You could read a whole article by a highly-regarded economist and come away convinced he is a simpleton. Stephen King of HSBC is no exception.
He wrote a comment piece in the Evening Standard asking whether the Bank of England understood what was going on. Fair question. We know they don’t. But then Stephen, HSBC’s’ senior economic advisor’ and author of ‘Grave New World’ proceeds to demonstrate his own powers of explanation. And it is not impressive.
The questions he was trying to answer were:
1. if employment is so strong, why is growth so weak, and
2. if unemployment is so low, why are wages so depressed?
And his answer is Brexit.
He points out that growth in the UK was consistently higher than in the EU until the European referendum. But 15 months after the vote UK growth has slowed and EU growth has accelerated. This correlation he assumes can be taken as a causal explanation. No evidence needed – just point to a coincidence of two events, and explain one by the other. A fatuous assumption for someone claiming to be a serious economist. You could just as well conclude that the consistent growth in UK GDP was the reason for the Leave vote. After all, the Leave vote came after the growth, so the former must have caused the latter.
When he addresses the two questions he put to himself (strong employment yet low wages, and low unemployment yet depressed wages) his explanation is even more fatuous. ‘This year the eurozone has lost its mojo,’ he tells us. Hold on a second. Is this the same eurozone area he just told us was growing so vigorously that the UK could not keep up? And yet within the space of a paragraph it has lost its mojo. [Mojo, here, is used in its precise economic sense of … oh dear, it doesn’t have an economic sense!)
As he jumps around from one superficial observation to another he lands on another explanation straight out of the Children’s Guide to Economics. ‘…it may be that unemployment is so low precisely because wages keep falling.’
Brilliant. This ‘senior economic advisor’ to HSBC should submit this theory to a peer-reviewed journal. It meets the criteria expected in journals of bourgeois economics. If you cannot explain A by B, switch the sentence around and make B the cause of A.
To bourgeois economists the law of supply and demand is the explainer of most economic phenomena. They do not look past the surface appearances of reality to try and understand WHY supply increases/decreases or why demand increases/decreases. If they did, they might find something resembling a causal relationship. At least they would be trying to find a reasonable explanation. But economics remains at the level of a child staring at a rainbow and seeing that is somehow associated with rain and sun occurring together. No need to delve into the realms of light refraction. That would be scientific. And if there is one thing that bourgeois economists run from, it is any attempt at non-superficial explanation.
So here we have a ‘senior economic advisor’ informing us that, if full employment does not cause wage growth, then low wages cause full employment.
Brilliant!