Edward Hugh: Twilight of the Euro Zone?

Edward Hugh

Photo by Lourdes Segade

The New York Times

My internet buddy Malcolm Pollack, over at Waka Waka Waka, first called my attention to the phenomenon of Edward Hugh in a blogpost a couple of days ago, but I probably would have run into Mr. Hugh anyway in the International Herald Tribune . . . since I in fact did, after all.

Pursuant upon reading about him there, I checked the New York Times and found the same article by Landon Thomas, Jr., "The Blog Prophet of Euro Zone Doom" (June 8, 2010), wherein he is described as "a gregarious British blogger and self-taught economist who repeatedly predicted that the euro zone could not survive."

Why not?

His bleak message, in newspaper columns, local television and radio appearances, and in meetings with officials, is almost always the same: since 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 percent internal devaluation instead. That means 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 the cash needed to pay down their debts.

"Why haven't these countries converged" with the rest of Europe? he asks. "It's demographics. As populations age, there are fewer people in their 20s to 40s to buy new houses, so they save more. The younger a country is, the more dependent it is on credit to get growth."

Germany, where the average age is 45 and rising even as the population is beginning to shrink, is a nation of savers, and public policy has encouraged keeping wages under control and building up export industries.

By contrast, the younger Greeks, Irish and Spaniards went on borrowing binges, driven in particular by rising demands for new homes and consumer goods that, in several cases, turned into housing bubbles before going bust. Wages were pushed up, encouraging spending but soon making it all but impossible for their industries to compete with the thrifty Germans, Dutch and other Northern Europeans.

Most economists, beholden as they are to their "promiscuous but essentially useless" economic models, Mr. Hugh rails, missed what he considers an easily predictable outcome. And that, he adds, "is why we are in such a big mess now."

In other words, the big economic imbalance between northern and southern Europe is due to the difference between an older, thrifty generation and a younger, spendthrift generation. Hence the 'twilight' of the euro zone.

Interesting.

But why is Mr. Hugh described as a "self-taught economist"? The article states that he "studied at the London School of Economics." Granted, he "was drawn more to philosophy, science, sociology and literature" than economics at that time and has probably learned a lot of economics on his own since then. But such is true of nearly any scholar in any field.

More significantly, however, "[h]is eclectic intellectual pursuits kept him not only from getting his doctorate but also prevented him from landing a full-time professor's job."

Hmmm . . . sounds vaguely familiar. Though I did manage in my academic studies to 'pile higher and deeper' for that coveted degree.

Be that as it may, Mr. Hugh himself sounds like an intriguing fellow of eclectic interests:

His blog posts reflect his varied interests, often citing Bob Dylan, Charles Bukowski, Jean-Paul Sartre, Friedrich Nietzsche and even the sociable behavior of his beloved bonobos, the primate species that is the closest relative to humans in the animal kingdom.

Bonobos? That's an especially intriguing interest. I wonder if the particular reciprocity characteristic of affairs among bonobos has any bearing toward explaining Mr. Hugh's "own support network of middle-aged housewives . . . , some of whom have provided him a place to live as he moves from abode to abode."

But I'll quell my curiosity on that point, and merely note that the article closes with an observation by Mr. Hugh:

"In the Middle Ages, curiosity in excess was regarded as a sin . . . . But with the Internet, I feel that I can do what I like. This makes me feel that I can really do something."

Yes, I also share that illusion, which explains my daily blogging . . . but as for those readers who would prefer the better informed illusions of Mr. Edward Hugh, feel free to click over and visit his own blog.