Memorandum submitted by Roger Ballard,
Director, Centre for Applied South Asian Studies, University of
Manchester
REMITTANCES AND ECONOMIC DEVELOPMENT
ABSTRACT
This is largely a product of the author's longstanding
interest in migratory flows from the Punjab region of Northern
India and Pakistan to the UK, and in the impact which counter-flows
of remittances have on the local economy in and around their villages
of origin. Despite the emergence significant local variations
as between the main areas from which migrants have been drawn,
the development potential of the huge inflow of capital has not
been nearly as fully utilised as it might have been. Working outwards
from this empirical baseline the paper goes on to suggest that
such outcomes—which are congruent with those which can be
observed in areas of high overseas migration all around the globe—are
not so much the outcome of a lack of entrepreneurial skills amongst
migrants and their kinsfolk, but rather a consequence of a whole
series of structural obstacles operating at local, national and
international levels. The combined impact of these obstacles has
been to confine villagers' entrepreneurial activities to a very
limited range of spheres, few of which provide adequate foundations
for the emergence of sustainable patterns of economic development.
The paper closes by offering some suggestions
about the ways in which the spirals of de-development so often
set off by the arrival of migrant remittances could be brought
to a halt through carefully tailored "smart aid" initiatives.
Designed and funded to overcome the most serious local obstacles
to more productive forms of entrepreneurial activity, the object
of such initiatives would above all be to "kick-start"
the hitherto neglected productive potential of the local economy
in areas of heavy overseas migration.
1. THE BASIS
ON WHICH
THIS PAPER
HAS BEEN
PREPARED
Ever since I took up my first academic appointment
as a research associate in the SSRC Research Unit in Ethnic Relations
at the University of Bristol in 1970, my central specialist interest
has been in tracing out both the processes and the consequences
of migration from South Asia to the UK. Over the years (during
which I successively shifted to posts in Leeds and then in Manchester
University) I have conducted extensive fieldwork within South
Asian (and most especially Punjabi) settlements in the UK, as
well as in settlers' villages of origin in India and Pakistan,
and to a much more limited extent in Bangladesh. My most recent
period of intensive research was during 1999-2001, during which
I conducted a project on Kinship, Entrepreneurship and the Transnational
Circulation of Assets, as part of the ESRC's Transnational Communities
Program; early this year I also completed a consultancy for DfID
on Migration, Remittances, Economic Growth and Poverty Reduction.
2. MY EMPIRICAL
STARTING POINTS:
JULLUNDUR AND
MIRPUR
Ever since I began fieldwork investigations
in Jullundur District (India) during the early 1970s, I have been
well aware that overseas migration—and most especially the
large reverse flows of remittances to which such population outflows
invariably give rise—is a major potential spur to economic
development in migrants' villages of origin. During the early
1970s rural Punjab was enjoying the benefits of a "green
revolution", involving the use of new high-yielding seeds,
the application of fertiliser, intense irrigation, and the much
more widespread use of agricultural machinery to handle the much
heavier crop yields. Whilst these new techniques were largely
indigenously generated, their successful implementation required
a fairly high level of capital investment, and in that respect
local families whose kinsfolk had settled in the UK were particularly
well placed to take advantage of the new opportunities. Many migrants
were only to willing to remit funds for the purchase of tractors,
the construction of tube-wells, and the acquisition of machinery
to cope with dramatically higher agricultural yields. That said,
it was equally clear that the arrival of migrant remittances did
not cause Punjab's green revolution: rather they added welcome
gilt to some locally devised ginger-bread.
A decade later I had an opportunity to conduct
intensive fieldwork in the second major source of Punjabi immigration
to the UK: Mirpur District in Pakistan. Here I observed a very
different set of outcomes. Although the scale of the outflow from
Mirpur District was even greater (at least in proportionate terms)
than that from Jullundur, and whilst the scale of the remittance
inflow has been both larger and much more long-sustained, investment
in agriculture has been virtually non-existent. Instead there
have been a series of massive booms in house construction and
in the service sector in general. Hence in sharp contrast to Jullundur's
productively grounded economic boom (which has manifested itself
in small-scale industrial sector no less than agriculture), the
local economy in Mirpur showed no sign of productively-driven
growth; growth there has been, but it is entirely concentrated
in the remittance driven service sector, so much so that whenever
the remittance flow begins to diminish, the impact on the local
economy is extremely dramatic. In a word the Mirpur's local economy
is now almost entirely dependent not just on the inflow of remittances
from overseas. Hence Mirpur's current wealth—which is real
enough in comparative terms in a Pakistani context—is built
on foundations which are almost certainly unsustainable in the
longer run. Most of the District's inhabitants are well aware
of the shallowness of the local economy: in these circumstances
there can be little wonder that amongst young people in Mirpur
the pressure to migrate to the UK continues to be intense (Ballard
2003b, 1989, 1988, 1983).
3. EXPLAINING
DIFFERENTIAL OUTCOMES
Having turned up these striking differences
in outcome, I have spent a good deal of time and effort seeking
to identify the precise factors which best serve to explain them,
and most centrally to challenge a widely held explanation which
seemed to me to be excessively naïve: namely that the Sikhs
from Jullundur District are inherently open-minded and entrepreneurial,
and so were bound to succeed, whilst Muslims from Mirpur have
been handicapped—or so it has been argued—by what
are commonly perceived as the "authoritarian" and "conservative"
character of their faith. Whilst I was perfectly willing to acknowledge
that there were significant differences between the two traditions,
the focus of the argument seemed entirely misplaced. As far as
I could see members of both groups appear to have an equally strong
commitment to entrepreneurship: where they differed was in the
precise character of strategic choices which members of each group
had chosen to pursue.
