Prof. El Mouhoub Mouhoud: “Algerians have understood that there is a political solution to the crisis in their country.

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E.M. Mouhoud1

Prof. El Mouhoub Mouhoud. DR.

Mohsen Abdelmoumen: Your book “L’immigration en France” contradicts the theses of far-right political parties that use the theme of immigration for electoral purposes. In your opinion, doesn’t immigration produce wealth?

Prof. El Mouhoub Mouhoud: The purpose of this book was to make available to the general public the state of scientific knowledge on the reality of international migration. I had then confronted with a number of questions: how are the representations formed which are crystallized by the thematic of migrations? Why, despite the figures and the analyses and lessons learned, based on consistent studies in different countries on migration or climate, for example, are the most unlikely allegations not demystified, and fantasies and not reality continue to pollute the « public debate »? Without bias for or against immigration, it is to these questions, sometimes disturbing but always substantiated, that my book tried to answer. When we observe the yawning and growing gap between the results of scientific research and representations, we can only try to contribute serenely to the debate.

With regard to the effects of immigration, the first manipulation concerns their number. When we look at the flows in OECD countries, we realize that France has even been structurally at the bottom of the pack for the last fifteen years. Every year, residence permits issued to foreigners represent about 200,000 people or 0.4 % of the French population, compared to an average of more than 0.7 % in OECD countries. The balance between the entry and exit of foreigners is around 100,000 people. Every year, 100,000 foreigners leave, 70,000 of whom are Europeans in free movement. Labor immigration concerns only 20 to 25,000 people per year, including 10,000 former students who were already living in France. Focusing a policy on entry restrictions therefore seems out of step with reality. It is important to promote reason in this debate. Eliminating or reducing these 100,000 net inflows will not solve the problem of unemployment rates or segregated territories. Issues are imputed to immigration while they are related to the failures of the structural policies of spatial planning, housing, education and the labor market.

Similarly, with regard to refugees, since the so-called migration crisis, France has received few refugees and granted very few protected status. In terms of population, three countries have concentrated most of the refugees: Germany, Sweden and Austria. France is at the bottom of the pack in OECD countries.

Finally, when immigrants present in France are counted not in flows but in « stocks » (about 6 millions, of which 3 millions are naturalized), we are in the European average at 8.5 % of the population and four points below the OECD average.

The other instrumentalized issue on immigration concerns its impact on the labor market of host countries. Immigrants are accused of the unemployment of local people or of contributing to lower wages. There is a consensus in the economic literature on this subject. The first consensus is that the arrival of migrants has very small effects and has not generally had any negative effects for the workers of the host countries. Why? Because the labor market is not a « cake » with rigid contours, but that it can grow as a result of the beneficial impact of immigration on the rest of the economy.

Economists observe that immigration produces, globally, a positive effect on the wages of local workers. This could be due to strong growth in these employment pools or to the displacement of local workers to other regions. After correcting for these possible misperceptions, the result remains that immigration does not have a negative effect on native employment in general. Migrant workers and local people who do not have the same characteristics in terms of qualifications and types of tasks they perform, the increase in the number of immigrants arriving in an employment pool helps to provide local people with more opportunities to take on less manual or executive tasks in favor of tasks that require more knowledge. And consequently better paid. Other Keynesian approaches also show a positive impact of immigration on consumption and growth in the host country, which in turn stimulates employment.

Does this mean that the influx of migrants only produces winners? No. Immigrants can have a negative impact on the wages of those with whom they compete directly. That is, workers… often from an earlier wave of immigration!

If the impact of immigration on the labor market is difficult to establish, at least some work allow to considering it as low, and generally positive. Those who benefit most are skilled natives, who see their employment and earnings prospects improve.

The instrumentalization of the issue of migration promotes misrepresentations that prevent effective and equitable win-win policies for host countries, countries of origin and migrants themselves.

How do you explain the rise of the far right, or even neo-Nazis, all over Europe?

