FOCUS: How the Refugees Smuggled Keynes Back from His Exile

FOCUS: How the Refugees Smuggled Keynes Back from His Exile

Peo Hansen

The European Union is beset with crises. Presently, the one topping the headlines is the so-called refugee crisis, including all that has followed in its wake of intergovernmental vitriol, border controls between EU members, and collapsing Dublin and Schengen systems. But the refugee crisis is just one amongst many in the big family of migration-related EU crises. Another one concerns the fast-aging EU’s ballooning ‘demographic deficit’, a crisis calling for millions upon millions of new labour migrants that seem out of reach; or as an Irish Times (2013) headline captured it: ‘Is Europe on the verge of demographic collapse?

This leaves us with a puzzle. How should we understand the EU’s dual and seemingly contradictory objectives of less migration, which is the mantra of the refugee crisis, and more migration, which is the mantra of the demographic crisis? Would it not seem reasonable to expect that the refugees be greeted as a first, albeit modest, step towards reducing the EU’s gigantic demographic deficit? As one report in the Financial Times (2016a) had it, commenting on the draconian efforts by some EU members to keep refuges out: ‘Poor demographics suggest they should welcome an influx of fresh workers. Finland is, for example, the most rapidly ageing country in the world behind Japan.’

Given the ongoing EU efforts to block the entry of refugees, it is easy to fall for the seemingly ultra-obvious notion that the EU wants to minimize migration in all its forms. To be sure, the EU’s asylum policy is replete with physical, virtual and legal fortifications aiming to keep refugees out, which also explains the tens of thousands of people who have died in the Mediterranean in recent decades. Since EU cooperation on asylum policy began in the late-1980s, the EU’s objective has been quite unequivocal about not wanting asylum seekers on its territory.

But, if Fortress Europe – as another way of expressing the objective of minimizing ‘inflows’ – has meaning when it comes to asylum policy, it fits poorly in other areas of EU migration engagements. For if the refugee crisis calls for minimizing inflows, the EU’s demographic crisis calls for maximizing inflows. In its 2005 ‘Policy Plan on Legal Migration’, the European Commission warned that unless the EU manages to drastically increase labour immigration the EU’s working age population is expected to contract by some 52 million by 2050. Furthermore, as is underscored in the Commission’s ‘2012 Ageing Report’, looking only to 2020 the EU would need a net migration of 25 million in order to keep the working-age population stable at current levels. According to the ‘2015 Ageing Report’, the old-age dependency ratio is projected to take a huge turn for the worse over the period 2013–2060, the Union moving ‘from having four working-age people for every person aged over 65 years to only two working-age persons’.

A large-scale increase in labour migration has become so urgent that the then Home Affairs Commissioner, Cecilia Malmström, referred to it as a matter of ‘our economic survival.’ The EU Commissioner for Internal Market and Services, Michel Barnier, said in 2011: ‘We need immigration to guarantee the sustainability of our welfare systems, and the dynamism of our economy.’ The member states, however, have not answered the Commission’s frequent calls and neither have they opted for common EU policies on labour migration. Hence Brussels’ increasingly pessimistic tone; or as Malmström put it, when referring to the necessity of stimulating labour migration: ‘But it is politically impossible to attain in today’s Europe.

But, if the Commission mourns the political impossibility of launching large-scale labour migration to the EU, we must ask, why does it not celebrate the current large-scale refugee migration as a compensatory gift from heaven? Certainly, the number of refugees is nowhere near satisfying the Commission’s labour migration demand projections. But still, should not the refugees be seen as a crucial first step in the right direction? So far, however, no such synergetic reasoning is to be found on Brussels’ agenda. Instead of seizing the moment to try and convince the member states to perceive of the refugee arrivals not as a crisis but rather as a demographic and economic growth opportunity, the Commission has gone ahead and spent all its energies on devising new measures to prevent refugees from entering the EU.

