Keith Rankin: Whose Brain Drain?

Thursday, 29 November 2001, 9:26 am
Column: Keith Rankin

When we think of the "Brain Drain" we tend only to think of the emigration of educated New Zealanders. (In the case of emigration to Australia, we include all New Zealanders. Even minimally educated New Zealanders, Sir Robert Muldoon once noted*, are relatively brainy in Australia!)

If someone says, "but what about our educated immigrants?", we tend to just think of those immigrants as offsetting the emigrants. Rarely do we pause to think about the brain drains of the poorer countries from whom a substantial number of our graduate immigrants come from.

Citizens of richer countries should always reflect on the global consequences of their countries' activities, and try and formulate national solutions that support rather than aggravate the global problem. "Human capital" is a classic example of a national issue that cannot be understood without an appreciation of its international dimension.

The brain drain is a global phenomenon that happens to both hurt and benefit New Zealand. While some aspects of this migration of brains towards the richest parts of the richest countries are problematic with respect to both global equity and global economic efficiency, a ban by any nation of international "economic" migration is not a solution.

A large proportion of the world's education is funded by the people of relatively poor countries. Much - especially school education - is funded by taxation. Most of the rest is funded by students' families. And a small portion is funded by people in richer countries; taxpayers and sponsors.

An ideal situation would be to use retained dividends to fund a larger proportion of the education "business", much as other businesses save large parts of their revenues. So what are the returns on the world's education outlays, and who receives the bulk of those returns?

Consider Sri Lanka. A country with very high standards of public education, and a country which has exported quality brains to the four corners of the world. Other countries almost certainly capture the lion's share of Sri Lanka's education dividend. Yet Sri Lanka probably gets just enough of that dividend to make its commitment to education pay. Much of that present return to Sri Lanka is through remittances from educated Sri Lankan's living outside of Sri Lanka.

Would Sri Lanka be better off if the rest of the world refused to accept migrants from Sri Lanka? Almost certainly not. Sri Lanka seems to be better at creating than employing graduates.

It's not that Sri Lanka cannot use its graduates; rather Sri Lankan employers cannot pay as much for educated Sri Lankan workers as can employers in other countries. Forcing Sri Lankan graduates to stay in Sri Lanka would simply reduce the size of global return to Sri Lankan education.

Still, if Sri Lanka is to ever become a rich country, it has to keep a larger share of its education dividend while continuing to use its educational excellence to generate a substantial amount of global income.

Therefore the challenge is twofold: to create a world economic order in which educated Sri Lankan's are as productive in Sri Lanka as they are out of Sri Lanka; and to create a system of global education property rights which would necessarily return a large proportion of the global education dividend to the educators.

Foreign aid and sponsorships do this in a totally inadequate way. They are analogous to Victorian-era charity, an ad hoc precursor of the modern welfare state.

There are two approaches that might work. One is that all employers, globally, should pay a levy to those who funded the education of their workers. This would lead to a set of global "transfers" (strictly "dividends") from the richest parts of the world to all parts of the world. The net flow would help to offset the present net flows of private property income that favour the richest people in the richest nations.

The second approach would be to properly account for the GDP of each country, through well established techniques such as growth accounting. All countries' governments would contribute to a global education fund from which education dividends would be paid. Education dividends would be paid, proportionately, to the suppliers of public education.

If the world was divided into a number of regional super-economies - what I have called elsewhere "commonwealths" - then the kinds of supports that existing federal governments pay to their constituent states could be extended to the commonwealth level. That would help, given the present unlikelihood of a truly global solution being implemented.

Even bilateral solutions would help in the interim. Australia, for example, could be paying New Zealand substantial education dividends. In turn New Zealand could pay education dividends to India, Sri Lanka, the Philippines, South Africa etc.

Once countries receive adequate and reliable education dividends, they will be able to pay higher salaries to educated workers, hereby enabling more of those workers to be employed in the lands of their birth. And there will be an incentive for poor countries without the educational infrastructure of, say, Sri Lanka, to improve their systems of public education.

Educational property rights represent an important kind of property right that straddles public and private. As such, they make full sense to people who extol the importance of private property rights. At the same time, they should help to remove any inhibitions that continue to discourage many of us from acknowledging public property rights as a legitimate source of proprietorial income. Further, because the lack of recognition of educational property rights is one of the negative aspects of globalisation, the fact that such rights are capable of recognition represents a powerful reason why globalisation may not be inherently bad for humankind.

In the meantime, New Zealand immigration is about to become more difficult. But not for people who have received a good education in their countries of origin and from whom we can expect to capture the larger part of the return on their education.

*Muldoon said: "When New Zealanders emigrate to Australia, the average IQ of both countries increases."

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

Contact Keith Rankin

• Website - Kieth Rankin