This produced a dual agenda, the first part
of which was to establish how far members of each group were making
their choices in the context of differing politico-socio-cultural
terrains. On the one hand this led me to explore the impact of
the specific environmental, historical, political and administrative
characteristics of each District, and on the other that of the
equally specific impact of their differing conventions of family
organisation, kinship reciprocity and marriage rules had had on
the way in which each network developed. But whilst such considerations
went a long way towards explaining why migrants from each area
should have followed such strikingly different trajectories of
both spatial and socio-economic mobility—and no less so
at home than abroad—it became increasingly apparent that
I had still left a crucial component out of the equation: namely
the logic and internal dynamics of the entrepreneurial networks
had themselves constructed in order to make the most of the resources
which they found they had available, as well as of the opportunities
in the global system within which they found themselves operating
(Ballard 1991).
This led on to the second part of my agenda,
the development of an analytical perspective the better to comprehend
the internal dynamics of these networks. Although each network
was slightly differently structured, they had in each case provided
their users with a means of circumventing a huge range of exclusionary
obstacles, from immigration controls onwards, and having done
so to exploit all sorts of novel opportunities in the global labour
market. Hence a central focus of my most recent work has been
on the organisation, dynamics and ever-growing reach of these
self-constructed transnational networks. In my view it precisely
the effectiveness and efficiency of such networks which is the
key the success of all those involved in processes of transnational
migration "from below"[31]
no matter where in the developing world they may have their original
roots (Ballard 2003a, 2001).
4. REMITTANCES,
DEVELOPMENT AND
TRANSNATIONAL NETWORKS
IN A
GLOBAL CONTEXT
Within this conspectus, it is quite clear that
the transfer of assets to which these networks give rise is a
major resource for economic development in all those many parts
of the developing world from where these transnational migrants
originate. In his contribution to the most recent edition of the
World Bank's report on Global Development Finance, Dilip Ratha
(2003) calculated that the value of migrant remittances being
passed back to their countries of origin through formal channels
in 2001 was $73.2 billion—a sum very substantially greater
than that delivered through economic and development aid. Moreover
the sum which Ratha quotes is but the tip of an iceberg. Many
migrants use informal channels through which to move their savings
back home, with the result that this form of value transmission
is not recorded in formal banking statistics. Hence there are
good reasons to suppose that the true volume of remittance driven
value transfers is at least double that which Ratha detected in
his sweep through the official statistics. However the exact value
of the multiplier need not detain us here: what cannot be gainsaid
is that migrant workers are now by far the largest suppliers of
development aid to their communities of origin in the Developing
World.
Whilst I am well aware that some analysts might
quibble about the validity my straightforward characterisation
of migrant remittances as "development aid", such a
usage in this context seems entirely apt, especially if one examines
the issue from the perspective of the migrants themselves. Their
willingness to divert such a significant part—and often
the greater part—of their overseas earnings straight back
home can only be understood as being the result of a deep-rooted
commitment to investment in their roots and all they stand for.
However if this is indeed development aid, it is aid of a very
specific character. First of all it is manifestly not country-to-country
assistance: rather it entails the channelling of resources which
have been despatched by workers living in highly localised ethnic
colonies in metropolitan cities, down networks of their own construction
to equally specific networks overseas. Such migrant workers are
not investing in such abstract concepts as "Pakistan",
"the Philippines" or "Sri Lanka": rather they
are investing in the families, the neighbourhoods and the immediate
communities from which they themselves are drawn.
On the face of it such "informal"
development aid appears to be comprehensively superior to that
delivered by formal international agencies. Not only do remittances
arrive with no strings attached, they incur no external debts
and deliver capital resources on a massive scale directly into
the pockets of those who need them most: members of rural peasant
communities in economically peripheralised areas throughout the
developing world. As virtually all commentators are agreed, one
of the most important reasons why economic development in such
areas remains stalled is that peasant farmers lack access to investment
capital. Yet however welcome the arrival of remittances from overseas
may be, outcomes are invariably substantially below the potential
optimum. Whilst local variations are very considerable, one pattern
is all too frequently observed: whilst the arrival of funds from
overseas provides an immense boost to the service sector, most
particularly in house construction, the more productive sectors
of the local economy, and most especially agriculture, begins
to languish.
Yet however sceptical one may be about the long-term
sustainability of patterns of prosperity grounded solely in the
service sector—and which are consequently wholly dependent
on the continuing inflow of remittances—the (short-term)
conditions of prosperity precipitated by the arrival of remittances
in areas where a significant proportion of the local population
have become migrant workers is real enough, and almost always
has far-reaching consequences. These are invariably far from straightforward.
Hence however welcome the sharply increased levels of prosperity
in the specific localities from which migrants have taken off
overseas may be, the networks which are thereby established, and
the ever-escalating flow of persons, ideas and financial resources
through them invariably precipitates all manner of socio-political
tensions and contradictions. As we shall see the resultant contradictions
are no less severe in national and international contexts than
they are more locally. And as one insightful commentator has argued,
it is precisely because such entrepreneurial networks so often
emerge from and are driven by those who stand way out on the global
periphery that their successes soon begin to "undermine the
centre" (Addleton 1992), and thereby to destabilise the established
socio-economic order.
5. THE LOCAL
CONSEQUENCES AND
CONTRADICTIONS PRECIPITATED
BY REMITTANCE
INFLOWS
If we begin by considering the dialectics of
these contradictions from the bottom up, the arrival of remittances
on a large scale soon begins to upset the local status hierarchy.
Some aspects of such disturbances are wholly predictable: to the
extent that the vast majority of those who made up the early waves
of emigrants were (at least in Indian and Pakistani contexts)
young males from households of middling socio-economic rank within
their villages, returnees soon found that they had acquired a
great deal more power to their elbows not only vis-a"-vis
their parents, but also those of their siblings who had not gone
to work overseas, and last but far from least, their wives. Whilst
those who found themselves so sidelined usually swiftly began
to devise counter-measures (South Asian family networks are nothing
if not dynamic), all manner of tensions invariably began to erupt
within recipient families as a result of the massive new inflow
of wealth[32]
Meanwhile at the next level up, those families
with access to such transnational linkages soon become massively
advantaged as compared with those who lack them: established socio-economic
hierarchies in their villages of origin were consequently seriously
disturbed. However there was an obvious remedy to that: richer
families who had hitherto disdained the prospect of sending their
sons to work as mere labourers overseas swiftly to abandon their
previous inhibitions, whilst the poorest families drew on their
links with more affluent patrons, who were often willing to facilitate
their clients' sons' passage overseas. In other words the re-jigged
patterns of wealth and status in the village precipitated by the
arrival of remittances were themselves a powerful spur to further
emigration. As typically occurs in such circumstances, the resulting
processes of chain migration were self-fuelling.
