Friday, October 28, 2005

Alan Greenspan

As head of the Federal Reserve for over 18 years many have wondered when Alan Greenspan will step aside. In 2000, Ben Bernake posed the question 'What Happens When Greenspan is Gone?' and has since recieved the answer: he'll replace him. Unlike the pathetic nomination of Harriet E. Miers who has already been forced to withdraw her nomination, Bernanke will easily be confirmed by the Senate. He has had a close relationship with Greenspan and has a remarkably impressive academic career. Hence when Greenspan retires in January, we need not worry about a clueless leftist (Paul Krugman anyone?) ruining the economy.
The mainstream view of Greenspan has always been highly favorable. This column on Times Online expresses such a view:

Alan Greenspan has often been described as the second-most important man in America, but this is a gross understatement. Historians who study the late 20th century will devote far more attention to the changes wrought in the world economy by the retiring Chairman of the US Federal Reserve Board than to any of the actions of the four US presidents under whom he has served since 1987.

But is it true what the columnist claims? that he more than anyone else made pure fiat money credible? that he is to blame for strengthening state control over the economy and demonstrating its ability to do this without serious upheavals?
Many will know the close links between Greenspan and my favourite author, Ayn Rand. He contributed to 'Capitalism: The Unknown Ideal' in which he defended the gold standard and economic freedom. So how could a defender of laissez-faire (leave it alone - radical capitalism) led the charge against the gold standard? Murray N. Rothbard, the famous libertarian scholar, gave his opinion in 1987 on why greenspan ought not to be considered a champion of free markets:

There is one thing, however, that makes Greenspan unique, and that sets him off from his Establishment buddies. And that is that he is a follower of Ayn Rand, and therefore "philosophically" believes in laissez-faire and even the gold standard. But as the New York Times and other important media hastened to assure us, Alan only believes in laissez-faire "on the high philosophical level." In practice, in the policies he advocates, he is a centrist like everyone else because he is a "pragmatist."
As an alleged "laissez-faire pragmatist," at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one's course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions.

Is the verdict out? did Greenspan cause more harm to liberty than good? I don't know, but it's something worth considering.


At 10:49 AM, Blogger Helix6 said...

A clueless leftist...? I see. The criteria for being "clueless" being "has views that don't agree with mine." Forget about a decades-long study of the issues on which Krugman holds those views. Forget about holding advnaced degrees on the subject from world-class universities.

If I recall correctly, Krugman made his reputation on analyzing (or, more accurately, conducting post-mortems on) economies that had followed the laissez-faire policies that you promote to their dying gasp. Argentina, anyone? Or perhaps the US on 1928?

By the way, what exactly are YOUR credentials?

At 2:10 PM, Blogger James said...

I'm well aware of his credentials and I'm not pretending i'm more knowledgable or intelligent than him. But he is wrong on many important issues, and just because I don't have a phd doesn't mean to say I can't disagree with him. Krugman's economic philosophy can best be described as neo-Keynesian - and I have an issue with that.

Argentina, if you mean in the late 1990s, was not following laissez-faire policies. What the IMF mostly recommends is not 'laissez-faire' but neo-liberal. And the US in 1928 crashed due to government intervention as many OTHER economists have argued. To quote from wikipedia:

"Today the most widely accepted theory is the one advanced by Peter Temin: the Great Depression was caused by catastrophically poor monetary policy pursued by the United States Federal Reserve during the years leading to the Great Depression"

Fed reserve shouldnt exist according to advoates of laisse-fairz hence don't blame the problem on us.

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