From Rothbard’s Power and Market: Government and the Economy:
“Laborers may also ask for geographical grants of oligopoly in the form of immigration restrictions. In the free market the inexorable trend is to equalize wage rates for the same value-productive work all over the earth. This trend is dependent on two modes of adjustment: businesses flocking from high-wage to low-wage areas, and workers flowing from low-wage to high-wage areas. Immigration restrictions are an attempt to gain restrictionist wage rates for the inhabitants of an area. They constitute a restriction rather than monopoly because (a) in the labor force, each worker owns himself, and therefore the restrictionists have no control over the whole of the supply of labor; and (b) the supply of labor is large in relation to the possible variability in the hours of an individual worker, i.e., a worker cannot, like a monopolist, take advantage of the restriction by increasing his output to take up the slack, and hence obtaining a higher price is not determined by the elasticity of the demand curve. A higher price is obtained in any case by the restriction of the supply of labor. There is a connexity throughout the entire labor market; labor markets are linked with each other in different occupations, and the general wage rate (in contrast to the rate in specific industries) is determined by the total supply of all labor, as compared with the various demand curves for different types of labor in different industries. A reduced total supply of labor in an area will thus tend to shift all the various supply curves for individual labor factors to the left, thus increasing wage rates all around.In a Rothbardian world, the government is abolished, and so are national borders. To his credit, Rothbard understands that national borders and controlled immigration impose labour market protectionism and so tend to raise and sustain real wages. Rothbard hates that with a passion, owing to his free market theology. Left-wing people have no such excuse – and indeed they should appreciate the advantages of labour market regulation, protectionism and controlled immigration.
Immigration restrictions, therefore, may earn restrictionist wage rates for all people in the restricted area, although clearly the greatest relative gainers will be those who would have directly competed in the labor market with the potential immigrants. They gain at the expense of the excluded people, who are forced to accept lower-paying jobs at home.
Obviously, not every geographic area will gain by immigration restrictions—only a high-wage area. Those in relatively low-wage areas rarely have to worry about immigration: there the pressure is to emigrate. The high-wage areas won their position through a greater investment of capital per head than the other areas; and now the workers in that area try to resist the lowering of wage rates that would stem from an influx of workers from abroad.” (Rothbard 2006 : 61–63).
In a Rothbardian anarcho-capitalist world, there is literally a race to the bottom as open borders allow endless mass immigration from the Third World to the First, a process which impoverishes workers in the First World and reduces their wages to those of the Third World, and in the process massively reduces living standards and working conditions (e.g., Third World labour may very well accept brutal working conditions). People thrown out of work will be left with private debts they cannot pay, a process which, where private debt is at a very high level, will only lead to further macroeconomic instability. Since there is no effective, reliable tendency to full employment equilibrium in market economies, when private sector aggregate demand is weak or fails, mass immigration would also tend to cause much greater and rising unemployment.
The insanity in Rothbard’s argument is also clear: it assumes that the flood of people wouldn’t cause overpopulation, soaring costs for housing or rent (given scare supply), an increase in crime and social disorder, and the collapse of national social and cultural cohesion.
Even worse, it has the mad assumption that workers are, essentially, perfectly or near perfectly substitutable. Rothbard tacitly assumes that you can take somebody from rural Bangladesh and bring them to Berlin, Hamburg, Frankfurt or Munich, and that you can substitute the Third World person for an educated skilled or semi-skilled German worker (and even a high level of substitution with unskilled labour is doubtful).
Unfortunately, if the Third World person cannot speak German, is illiterate, is unskilled, does understand German law, culture or the German work ethic, then they are not substitutable with domestic labour. The cost of teaching people German and (even if you totally dispense with wanting them to learn the national language) training them to be skilled or semi-skilled workers – certainly in large numbers – takes a considerable amount of resources and may not even succeed for a significant number of people (e.g., it is difficult to teach a mature adult to master a whole new language and many simply may not be capable of being trained up into highly skilled workers). In a Rothbardian world, this training would be left to private businesses which would raise their costs and divert resources from other industries and services. And what about the people who come who are unemployable? You are likely to get an underclass of criminals and social misfits. There is no reason to think such an open borders policy would be anything but catastrophic.
Finally, we have not even got into serious social and cultural issues. If you allow a tidal wave of people from the Third World into, say, Denmark, Spain, or Sweden, eventually these countries will cease to be Danish, Spanish or Swedish. If you allow mass immigration of people with highly illiberal, regressive, misogynist and homophobic values, then the liberal and progressive mainstream values of these countries will be destroyed.
Since we now live in a world where mainstream liberals, social democrats, Marxists and left anarchists are militantly in favour of open orders and mass immigration to varying degrees, much of the left stands with a lunatic like Rothbard in wanting a policy that – in economic, social and cultural terms – is plainly a catastrophic for the First World.
And I am afraid that the social and cultural objections to this militant left-wing open borders obsession are just as powerful as the economic objections. Unfortunately, many people on the left have been deluded by ideas from Postmodernism like extreme multiculturalism and extreme cultural relativism. To think that open borders could never cause any significant problem of any type requires that you think – just like Rothbard – that all human beings are, in social and cultural terms, perfectly or near perfectly substitutable. This is manifestly untrue.
Rothbard, M. N. 2006 . Power and Market: Government and the Economy (4th edn.), Ludwig von Mises Institute, Auburn, Ala.