A useful way of envisaging these processes is
as self-constructed escalators which reach upwards from specific
localities in the developing world to equally localised ethnic
colonies in specific cities in the metropolitan world. Migrants—no
less than remittances—move around the globe though tightly
personalised networks. Access to such networks confers very real
privilege: each one provides its members with easy access to an
escalatory process which can transport them swiftly and smoothly
from a position of relative poverty to one of relative wealth;
by the same token it also facilitates the transmission of a large
volume of remittance back to the escalator's starting point. However
each such escalator is highly specific in character. Some merely
stretch to the national capital, others to more distant destinations
elsewhere in the developing world, whilst a select but highly
significant minority stretch into the heart of equally specific
urban centres in one or other of the metropolitan economies of
the developing world. Whilst all these escalators offer those
who stand on them access to entrepreneurial opportunities, it
is of course those which reach into the heart of the developed
world which invariably offer the greatest benefits. The results
are plain to see, and can be observed throughout the developing
world. Wherever escalators of the latter kind have been constructed,
the areas from which they have arisen (which may often be restricted
to a small number of villages) stand out as islands of relative
wealth in the midst of an otherwise much more poverty-stricken
"sea".
Where these "islands" emerge, they
inevitably disturb the established local order. Not only do the
inhabitants of less fortunate areas which lack access to such
escalators—or at least to escalators which lead to such
favoured destinations—tend to become increasingly jealous
of those that do, setting off all manner of socio-political tensions,
but the resultant patterns of economic inequality frequently precipitate
the emergence of yet further migratory movements. If wages are
significantly higher and job opportunities more widespread within
such islands as a result of a heavy inflow of remittances, further
more local escalators will begin to be constructed as the inhabitants
of less favoured areas seek to take advantage of this novel pattern
of opportunities.
6. NATIONAL CONSEQUENCES
AND CONTRADICTIONS
Migrant remittances also tend to precipitate
similar kinds of contradiction at a national level, particularly
when the inflow of funds grows sufficiently large to engage the
attention of the national government. Given that virtually all
governments in the developing world suffer from a severe deficiency
of foreign exchange, the inflow of migrant remittances (once recognised)
is invariably viewed as a Godsend. Not only is the forex inflow
from this source perceived as virtually cost-free, but since it
appears to arrive with no strings attached, it is invariably perceived
as providing a wonderful opportunity to pursue all manner of national
objectives which have hitherto had to be deferred.
But just what are those objectives usually perceived
as being—at least from the perspective of the Ministry of
Finance? The most usual answer is three-fold. Firstly to boost
national forex reserves, virtually come what may. This can best
be facilitated by encouraging further emigration in what are often
explicitly described as programs of manpower export, and by reminding
emigrants that they have a patriotic duty to invest their savings
back home, often in specially designed government bonds and high-yielding
savings account. Secondly to further enhance government revenue
by taxing this income-stream, if not directly then at least by
setting inflated rates for the issue of passports, of visas, departure
taxes, international telephone calls and so forth, all of which
are facilities used disproportionately heavily by migrant workers.
Thirdly to the extent that the volume of funds remitted in this
way are often so large that they cannot be soaked up in immediate
expenditure by their recipients, to draw the excess funds into
deposits in the formal banking system, so hugely improving its
liquidity.
However whilst all the measures can be expected
to provide a major boost to national financial resources, they
also lead one to pose a further set of questions: by whom, for
what purposes and to whose advantage is this massive inflow of
financial resources actually deployed? To the extent that these
issues largely present themselves at a national level, it is officials
in the Ministry of Finance and/or the State Bank who take these
decisions. What, then, do their objectives tend to be, and what
sorts of financial initiatives do they tend to prioritise? In
exploring these complex issues it is worth distinguishing (in
so far as it is possible to do so) the domestic from the foreign
exchange dimensions of the opportunities to which the inflow of
remittances give rise.
6.1 Remittances and the national foreign exchange
account
In many of the world's least developed countries
migrant remittances are now emerging as a major source of foreign
exchange, and very often one whose value is so great that it substantially
exceeds the income generated by the export of goods of all kinds.
When this is so, remittances play a major role in national finances,
and are often the only bastion against a radical devaluation of
the local currency. But whilst most governments take it for granted
that the protection of the value of the national currency is a
vital policy objective, it is nevertheless worth asking just which
segments of the national population reap the greatest benefits
from the fulfilment of that objective. The answer—in most
parts of the developing world—is only too clear. A fall
in the international value of the local currency is likely to
have very little impact on the rural population. Living in near-subsistence
conditions, their propensity to purchase imported goods and services
is minimal; moreover they might well find that the prices they
can obtain for their agricultural will rise if the external value
of the local currency falls, since imported products—including
food products—will become ever more expensive. By contrast
the more one looks towards the cities, and most especially towards
the urban elite, the more the propensity of the population tends
to rise: since elite lifestyles are heavily dependent on goods
and services which must ultimately be paid for in foreign exchange—whether
in the form of cars, televisions, health care for themselves or
education for their offspring—it is their interests, rather
than those of the rural peasantry which are disproportionately
favoured when migrant remittances are used by elitist national
governments as a convenient means of maintaining their local currencies
at radically over-valued levels.
There is a further sub-text to all this in which
migrant remittances also play an extremely important role. In
an effort to conserve the outflow of foreign exchange, many developing
countries also impose strict exchange controls, so much so that
local residents without the necessary political and official connections
find it virtually impossible to gain access to foreign exchange.
