October 24, 2015

Migration is about freedom of movement of people. But what about freedom of movement of bank credit?

Sir I refer to Tim Harford’s “The real benefits of migration” October 24.

For me it is hard to understand how someone who takes such a positive view on migration as Harford therein expresses, at the same time is seemingly ok with regulations that interfere with the free allocation of bank credit.

Not long ago I went to visit the Statue of Liberty for the first time. While standing there I thought about what would have become of these migrants if, on top of how bankers are adverse to risk, regulators also had instructed the banks, by means of lower capital requirement incentives, to stay away from the “risky” migrants?

I ask: “In a world where we rightly abhor racial and sexual discrimination” why should we agree with regulators discriminating against the bank borrowing needs and wishes of the risky? And such discrimination occurs even when for instance in the US there exists an Equal Credit Opportunity Act.

Tim Harford argues the “supposed costs or benefits [analysis] always omit one crucial group. That group is the migrants themselves”. But, in the case of bank regulations, there is also an omitted group, namely all those SMEs and entrepreneurs who have been denied bank credit, precisely because regulators disliked “the risky”.

PS. Tim Harford refers to concerns about “brain drain”. I, having been an Executive Director of the World Bank for many nations depending on remittances by their migrants, have always been more concerned with the possibility of a “heart-drain”.

@PerKurowski ©