Regarding the rise of populism and the extreme right, the work of political scientists is supposed to better answer this question. From an economic point of view, it has been underestimated that globalization does not have homogeneous effects but specific effects that affect some territories and some categories of workers differently. In the past, low-skilled workers were the losers of globalization. One of the characteristics of contemporary globalization is that production workers, even at higher levels of qualification (foremen, engineers, technicians) are also affected by globalization, while managers and workers with coordination and management tasks are more successful. Mechanisms to compensate for the negative effects of relocations, however few, do not play a role: vulnerable territories lock up unemployed workers on the spot while in other territories jobs do not find takers. Labor mobility cannot be decreed, it must be organized. A right to mobility requires an investment policy in this area. Public policies have failed to compensate for these negative shocks. The middle classes are hit hard. They then follow populist or extremist parties claiming to bring them a solution by closing borders, a national preference, or leaving Europe as in the UK or Italy.

You are one of the first economists to mention the concept of industrial relocalization. Can you explain this concept to us?

Strictly speaking, relocalization is the return to the country of origin previously outsourced production, assembly units in various forms in countries with low labor costs. In a broad sense, relocalization can be defined as the slowing down of the offshoring process toward low-wage countries, i.e. the questioning of offshoring decisions or the non-offshoring in sectors sensitive to competition by costs.

There are three reasons for the relocalization. First, on the supply side, the possibilities of replacing low-skilled work with machines or robots. Thus, the part of wage costs in the cost of assembling electronic chips has fallen from 30 % to 40 % in the 1970s to less than 4 % in the 1980s thanks to robotization. In sectors with « solid materials », such as mechanics, automobiles or electronics, there are no technical barriers to robotization. On the contrary, in clothing or shoes, when the materials handled are flexible, work still accounts for nearly two thirds of the total cost in assembly. At the same time, wage costs per unit of output (the ratio of wages to productivity) have increased significantly in Asian countries and China in particular. The unit labor cost of China and emerging countries, which represented only 40 % of the US level in the early 2000s, has caught up with the US cost since the early 2000s. The interest to offshore in Asia to reduce costs and reimport the final product decreases all the more as in developed countries very low interest rates allow companies to borrow to equip themselves with robots.

Then, on the demand side, the problems of responding to consumer variability, the need to stick to markets and manufacture short series of products with a life cycle of no more than three to four weeks, as in the clothing industry for example, and quality or safety problems of imported products assembled in China or other low-wage countries, these problems confirm the failures of offshoring and often involve returning to the country of origin or close to markets as a survival solution.

Finally, the problems of transport costs and coordination costs related to geographical distance occur mainly in heavy activities (the weight of components account) but only marginally affect light products (clothing) or services (call centers, computer maintenance…). In sectors such as textiles-clothing, footwear, toys… many firms that are offshoring are champions of logistics and rapid response to demand while continuing to outsource production to low-wage countries

You wrote Mondialisation et délocalisation des entreprises. In your opinion, has not the industrial offshoring policy been a disaster?

While having encouraged the emergence of new countries in the global growth, hyper globalization has reached the end of its logic: geographical concentration of activities and dramatic territorial inequalities, concentration of income on a handful of globalised managers, dropping out of middle management, employees and workers… Globalization, which was likely to bring progress and the diffusion of knowledge, catch-up and convergence of economies, has created an increasingly fragmented world. Deregulated international finance, instead of playing its role as a catalyst for growth and innovation, has brought capitalism back to its worst times of crisis.

While the « hyperglobalization » of finance continues in the absence of real state regulations, that of industrial production and services has entered a phase of unprecedented complexity: offshoring movements coexist with partial relocalizations that do not recreate the jobs destroyed by offshoring. In our opinion, proactive action by the State must focus more on production factors: work, training, research and innovation, which are a source of regaining competitive advantages over low-wage countries and therefore of economic relocation to French and European territories.

You are an eminent economist and a renowned researcher. In your opinion, are we safe from a new economic crisis?

Finance has not been regulated. There are many risks of financial crisis.

You have probably watched the news about Algeria. How do you analyze the events in Algeria, in particular this great popular movement with demonstrations since February 22nd?

This uprising is part of a long history of uprisings in Algeria: the country had already experienced a major break with the youth riots in 1988. They had already cracked the regime and initiated 3 years of unprecedented democratic openness. But there were also the Kabylian revolts of 2001, the attempts at « Arab Spring » demonstrations that were nipped in the bud by the police in 2011, the protests in southern Algeria in 2016 against the extraction of shale gas. In the 2000s of the oil boom, but also particularly in 2011 during the uprisings in Tunisia and Egypt, and thanks to the downward turn in the price of oil in 2013, the government continued to subsidize consumption (up to around 30 % of GDP). Nevertheless, it overestimated its « security capital » and failed to fully appreciate the warnings that, as early as 2014, indicated the possibility, if not the imminence, of a popular uprising.