As is only to be expected in such circumstances a "black
market" soon develops, especially since migrants are invariably
only too keen to get a better rate of exchange on their remittances
than those offered by institutions directly controlled by the
national government. However in assessing the existence of such
markets it is worth remembering that they only exist—and
indeed are only designated as "black"—because
they operate outwith the formal procedures of the state, and they
do so in counties where the greater part of the commercial activities
also take place within this self-same informal sector. Indeed
the more that this is so, the greater will be the tendency for
migrant remittances not to be channelled into the state-controlled
sector of banking and finance, but rather through the informal
sector. But whilst such developments invariably regarded as extremely
alarming by central bankers, as well as by the IMF's econometricians,
there are few indications that the growth of the informal sector
does much harm to the migrants themselves, or to the local economies
of geographically and politically peripheral regions from which
most of them are drawn. Indeed in those parts of the world in
which the "centre" has disappeared because the state
has effectively collapsed (as is currently the case in both Somalia
and Afghanistan), the entire national economy now operate within
the informal sector. In both cases migrant remittances provide
a substantial part of system liquidity (Maimbo 2003, Shire 2003).
6.2 Remittances and the more local dimensions
of the national economy
Whilst contemporary Somalia appears to be unique
in the sense that remittances now form the national economy's
sole source of foreign exchange, there are many other parts of
the developing world in which the inflow of value from remittances
is substantially greater than that accruing from the export of
goods. However given the salience of value transfers through the
informal system in such contexts, together with the absence of
any econometric data on the scale of such transfers (given that
current data as based on reports received from State Banks operating
solely within the formal sector), figures such as those set out
by Ratha—substantial though may be—greatly underestimate
just how large a part of most national economies throughout the
poorer parts of the developing world are actually supported by
migrant remittances. But even if all that can reliably be said
at present is that the impact of remittances is "large",
absence of precise numerical data does not prevent us from asking
some obvious questions. Just where does all the money actually
go? And who benefits most from its arrival?
At one level the answer to the first question
is quite clear: straight to the rural areas from which the majority
of transnational labour migrants are almost invariably drawn.
Mirpur District in the Azad Kashmir region of northern Pakistan—where
I myself have conducted extensive fieldwork—is one such
area. To non-Mirpuri Pakistanis, the prosperity of such areas
is quite self-evident, so much so that the emigrants' success
elicits active feelings of jealousy even amongst members of the
urban elite. I have listened to many conversations in Islamabad
in which returnee migrants have been mocked for their bizarre
behaviour, such as importing widescreen televisions and enormous
refrigerators to villages which are hardly yet served with electricity
connections. From the perspective of the urban elite returnee
migrants are not only "not-poor", but also have more
money than they know what to do with. Given that overseas development
specialists socialise primarily with members of the urban elite,
it is by no means uncommon for them to incorporate these arguments
into their professional judgements.[33]
There is, of course, a substantial degree of
commonsense logic to such arguments: the living standards enjoyed
by the inhabitants of areas from which mass overseas emigration
has taken place are invariably very significantly higher than
those enjoyed in areas where that has not occurred. However in
assessing the significance of that condition of relative wealth,
it should never be forgotten that one of the principal reasons
why emigration from such areas took off in the first place was
local poverty, and even more specifically the absence of infrastructural
resources such as roads, schools, hospitals, markets and so forth.
Whilst remittances can provide the wherewithal for the introduction
immediate high-tech solutions for some of these deficiencies,
since 4x4s can cope with the absence of made-up roads, generators
with the absence of mains electricity, and mobile phones with
the absence of land-lines, such remedies merely circumvent, and
hence do nothing to resolve, the underlying deficiencies in the
local infrastructure. Moreover as long as such deficiencies are
left unremedied, as is invariably the case so long as national
government priorities are focussed elsewhere, the prospect of
being able to make profitable investments in any sector of the
local economy other than that driven by the arrival of further
remittances will remain remote. The result in Mirpur—as
in many other similarly-placed localities around the globe—is
a sharp decline in agricultural production (which becomes increasingly
unprofitable) in an area with an excess of investment capital
looking for a home. This leads quite straightforwardly to an outcome
which is as paradoxical as it is counterproductive: a condition
of "Capital-rich Under-development" (Ballard 2003b).
Just how can such a paradox best be explained?
No matter how eagerly members of the urban elite may suggest that
"those migrants have far more money than is good for them,
no wonder they don't know how to spend it properly", jealously
self-interested interpretations of this kind are best regarded
as specious. Although members of the urban elite may routinely
describe such labour migrants "illiterate", and the
social and cultural milieu from which they are drawn as "backward",
emigrants from such areas have displayed extremely high levels
of entrepreneurial ability in the course of gaining entry to,
and making the most of opportunities in the global labour market.
Set within that context, the suggestion that those abilities simply
evaporated the moment migrants returned to their home base makes
very little sense. A better explanation is that despite all their
efforts to deploy their entrepreneurial skills on a more sustainable
basis, they were largely stymied by the local obstacles. In other
words an investigation of structural constraints which the inhabitants
of these areas have continued to encounter—rather than allegations
that migrants and their kinsfolk lack the necessary entrepreneurial
abilities to do any better—are much more likely to provide
meaningful explanations of observed outcomes.
One explanation along these lines has already
been noted: if infrastructural development programs tend to by-pass
areas from which high levels of overseas emigration has taken
place on the grounds that they are "not poor", remedies
to the underlying infrastructural deficiencies which caused migration
in the first place will be yet further postponed. Nor will this
outcome necessarily cause much concern to officials in the national
Ministry of Finance. Since such areas host their own self-funded
programs of manpower export, and are consequently highly efficient
producers of foreign exchange, why intervene? Given that the national
economy benefits so greatly from the forex inflow, it would be
idle to do anything to disturb it.
