Integration and Disintegration: Trade and Labor Market Integration

After World War II, the victors—the USA and the UK—created a liberal international order (LIO) based on integrating markets for goods and capital but not labor. The decision to remove barriers to trade in goods and capital flows have had profound effects on immigration. Trade has meant the closure of businesses in developed countries that rely on low-skill labor. When these firms closed, they took their support for low-skill immigration with them. The ability of capital to move intensified this trend: whereas once firms needed to bring labor to their capital, they can now take their capital to labor. Once these firms move, they have little incentive to fight for immigration at home. Finally, increased productivity, as both a product of and response to globalization, has meant that firms can do more with fewer workers, again decreasing demands for immigration. Together, these changes have led to less business support for immigration, allowing politicians to move to the right on immigration and pass restrictions to appease anti-immigration forces. The recent backlash to the LIO, then, has implicated the very flow—the movement of labor—that was never part of it.