The Innsmouth Deal is not real, but once you see it, you understand. H. P. Lovecraft was good for writing strange stories with interesting moods. The Shadow Over Innsmouth is about one man's trip to Innsmouth with its strange goings on and even stranger looking people (full text here). The town is full of hybrid fish-human people who start out human but as they age become more fish and return to live in the city under the sea. Their humanity is gone. It is a spooky story and part of the Cthulu Mythos. if you read closely, it also reveals the human flaw that creates the Innsmouth Deal.
The town had a merchant captain named Obed Marsh who discovered these Deep Ones, and he set the city up for the deal. Marsh discovered them in the West Indies via a native tribe. The tribe made the deal with the Deep Ones first and why did they do it? To maintain their current system of living. From the story:
But it was all right with the heathens, because they’d ben havin’ a hard time an’ was desp’rate abaout everything. They give a sarten number o’ young folks to the sea-things twict every year—May-Eve an’ Hallowe’en—reg’lar as cud be. Also give some o’ the carved knick-knacks they made. What the things agreed to give in return was plenty o’ fish—they druv ’em in from all over the sea—an’ a few gold-like things naow an’ then.Now that be sailor talk, but we can figure it out. The tribe was desperate and rather than change what they did, they made a deal with the Deep Ones that ultimately changed who they were. A little human sacrifice was not so tough for them, but they bred together and changed forever. They stopped being themselves and become a colony of Deep Ones that lived first on the surface.
The Innsmouth community did the same thing. They had traded with that native island community on top of their regular merchant activities. The tribe was slaughtered. This created a problem for the current order of Innsmouth.
“That naturally hit Obed pretty hard, seein’ as his normal trade was doin’ very poor. It hit the whole of Innsmouth, too, because in seafarin’ days what profited the master of a ship gen’lly profited the crew proportionate. Most o’ the folks araound the taown took the hard times kind o’ sheep-like an’ resigned, but they was in bad shape because the fishin’ was peterin’ aout an’ the mills wa’n’t doin’ none too well.
This created a desire within the town to make a deal with the Deep Ones for fish and gold. Bring back the good ol' days. They did and only at the cost of some sacrifices to the sea but in the same biological nature as the islanders. They even traded in their God for praying at the altar of the Deep Ones.
They did not want to change their ways. They did not want to try something new. They did not want to suffer an economic loss. Yet they did try something new and they did change their ways. In the process, they changed everything about who they were. That was the Innsmouth Deal. Will the Somalis in Sweden, the Algerians in France, the Muslims in Germany be worth the supposed maintaining of economic order if Sweden becomes Somalia, France becomes the Maghreb and Germany becomes Turkey? It's just a little human sacrifice. It's just replacing your bloodlines. It's just praying 5 times a day. It's all done to maintain the current elite's grip and not force them to face change, try something new yet remain who they are.