In a further extension of the same argument,
it is worth noting that such areas also provide a vital prop to
the national banking system. Having invested heavily in prestigious
new houses and copious quantities of gold jewellery, the inhabitants
of such capital rich areas invariably place their surplus funds
on deposit in the local banks. Hence whilst bank branches in capital
rich-areas usually have huge sums on deposit, their loan portfolios
are almost always insignificant—at least locally. Migrants'
savings deposited in capital-rich areas consequently serve as
a means of financing loans to customers resident elsewhere—and
in most developing contexts the bulk of such loans go to members
of the elite in the major cities. From this perspective such banking
structures emerge as engines of financial redistribution, drawing
in deposits from the relatively poor, and redistributing their
developmental potential to members of the urban elite. It is also
worth noting one further twist to such sagas. Where the banks
in question are nationalised, as very frequently the case, politically
well-connected borrowers are not only the most frequent recipients
of such bank loans, but their connections often enable them to
avoid ever having to repay them. In such circumstances such a
temporary redistribution of wealth from the poor to the rich can
often prove to be permanent.
Such mechanisms—of which the banking merry-go-round
is but a particularly graphic example—provide a clear illustration
of the way in which a substantial component of the value transfers
to which migrant remittances give rise can be diverted in such
a way as to yet further reinforce the wealth and living standards
of distant urban elites. Moreover the more extensive this transfer
resources becomes, the less funds there will be to improve local
infrastructural resources in areas of high migration, so yet further
reinforcing local conditions of capital-rich under-development,
and hence the propensity to migrate: a vicious cycle if ever there
was one.
Yet although there is clearly a substantial
degree of force in such an analysis, it would be wholly misleading
to use it as a means of falling back into a "migrants as
victims" trope. Such processes are also being actively contested,
not least because a very substantial component of the total remittance
inflow—particularly to the least developed countries—has
now begun to be routed through the informal sector, such that
it circumvents the formal financial institutions created and very
largely controlled by the state. As we have seen the custodians
of the formal sector invariably view the informal sector with
as much suspicion as they do alarm. Hence despite the ever-growing
scale and vitality of this sector of the real economy in much
of the developing world, efforts to suppress it remain as vigorous
as ever—and all the more so since migrant remittances have
now become one of the principle source of liquidity for the informal
sector. From an elite perspective it is easy to see why efforts
to divert remittances flows back into formal channels should be
regarded as such an urgent priority: use of informal channels
quite directly "undermines the centre", as Addleton
puts it. However from the migrants' perspective this outcome is
far from unsatisfactory. To the extent that the national economy
in so many developing countries is run in such a way that its
overwhelming priority is to protect and advance the highly privileged
interests of members of the urban elite who control it, it is
positively in migrants' interests to devise strategies by means
of which to circumvent the formal nets within which the state
seeks to confine them.
7. INTERNATIONAL
CONSEQUENCES
7.1 The role of remittances in the global
economy
The contradictions which migrant remittances
have begun to unleash on a global scale are no less complex, not
least because they are such a big business. A stream of value
transfers well in excess of $100 billion per annum is not to be
sniffed at in anyone's book—not least those of the major
international banks, for whom foreign exchange is a high margin,
and hence an extremely profitable activity. Commissions on international
money transfers through the formal banking system range from anywhere
between 8% and 20%, depending on the sum transmitted and the destination
to which it is sent. Access to a slice of the remittance transfer
business therefore offers extremely rich pickings to those with
the requisite facilities.
But precisely because of the sky-high commissions
charged by the banks, the slow pace with which they transfer funds
to their destination, and the difficulties which relatives so
often experience in retrieving those funds when they eventually
arrive, migrants throughout the world have developed their own
informal modes of money transmission (el-Qorchi 2003). Whilst
the precise way in which these systems are organised and the names
by which they are known varies enormously, the hawala system used
by South Asian migrants—which has its roots in the banking
system on which by long-distance traders in the Indian Ocean region
relied during the pre-colonial period—is one of the largest
and most sophisticated (Ballard 2002). From its hub in Dubai,
the contemporary hawala system of informal value consolidation,
settlement, and deconsolidation not only handles many millions
of dollars worth of migrant remittances every day, but provides
its customers with cash payouts in the most remote destinations
far more swiftly and reliably than does the formal banking system.
Moreover its rates of commission—normally little more than
1%—are far lower than those charged by any bank. No wonder
South Asian migrants most usually prefer to use the hawala system
to send remittances back home—always providing that the
system is available.
7.2 9/11 and its consequences
However the viability of hawala is currently
under threat, largely as a result of efforts to enforce a new
global AML/CFT (Anti-Money Laundering/Control of Finance for Terrorism)
regime to regulate financial transfers of all kinds. Introduced
in the immediate aftermath of 9/11, the new regulations seek to
contain the activities of both drug smugglers and international
terrorists by destroying the financial foundations of their operations.
The principle method whereby it is currently hoped to achieve
these AML/CFT objectives is by requiring financial institutions
of all kinds to systematically enforce detailed "know your
customer" regulations, which—if comprehensively enforced—should
deny both terrorists and drug-smugglers access to the international
financial order, so severely curtailing their activities.
Yet however worthy the objectives of the new
regulatory regime may be, it is far from clear that the overwhelming
bureaucratic methods on which this initiative currently relies
will provide either a viable or an effective means of reaching
its stated goals. Not only do "know your customer" regulations
(at least as currently interpreted) require transactions to be
much more comprehensively (and hence much more expensively) documented
than hitherto, but it is by no means self-evident that determined
terrorists and drug-smugglers will have any difficulty in evading
them. But in addition to these reservations, the new regulations
also have an immediate downside: on the grounds that they are
comprehensively undocumented, informal value transfer networks
of all kinds have come to be regarded as criminally suspect.
