Thursday, October 09, 2008

Chicago Has Much to Answer For

Lawson A. Omokhodion (MD/CEO of the defunct Liberty Bank) writes an interesting opinion in The Guardian (HERE) of the banking business in Nigeria and his interpretation of the lessons from the current banking crisis:

‘How not to manage a banking crisis’

by Chief Lawson A. Omokhodion (MD/CEO of the defunct Liberty Bank):

THE managers of the OECD economies are a marvel to watch. When the situation is right, they preach the monetarist glamour of free market, globalisation, liberalisation and the supremacy of the invisible hand of 'Adam Smith'. But at other times, they are not shy to radically embrace the Keynesian principle of the role of big government in economic transformation. The OECD economies can subsidise its production systems while kicking against a similar initiative in the developing economies.”

There are those in the OECD (and the World Bank, IMF, Wall Street, City of London, and Treasury Departments around the world, who do believe in the mantra that Chief Omokhodion recites on their behalf.

It’s the usual nonsense about the mystical belief in “the supremacy of the invisible hand of 'Adam Smith'” that caught my attention.

And that is a problem which Chicago created for economists when they invented the false image of Adam Smith as a believer in laissez-faire, a ‘small’ night-watchman state, and invisible hands mysteriously converting the actions of ‘merchants and manufacturers’ into benign outcomes for society, somehow, as long as they followed their self-interests (eliding in selfishness).

This creates a series problem for advocates of market solutions when those same behaviours are shown to be less than benign (pollution, monopolies, cartels, and anti-competitive). Chicago has given the enemies of markets a stick with which to beat up on proponents of Smithian economics of growth and employment.

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