In order to understand why this, from the perspective of the European Commission, does not constitute a contradiction we need to know more about the regime within which Brussels anticipated large-scale labour migration is to be managed. The key terms here are circular migration and security, with circular migration being defined as ‘migrants coming to the EU for short periods and going back to a third country after the end of the contract’ (EC 2014). That is to say, the Commission’s policy builds, firstly, on the conception that labour migration chiefly should be of a temporary nature, lacking any guarantees (or visions) of paths to citizenship; secondly, it should be strictly demand-driven from a labour market perspective; and thirdly, it is set up to be jam-packed with control mechanisms so as to guarantee security and avoid any forms of ‘unwanted migration’. Already we can spot the obvious mismatch between external labour migration and the current entry of refugees, given that refugee protection and the asylum system have a penchant for long-term stay and permanent residence provisions, or, at least, make people less deportable. In addition, the asylum process is seen as slow and costly due to a heavy legal apparatus and rarely present fast-tracks to the labour market.

In the eyes of the European Commission, then, refugees cannot be welcomed as a much-needed demographic labour boost. They simply do not live up to the criteria set for how labour migration should be managed. These criteria apply exclusively to the austere category of the temporary and circular migrant. As such, the labour migration regime propagated by Brussels tallies with the overall austerity regime imposed by governments and EU institutions.

Let’s pause here to recall the earlier reference to the then Home Affairs Commissioner Malmström and her pessimistic tone regarding a large increase of labour migration, claiming that such an undertaking is ‘politically impossible to attain in today’s Europe.’ Yet, in the autumn of 2015 a window of opportunity seemed to have opened for this undertaking, with the two main receivers of asylum seekers, Germany and Sweden, invoking what I would like to call the ‘refugee dividend’ to defend and explain why their admission was not only justifiable from a humanitarian standpoint, but why it was also economically rational.

The dismal demographic outlook, they claimed, simply spoke for itself. It was done, as one Leader in The Economist (2015) put it at the time, ‘not just for moral reasons but for selfish ones, too’. In September 2015, Germany’s Interior Minister, Thomas de Maizière, defended the admittance of refugees in the following terms: ‘We need people. We need young people. We need immigrants.’ He added: ‘All of you know that, because we have too few children.’ ‘A country with a decreasing population is a stagnating country’, said Sweden’s minister of migration when maintaining that asylum seekers needed to be seen as ‘an investment for our country.’ Commenting on Sweden’s high number of asylum admissions, the Swedish prime minister, Stefan Löfven, put it similarly at an EU meeting in Brussels in June 2015. While the undertaking was not frictionless, it was ‘an asset’: ‘We must recognise that if we do not do this now, we are going to have a gigantic problem in a few years.’

In the business press and parts of the corporate world a buzz was created around the refugee dividend. Daimler CEO Dieter Zetsche’s spoke of young and skilled refugees as ‘just the sort of people we’re looking for’ (Financial Times 2015b). Researchers chimed in too, some claiming that the business community was leading the way in showing governments the upside posed by refugee migration, hailing humanitarian efforts extended by corporate giants such as Google, Federal Express, Facebook and JP Morgan Chase. Such charitable contributions walked hand in hand with ‘a business opportunity, as new arrivals offer their talents and knowledge to forward-thinking firms.’ In this way, Khalid Koser and other scholars argued, corporations were doing what ‘politicians in fear of (or in thrall to) xenophobic currents have struggled to accomplish’, namely to ‘make the case for the bright side of the refugee influx: it can help close Europe’s demographic deficit, plug gaps in the labour market, and supply a cohort of young workers and taxpayers for the future.’

What such accounts overlooked though, was that this was precisely the message that the governments of Germany and Sweden kept repeating … until they stopped repeating it. In September 2015 the sentiment was that ‘Germany’s generosity towards the refugees shows no sign of abating’. Come December, and we had gotten used to a different beat, with Angela Merkel imparting that ‘we took on board the concerns of the people, who are worried about the future, and this means we want to reduce, we want to drastically decrease the number of people coming to us’ (Reuters 2015). Come January and German finance minister Wolfgang Schäuble’s decides to go public with some measured vindication of Viktor Orban: ‘To be honest, we have to admit that not everything Hungary has done has been wrong.’ (Süddeutsche Zeitung 2016). And come February and Germany’s deputy finance minister, Jens Spahn (2016), had this to say: ‘If we do not manage to reduce the numbers coming in significantly, and soon, the refugee crisis has the potential to tear German society apart, politically and culturally.’

