Unfortunately, what passes for a heterodox economist nowadays could be defined as ‘somebody who aims for cheap applause from economically illiterate Guardian readers’. See this article here from Ha-Joon Chang, who is perhaps the last remaining guru of protectionism and large-scale industrial policy, and therefore a Jägermeister economist. Chang applauds Ed Miliband and the Living Wage campaigners for their plans of forcing up wages, and ‘debunks’ the ‘myth’ that higher wages hurt employment prospects.
Britain cannot regain global competitiveness through lowering wages, Chang explains. A reduction of British wages levels to Chinese standards could only be achieved by turning Britain into a military dictatorship, because it would require forcing wages down through brute force. But even if this were to happen, we would only discover that Vietnamese wages are lower still, so we would have to force wages down again to match Vietnamese levels. Once that has been accomplished, we would discover that we are still not competitive, because Ethiopia is cheaper still, so the wage-cutting game would have to start anew. ‘Countries like Britain can never win that game’, Chang explains. If this was a comedy show, this would be the moment where the audience is given the cue to cheer.
So that, apparently, is heterodox economics: use clever rhetoric to debunk a position that nobody holds, and that is self-evidently absurd. Surely, Chang must have more to offer?
He has. Chang also makes the highly heterodox point, shared only by a tiny minority of approximately 100% of all economists currently alive, that high wages are not a problem as long as productivity levels are commensurately high:
‘Workers in German car factories are paid about 30 times more than their Chinese counterparts, and twice what their American “competitors” get. Despite that, German car companies more than match their Chinese and even US rivals’, because ‘German workers benefit from more productive technologies as a result of the investments that German companies have made in advanced machinery and research and development.’
Well, yes – and the key term here is ‘result’. These companies do not pay high wages because they are forced to do so by the government, or named and shamed into doing so by Living Wage campaigners. The advanced machinery and technology came first, and wages then rose as a consequence. Robinson Crusoe increases his fish consumption because he builds a boat and knots a fishnet – not because social justice campaigners pressure the ocean into providing a ‘Living Catch’. Without realising it, Chang points out exactly what is wrong with the Living Wage idea: it puts the cart before the horse.
Yes, we could indeed do with a few heterodox thoughts on how to get more productivity- and skill-enhancing investment going, especially in those sectors that employ a lot of semi-skilled workers. A shame that the oh-so-heterodox Ha-Joon Chang offers no such thing.