One of the central secrets of the success of
the Hawala system (and indeed of all other forms of IVTS) is that
it relies on relationships of absolute trust rather than necessarily
expensive bureaucratic procedures to guarantee the security of
its translocal transactions. As a result its operators are able
to reduce record-keeping to a parsimonious minimum, thereby enabling
them to hugely undercut the much more expensive bureaucratic procedures
routinely deployed within the formal sector. But despite the clear
commercial logic of these practices, hawala operations have found
themselves acutely exposed paranoid speculations in a post 9/11
context. Given that hawala transactions allegedly left no audit
trail whatsoever, that many of the hawaladars were Muslims, and
that their operations facilitated the transfer of huge sums of
money from allegedly unidentifiable sources on a daily basis,
many excited commentators began to suggest that their operations
were not just a front for laundering the profits of drug smuggling,
and since 9/11, but also a major conduit for the finance of international
terrorism. Although little or no concrete evidence support for
these contentions has ever been produced (most of the funds to
support the 9/11 conspirators were routed through a formally constituted
bank in Florida) the impact of this excited discourse on global
hawala operations has been substantial. In 2002 the US authorities
closed down the al-barakat network, which had hitherto been the
principle vehicle for the transmission of migrant remittances
Somalia, on the grounds that it was merely a front for the transmission
of funds to support international terrorism. Al-barakat has since
been replaced by several similarly structured organisations which
have so far managed to satisfy the AML/CFT regulators; Meanwhile
in the UK Customs and Excise has brought a number of successful
prosecutions against a number of UK hawaladars, despite Customs'
singular lack of success in following the money trail back to
any major heroin importers in the course of the massive surveillance
operations which resulted in these prosecutions[34]
(Ballard: 2003c).
7.3 The Banks-v-Hawala: formal and informal
systems compete head to head
Given the ever growing scale of the global remittance
market, together with the severe constraints under which Hawala
systems and their equivalents now find themselves operating, a
number of formally constituted banks have begun to make ever more
concerted efforts to move into the remittance market. Nevertheless,
they have encountered considerable challenges in the course of
so doing. On the one hand they have found it extremely difficult
to conform to the letter of the new AML/CFT regulations: Western
Union, one of the leaders in the field, was recently fined US$
1 million for violating the rules. On the other they have found
there is no way in which they can begin to match the low level
of hawaladars' commission rates, even when making payouts in urban
centres; meanwhile the cost of making cash deliveries in the remote
rural areas from which the majority of labour migrants are drawn,
and whose interests and needs the hawala system served so effectively,
are proving to be prohibitive.
Just what outcome will eventually be precipitated
as formal and informal value transmission systems begin to compete
head to head is most unclear. In principle hawaladars occupy a
position of clear competitive advantage: they can fulfil the task
far cheaply, expeditiously and reliably than can the formal sector.
Moreover in doing so the success of migrants' self-constructed
networks offer much the same kind of challenge to the established
global order as they do nationally: in both cases they undermine
the centre. However the centre clearly has the wherewithal to
resist such challenges, no less globally than nationally. If the
US Treasury manages to enforce its regulatory objectives with
sufficient vigour, the formally constituted banking sector might
well succeed in eliminating IVTS—although if it did so,
it would of course be the migrants who would have to bear the
additional transmission costs. However the success of migrants'
strategies of transnational entrepreneurship "from below"
in so many other contexts makes one doubtful as to whether the
centre will indeed hold.
8. REMEDIES:
HOW MORE
MIGHT BE
MADE OF
MIGRANT REMITTANCES'
DEVELOPMENT POTENTIAL
That remittances—and especially those
sent back by migrants who have managed to step across the huge
disjunctions between economic opportunities currently available
as between the developing and the developed world—have buried
within themselves the capacity to comprehensively transform economic
conditions in their villages of origin is by now self-evident.
However what should by now be equally clear is that virtually
all the successes which they have achieved are not only the outcome
of their own efforts, but efforts which have invariably been deployed
in the face of various forms of structural adversity. It is precisely
by making the most of their own self-generated resources, and
by using those resources—whatever they happened to be—that
migrants have devised strategies by means of which to circumvent
all the many obstacles which they have encountered in the course
of their travels. Hence from the migrants' perspective it is their
own networks—composed of and devised by people like themselves,
and ordered in terms of equally specific values, assumptions and
patterns of reciprocity—which are their greatest asset.
Outsiders, in their experience, are the very antithesis of insiders:
always ready to make a quick buck in pursuit of their own alternative
interests and concerns. If so, it also follows that outsiders
deserve, by definition, to be paid back in the same terms.
To the extent that this is so, efforts by members
of more formally constituted agencies to provide "aid"
or "assistance" in such circumstances is likely to prove
to be an extremely challenging task. Since all migrants' experience
teaches them that best most effective way of circumventing obstacles
is to avoid the expectations and strategic conventions of the
established order, and to rely instead on alternative strategies
which they themselves have constructed, members of transnational
networks tend to be extremely sceptical about the real utility
of all forms of external advice and support, no matter how well-meaning
the intentions of those who offer such advice may be. So it is
that migrants' initial reaction to such schemes is very often
to subvert such schemes for their own purposes—much to the
consternation of their supposed benefactors.
In circumstances such as these international
agencies seeking to promote more sustainable forms of economic
development can only expect to find themselves faced with an extremely
sceptical clientele, but also to find themselves forced to discard
many of their established paradigms. By definition those involved
in such networks are "not-poor" in an absolute sense,
for they have already begun actively to remedy the positions of
marginalisation in which they originally found themselves; hence
it makes little sense to regard them as helpless victims of overweening
socio-economic pressures, whose lack of skills and insights is
so comprehensive that they are effectively starting from scratch.
Yet despite the manifest entrepreneurial success of transnational
networks, their achievements should not be over-romanticised.
Close examination of the development of any given network invariably
reveals that each of the niches in which they have managed to
colonise—no less at home than overseas—have been carved
out in the face of powerful forces of socio-political marginalisation.
Nor are their current strategies, whatever they happen to be,
the acme of perfection. A major part of the secret of such networks'
success is that their members are constantly on the look-out for
better, but hitherto overlooked or unrecognised opportunities.
