions on labor mobility. Moreover, the current round of trade talks--the Doha Round--specifically focuses upon development. The WTO should place the $65 trillion labor mobility question at the top of the agenda. Its importance dwarfs all other issues that have stalled the trade talks.
Further, the labor mobility issue dovetails with the $100 trillion currency reserve issue. The rapid development of the least economically powerful nations would assuage the baseless fear that many workers in developed countries have regarding more expansive immigration--that they will face declining wages and fewer job opportunities (economists show the opposite is true: immigration actually raises native wages overall and increases worker specialization and productivity). First, rapid development would expand demand for all goods produced throughout the world economy. Second, rapid development would diminish the incentives for labor to exit undeveloped nations.
Thus, if the WTO wishes to pursue development it should pursue labor liberalization and currency reserve reform. The economic case is simply overwhelming that a sturdier globalization requires a legal construction that addresses currency reserves and labor mobility.
Perhaps even more importantly, however, are the political implications of such reforms. Free movement of people would mean that nation states would need to compete for the best and brightest human resources. Laborers would seek out locations where their productivity and quality of life would be maximized. As Joseph Stiglitz recognizes, if nations had to compete for talented people then "Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about."
Free movement of people is both an economic as well as political game-changer.