A story is told of Arthur Burns, Eisenhower’s chief economic adviser, appearing before a congressional committee on unemployment. Peering through thick glasses from under his thatch of centre-parted hair, Burns dilated on the issue for some time in a sombre monotone, then seemed to stop. “If I infer correctly,” said a Connecticut congressman at last, “what you are saying is that the unemployment problem is really one of women and young persons.” Burns paused ominously, fixed the congressman with an icy gaze, took a long drag of his pipe, and finally replied in his New Jersey drawl, “I said a great deal more than that.” The room waited. Further elaboration came there none.
Burns, Friedman, Galbraith, Heller, Samuelson, Keyserling: the hand-picked economic mandarin has been a familiar figure in the Beltway since the New Deal. And no representative of this clerisy has had the presence of Alan Greenspan. Burns, as it happens, was his mentor when he was a young analyst at the National Industrial Conference Board in the 1950s; like Burns, Greenspan followed spells as a domestic policy co-ordinator (for Richard Nixon) and chief economic adviser (to Gerald Ford) by casting the interest-rate runes as chairman of the US Federal Reserve (for Reagan, Clinton and Bush père et fils, over 18 years). His status was attested in 2000 by the ultimate certification: a biography by Bob Woodward, Maestro, which made up for its thinness with pure schoolgirl gush. “With Greenspan, we find comfort,” Woodward wrote. “He helps breathe life into the vision of America as strong, the best, invincible ... Each of us is a character in the nation’s great economic soap opera; Greenspan is both director and producer.” Well, maybe if it was Revenge of the Nerds.
To be fair, the “economic soap opera” was always vested with a certain jokey self-awareness. At the zenith of Greenspan’s influence, the financial-news network CNBC got into the habit of filming his arrival for Federal Open Market Committee meetings, submitting to analysis the size of his briefcase. The operating principle of the Briefcase Indicator was that the slimmer the case, the lighter the owner’s heart and the more buoyant his market prognosis. In fact, according to Greenspan’s new autobiography, The Age of Turbulence: Adventures in a New World (Penguin, 490pp; $59.95), the choice of case was dictated by whether he had packed his lunch - but to say so at the time, of course, would have spoiled the game of the market watching him watching the market watching him.
The book, for which the publisher paid an advance of US$8 million, finds Greenspan still playing up to his role as the wonk’s wonk, all owlish specs and oracular pronouncements, a man who once jested of himself, “I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I said.” On the first date with his future wife, he talked about monopolies and asked her back to his flat to read an essay he’d written on anti-trust. So dense is his expression, even in repose, that it later took five attempts before she realised he had proposed; on their honeymoon in Venice, he exasperated her with remarks like, “What is the value-added produced in this city?” He imbues with great gravity such personal philosophies as, “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.” He fell into a virtual swoon when that monetarist minx Margaret Thatcher introduced herself with a flirtation: “Tell me, Chairman Greenspan, why is it that we in Britain cannot calculate M3?”
Greenspan makes so much of this as to cast doubt on whose is the voice in The Age of Turbulence: is it Himself or that of his amanuensis, Fortune’s Peter Petre? There are a few of the subject’s trademark terminological train wrecks - for example, “inherent anchor in a fiat-money regime” and “decontrol-engendered affluence” - but otherwise the prose is lucid and the reasoning pretty clear. The vernacularising process might even have gone a little far. The book is burdened by tired colloquial personifications of the market: from “roller-coaster” to “eight-hundred-pound gorilla”, and inevitably as a “Titanic” on course for an “iceberg”. One searches in vain for an insight as arresting as the delightful aperçu of the Fed’s longest serving chairman, William McChesney Martin Jr, who said his role was to “order the punch bowl to be removed just when the party is really warming up”. Greenspan doesn’t do much better than, “Panic in a market is like liquid nitrogen - it can quickly cause a devastating freeze.” And the dullest passages read like a recitation of rote-learned clichés, such as:
Had we turned the screw one time too many? We were groping through a fog. The FOMC has always recognized that in a tightening cycle, if we stop too soon, inflationary pressures will resurge and make it very difficult to contain them again. We therefore always take out the insurance of an additional Fed funds increase. Ending the course of monetary antibiotics too soon risks the re-emergence of the infection of inflation.
Or: “My concern about a bubble had changed my mind. I told the committee we might need an interest-rate increase to reign in the bull. I was choosing my words carefully because we ... were playing with political dynamite.”
