Where, oh where, are the orthodox economists now?

Ann Pettifor is a new economist and author of 'The Coming First World Debt Crisis' (Palgrave, 2006) and editor of 'The Real World Economic Outlook' (Palgrave, 2003). She is a fellow of the new economics foundation (nef) in London and director of Advocacy International.


In the midst of all this tragedy and chaos, one has to savour the moment. The sight of all those free-market capitalists, trained by economists at the Chicago School of neo-liberalism, handing over to ‘big government’ the financial system of the biggest free market economy in the world.

And in the midst of what will prove to be a prolonged period of economic failure, one must be allowed to indulge just one feint sense of satisfaction. For only a couple of weeks ago (see below) Jim O’Neill chief economist at Goldman Sachs, advised me, and a BBC World Service audience that this financial catastrophe was no big deal, ‘just another periodic crisis’….. like five that he had already lived through. (He was referring, I believe, to crises such as that of the US stock market of 1987, the South East Asian crisis of 1998 and the Dot.com crash of 2001.)

It is now pretty clear that I, without the data, research back-up and infrastructure that supports Jim O’Neill’s analyses – already knew that this was not at all like the previous ‘periodic crises’. With my background in Keynesian monetary theory, I had a more sophisticated and accurate view of the gravity of this crisis than Goldman Sachs’s neo-liberal economists. Regrettably my foresight and wisdom did not extend to earning Goldman Sachs-like fees. More fool me.

Last year, at a seminar in Cambridge, a prominent economist with a column on one of Britain’s most prestigious newspapers, argued to me that managing the distribution of money was a little like managing the distribution of bread. He gaily recounted the story of Kruschev visiting New York in the 1950s – when he asked to be introduced to the man who so miraculously distributed bread throughout that city. His American hosts replied that bread was distributed not by a man or a company, but by ‘the invisible hand’. In just the same way, argued this orthodox economist, money is distributed effortlessly, and above all efficiently by financial markets. Despite the ‘debtonation’ of 9th August, 2007, he argued, the management of finance could be trusted to Adam Smith’s terminal, prehensile limb.

http://debtonation.org/2008/09/where-oh-where-are-the-orthodox-economists-now/#more-132