The rule-setter on remittances

ARTICLE: “A Western Union Empire Moves Migrant Cash Home,” by Jason DeParle, New York Times, 22 November 2007, p. A1.

IDEAS & TRENDS: “Migrant Money Flow: A $300 Billion Current,” by Jason DeParle, New York Times, 18 November 2007, p. WK3.

I just love the comparison to the integration of the American West that these stories evoke in my thinking, not the acquisition phase (pre-Civil War), but the integration phase (1865-almost WWI), when territories were turned into states and pioneers were turned into citizens. Obviously, when you’re talking Western Union, the comparison gets pretty easy.

Making remittances happen is a huge globalization function, and nobody facilitates this like Western Union: “Global migration is the cornerstone of how we’ve grown,” says Christina A. Gold, the CEO.

Talk about networking: Western Union has “five times as many locations worldwide as McDonald’s, Starbucks, Burger King and Wal-Mart combined (my emphasis).”

Western Union is the lone behemoth among hundreds of money transfer companies. Little noticed by the public and seldom studied by scholars, these businesses form the infrastructure of global migration, a force remaking economies, politics and cultures across the world.

THAT’S why I say we’re in an age of frontier integration.

Remittances roughly equal ODA + FDI (or Official Developmental Aid plus Foreign Direct Investment).

Western Union is so big in this biz, it is basically “a force in development economics, a player in American immigration debates and a target of contrasting attacks.”

Western Union began in 1851 as a telegraph company with big ambitions. It first linked America’s West and East coasts about a decade later.

Fast forward with faxes and airmail and the company goes bankrupt in 1992, a victim of globalization much like this former Sovietologist.

Then, like me, Western Union is forced to reinvent itself, emerging “two years later with a focus on its money transfer service.” It is acquired by Colorado corp. First Data in 1995 and the rest is modern globalization history.

Western Union: valuable for integrating the West in the 19th century, again valuable for integrating the Gap in the 21st century.

320,000 units worldwide, with 60% of the transfers happening wholly outside the U.S.

The company is so successful now, it naturally attracts the anti-immigration furor of the Tancredos (and one imagines, the Dobbs types). It also spun off from First Data and now owns a global market share of 14%. The closest competitor sits at 3%. It is the most expensive service in the market, but it manages that by being incredibly secure, and people will pay for security.

Second story just built around big map showing remittance flows.

Here’s a new definition of economic connectivity: Nations with remittance-dependencies.

Of the top twenty globally:

For the U.S., these seven pop up: El Salvador, Honduras, Jamaica, Haiti, Liberia, Laos and Lebanon.

For Russia, these five pop up: Moldova, Georgia, Armenia, Kyrgyzstan, Tajikistan (the legend incorrectly says six).

Eight others rely on neighbors (the legend incorrectly says seven):

‚ÜíGuinea-Bissau relies on Senegal

‚ÜíBurundi relies on Tanzania

‚ÜíLesotho relies on Mozambique

‚ÜíEritrea relies on Ethiopia (not so independent, eh?)

‚ÜíJordan relies on the Palestinian territories (that must suck)

‚Üíthe Palestinian territories rely on Syria (thus suggesting that Jordan is tied to Syria economically by extension)

‚ÜíAlbania relies on Greece, and

‚ÜíBosnia relies on Croatia.

In terms of share of GDP from remittances, here’s how the top twenty shake out:

‚ÜíGuinea-Bissau at 48%
‚ÜíEritrea 38%
‚ÜíTajikistan 37%
‚ÜíLaos 35%
‚ÜíMoldova 31%
‚ÜíPalestine 30%
‚ÜíKyrgyzstan 28%
‚ÜíLiberia 26%
‚ÜíLebanon 25%
‚ÜíHonduras 25%
‚ÜíLesotho 24%
‚ÜíBurundi 23%
‚ÜíAlbania 22%
‚ÜíHaiti 21%
‚ÜíBosnia 20%
‚ÜíGeorgia 20%
‚ÜíJordan 19%
‚ÜíArmenia 19%
‚ÜíJamaica 18%
‚ÜíEl Salvador 18%.

Source listed is “Inter-American Dialogue,” led by Manuel Orozco. The Orozco report is similar to that of the World Bank’s, with some differences. It says 60 countries received a billion-plus last year and that in 38 countries the number accounted for more than 10% of GDP. Orozco estimates only one-third (96B) comes from the U.S., with Europe and the Middle East being the next biggest sources.

Of the $300B, it is estimated that 80 percent is consumed by spending on food, clothing, housing, education and whatnot. The rest goes to savings and investment, it is believed. If that 20% is used in this manner, it would still be a huge number at $60B, or roughly 60% of the global flow in ODA, as a sideline to the 240B that immediately impacts the lives of families through increased income.

Stunning stuff.

Comments

[andyinsdca]

Where is Mexico? Remittances to Mexico from the US is like #3 (after oil & tourism) in terms of GDP in Mexico.

I SERIOUSLY doubt the veracity of the source since Mexico isn't even listed.

[zenpundit]

"‚ÜíJordan relies on the Palestinian territories (that must suck)

‚Üíthe Palestinian territories rely on Syria (thus suggesting that Jordan is tied to Syria economically by extension)"

The PLO for decades exacted sub rosa "taxes" from Palestinian emigre businessmen in W.Europe, America and the Gulf states. Assuming this still goes on with the PA, coupled with HAMAS fundraising in the same states, we can extend the complexity of connectivity yet further.

[vinit joshi]

On my trip to India, the thing I noticed the most was the number of Western Union offices in Mumbai. A lot of them, and they are everywhere

[Remitter]

I think you missed out on India and Philippines, both receive huge remittance flow. The dependence of the third world countries on the developing countries is quite well known. What's interesting is how these countries have traditionally treated these remittances. Philippines, on one hand hero worships its OFWs (my blog http://remitter.wordpress.com/ has been pointing and witnessing this) but fails to deal with their problems in a significant manner. While India to a large extent has benefitted from these remittances as it has managed to resurrect its economy. The big question is how the economic problems in the countries like the US and the UAE (sources of large volumes of remittances) are going to affect these developing economies?

[Zeragito]

After seeing the data on Eritrea's dependence on remittances from Ethiopia, it immediately undid the reliability of this report. Unless it is from the mid-1990's, it is laughable to think Eritrea can get any remittances from Ethiopia after 1998. That is when Eritrea and Ethiopia went to war and have since remained in a state of war with no relations whatsoever. Both countries deported hundreds of thousands of eachother's citizens. Any Eritreans remaining in Ethiopia could be jailed, deported or even killed if they try to send money to Eritrea from Ethiopia. That is if they have any money to send at all. Even before 1998, the biggest remittances came from Eritreans living in USA, Europe and the Arab Gulf states, not Ethiopia.