Review of Alan Greenspan's The Age of Turbulence
by Michael Kinsley
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So the suspense is over: Alan Greenspan is able to express himself in clear English prose. This is not entirely a compliment. For 18 years as chairman of the Federal Reserve Board, Greenspan was known for his inscrutable Congressional testimony. That joke had long become tired, and now he is exposed as a fraud. It seems from "The Age of Turbulence" that Greenspan enjoyed the obfuscation game: as a frank antipopulist, he thought and still thinks that an air of mystery around the Fed is a good thing.
The charm of Greenspan's book is its self-portrait. The author may have put as much art into the self as into the portrait, but the result is one of the more interesting characters in the history of our democracy: a saxophone-playing math dweeb who became not just powerful but glamorous, while remaining a dweeb. He writes, in reference to one of his early published articles, "I declared, with all the enthusiasm of youth, 'Since small business may act as a barometer of cyclical movements, a survey of both the immediate and long-term trends in small corporate manufacturing is of particular interest.' You gotta love a guy whose idea of an important life lesson is: "I have always argued that an up-to-date set of the most detailed estimates for the latest available quarter is far more useful for forecasting accuracy than a more sophisticated model structure." Words to live by.
Greenspan resists all opportunities to portray himself as cool. He races past his early career as a professional jazz sideman, noting hastily that his saxophone teacher paired him up with "a 15-year-old by the name of Stanley Getz," and that the band he played with included the pop artist Larry Rivers as well as the future Nixon Lawyer Leonard Garment and the future composer of the "theme music for M*A*S*H." ( ... ) He dwells on his boyhood love of Morse code. He brags that while his fellow musicians were smoking pot, he was doing their income taxes. He declares unnecessarily that in the 1960s, "I didn't relate to flower power," adding with strange dignity: "I had the freedom no to participate, and I didn't."
Freedom. For this proud square, this eager conformist and joiner of the establishment, freedom is nevertheless the supreme value of his life. Freedom and, he would add, rationality. In the early 1950s he joined the inner circle of Ayn Rand, the author of "The Fountainhead" and "Atlas Shrugged," whose philosophy, known as Objectivism, was an extreme form of libertarianism that actually celebrated selfishness and greed. Many young brainiacs of dorkish tendencies go through an Ayn Rand period (her books are very popular at Microsoft). But Greenspan credits Rand as "a stabilizing force in my life" and was "a regular at the weekly gatherings at her apartment" through the early 1960s. She stood at his side when he was sworn in as chairman of the Council of Economic Advisers in 1974, and they "remained close until she died in 1982."
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Milton Friedman deserves some of the credit. Greenspan became Fed chairman just as Friedman's theory of monetarismㅡthat the money supply determines the inflation rateㅡbecame more or less universally accepted, and just after we peered over the hyperinflation precipice and pulled back. Friedman actually believed that expansion of the money supply should be put on automatic pilot. He did not favor someone pulling levers and twisting dials like the man behind the curtain in "The Wizard of Oz." Nevertheless, Greenspan took the newfound importance of monetary policy, mixed in his number-crunching talents on the one hand and his social and business prestige on the other, topped it off with his soon-to-become-legendary mumbo jumbo at hearins, stirred the mixture, drank it and turned into a wizard.
Why did Guess What Greenspan Is Thinking becomes such a serious sport during his tenure at the Fed? Why can his word moving markets even now? The answer to the second question is that people are nuts. The answer to the first is that Greenspan's predictions about the economy may not have been better than anyone else'sㅡbut he was in a position to do something about them. To put it in terms Greenspan the data lover might appreciate, his opinions as Fed chairman weren't important as a view of the data: they were data.
Most of the bad publicity Greenspan has gotten since the book was published concerns the early years of the second Bush administration. That's when Greenspan gave every appearance of endorsing the president's grossly irresponsible tax-cut proposal. Greenspan said at the time that he was concerned about the danger of the huge surpluses that seemed to loom ahead for about five minutes. In the book he says he was "wrong to abandon my skepticism" about the reality of these surpluses and maintains that it's not his fault if people missed the part about canceling the custs if the surplus didn't materialize. ( ... ... )