The Capitalism of Tomorrow: Trade and Immigration

Part 3

Trade and Immigration

It’s finally time to start talking about specific issues, and I’ve decided to start with some of the most important: trade and immigration. But first, why are they important and how are they related?

Trade is important because complete autarky is impossible. Any nation will always be dependent, to some extent, on international trade in order to develop itself, and since we’re dealing with a much smaller nation than the one’s we’re used to, even more so.

Immigration, specifically immigration regulation and enforcement, is equally important as to maintain a nation’s ethnocultural uniformity and allow for its natural growth. Uncontrolled population increase (especially involving members of a different ethnic or cultural background) has major consequences on society, individuals and the economy. The relationship between the two is best described by Hoppe:

“The relationship between trade and migration is one of elastic substitutability (rather than rigid exclusivity): the more (or less) you have of one, the less (or more) you need of the other. Other things being equal, businesses move to low wage areas, and labor moves to high wage areas, thus effecting a tendency toward the equalization of wage rates (for the same kind of labor) as well as the optimal localization of capital. With political borders separating high- from low-wage areas, and with national (nation-wide) trade and immigration policies in effect, these normal tendencies—of immigration and capital export—are weakened with free trade and strengthened with protectionism.” [1]

In short, the more you trade with other nations, the less incentive they have to emigrate to yours. However, when it comes to high-wage areas such as the USA and most of Europe, such incentive is always present, which is why restrictive immigration policies are quintessential.

In order to make all of this less abstract, we should refer to the closest contemporary example to the idealistic model of private government being discussed: Liechtenstein. Lichtenstein is a micronation in the Alps, sandwiched between Switzerland and Austria. It has a total area of 160km² and a population of just under 40 thousand. Due to their limited area and resources, Liechtenstein is very open to international trade, being a part of the EEA (European Economic Area) and Schengen Zone.

Liechtenstein hardly has any trade barriers and its deregulated economy and low taxes greatly encourage trade and investment. For reference, Liechtenstein’s standard VAT is less than half of Germany’s (7.7% and 19%, respectively), its income tax ranges from 3 to 24%, a lot lower (and flatter) than Germany’s 1 to 45%. Additionally, Liechtenstein has no estate, gift or inheritance taxes.

Liechtenstein makes up for its vastly deregulated economy by having very restrictive immigration policies. In order to obtain citizenship, one must reside in Liechtenstein for 30 years (you can also be ‘voted in’ by the community you live in after 10 years) or be married to a citizen for 5. These restrictions aim to keep the population growth natural and make sure those who do obtain citizenship are functional and compatible. In order to incentivize natural growth, Liechtenstein offers up to CHF 12.000 in tax deductions for every minor child. This way, they remain among the world’s most prosperous countries while taking in a minimal amount of migrants.

The one caveat worth discussing is that international trade has geopolitical implications. Unrestricted trade does not equate with indiscriminate trade. Nations may (and should) opt out of trade with other hostile nations or regimes. I for one would be against trading with any regimes of public-governance (republics), especially those that constitute an immediate military or ideological threat (e.g. Communists).

The importance of continuous economic growth and technological development cannot be overstated: subsistence is not, in of itself, sufficient for the long-term maintenance of a nation. Those who stagnate will eventually be conquered. Free trade allows for the fastest and least centralized development of techno-capital, and thus is preferable.

Endnotes

  1. Hans-Hermann Hoppe, “The Case for Free Trade and Restricted Immigration”, Mises Institute, https://mises.org/library/case-free-trade-and-restricted-immigration-0 (accessed August 7, 2020).

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