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Friday, October 10, 2014

An even larger force than remittances



Today's TedTalk features Dilip Ratha, talking about the hidden force in today's global economy -- remittances.
Here is a fact that might surprise you: 413 billion dollars, 413 billion dollars was the amount of remittances sent last year by migrants to developing countries. Migrants from developing countries, money sent to developing countries — 413 billion dollars. That's a remarkable number because that is three times the size of the total of development aid money. And yet, you and I, my colleagues in Washington, we endlessly debate and discuss about development aid.
Indeed, there is much to love about remittances apart from the fact that they're massive and have already surpassed foreign aid. As Dilip points out, they act as insurance, usually being sent when unfortunate events occur. We know this in the Philippines, as typhoon after typhoon, we have come to benefit from donations of our brothers and sisters abroad. Remittances are also properly targetted, as opposed to aid or government programs that we sometimes suspect are corrupted. Remittances go straight to the pockets of those who need them, because why else would a household send a member abroad if they did not need additional money?

But in the end, all of this of course might just be the tip of the iceberg. Migrant savings could be massive as well, since migrants do not send back everything. We do not have a great idea on how much migrants bring home, when they do eventually return. And what do they use that money for?

But even if migrants don't return, would that at all be bad? Imagine a world where poor migrants were able to bring their whole families abroad and had no need to send remittances? Migrants could double, even triple, their earning power. There are big gains that could be made. Dilip didn't say, but a friend once remarked, one sure fire way to increase the amount of remittances is for richer countries to allow more poor workers from developing countries to come in.

Remittances are today's hidden force in the global economy. But an even larger hidden force could be international migration.

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