This U-turn just makes the initial governmental responses in Germany and Sweden seem even more remarkable and un-European. They stood in glaring contrast to the spiteful rhetoric and policies exhibited by scores of EU members. For the first time in the thirty-year history of EU asylum policy cooperation, arguably, it looked as if two members were about to break ranks, parting with the EU’s established policy of refugee prevention to instead advocate a policy of refugee admission. The EU’s refugee austerity was finally challenged by a bid for refugee expansion. Or so it seemed for a few short months in the summer and autumn of 2015.

I have already explained why Brussels was not swayed by Germany and Sweden’s invocation of a refugee dividend. But why, then, did they stop invoking it? To begin with, the sudden policy shift in Germany and Sweden is not satisfactorily explained with reference to a simple caving in to racial austerity à la Denmark or Hungary. To be sure, Berlin and Stockholm do act out of ‘fear of […] xenophobic currents’, as Koser put it above. Still, this only goes so far in explaining the abrupt shift from a policy of ‘welcome’ to one of rejection. In moving towards a deeper explanation we need to say something more about austerity, thus adding the alleged financial peril posed by refugees. Or to state what ought to be quite obvious; that is, in order to challenge refugee austerity in today’s EU this necessarily also implies challenging the EU’s master regime of fiscal austerity. Otherwise the first will only go as far as the latter allows.

Berlin and Stockholm’s initial responses were thus not naïve in the sense of failing to anticipate, as the prevailing opinion has it, that there were both material and public tolerance limits as to how many refugees could be admitted. Rather, what they failed to anticipate was that saying welcome to refugees inevitably would have required saying goodbye to austerity writ large. What was truly naïve, then, was the failure to reckon with the fact that the refugee reception would require huge public investments and huge public planning efforts.

Already in the early autumn of 2015 finance ministries were starting to grumble. Since then the grumble has grown into a roar, with finance ministries’ warnings going in tandem with media images of refugees illustrating ill-boding headlines about ‘Ballooning Refugee Costs’ and ‘Asylum Costs: Germany’s Budgetary Burden’. Underneath the latter headline in Handelsblatt the introduction read: ‘A surging population of refuges in Germany could burst its balanced budget with billions of euros in added outlays.’ The fact that Germany simultaneously could report a record budget surplus of some 20 billion euros has done nothing to temper the crisis mode over refugee costs. On the contrary, Schäuble has just become even more adamant that the country’s fiscal health hinges on a drastic reduction in refugee numbers, his deputy, Spahn, adding that ‘[m]oney for other things that we might want is simply not there.

This message, that spending is reserved for unwanted refugees, whose numbers need to be drastically cut so as to not sabotage the budget any further, has antagonized the social democratic coalition partner, which, in February 2016, instead proposed a general increase of necessary social welfare spending. Sigmar Gabriel, the SPD leader and vice chancellor, warned that the singling out of refugees as the only spending item ran the risk of being divisive. That is, by maintaining that a budgetary surplus takes priority over social cohesion, the CDU, Gabriel claimed, becomes complicit in the current right wing radicalization. Whereas Merkel’s response reiterated the importance of sticking with a balanced budget, Schäuble’s was implacable, denouncing Gabriel’s intervention as ‘pitiful’.

The Swedish finance ministry has adopted a similar outlook, reaffirming its commitment to the budget ceiling while at he same time underscoring that today, as stressed by the finance minister, Magdalena Andersson, ‘the margins under the ceiling are way too thin’ and that ‘[t]his is due to Sweden having admitted an exceptionally large number of asylum seekers.’ Precisely because of these high refugee costs, the government feels obliged to cut projected spending in a number of areas, while also making necessary adjustments to keep refugee costs in check. In addition, the government, just like its German counterpart, has been very vocal about ensuring the return of huge numbers of rejected asylum seekers.

