Many economists blamed the financial crisis on “irrational exuberance” in the banking and investment communities. Now, a former British drug czar says he knows what caused that exuberance: cocaine.
Bankers’ use of the white stimulant led them to be overconfident and make the mistakes that led to the financial crisis, David Nutt has said.
Nutt, who was head of the British government’s Advisory Council on the Misuses of Drugs, made the comments in a Sunday Times interview that is not available online.
The use of cocaine — a drug often linked to high finance in pop culture — led to a “culture of excitement and drive and more and more and more,” he said, as quoted by The Independent. “It is a ‘more’ drug.”
In a column in the Guardian, prominent London stock market analyst and columnist Geraint Anderson said he found Nutt’s argument easy to believe.
“Cocaine is (I’m reliably informed) a drug that results in intense bouts of over-exuberance as well as a tendency to talk extremely convincingly about stuff you know nothing about,” he wrote.
“It could … be argued that traders would be better able to sell absurdly complicated financial weapons of mass destruction after taking a confidence-boosting narcotic such as cocaine. Furthermore, surely only cocaine-ravaged buffoons would actually buy billions of dollars worth of mortgage-backed securities when they were so clearly doomed to explode the minute the property boom stalled,” he added.
But it seems the financial crisis and bailout may have had a mellowing effect on the choice of drugs among the Wall Street crowd, because according to some sources, these days bankers are turning off cocaine and turning on to pot.
A 2010 research study from Sterling Infosystems found cocaine use dropped by more than half among bankers in the three years prior to the study, while marijuana use grew more prevalent. The study found the financial industry is somewhat “cleaner” than the general population, with 2 per cent of employees testing positive for drugs, compared to 3.6 per cent in the general population. (Of course, bankers may just be good at hiding their habits.)
Nutt, a neurological pharmacologist by trade, has a history of controversial views. He was appointed Britain’s drug czar in January, 2008, but lasted little more than a year in the job thanks to a controversial study he issued that compared the risk of taking ecstasy to that of riding a horse.
Just last week, he harshly criticized the U.K.’s drug laws, calling the country’s ban on magic mushrooms, ecstasy and marijuana “absurd,” and arguing the the ban on magic mushrooms is a hindrance to psychological research, according to the BBC.