SELF-TAUGHT ECONOMIST Edward Hugh, a British blogger living in Barcelona since 1990, was long ignored when he predicted the downfall of the euro zone. Surviving on a starvation diet with a part-time income from teaching English to the natives he fired off blog after blog into a Web wilderness forecasting the folly of North European Governments in trying to establish a united currency with the Mediterranean nations to the South. How could the aging, tight-arsed Germans ever survive with the lavish living youthful folk of Southern Europe (including Southern Ireland) wielding their credit cards?
Mr Edward Hugh is no-longer an unnoticed lonely blogger, as the euro is driven lower by the day. Indeed not, he is now being courted and offered jobs (all of which he has thus far turned down) by the likes of the International Monetary Fund and Hedge Fund managers. Only last week he had to borrow money from friends to address a conference of politicians and business executives in Madrid. Mr Hugh's message is simple as explained in yesterday's International Herald Tribune: '[S]ince Spain and other struggling countries of the euro zone like Greece, Portugal, Ireland and Italy cannot devalue their common currency unilaterally, they have little choice but to endure what would essentially be a 20% internal devaluation instead.' This means that their public and private sector wages need to fall by roughly that amount if those countries are ever to restore competitiveness, lift exports and bring in cash needed to pay their debts. A daunting prospect!
Germany is a nation of savers with an average age of 45 and this is rising. It's a nation of skinflints, who save up and has kept wages under control while building up export industries. Contrast this with the younger Portugese, Irish, Greeks and Spaniards (the 'PIGS') who chuck their money about, going on borrowing binges, driven by a demand for new homes and consumer goods, resulting in housing bubbles that burst. In the end they couldn't compete with the tight Germans, Dutch and the North Europeans. It's not nice being one of the PIGS these days!
Why didn't the professional economists spot this dilemma that Mr Hugh has been bleating on about? The problem with academics like most of those in the teaching profession is that they have an occupational disease which weds them to a belief in formulas and cookbook thinking. Mr Hugh says they are so 'beholden' to 'their promiscuous but essentially useless' economic models and that they easily miss foreseeable consequences. This is what the epistemological anarchist and philosopher of science, Paul Feyerabend, once called 'Professional incompetence; incompetent professionalism'.