Hence whilst members of such networks are invariably wary of the
bona fides of outsiders, and sensibly sceptical of proffered advice,
they are rarely so short sighted as to reject it out of hand:
their principal criterion is will it work—for them, and
in their own particular circumstances? These folk are cool customers.
As a result experienced members of transnational
networks are much more likely than most to challenge the unspoken
subtext which all to often still underpins even the most well-meaning
development programs: that because those to whom assistance is
offered are more or less helpless victims of adverse circumstances,
outside experts will always be able to provide more effective
solutions than they themselves have hitherto been able to devise.
If such pitfalls are to be avoided, development agencies need
to adopt a much more subtle approach. Viable initiatives must
not only recognise and respect, but actively seek to build upon
the resources and strategic solutions which members of local networks
have already devised and implemented. To have any chance of doing
so, all such initiatives must at the very least include three
following components:
(i) A comprehensive appreciation of the precise
character of the constraints and opportunities within which members
of the local population find themselves operating, given the historical,
social, economic, political, cultural and religious features of
their immediate environment.
(ii) An equally rich appreciation of the
strategic initiatives which members of the local population have
already devised in the course of circumventing the worst of the
obstacles confronting them, and of making the most whatever opportunities
they have so far been able to identify.
(iii) Given such understandings (for they
must always come first), to help them to identify additional options
which could supplement those which are already in place, as well
as the ways in which they add further entrepreneurially valuable
skills, insights and understandings to those which are already
in place.
However straightforward these principles may
seem, my own experience suggests that they are very rarely applied.
Indeed in all my experience as a fieldworking anthropologist the
only initiatives I have encountered which appeared operate in
ways broadly congruent with these principles were those sponsored
by the Aga Khan Foundation. To be sure few of these initiatives
focused on areas from which heavy overseas migration has taken
place: rather most aimed to spark of higher levels of economic
development in localities where poorer sections of the now globally-distributed
Ismaeli community still live. However the most significant aspect
of these initiatives is that they are financed—and very
largely staffed—by members of a single transnational network.
There are clearly lessons to be learned here.
The Aga Khan Foundation apart, I regret to report
that I have not yet come across details of any really successful
development initiatives in areas of heavy overseas migration,
whether from the Indian subcontinent or anywhere else. Nevertheless
the broad parameters of the kinds of initiative which might indeed
be more successful are comparatively easy to spell out.
8.1 Structural constraints on the more positive
utilisation of migrant remittances
Starting from the top down, a number of issues
self-evidently need to be addressed at a global level. Most saliently,
obstacles placed in the way of the speedy, reliable and economically
efficient delivery of migrant remittances to their destination
can only be regarded as unhelpful. Of course it is entirely reasonable
other issues, such as AML/CFT, should not be overlooked; however
it is entirely unreasonable to clamp down indiscriminately on
migrants and their remittances simply because intelligence agencies
need scapegoats behind which to hide their failure to contain
either terrorism or drug trafficking.
However the IVTS issue is but the tip of the
iceberg, for labour migrants invariably find themselves up against
in all the contexts in which they operate, whether at home or
abroad. Moreover in a constant paradox, the more successful their
efforts to build transnational networks by means of which to circumvent
those conditions of marginalisation become, the more the contradictions
they find themselves facing tend to intensify. As we have seen
efforts to constrain their transgressive successes can be observed
at every available level, local, national and even international.
However the very fact that migrants have found it necessary to
move elsewhere in search of a better future underlines a crucial
dimension of their predicament. No matter how strongly they may
be committed to the betterment of conditions in their home base,
the obstacles which cluster around them there are invariably far
more deeply entrenched than they encounter overseas: otherwise
there would be no need for mass migration. It is also worth noting
that the prospects for stimulating home-based focused development
initiatives are limited by another factor: interest in and commitment
to doing so is very sharply attenuated amongst migrants' overseas-born
offspring. The window of opportunity within which more positive
remittance-financed initiatives might be implemented is therefore
sharply time limited.
Such reservations apart, just what shape might
initiatives of this kind actually be expected to have? In so far
as infrastructural deficiencies are a major obstacle to progress,
it is worth remembering that migrants have very frequently taken
some steps to these issues on their own account: collectively
organised efforts to construct shrines and temples, to pave the
streets of villages, to build schools, clinics and even hospitals
can be observed in every locality from which large-scale overseas
migration has taken place. However the prospect that more substantial
infrastructural projects—such as the construction of highways,
bridges, dams, electricity grids and so forth—might be funded
through such network-based voluntary initiatives appears to be
remote in the extreme. No matter how great the collective benefits
which such initiatives might be expected to precipitate, they
are of such a scale as to be unlikely to be funded by any agency
other than the state. But if national governments in the developing
world continue (as seems likely) to set their priorities elsewhere,
other stakeholders—such as HMG—might well see it as
being in their interests to intervene.
8.2 The prospects for "smart aid"
With such considerations in mind the report
which I prepared for DfID (Ballard 2003d) makes the case for implementing
a series carefully targeted "smart aid" initiatives.
Deployed in and around the capital-rich rich "islands"
precipitated by the arrival migrant remittances from the UK, such
initiatives would have two complementary objectives. Firstly to
remedy specific deficiencies in the local infrastructure, thereby
removing key blockages with had hitherto stood in the way of implementing
the area's inherent developmental potential; and secondly to promote
and support more sustainable—but nevertheless comprehensively
network-friendly—local entrepreneurial initiatives.
It should be emphasised that the latter component
of the exercise is just as important as the former. It is unrealistic
to expect that the removal of infrastructural blockages would
be sufficient, in and of itself, to stimulate sustainable growth
in an otherwise stagnant local economy. Hence the need to complement
such initiatives with active efforts to identify novel, but more
profitable, forms of income generation which make the most of
locally-specific environmental resources. For example it might
well be the case that incomes could be radically improved if farmers
abandoned the largely unprofitable cultivation of food grains
in favour of higher value crops such as vegetable and fruit; however
it goes without saying that such profits could only be realised
if there was a ready market for these products in neighbouring
urban centres, together with a transport infrastructure to ensure
their timely delivery.
