Hamish McRae: Resentment, racism and the reality of mass migration in a globalised economy

I was brought up in Ireland, and the majority of my economics class left the country on graduation

Nothing like the prospect of an advance by the BNP at the polls to stir the mainstream politicians into action. Margaret Hodge, MP for Barking, warned that Labour was losing support and that the "political class" was frightened of the race issue. That has re-ignited smouldering concerns that there might be a sizeable anti-immigration vote in the May local elections.

But of course this is not just an issue for our politicians. It is global. The world is experiencing huge movements of population both within and between countries - probably the largest in proportionate terms and certainly the largest in absolute terms that the human species has ever undertaken.

We are very aware of what is happening in Europe but the US is also experiencing one of its periodic waves of immigration and seeing strong resistance to that. But these flows are dwarfed by what is happening in China, where the movement of people from the country to the city - and from inland locations to the coast - is currently the largest movement of people of all.

The driving force behind these movements is economic opportunity. Eastern European immigrants to Britain, at the moment the largest single group, come in the main because there are better job opportunities here than in Poland or the Baltic. The US south-west is host to millions of Mexicans because, though conditions may appear poor, they are better than south of the border. In India and most remarkably in China people flock to the cities because they believe thatthey will do better for themselves and their children.

Given the scale of these movements it would be astounding were there not extreme social pressures as a result. That applies to movements within countries as much as those between them. It is hard from this distance to gauge but the social pressures within China are as large as anywhere in the world.

So as a general proposition, population movement is driven by economic growth. Yes, there is movement of people displaced by famine and war and of people seeking political asylum. According to the UN, which is warning of "asylum fatigue", there are 175 million such people. But even if, in some utopian world, there were no refugees, there would still be huge movements of people seeking a better economic life. Migration may be in part a function of political failure but it is to a greater extent a product of economic success.

The most obvious example of this phenomenon is Ireland. It was a country of emigration: I was brought up there and three-quarters of my economics class left the country on graduation. The country switched from being a net loser of people to a net gainer as recently as 1995. Now it is a magnet for migrants from all over Europe and indeed the world, with net migration of around 40,000 a year, equivalent to Britain having a net gain of some 600,000 people each year. There have been strains as a result but I have never heard any desire to return to the pre-Celtic Tiger days for obvious reasons. Unemployment in 1993 was 16 per cent.

Indeed there is a lot of economic research on the effects of migration worldwide from the perspective of a developed country. The main thrust of this is that there are unequivocal gains to the host country if the migrants are highly skilled. That would square with our experience in the UK. There is hardly any hostility to the young Europeans or Americans who work in London in the financial services industry. The skilled Polish workers who have come in recent months appear equally welcome. It may be that the UK now has as much as a million migrants from the new EU member states but these people have been absorbed with very little friction.

There is more debate about the impact of unskilled workers. In the US, where the proportion of such immigration is higher, there has been some concern that this has depressed the wages of the unskilled more generally. You would expect this to happen: increase the supply of workers and the pay rate should be expected to fall. But there is an offset in that such migration permits faster growth. Most studies suggest that the effect, if it exists, is small. Everywhere in the world there seems to be a relative rise in the returns for skills and that has a worrying impact on inequality. But that seems to have more to do with the decline in production-line work in manufacturing and less skilled jobs migrating to Asia, rather than less skilled people moving to Europe and the US.

Still, even if the effect is small generally there will be areas where low-skill wages are depressed by immigration and that will cause resentment. Add in the social dimension - people who speak a different language and refuse to learn that of the host country - and that resentment will increase.

Sometimes there is of course a racial edge to such resentment, but not necessarily. Look at the resentment towards some British people who move to France and Spain, allegedly scrounging off the healthcare there and complaining that the local doctors and nurses don't speak English!

Politicians everywhere have to deal with this. It won't go away. In that sense Margaret Hodge is right. But the problem is bigger than Barking. The more successful the world economy, the greater the likelihood that people will move around to take advantage of the opportunities it offers.

The good news is that it ought to be easier to manage the strains of success than the consequences of failure. The bad is that there will be some losers from this process and the very fact that the country, region or whatever is being successful will make those losers even more bitter. Barking, in the South-east of England, is part of the most successful large economic growth centre in Europe. It is very tough to feel excluded from that success.

This very fact points, tentatively I admit, to a way forward. There are blanket policies that make obvious sense: a pretty much open-doors policy towards skilled immigrants and a much more cautious one towards ones without appropriate skills. But there are also micro-policies that need closer examination. Why should some parts of a successful region - the South-east - do so much better than others? What are the practical reasons for pockets of deprivation? What can clever planning do to revive town centres? What has stupid planning done to wreck them? What has gone wrong in Barking?

In short, we need to get the detail right. The mechanism will probably be through thoughtful local initiatives rather than some top-down policy from Whitehall. That would be the most effective way of rendering the BNP irrelevant.