If Greenspan were truly an advocate of the free market, this is what he would have said. Of course, he’s not an advocate of the free market. He hasn’t been since his early years, as a student and associate of Ayn Rand’s. But it’s not being reported that he never was an advocate of the free market, outside of his early years. And that’s what’s so disturbing about this whole event.
Let’s consider some of Alan Greenspan’s quotes from the era in which he established his reputation and career – the era which propelled him to the high office he eventually held.
According to the original Greenspan: “The guiding purpose of the government regulator is to prevent rather than to create something.”
How true. Literally a century of central banking and government regulation has prevented the level of economic growth we otherwise would have had. Today, it has quite literally brought economic growth to a total halt. There’s not much left to regulate. All that’s really left is outright nationalization and socialization. Under George W. Bush, that process began with the nationalization of the banking industry. They can call it “temporary” nationalization, but there’s no such thing as temporary nationalization. Government has never given up control, not in all of human history, outside the context of armed revolt by the citizens. You can be sure that further nationalization under President Obama will not be temporary, either.
According to the original Greenspan: “The minimum standards, which are the basis of regulation, gradually tend to become the maximums as well.”
What an astute observation. And how borne out it is by today’s banking crisis.
Government, for decades, set the rules for the banking and lending industry. He who sets the rules also sets the bar, deciding what the standards will be. If Wall Street’s standards were so low, what does that say about the moral effectiveness of government regulation? Government determined those standards for Wall Street, claiming it could do a better job than the free market. Witness the results.
According to the original Greenspan: “What collectivists refuse to recognize is that it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”
Amen! Yet doesn’t this weaken the case for regulation in the first place? Keep in mind that regulation doesn’t mean upholding legally binding contracts, entered into freely by consenting individuals. Regulation doesn’t mean failing to prosecute outright fraud. Capitalism would fall apart without a government to play these roles. There would be anarchy and chaos without government legitimately defined. But regulation as we know it – as we have known it since at least the 1920s – operates on the premise that business cannot be trusted to provide what only government oversight can deliver. That’s the definition of the mixed economy. The mixed economy essentially collapsed in the past few months. Is this Alan Greenspan’s fault – or is it in the nature of the mixed economy itself? The original Alan Greenspan knew the answer. Does the elderly Greenspan know? If he does, he’s not saying.
According to the original Greenspan: “There is nothing to guarantee the superior judgment, knowledge, and integrity of an inspector or a bureaucrat – and the deadly consequences of entrusting him with arbitrary power are obvious.”
It seems the elderly Greenspan has come full circle, with respect to the original Greenspan. Way back then, he clearly realized that an individual bureaucrat (even a Federal Reserve Chairman) is no less human and fallible than an individual businessman, operating in the marketplace. However, the young Greenspan also recognized a crucial difference between the businessman and the bureaucrat, a distinction he ultimately came to evade: The bureaucrat is entrusted with arbitrary power. Greenspan was entrusted with arbitrary power. He may have tried to use it in what he sincerely considered the best interests of everyone. But he knew better, well before he ever got to that office. He knew such power was not inherently rational. Yet he took it anyway. He paid dearly for that evasion, although it took many years for his celebrity to finally falter and collapse.
It’s interesting. Alan Greenspan started out as a strong proponent of Ayn Rand’s philosophy of Objectivism. According to this philosophy, integrity is practical; loyalty to one’s values and beliefs advances self-interest.
In short, according to Objectivism, the moral is the practical. For a long time, Greenspan’s career seemed to defy this. He departed daily from his contention that the market cannot and should not be regulated. He accepted the job of Federal Reserve chairman not to provide a transition back to free market capitalism, but to hamper capitalism even more. For this, he won praise … for a time. He bought into most of the wrong premises of the politicians who run Washington D.C., those petty little elected officials who redistribute wealth while never creating anything. He left office considered perhaps the greatest Chairman of the Federal Reserve in its history; as one of the greatest economic minds in history – for all of the wrong reasons.
Now, only a year or two into retirement, his reputation is, like our economy, in a shambles. Whatever the future holds for our economy, Alan Greenspan’s reputation will never recover. He will go down in history as the second Herbert Hoover – or worse. He will go down in history as the father of whatever economic malaise is now upon us.
Alan Greenspan should never have departed from Ayn Rand’s principles. It wasn’t practical: Not for him, and not for the rest of us.
Excerpts from Alan Greenspan are from his essay, “The Assault on Integrity” published in Capitalism: The Unknown Ideal, by Ayn Rand, New American Library (1962).