Berlin and Stockholm fear that the refugee admission will jeopardize balanced budgets and spending limits – the EU’s supreme political economy – and so they act in accordance, ring-fencing their asylum systems externally and squeezing them internally of social allowances, permanent residence and family reunification. While there are differences between Brussels’ avoidance of the demographic refugee dividend, on the one side, and Germany and Sweden’s eventual reversal, on the other, they nonetheless coalesce around the same basic austere outlook.

These are drastic adjustments. Yet, we must not forget that they come in response to a policy that by making room for refugees unequivocally also meant providing enough room in the budget. For a brief period, then, Germany and Sweden decided it proper to open their purses and start the public spending spree. In this sense we can speak of a very real acting on the refugee dividend, and with this action, this lapse into fiscal expansion, the ‘refugee crisis’ also made for a rare Keynesian laboratory environment. The results have not been long in coming, with economic growth gains from refugee spending being detectable already at the end 2015.

Since then numerous reports corroborate this picture (e.g. IMF 2016; Statistics Sweden 2016). ‘Refugee wave behind Sweden’s GDP growth’, ran the headline in Sweden’s major business paper, Dagens industry, following the release of the exceptionally strong growth figure of 4.1 per cent for 2015. As reported by the Financial Times (2016d), ‘[e]conomists credited the refugee crisis for helping boost growth as a record number of asylum seekers […] led to an increase in consumption and government spending.’ These developments, in combination with a mounting criticism of fiscal austerity in general coming from a number of high places (e.g. the OECD 2016), are of course vindication for the Keynesian outlook. In contrast to the rosy hopes pinned on the private sector to lead the way – mirroring the hopes currently driving monetary policies of low to negative interest rates and quantitative easing – it has been public spending and government action that have actually done the job.

But with this impact out in the open, Germany and Sweden seem dead set on going back to basics, terminating what could only be an interlude of public spending. In the eyes of fiscal hardliners, the growth accrued is obviously the wrong, ‘artificial’ type of growth. By the same token, and in line with Brussels’ policy, refugees are now seen in both Sweden and Germany as the wrong type of migrants, not easily matched with labour markets.

This latter issue has of course been high on the agenda since the outset, and there is basically unanimous agreement concerning the imperative task of ensuring refugees’ swift labour market integration, since the consequences of a failure obviously would have very serious consequences. This is what makes Berlin and Stockholm’s decision to retreat back under the budget ceiling even more startling. Because even if they now are succeeding in reducing the asylum admissions significantly, a significant increase in public spending and investment is still going to be needed, unless, that is, we relapse into wishful thinking about a trailblazing private sector coming to the rescue. As economist Anke Hassel argues, many of those areas which are key to successful refugee integration, including education, active labour market programmes, childcare and housing, are precisely those most severely affected by Germany’s prolonged period of meagre public investment and spending cuts. Skills training, for instance, was cut by more than 40 per cent between 1995 and 2012. Hence, Hassel argues, ‘Germany will only be able to turn the refugee crisis into an opportunity if the federal government ups its game with regard to public investment in general, and educational programmes in particular.

Writing in the midst of these events unfolding, even speculating about what the near future may hold can feel daunting. Yet this should not keep us from pointing to the obvious risks involved in Germany and Sweden’s decision to recommit to rigid budget discipline at a time when public investment, planning and intervention in the labour market are urgently needed. It makes for a negative spiral to take hold, with further calls for budget tightening going in tandem with further calls for refugee tightening. In doing so, in claiming that refugees are a fiscal burden that can only be eased through border enforcements and scrimping on those already here, is not only making a mockery of any calls for integration into society and labour market. It is also a vindication to those who claimed that refugees were a bad idea in the first place. A vindication, that is, for those forces who are advocating various kinds of racial austerity, mostly in the form of anti-Muslim hostility. In order, therefore, to stem the tide of racial austerity in the EU it is necessary, although not sufficient, to break with fiscal austerity. For a little while, it seemed as if there was a small window of opportunity for this. Not because Germany and Sweden intended such a break – not at all. But since they aspired for a responsible refugee policy they were also compelled to be fiscally responsible and make room for necessary spending increases. Since then fiscal irresponsibility has taken hold once more and, with it, we are faced with a familiar, irresponsible EU asylum policy dynamic, where refugees-not-welcome has, once more, become the only game in town.