In the same time, Algerians have carefully followed and observed the developments of the Arab springs in other countries. This has helped to give the popular movement a remarkable political maturity. Neighboring experiences play the role of both a repeller – the Syrian, Egyptian and Libyan examples being perceived as counter-models – and an example – the Tunisian experience in particular being perceived as a model for political transition. It is clear to what extent the uprisings in Egypt, Tunisia and elsewhere have been examined and assimilated by today’s Algerian demonstrators, in their forms, methods and development, the way in which Algerian demonstrators have organized themselves, for example to protect women in demonstrations or to clean the streets: two practices directly related to the will to not reproduce some negative experiences of the uprisings in Tahrir Square (whose origins are unknown) in Cairo, or in Tunisia.

Through the Tunisian example, Algerians have understood that there is a political solution to the crisis in their country. The Tunisian Constituent Assembly represents a new example in the Arab world, which has guaranteed freedom of conscience, equality between men and women and respect for religions. That is to say, it has succeeded in building the historical compromise between the different parts of society, from women to Islamists, while guaranteeing a fundamentally secular framework. This example of an inclusive transition that can take a long time, smoothly despite the economic difficulties, can serve as a reference, or even as a guide for Algerian protesters.

Another element plays a central role in explaining the strength and maturity of the February 22nd movement and its ability to overcome political divisions. It is the fact that the specter of an « Islamist threat » no longer operates. Although the government played heavily on the fears of the 1990s, including by rebroadcasting violent documentaries, this « security capital » that the authorities believed they had was shattered. Indeed, despite the social impact and the spread of religious conservatism, the population no longer seems, to hear the testimonies in the massive demonstrations, to wish the Islamists to come into power. And among the latter, many of them have also discredited themselves, allowing themselves to be co-opted by the authorities.

The previous government in Algeria used the money printing. You are a talented economist and you know this process. In your opinion, is the banknote printing option a solution for a country that is totally dependent on hydrocarbons?

The Algerian economy is composed of three sectors. First, the resources come mainly from hydrocarbons, which represent about 35 % of GDP, 72 % of the State budget and about 98 % of external revenues. In boom times, money flows to the state, which redistributes it in a clientelistic way, especially in recent years, in the form of consumer aid and subsidies. The rentier sector is predominant in the economy, income comes massively from outside and is sensitive to fluctuations in the global market, and the annuity is distributed on a more or less discretionary basis instead of being accumulated in the investment. The second sector, imports (one third of GDP), is an idle sector that also feeds clientelistic relationships between the State, the ruling clan and the companies connected to that clan. Finally, manufacturing industry declined to represent only 5 % of GDP and gave way to a third sector: that of non-tradable (service, construction, and building). These three sectors represent the bulk of the economy and are illustrated in the fact that Algeria has the lowest labor force participation rate in the world, like the other rentier countries in the region, and an extremely high unemployment rate for graduates.

In 2015, with the then Prime Minister, Mr. Sellal, and with Mr. Tebboune’s very short relay from May to July 2017, the government had expressed a desire to implement structural reforms and modify the clientelist relationship between companies and the State. But very quickly, with the return of Ahmed Ouyahia in the summer of 2017 as Prime Minister, the government turned its back on reforms, and has embarked on an adventurous macroeconomic policy based on « non-conventional » financing (the famous banknote printing) of 35 % of GDP in two years. However, 2016 was a year of excitement and impatience; all the latent economic and social ingredients were there, the slogans of young people, especially in the stadiums, showed the impatience of the populations. The observation of some studies such as Arab Barometer showed a dramatic loss of confidence in governments, while at the same time significantly increasing the sense of personal physical security.

The economic situation has worsened from the point of view of the flaws of a rentier economy. The economy has never been able to diversify, which has led to a decline in the share of industry (4 %) and agriculture (8 %) in GDP. Abdelaziz Bouteflika pursued a policy that led to this economic disruption, which had been foreseeable for several years. Nevertheless, there have been major advances in education, with the share of public expenditure on education as a percentage of GDP doubling between the early 2000s and today. In addition, the State has heavily subsidized consumption since 2011 (30 % of GDP between 2012 and 2014) and enrolment in higher education, which increased by more than 10 points between 2011 and 2016, from 30 % to 42 %. If the objective was to achieve social peace, these efforts focused on quantity rather than quality, as illustrated by Algeria’s very low ranking in the international ranks for educational quality (PISA rankings).