However it should be emphasised that I am in
no way suggesting that "smart aid" initiatives should
endeavour to run such fruit and vegetable farms, marketing agencies
and their associated distribution networks. Quite the contrary.
The objectives of the initiative would be much more parsimonious:
namely to establish—largely on the basis of in situ empirical
research—just which crops might best fill high value slots
in accessible markets, how those crops might best be cultivated,
marketed and distributed in such a way as to make maximum use
of locally available resources. From this perspective the central
aim of the initiative would be to research potential solutions,
and to test out their economic viability. Final implementation
would be left to local entrepreneurs, in the confident expectation
that once the profitability of such activities within that specific
local context had been demonstrated, others would swiftly pick
up the baton and run with it.
9. CONCLUSION
Whilst Dilip Ratha has rightly insisted that
migrant remittances are "an important and stable source of
external development finance", and one whose potential for
stimulating economic growth has hitherto been largely overlooked
by those who explore such issues from the top down, that has certainly
not been the case from the perspective of millions of migrant
workers working from the bottom up, who have for many years been
sending billions of dollars of investment funds back to their
home villages. In just the same vein it is also worth remembering
that even if it is the case that only a very small part of the
developmental potential of these immense flows of funds have as
yet been liberated, that is not for want of efforts to make more
of that potential by the migrants themselves, by their overseas-born
offspring, or indeed by their relatives who stayed back home.
Neither absolute poverty nor lack of capital nor lack of entrepreneurial
ability have been the central obstacles to the generation of more
sustained patterns of economic growth on the back of these inflows:
institutional, structural and infrastructural constraints have
been the principal reasons why so little has yet been made of
these opportunities.
Such failures are now having much more than
local consequences. Given that few parts of the under-developed
world—including its most economically and spatially peripheral
regions—are still untouched by long-distance migration,
the prospect that the vicious cycles of de-development are currently
emerging throughout the developing world (as evidenced by explosive
patterns of urban growth, especially in the very poorest of countries)
can only be described as alarming in the extreme. We are all stakeholders
in the negative consequences of such outcomes. Such de-development
further disadvantages those unfortunate enough to find themselves
confined to the underdeveloped periphery, so yet further reinforcing
their propensity to migrate. But if such migration proves unstoppable
not only will metropolitan centres—whether in the developed
or the developing world—become increasingly overcrowded,
but as their rural peripheries are drained of their populations,
so their productive potential will steadily decline, thereby yet
further fuelling the propensity to migrate. As long as policy
initiatives and institutional structures routinely favour the
metropolis over the periphery, the urban over the rural and the
formal over the informal—as they clearly do at present—a
vicious cycle which leads to an ever greater concentration of
people and resources in metropolitan areas, and a parallel process
of de-development in the countryside seems set to continue. To
be sure members of transnational networks may continue to try
to buck this trend for a while. But given that their capacity
to subvert the structures of the established order is of necessity
strictly limited, and that they also have access to alternative
arenas within which to deploy their entrepreneurial skills, the
prospect that they will achieve any great degree of success on
this front. Instead it seems far more likely that they will follow
similar trajectories to those devised by their counterparts "from
above" by taking themselves and their networks ever more
comprehensively offshore.
As should now be self-evident, this paper is
no way the last word on these issues: instead it is best regarded
as a contribution to a wider debate about an increasingly significant
dimension of the dynamics of the contemporary global order. In
highlighting the impact which informally structured transnational
networks have begun to have on so many spheres of global activity,
I trust this paper will provide the committee with some useful
food for thought.
BIBLIOGRAPHY
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presented at a World Bank/DFID Conference on Migrant Remittances:
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http://www.art.man.ac.uk/casas/pdfpapers/remittances.pdf
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and Harriss, J. (eds) The Sociology of Developing Societies:
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Rose, David (2001) "Opium of the People"
The Observer Sunday July 8, 2001.
Ratha, Dilip (2003) "Workers' Remittances:
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Shire, Saad (2003) The operation of Dahab-shiil
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31 I owe this term to Alejandro Portes (1997) and his
collaborators (Smith and Guarnizo, 1998), who drew a clear and
extremely illuminating contrast to processes of globalization
emanting "from above", and which have become the principal
means whereby Euro-American interests bear down hegemonically
on the non-European world, and the countervailing forces of "globalisation
from below" which have recently begun to be unleashed with
considerable success by migrant workers and their offspring. Back
32
Gardner's account of "Londoni" villagers in Sylhet (Gardner
1995) provides some extremely illuminating. Back
33
Whilst in Islamabad during the course of a fieldwork trip in 2000,
I called the DFID office in the High Commission suggesting that
it might be mutually profitable if I discussed my research with
a member of their staff. However, I was very firmly informed that
Mirpur lay out side DFID's area of concern, since its population
was manifestly "not-poor". Since then, however, DFID's
priorities have changed substantially. Back
34
In the context of their manifest lack of success in catching industrial-scale
heroin importers red-handed, Customs and Excise recently announced
that nearly a quarter of its specialist staff had switched their
attention to "following the huge amounts of money being sent
through a network of bogus travel from Britain via Dubai to Pakistan
on behalf of Turkish and Pakistani traffickers" (Rose 2001).
Although Customs and Excise have by now brought successful prosecutions
against most of the Hawaladars to which they appear to have been
referring, no evidence that their investigations had led them
to any major heroin importers was introduced in any of these trials.
In the light of the fact that Customs still does not appear to
found its way to its real targets (evidenced by the fact that
the street price of heroin in the UK has continued to fall) there
appears to be a very real prospect that the Hawaladars currently
serving long sentences for money-laundering are no more than convenient
scapegoats whose sentences serve to occlude on-going investigative
failures by both Customs and Excise and the Intelligence Services. Back
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