In Migrants Crisis, a Chance to Revitalize Europe's Economy

By Thomas Piketty, The Boston Globe

15 September 15

he plight of the refugees is an opportunity for Europeans to jump-start the continent’s economy. Germany’s attitude is a model to follow.

As belated as it may be, the recent surge of solidarity in favor of refugees has the merit to remind not only Europeans, but the rest of the world as well, of an essential reality. The continent can and must become a great land of immigration in the 21st century. All conspires to that end: our self-destructive aging imposes it, our social model allows it, and the combination of global warming and Africa’s demographic explosion will increasingly require it.

All this is well-known. What may be less known, however, is that when it comes to migrations, pre-financial crisis Europe was on the verge of becoming the most open region in the world. But the world financial crisis, and Europe’s inability to overcome it due to its bad policies, led to the rise of unemployment, xenophobia, and a brutal closure of the continent’s borders.

Let us take a step back.

As of 2015, the European Union counts almost 510 million inhabitants, compared to 485 million in 1995. Of the 25 million, more than 15 million were immigrants. Between 2000 and 2010, the European Union has absorbed migratory inflows of 1 million people per year. That is equivalent to the United States’ level, but with a higher degree of cultural and geographical diversity. At that not-so-distant time when Europe knew how to be more welcoming, however relatively, unemployment was on the decline in Europe, at least up to 2007-’08. The paradox is that the United States, thanks to its pragmatism and its fiscal and monetary flexibility, managed to quickly recover from the financial crisis it had set off. It rapidly resumed on its growth trajectory , and immigration is stable at around 1 million people per year. By contrast Europe, mired in its divisions and its sterile posturing, still has not regained its precrisis level of economic activity, with the consequences of rising unemployment and border closures. Migratory inflows dropped abruptly from 1 million per annum in 2000-2010 to less than 400,000 between 2010 and 2015.

What is to be done? The tragedy of the refugees could be an opportunity for Europeans to rise out of their petty disputes and their navel-gazing. By opening themselves up to the world, by jump-starting the economy and investments (housing, schools, infrastructure), by fighting off deflationary risk, the European Union could easily return to its precrisis immigration levels.

In that regard, the openness demonstrated by Germany is excellent news for all those who are worried about a decrepit and aging Europe. One can indeed acknowledge that Germany has but little choice in the matter, given its very low birth rate. According to the latest United Nations demographic projections, even with twice the immigration rate in Germany than in France in the coming decades, the German population would still decrease from 81 million to 63 million by the end of the century, while France would go from 64 million today to 76 million in the same interval.

In addition, one should not forget that Germany’s level of economic activity is in part the result of an enormous trade surplus, which by definition could not be extended to the rest of Europe. (There would not be enough people on the planet to absorb such quantity of exports.) That level of economic activity can also be explained by the efficiency of Germany’s industrial model, which most notably relies on a strong involvement of its workers and their representatives, and whichthe rest of Europe would be well-advised to draw inspiration from.

Above all, the openness to the world shown by Germany sends a strong signal to EU members from the ex-Communist bloc, who want neither children nor migrants, and whose combined population, according to the UN, should shrink from its current 95 million to 55 million by 2100.

The Eurpoean countries should be elated at Germany’s attitude, and seize this opportunity to carry through this vision of a Europe that is both open and positive towards refugees and immigrants.