The Origin of Wealth

CHAPTER TWO

Traditional Economics

A WORLD IN EQUILIBRIUM

IT WAS 1984 and John Reed had a problem.¹ At the age of forty-five, he had just been elected chairman and CEO of one of the world’s largest companies, Citicorp. But Reed was inheriting a company that had recently been through a major trauma. Throughout the 1970s, Citicorp, along with other major American banks, had lent aggressively to the governments of developing countries, in particular to those in Latin America. Reed’s predecessor, Walter Wriston, had proclaimed that such lending was “safe banking” because sovereign governments did not default on their debts. Wriston was proved badly ...