The macroeconomic situation has also deteriorated sharply in Algeria. The public deficit, which represented 1.4 % of GDP before the 2013 oil counter-shock, reached 15.7 % of GDP in 2016. Foreign exchange reserves fell drastically from just under $200 billions in 2013 to $108 billions in 2016 and reached $60 billions in 2018. The terms of trade have deteriorated and the official dollar depreciated by 20 % in nominal terms. The adjustments that followed were no less drastic: assuming a barrel at 35 dollars, public expenditure was reduced by 9 %, mainly for investment expenditure. Imports of final consumption goods (new import licenses) were also reduced, but imports of intermediate goods, which are increasingly diverting from manufacturing investments to the construction sector, remained stable. Attempts to open up the capital of public companies to encourage investment in non-hydrocarbon sectors have remained embryonic.

These economic problems have contributed to feeding the Algerian revolt. A significant part of the population has not been taken into account by the system, particularly young people. In rural areas, the situation is even more serious because unemployment rates can be as high as 80 %. People are cornered, confined to their homes because the cost of housing is absolutely prohibitive in cities. Even if they could access employment in large urban areas such as Algiers, young people cannot go there because of the exorbitant cost of housing that would burn their wages immediately. Strong growth depends on hydrocarbon fluctuations but can also exclude many people: young graduates are highly unemployed, forced into internal downgrading or forced expatriation. Given its per capita income as a middle-income country, the expatriation rate of skilled people in Algeria and the countries of the region is abnormally high, almost twice as high as in the large middle-income countries. We are therefore witnessing the phenomena of « harraga » [“border-burning” migrants], some of whom have died trying to leave Algeria by boat. This has been a shocking and violent factor for the collective memory. The most qualified succeed in migrating to North America.

You have undoubtedly heard about the corruption scandals perpetrated by some officials in Algeria and their relatives, including the flight of capital abroad through overbilling, among other things. In the event of the advent of a legitimate government, do you think that the Algerian people can hope to recover the embezzled money?

This rentier economy implies privileges and is similar to a crony capitalism that vassalizes these companies and businessmen. Non-government companies, some of which were created by the diaspora, are affected. These dynamisms effectively oust the best. If reforms are to be carried out, their prerequisite must be political and institutional. We need to change the institutions in order to change the Algerian growth model. This can only be achieved by gently accompanying the political transition. But the ruling clan had no interest in change because it has constituted a verticalization of corruption mechanisms that are no longer only confined to the state apparatus, because entire sectors live from this verticalization of corruption. However, a burst is still possible. The army began the work with purges from inside the clan’s former leaders. But we can doubt a justice that comes from the army; only an independent, transitional justice worthy of the name will be able to overcome the corruption that plagues the economy and discourages initiatives.

Interview realized by Mohsen Abdelmoumen

 

Who is Dr. El Mouhoub Mouhoud?

Dr. E. M. Mouhoud is Professor of Economics at Paris Dauphine University where he co-directs the Master of International Affairs. He is a specialist in globalization, offshoring and international migration. He is also Director of the CNRS International Research Group DREEM (Development of Euro-Mediterranean Economic Research) and a researcher at the Economics Laboratory of Dauphine- DIAL IRD. His research focuses on technological change, multinational companies, offshoring – relocalizations and international competitiveness, European integration, convergence of economies, Euro-Mediterranean relations, factor mobility and labor markets, international migration, the impact on host and departure countries, the knowledge economy, corporate financing and crises.

He has published numerous books and articles, including L’immigration en France, mythes et réalité (2017) ; Mondialisation et délocalisation des entreprises (2008) ; Sauver Marx ? Empire, Multitude, travail immatériel (2007) with P. Dardot and C. Laval ; Les nouvelles Migrations, Un enjeu Nord-Sud dans la Mondialisation (2006) co-author ; Connaissance et mondialisation (2000) co-author ; Changement technique et division internationale du travail (1993).

Published in American Herald Tribune, June 25, 2019:  https://ahtribune.com/interview/3255-el-mouhoub-mouhoud.html