Marble Falls As Trump continues to push globalization into the dustbin of history, it’s worth looking at the intended and unintended impacts of remittances around the world. Some may remember that one of Trump’s proposals in trying to attack immigration and migrant workers is to propose a transaction tax on remittances flowing from the United States to home countries. Recent reports indicate that there is a temporary surge in US sourced remittances as immigrant workers accelerate payments against the fear that they may lose their American jobs and be deported. A piece by the so-called Vulgar Empiricist in the current issue of Jacobin offers about the best reality check on all of this.
Longtime readers and listeners know that ACORN has been beating the drum about remittances for years now with one report and action after another. Mostly, we have focused on the predatory costs that banks and intermediaries attach to these transfers. The heart of our case is that the real cost to handle these transfers electronically is minimal now, so there is no justification for the huge whack the middle men are taking out of hard-earned money going to support desperate families in lower income countries. With the Trump attack and border walls rising across Europe and many other countries, the issue of remittance costs hasn’t disappeared, but increasingly may take second place compared to the survival of this form of support for people and communities in such countries.
Remittances are critical economic lifelines from people to people. They dwarf both all foreign aid and all foreign direct investment. As the empiricist writes,
Valued at around $740 billion, for low-and-middle-income countries the inflow of remittances is currently nearly triple that of global development aid and nearly double that of foreign direct investment.
That’s big money, so once Trump and the deglobalization wrecking crew start messing with it, it’s going to have huge consequences.
Trump seemed to think this was a slap at Mexico, and for sure Mexico would feel it, because it’s in the top ten among remittance receivers, but it’s not remittance dependent as many others, like the twenty-nine countries where remittances make up 10% of GDP. Nicaragua, El Salvador, and Honduras are the 5th, 6th, and 8th in the top ten most dependent on these transfers, making them virtually US client states with more than 20% of their GDP coming from migrant workers and families.
When you look at the top remittance national recipients, the list is led by India, which doubles the level received by Mexico. France and Germany are also in the top ten, which might surprise some, as is China. The Philippines, Pakistan, Bangladesh, Nigeria, and Guatemala make up the rest of the big ten.
Where global politics and name-calling also become very important is when you look at remittance corridors. A country like the Philippines that sees its population as a workforce exporter does so to a wide range of countries around the world, so, ironically, is less impacted by changes in policy in any one country since they operate in multiple corridors. Mexico is almost totally depending on the United States, as is Guatemala. India depends on the US as well, but also the UAE and Saudi Arabia where it has long exported workers. Trump’s new H-1B visa policy change and hardening borders will both cause severe heartburn in India, where his tariffs are also inflicting pain.
In campaigning to reduce the transaction costs of remittances, we found that it’s the wild west out there. Each country’s national banking system is by default the regulator of remittances, which means that there is no global coordination and an open-door invitation for bribes, cronyism, and general corruption. Yet, ironically, for all the hue and cry about the impact of decreasing foreign aid or barriers to corporate global investment, no country is doing a good job of protecting its citizens and foreign workers from greedy financial institutions, nor are they doing what they should to keep the people-to-people economic fire hose of direct family support remittances continuing to flow.