Many people wonder about Alan Greenspan. As a student and associate of Ayn Rand in the 1960s, he wrote many articles on the virtue of capitalism, some appearing in her seminal work, Capitalism: The Unknown Ideal. An eloquent and ardent advocate of the free market, he nevertheless sought work in the government’s primary economic regulatory body and has become one of the most revered, most “successful,” chairman in the history of the Federal Reserve Bank.
The mystery is over what Mr. Greenspan actually believes, for he has never publicly disavowed Ayn Rand’s philosophy–and even publicly defended it when such a defense would have harmed his reputation most among the public policy makers who would eventually confer upon him his current position–yet he works in a system that he has rightly denounced as evil. Some have suggested that he is simply camouflaging his true ideas while he works–effectively as a spy–to restrict government interference in the markets, acting on the premise that it is easier to change public policy “from the inside.” If so, he is remarkably gifted at the art of concealment, as his statements and actions over the years have shown, and no more so than in his most recent congressional testimony.
Consider the following selected lowlights.
He worries simultaneously about increased wealth (primarily due to the boom in stock prices) and increased consumer spending. That increased wealth, derived from stock market investment, means that people have more money to spend. Every dollar they then exchange for goods and services creates more economic activity, employs more people and creates more higher revenues. Greater sales mean greater corporate profits, which provide the investment capital to finance future growth. In this manner, wealth and spending are inherently complementary. (Try comparing wealth and spending growth in Somalia.) It may be better if consumers saved more for their own futures, but high tax rates make it difficult, and decades of dependence on Social Security seem to make it unnecessary, but about these facts he says nothing.
While complaining about the low savings rate, he argues against tax cuts so that the government can maintain its solvency by paying off its own debts. Those high taxes are the primary reason for the low savings rate. Every low- and middle-income earner struggles to put anything aside for investment and/or retirement, while high-income earners struggle to put as much aside as they would like to, and are entitled to. They then spend small fortunes on accountants, lawyers and politically-friendly charities to minimize their tax bills. Lower tax rates would solve the very problem Greenspan laments, generates the economic growth which he fears cannot be maintained, and asserts the moral principle of a man’s right to his own property, yet he opposes them. Moreover, he says nothing about the government reducing its spending, and tentatively suggests only that they not increase spending too much.
He fears that the low unemployment rate may cause a natural rise in wage rates, yet he says nothing about the artificial rises caused by minimum wage legislation. These arbitrary wage rates inhibit employment, drive prices up artificially, slow business growth, and poison the justice inherent in a system that would otherwise pay individuals according to their virtue, i.e., their productivity.
He seems to celebrate the fact that mortgage rates are rising–primarily because he has decreed that they should–so that fewer people will be able to buy or build their own homes, thus easing the “growth pressures” in the building industry. To him, it is now more important that the economy does what he thinks it ought to do than it is for people to own their own homes.
To gain some perspective on Mr. Greenspan’s state of mind, remember that: productivity is growing; employment rates are up, corporate profits are rising, household wealth is increasing, and prices are rising at the slowest rate in recent history.1 Overall economic growth has continued for the longest period on record.
This good news is, according to Mr. Greenspan, really bad news. These factors, he said, are “engendering a set of imbalances that, unless contained, threaten our continuing prosperity.” Prosperity (this means) is a threat to itself, and must be protected by further government intervention in the economy; the markets must be protected from themselves. As economist Richard Salsman noted, this is pure Marxism: “Capitalism sows the seed of its own destruction.”
The “spy theory” on Alan Greenspan is nothing more than wishful thinking on the part of those who cannot bring themselves to totally condemn him. The kindliest explanation is that he has spent so much time studying innumerable economic reports and models that he has lost touch with reality. The economy, to Greenspan, is whatever he can create out of all the data he sees, not the real-life interaction between productive citizens that it actually is. The harshest explanation is very harsh indeed.
Whatever Greenspan was once–and even if he intended to be the free market “mole” in the welfare state–he is no longer a capitalist. Be it through conscious design, or accidental metamorphosis through overwhelming immersion in reports and projections, he has turned his back on individual rights and the free market. Bad as this is, it may still be that he is the best, most market-friendly candidate to lead a fundamentally malignant bureaucracy. And that is really bad news.
1 “Inflation” does not mean a general increase in prices. Prices fluctuate according to supply and demand, a mechanism Greenspan has noted “is not to be conned.” (“Gold and Economic Freedom,” Capitalism: The Unknown Ideal) Inflation is an improper or fraudulent increase in the money supply, initiated by a government (which is the only body with this power) to support deficit spending.