Last week, European Commission President Jose Manuel Barroso expressed concern over the rise of nationalist, xenophobic, and protectionist rhetoric in Europe and the possibility that populist parties could gain seats in next year's European Parliament elections.

Barroso's concerns are well founded. Across Europe, Eurosceptic and nationalist parties have increased in popularity. Unfortunately for Barroso and many of his fellow European lawmakers, the rise of ignorant, populist, and sometimes violent xenophobic parties and movements in Europe is to a large degree a consequence of government policies, which do little to help promote social cohesion and actually restrict the economic potential offered by immigrants.

Consider the so-called ghettoization of many European cities. In many parts of the U.K, France, and other European nations, whole sections of cities are dominated by foreign ethnic, cultural, and religious groups. This understandably causes resentment and anger among some natives, and can contribute to civil unrest. Of course, immigration is nothing new to Europe, which has experienced the movement of people for thousands of years. However, recent immigration to Europe seems to be something different, as Walter Russell Mead explained in The American Interest, some view immigrants from sub-Saharan African or Muslim backgrounds as being too removed from Europe's current culture to be easily assimilated.

Unsurprisingly, across much of Europe the "perceived incompatibility" mentioned by Mead leads to concern about the so-called "Islamification" of Europe. This concern is demonstrated in part by the amount of literature on the subject of Muslim immigration to Europe, some of which warns of domestic radicalism and/or the supposed risks of immigrants having more children than natives.

There can be no doubt that the current status of native-Muslim immigration relations in much of Europe is far from ideal, with at least one French politician questioning the compatibility of Islam and democracy and demonstrations by groups like the English Defence League. But this is in large part due to the ghettoization mentioned above, which does not encourage new arrivals to assimilate and hampers mobility.

The 2006 book Integrating Islam from the Brookings Institution does a good job at explaining not only the number of immigrants that have moved into government social housing projects built in the 60s and 70s outside urban areas in France, but the distinct culture that forms in part thanks to their isolation.

Of course the fear of domestic radicalism would not disappear overnight were governments to withdraw from being involved in the building of social housing, but it would be one of the easiest ways for governments to promote mobility and assimilation. Indeed, governments would not have to withdraw from providing welfare altogether–the implementation of something like Milton Friedman's negative income tax would allow for the government to ensure the very neediest have security while allowing private markets to decide not only where immigrants will live but also how many there will be.

In the U.K. it is often said by pessimists that the country is too crowded. This is nonsense. An article published by the BBC last year highlights the fact that only 2.27 percent of England is built on. There is a vast amount of space for new housing and infrastructure in the U.K., one of the most densely populated countries in Europe. However, government regulations make building on a lot of the land in the U.K. difficult. According to the New Statesman's George Eaton, British housebuilding is at its lowest levels since the 1920s. Many concerns about immigrant assimilation could be addressed if the government was not in the business of building houses and allowed private entities to do so instead.

Many Europeans are not only concerned about the radical Islam some immigrants bring to their countries, xenophobic and protectionist groups in Europe are also worried about Roma and Eastern Europeans, who are considered not so much a perceived cultural threat as a threat to "jobs." The idea that employment can belong by right to this European or that is an absurd concept.

In fact, in the U.K. recent immigrants make a net contribution to public finances and drive down housing prices. And while it is the case that in some Northern European countries such as Denmark, Finland, and Germany migrants are statistically significant recipients of welfare compared to the native population, research on 19 countries in Europe suggests that immigrants to the European Union as a whole are less likely to live on welfare than native populations and that there is no correlation between how much the European countries in question spend on unemployment benefits and the amount of immigration they experience. The "welfare magnet," the concept that immigrants move to Europe primarily because of its generous welfare systems, is a myth in much of Europe.

Without the government being involved in housing and welfare more broadly, the only arguments that could be mounted against immigration are cultural. The state should not have any role in shaping a nation's culture, something that can be seen when the government gets involved in housing by creating a level of isolation that is not needed and would unlikely be seen were the state removed from housing and welfare, thereby contributing to the regrettable situation Europe is now facing. Without the government involved it would be the free market that would decide where immigrants lived, and free markets are better than politicians or government policies at reflecting attitudes and preferences.

Of course, it is unlikely that were French and British governments to get out of the housebuilding business and implement a negative income tax immigrants wouldn't naturally form tight communities with people from their own native culture anyway–this has been the case throughout the history of immigration. However, what would almost certainly be different would be the size of these predominantly immigrant communities as well as their structures. Absent ghettoization induced by government housebuilding policies and the perverse incentives of an expansive welfare state, immigrants would have access to a freer market and conditions that reward assimilation and provide opportunities for meaningful integration into European society.

Recent events, such as the drowning of over 200 migrants off the coast of the Italian island of Lampedusa, have highlighted that there is no shortage of human beings around the world who are not happy about where they were born and that many are willing to go to extraordinary lengths to get somewhere better. Europe, unsurprisingly, is one of the most popular destinations. European policy makers would be able to address many of the concerns surrounding immigration while also allowing their countries to benefit from the economic contributions of immigrants if they tried doing less and let markets work.