The Waldorf-Astoria Hotel employed girls to operate tickers and stock exchange boards, November 12, 1918.

For Love of Money: Why Central Bankers and Speculators Need Each Other

In This Review

The Vandals' Crown: How Rebel Currency Traders Overthrew the World's Central Banks

By Gregory J. Millman
Free Press, 1995
250 pp. $23.00

Until the early 1980s, there was a running dispute within the economics profession that descended to the level of a spectator sport. One side was eloquently represented by John Kenneth Galbraith, the other by Milton Friedman. Together they accomplished for economics what Norman Mailer and Gore Vidal did for literature. Friedman published, or perhaps merely allowed to be published, a slender treatise entitled Friedman on Galbraith, which consisted of a roundtable discussion convened to examine, in something less than the spirit of scientific inquiry, the inexplicable global appeal of his rival. For his part, Galbraith was wont to open speeches with a canned joke about the night he was awakened at 3:00 a.m. by an Israeli journalist asking his reaction to Friedman's appointment as an adviser to Israel. "With Milton Friedman as your economic adviser," a sleepy Galbraith told the Israeli people, "you have nothing to worry about from a few hundred million hostile Arabs."

It was a rare case of a dispute between academics that was so bitter because the stakes were so high. Perhaps the most critical question in their debate was what precisely had caused the Great Depression. Galbraith argued on behalf of John Maynard Keynes that the cataclysm had been caused by inherently unstable free markets. Friedman, holding new evidence, explained that the depression was the result of the failure of central banks to respond to a reduction in the money supply. So the government, and not the market, had failed.

By the early 1980s Friedman's view pretty much had replaced Keynes' as the new orthodoxy in economics departments. But what this meant in practice was less clear. Keynes' ideas had spawned government-controlled financial structures around the globe and embedded within central banks and government treasuries a certain smugness about their ability to manage markets. The paradigmatic post -- World War II financial institutions, the World Bank and the International Monetary Fund, had been conceived by Keynes himself precisely to prevent the free markets from regaining control

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