"If, as a result of Brexit, the economy crashes it will not vindicate the economists, it will simply illustrate once more their failure." -- Ann PettiforYou can see immigrants. You can't see NAIRU or flexible labor market policies. Most people wouldn't know a NAIRU from a Nehru jacket and have probably never heard of flexible labor market policies.
There is a simple logic behind the "growth through austerity" policies beloved by Cameron and Osborne: "wages are too damn high." But there is also a more technical-sounding obfuscation. This more convoluted explanation is that there is a long-run, "natural" rate of unemployment that is unaffected by aggregate demand, therefore fiscal stimulus will result in inflation. Thus the only non-inflationary way to reduce unemployment is to fine tune this hypothetical natural rate by removing labor market rigidities.
Sounds plausible? What it means in practice is "wages are too damn high." In the 19th century, this superstition was known as the wages-fund doctrine. Also known as this magazine of untruth.
Another euphemism for these "flexible labor market policies" (i.e., "wages are too damn high.") is "structural reforms." In a press release from the Center for Economic and Policy Research, Mark Weisbrot pointed out the connection between Brexit and these so-called structural reforms:
"While the movement in the UK to leave the EU had right-wing, anti-immigrant and xenophobic leaders, in most of Europe that is not the driving force of the massive loss of confidence in European institutions. The driving force in most of the European Union is the profound and unnecessary economic failure of Europe, and especially the Eurozone, since the world financial crisis and recession.
"It has cost European citizens millions of jobs, trillions of dollars in lost income, and is sacrificing a generation of youth at the altar of fiscal consolidation and 'structural reforms.' It has delivered an overall unemployment rate in Europe that is twice the level of the United States; more than seven years of depression in Greece; more than 20 percent unemployment in Spain, and long-term stagnation in Italy. In recent weeks French workers have been fighting against 'structural reforms' that seek to undermine employment protections and the ability of organized labor to bargain collectively."