I mind working alongside this economist who’d previously worked for the Bank of England and very smart they were too, except the one thing they would never, ever do was give a clear opinion about what they thought was likely to happen.
Now at the time I wasn’t that bothered, I mean go and talk to yer typical lawyer as a typical punter and all they’ll do is state what your options are rather than give meaningful advice as to which one it would be in your interests to choose and which ones to ignore. But, then I subsequently found myself working alongside lawyers paid a retainer by a big company and man did they come out with clear, straightforward guidance, advice and opinions. So in my experience when there’s a big, fat, regular fee involved professionals tend to pull the finger out, except for this economist person.
You could almost admire the degree to which they had made fence sitting an art, give or take the risk of skelfs. At least you could until they started playing the big, stupid concept game. This is something loads of economists have been playing for years and it’s a shame because it does nothing more than undermine their personal, professional credibility.
For that to happen you need to know some of the rules, so here they are.
Rule 1 – cut and paste the definition of something from Wikipedia or an economics text book. For some practical examples google recession and Wikipedia or stagflation and Wikipedia.
Rule 2 – fire in some quotes from some long dead economist, say Ricardo, Say or even better Adam Smith, so it reads all erudite like.
Rule 3 (i) – do some braindead commentary stating why its reasonable to be mindful of the circumstances set out in this concept, but that it may or may not actually apply to current circumstances (ideally because you defined it so tightly in your cut and paste from Wikipedia, but who cares either way because its mince after all).
Rule 3 (ii) - alternatively assume everyone knows what you're talking about and just batter on regardless about your concept having missed out rule 1.
Rule 4 - well that’s it really. You’ve produced an article or report that says hee haw about hee haw and avoids providing a view as to what might happen while looking productive enough to justify this month’s paycheck. The more accomplished might even end with a few rhetorical questions.
So time for some recent examples of big stupid concepts -
Stagflation: Ooooh this is a biggy, the 70s revisited and all that and something that was being commented upon a year ago as a real possibility. Quick definition – usually you get economic growth and inflation. Stagflation sees weak or negative economic growth and inflation which kinda screws monetary policy cos raising interest rates to cut inflation would exacerbate the weak/negative economic growth.
So yeah due to galloping oil price rises this emerged as a genuine fear. Problem was when it had happened in the past supply side shocks had caused the oil price hikes, whereas this time round it was simply demand running ahead of supply (plus a cheeky speculative froth). So by definition stagflation was never really going to become an option because weaker economic growth would have seen oil prices fall back (as they subsequently have done).
Decoupling: this is a seriously high profile bollocks concept predicated on the notion that domestic demand in the BRIC economies (BRIC? Brazil, Russia, India and China) would be sufficient to counterbalance the expected decline in demand from the key Western economies, particularly the US e.g. the US is stuffed? Who cares cos China is selling shit to Indian and Chinese consumers. And if decoupling was true then stagflation was a possibility.
The glaringly obvious problem though is that rapid growth in the BRIC countries was based on exporting to the US and EU. Intra-Asian trade did grow, but the stats were exaggerated big time by international supply chains that in reality meant rather than China selling finished goods to say Korea, much of what was actually going on was that semi-finished goods were being shipped elsewhere to be finished for eventual sale into the US (financed by the Chinese purchase of US financial assets). As for Brazil and Russia, I mean c’mon – basic commodities being exported to enable the production of goods exported to well the US and the EU essentially. So now that the US and the EU are stuffed of course everyone else!
Recoupling: This gets the award for cheekiest bollocks. When decoupling looked an increasingly daft notion due to all the stats emerging, people started saying ahh, now we're recoupling. Except, thats pants. We weren't recoupling because we'd never decoupled in the first place.
Reindustrialization: this is the dumbest notion going at the mo, no really, its King Dumb, Captain Ignorant, Baron Thicko and Colonel Shitferbrains all rolled into one. First off despite being used in a British context, that the word tends to have a “Z” in it should make anyone suspicious, except you’re put off guard by the rather tender thinking involved which goes as follows – finance and business services (FBS) have driven UK economic growth for years and created all the new jobs, except anyone with half a brain knows FBS is stuffed for at least the next few years. This realisation prompts a look elsewhere for positive signs and I know here’s one - the downturn in the exchange rate is an opportunity for exporters, in fact if only Britain could reindustrialise and take advantage of this great opportunity by making things again to sell to Johnny Foreigner! Even better we could even see the economy rebalancing away from financial services!
Right, let’s bring reality into play right fecking now. Regional policy in Britain was invented in the 1920s and 30s to help ease and ideally reverse the decline in heavy industry by encouraging the creation of new, light manufacturing jobs. See the key date there is the 19-fecking-30s i.e. some plums appear stupid enough to think 1 or 2 years worth of competitive exchange rate is going to have more effect than 80 years of active intervention in a wide variety of forms. Mebbe it will, but you and I know it won't and anyone stupid enough to buy into the notion that at best medium term market signals are potent enough to engender structural, economic change should be asked to piss off sharpish or my name isn’t Ravenscraig Linwood Silicon Glen the III!(1)
So there you are then, there are loads of actively rank concepts kicking about that have no solid intellectual foundations in the current environment because they aren’t even remotely plausible. Personally, if I was to read anyone taking any of this kind of mince seriously, then I’d click delete and avoid them on the grounds that either (a) they don’t actually know any better or else (b) they do know better, but have nothing more interesting to say about current events. Waste of space either way if you ask me.
And no I'm not making any of this up. For some practical examples see –
Stagflation - http://www.guardian.co.uk/commentisfree/2008/jan/02/stagflationcometh
(1)well no its not, but those are some major, major examples of sustained attempts by government at engendering reindustrialisation in Scotland.