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Fears of a "Brain Drain"

November 27, 2006

Tags Free MarketsGlobal EconomyEntrepreneurship

People in developing countries complain about the "brain drain" supposedly practiced by rich countries. This complaint surfaces even among Europeans with respect to the United States. The idea is that the US is stealing the most qualified talent from Europe in an unfair way.

It is certainly true that many well-qualified professionals from countries like mine, Romania, or neighboring Hungary leave their homeland for career opportunities in Western Europe or the United States. At the same time, people are leaving the US to work in emerging economies in Europe. This is something we can observe every day.

But is this bad and unfair, as most in these countries claim? Are "human capital" exports always bad and imports always good?

Browsing through the latest news on the European Union, I stumbled upon an interesting commentary by a Hungarian economist, Dr. Magdolna Csath. In her piece, Dr. Csath unfavorably evaluates the European membership of Hungary. The article has some excellent observations on the political side, but it's also full of economic fallacies. I will take up only one of them. She writes:

But what is particularly unfair is that almost every country encourages the migration of highly skilled professionals. Architects, accountants, engineers, nurses, doctors and IT [Information Technology] specialists are more than welcome to come and work in the majority of the original member states, among them Belgium.

IT specialists can also easily settle in Germany. This is actually a deliberate process of brain drain. People trained in Hungary are now strengthening the economies of the developed Western European countries, while Hungary is being deprived of the only strength it has: valuable human capital.

Free movement of capital, including human capital, is one of the pillars of prosperity. What explains this migration is not the political will of some evil western countries, but the price system that does an excellent job in directing capital where it can be the most productive. In this case, the price of human capital, in the form of wages, makes possible capital accumulation in places where this human capital can be the most efficient.

Dr. Csath hints at this when she mentions that "Young engineers, economists and other professionals are also forced to leave the country, because there are very few professional jobs available."

No government can produce this market process of capital reallocation, because it happens spontaneously. Government can only cripple it. Even if the United States is pursuing policies aimed to facilitate this migration — which is unlikely — that is not the main cause of it. Misplaced resentments towards foreign governments will not help us at all. We should be resentful towards our own governments and political elites with their social and protectionist agendas, which impede the market process and the creation of jobs within our borders.

It is also questionable that this migration of our skilled professionals is such an evil thing to those of us who remain here. Capital accumulation means that the conditions are created for new inventions and the production of new wealth.

Consider this: how many inventions that we use in our daily life have been made in our own countries? Some but not all, and maybe not most. The progress of technological innovation comes about where the conditions for capital accumulation are met.

It is true that in the short run we do not see the benefits of the professional activity of those who have "bailed out" and gone west, because it takes time for wealth to spread to less well-off places. Meanwhile, politicians and analysts decry the evils of free circulation of goods and capital. But denouncing the very process that leads to progress and wealth-creation will only make all of us less well off in the long run.

Let's look at some presuppositions that lurk behind the entire "brain drain" theory. First of all, it is a mistake to think in terms of "national economies" in competition with each other. Such concepts have nothing to do with sound economics and everything to do with nationalist ideology. The free market is a transnational affair and such artificial constructs as the Hungarian economy, the Romanian economy, or the US economy are misleading.

It is very true that on the global market there are parasite organizations, known as states, that exercise political monopoly over given territories and carve out a piece of the market that afterwards goes around by the name of national economy. These organizations then use their monopolistic powers on that given territory to extract revenue, regulate economic activities in the benefit of interest groups, subsidize what people in power consider worthy of being subsidized, and generally committing such a disruption of sound resource allocation that in some cases professionals need to go elsewhere in order to find a decent job.

It is seductive here in Eastern and Central Europe to invoke national sentiments, and national interest. But "national interest" is rarely more then a cover for some very private interests that can be realized only through state power. The so-called "brain drain" question is a problem only because a determined monopoly of organized political means (the state) loses resources to a wiser and less intrusive monopoly of organized political means. As a consequence, we see all the fuss in the media and in the streets about the evilness of the rich countries that are exploiting us.

 

After more then two hundred years of the very nationalist propaganda that helped create these hungry leviathans in Central and Eastern Europe, we still have not learned our lesson. We spend so much time caring for the interests of the national collective, supposedly represented by the nation-state, that our brains are hopelessly infused with statism.

Maybe that is why all those professionals are going away to the freer West. Maybe that is why in our countries it is so easy for private interests to use the state in crippling the market for their benefit in the name of national interest, making the rest of us poorer, but filled with national pride.

Is this "national economy" thing something worth defending? Well, there is an entire political and intellectual class that has every interest to convince you that it is. But whether we are speaking of the migration of goods or of minds, it is in the long-term interest of everyone that global movement proceed without hindrance of any sort.

 


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