It is often said that the refugee crisis has become even more serious than the euro crisis. Much less thought has gone into how we might connect them. What I have argued here is that two countries’ initial handling of the former inadvertently provided a recipe for how – if prescribed to the EU as a whole – the dire socio-economic consequences of the latter could be mitigated. Let’s call it refugee Keynesianism. And the ‘refugee’ part is key in this recipe, since Keynesianism is usually thought of as applying to citizens, the broad strata thereof. The irony is therefore so much greater, because a common claim amongst those, including some on the left, who want to stop or limit refugee admission is that the state’s primary responsibility lies with its citizens. Hence, the argument goes, it is wrong to have citizens foot the refugee bill against their will, particularly, as some on the left would add, in a situation of growing poverty and working class hardship. Apparently, years of extreme austerity across the EU, hammering citizens, in general, and working class citizens, in particular, have failed to put such fantasies to rest. As if the neoliberal austerity state could act responsible towards citizens in the first place; and as if the removal of refugees would be the thing ushering in such responsibility. Rather, and through a fluke of luck, it took a refugee ‘crisis’ and a refugee ‘burden’ to impart a glimpse of how a socio-economic crisis could be alleviated and how citizens could be relieved of the burden of austerity. A responsible resolution of the refugee crisis, then, requires a responsible economic policy in the EU; and, vice versa, a responsible economic policy in the EU would enable a responsible handling of the refugee crisis.

European Commission (2012) ‘The 2012 Ageing Report: Economic and budgetary projections for the 27 EU Member States (2010–2060)’, European Economy 2/2012, DG Economic and Financial Affairs.
European Commission (2015a) ‘The 2015 Ageing Report: Economic and budgetary projections for the 28 EU Member States (2013–2060)’, European Economy 3/2015, DG Economic and Financial Affairs.
European Commission (2014) ‘5th Annual Report on Immigration and Asylum (2013)’, COM (2014) 288 final, Brussels, 22. 5.
Financial Times (2015a) ‘Europe heads for a jam over loss of passport-free travel’, 27 November.
Financial Times (2015b) ‘War victims feel warmth of “Generation Merkel”’, 10 September.
Financial Times (2016a) ‘Pressure on welfare model spawns fears Nordics are tuning nasty’, 5 February.
Financial Times (2016b) ‘EU weighs ringfencing Greece to stop migrant flow’, 23/24 January.
Financial Times (2016c) ‘Athens faces ejection from borderless EU zone over migrant processing errors’, 28 January.
IMF (2016) ‘The Refugee Surge in Europe: Economic Challenges’, IMF Staff Discussion Note, January, SDN/16/02.
Irish Times (2016) ‘Wolfgang Schäuble warns German budget surplus must go to refugees’, 25 February.
OECD (2016) Interim Economic Outlook, 18 February.
Reuters (2015) ‘Angela Merkel wants to “drastically reduce” reduce refugee arrivals in Germany’, 14 December.
Spahn, Jens (2016) ‘Germany needs cool heads and a swift cut in migrant numbers’, Financial Times, 17 February.
Statistics Sweden (2016) Sveriges ekonomi, No. 1.
Süddeutsche Zeitung (2016) ‘Rückkehr sollte der Normalfall sein’, 16/17 January.
The Economist (2015) ‘Let them in and let them earn’, 29 August.


Peo Hansen is Professor of Political Science at the Institute for Research on Migration, Ethnicity and Society, Linköping University. A former senior fellow at the Remarque Institute at New York University, his research areas include European integration, EU migration policy, theories of citizenship and nationalism, postwar European geopolitics and the history of colonialism. His most recent books are Eurafrica: The Untold History of European Integration and Colonialism, co-authored with Stefan Jonsson (Bloomsbury, 2014); and The Politics of European Citizenship: Deepening Contradictions in Social Rights and Migration Policy, co-authored with Sandy B. Hager (Berghahn Books, 2012).

Image: Wikipedia Commons CC BY-SA 4.0