A few years ago, when a company such as Western Union, the American money transfer group, looked at a country such as Turkey, its employees thought they knew what to expect. Turkey was considered poor, and a source of migrants to places such as Germany. Thus, in money-transfer jargon, it was deemed an “inflow” country, since 90 per cent of the money that was moved across the Turkish border in small-scale wire transfers went into Turkey – not out.
But these days, something rather striking is afoot. According to Hikmet Ersek, CEO of Western Union (who is himself Turkish), money is now starting to flow out of Turkey, not in. That is because Europe is ailing while the Turkish economy has boomed. So while Turks in, say, Germany used to send money to their families in Turkey, during 2012 families in the homeland often ended up helping their kin in Europe – creating outflows that are now estimated at about 30 per cent. Or, as Ersek told me on the sidelines of Davos last month, with a smile of pride and wonder, “It’s a huge change.”
That might be an understatement. When the global leaders gather in Davos each year, there is a tendency for them to toss plenty of rhetoric around about “globalisation”, economic “rebalancing” or financial crisis. And these grandiose debates are typically backed up with reams of formal data about gross domestic product – and statistics from bodies such as the Bank for International Settlement about global capital flows.
But for my money, one of the most intriguing insights I had this year in Davos came not from a Wall Street titan or finance minister – but from Ersek’s tales about cross-border remittances. This is a profoundly humble corner of the global finance system (average transactions are just $350 a time). But more than 200m people in the world use such services, often to send money home; as Ian Goldin, the Oxford academic notes – or Robert Guest writes in his excellent book Borderless Economics – cross-border flows of people and money are a crucial part of the modern world. And when you add all that activity together – which equates to 28 transactions at Western Union every second – you get a fascinating real-time snapshot of the global economy, viewed from the micro-level lives of millions of people, rather than at 30,000 feet.
Sadly, Western Union is wary of releasing too many precise numbers about these flows. But the company is the biggest in the market, moving $81bn funds in 2011 (the total sector is estimated to be about $500bn, though data is patchy). Thus what it says – albeit in general terms – about the trends are fascinating. Take Europe. Four years ago, countries such as Spain were deemed to be “outflow” countries, because migrants from Mexico, north Africa and Latin America were travelling to Spain and sending cash home. Now, however, that outflow has slowed dramatically, and could soon turn into inflows, because migrants are finding it tough to get jobs in Spain – and young Spaniards are going to places such as Latin America and sending money back.
Another shift, Ersek says, can be seen in France and Germany: flows from those two countries have recently intensified to places such as Spain and Portugal, as workers from the periphery go to the core of the eurozone to hunt for jobs. However, flows around Greece have recently stabilised. And striking changes are afoot in the so-called emerging market countries such as Mexico, Korea and Indonesia: like Turkey, these are starting to be “outflow” countries, not “inflow” countries, as they attract migrant workers from elsewhere. Russia has seen a particularly remarkable turnabout: though it was an “inflow” country several years ago, it is now the third-largest “outflow” country, with 80 per cent “outflows”, because of the oil and gas boom (and, perhaps, a pattern of capital flight).
Elsewhere in the world America is seeing a rebalancing of its “north-south” flows, as fewer Mexican migrants send money home. However, the single fastest point of growth right now for Western Union lies with intra-Africa flows: parts of the continent, such as west Africa, are now becoming wealthy on the back of the commodities boom – and, as growth intensifies, suck in migrants from poorer regions, sparking cross-border monetary flows on a scale never seen before.
Now, many of these trends are potentially volatile: if Spain were to boom again – or the commodities market suddenly crash – those financial trends could quickly reverse. But if nothing else, the Western Union tale should remind us how the big macroeconomic stories are now creating millions of little tales of microeconomic change; as people move in search of jobs and survival. Call it, if you like, a sign of a world that is trying to adapt to new patterns, $350 at a time; and in a period of global gloom, that perhaps offers a tiny – grassroots – hint of cheer.