The quiet march of remittances

By Antoine Clarke | 1 December 2005

A relatively quiet revolution has been taking place all over the world as some of the wealth created by guest workers in developed countries is sent home to provide economic support for families in the underdeveloped world. Time magazine has investigated this phenonmenal direct aid effort:

Mass migration has produced a giant worldwide economy all its own, which has accelerated so fast during the past few years that the figures have astounded the experts. This year, remittances - the cash that migrants send home - is set to exceed $232 billion, nearly 60% higher than the number just four years ago, according to the World Bank, which tracks the figures. Of that, about $166.9 billion goes to poor countries, nearly double the amount in 2000. In many of those countries, the money from migrants has now overshot exports, and exceeds direct foreign aid from other governments. "The way these numbers have increased is mind-boggling," says Dilip Ratha, a senior economist for the World Bank and co-author of a new Bank report on remittances. Ratha says he was so struck by the figures that he rechecked his research several times, wondering if he might have miscalculated. Indeed, he believes the true figure for remittances this year is probably closer to $350 billion, since migrants are estimated to send one-third of their money using unofficial methods, including taking it home by hand.

The great thing about this kind of aid effort is that the money really gets spent on improving living conditions among some of the poorest people in the world, with very little dissipated by administration costs of one sort or other.

Critics might complain that the migrant workers are "siphoning off" money from their host countries. This would imply a "zero sum" view of market activity, that defies economic reality. Yet the men and women who send money home have worked long hours at jobs that most indigenous unemployed youths would refuse or be unable to do. Instead of complaining about migrant workers, we should see them as people who are really doing something for their families and communities.