Certainly the book contains no economic idea quite so compelling as one to which Greenspan has regular recourse: Joseph Schumpeter’s “perennial gale of creative destruction”. This is the book of a nimble, adaptable but small-scale thinker. Perhaps this made him a good bureaucrat; it doesn’t make him the ideal memoirist. The Age of Turbulence has to be read closely for other than merely incidental pleasures.
In the main, Greenspan’s personal judgements are unsurprising. Nixon was the smartest and angriest of leaders, while Reagan lent a “sunniness and benevolence to the presidency that never wavered”. Greenspan’s relationship with Bush senior was tense, with Bush junior tenuous. Of all the presidents, he testifies most glowingly of the humble and hard-working Ford, but was most enamoured of Clinton, captivated by his charm and intellect, oblivious to his immorality and opportunism.
And for all Greenspan’s intellectual insouciance, that capacity to be charmed is perhaps the real story. Greenspan found he could not cheerfully serve Nixon and retreated to consulting on Wall Street; taxed once by a question about his former boss’s alleged anti-Semitism, he replied pithily, “I don’t know anybody he was pro. He hated everyone.” By the ‘90s, however, Greenspan was the quintessential insider - and, as he says, “I have to admit, I was having fun.” His account of the Clintons’ Millennium Dinner is almost starry-eyed, even to the extent that he notes his wife’s “cut-velvet burgundy and black Badgley Mischka”.
Greenspan was also far from uninvolved in the manufacture of his own myth. The phrase for which he will be recalled, he relates, came to him in the bathtub shortly after the Dow broke 6000 in October 1996. He kicked it round for a couple of months with colleagues, debating its adequacy, pondering its consequences. “Are you sure you want to say this?” asked a senior colleague before the American Enterprise Institute dinner at which it made its inaugural public appearance. Greenspan enjoyed studying the reactions as it reverberated round the room: “On the podium that night, I delivered the key passage, watching carefully to see how people would react ... No one guessed. But I’d seen people in the audience sit up and take notice, and as the evening ended, the buzz began.”
“Irrational exuberance” suited the circumstances exquisitely; in its donnish dubiety, it soon became not merely something Greenspan had said, but also what he would have said. In reality, it was scarcely the cry of ‘Fire!’ in a crowded theatre, being expressed in the form of a question: “But how do we know when irrational exuberance has unduly escalated asset values ...?” In congressional testimony the next week, indeed, Greenspan denied he was talking share prices down. But this, for the speaker, was perhaps the episode’s most intoxicating part: recognition, even reverence, for not saying very much at all; merely for sounding measured, informed, yet non-committal.
The Fed’s autonomy is guaranteed by the Banking Act of 1935; it funds itself, and the chairman is answerable only to his board of governors. Greenspan’s immediate predecessor, Paul Volcker, once received a note from Reagan asking if the president could come see him; Volcker replied tersely that this was “inappropriate”. Yet after “irrational exuberance” gave him global profile, Greenspan’s White House contacts grew increasingly regular. He allowed himself to be courted by the Clintons and then by Bush junior, members of whose cabinet he knew exceedingly well, especially Cheney, Rumsfeld and Paul O’Neill: all veterans of the Ford administration. At regular White House lunches, Greenspan recalls, “I talked so much that I don’t recall ever having time to eat.”
This is a telling admission. It smacks of Greenspan reverting to his previous role as chairman of the president’s Council of Economic Advisers, rather than preserving the distance and impartiality incarnate in his own office. And it is hard not to speculate that it bore on his testimony to the Congressional Budget Committee in August 2001 when, during the American economy’s five minutes of surplus sunshine, he appeared to bless the Bush tax cuts that led the US deeply into deficit. Again, this was a premeditated step from which colleagues strove to dissuade him. “The issue isn’t so much what you’re saying,” said the former treasury secretary Robert Rubin. “It’s how it’s going to be perceived.” Greenspan gave a wilful reply: “I can’t be in charge of people’s perceptions. I don’t function that way. I can’t function that way.” But he was, he did and he always had; and while Bush would probably have forged ahead with his tax cuts regardless, Greenspan’s fiat gave them an irresistible momentum. In The Age of Turbulence he excuses the lapse as statistical: the effect on the tax base of the dotcom bust was greater than expected. The suspicion lingers that it was more personal, an undue relish for the role of maker and breaker of policy.
Greenspan spends a good deal of the rest of his recollections dissing the Bush White House for its comfort with deficits, its cynicism in distributing spoils and its connivance in the unstoppable growth in “earmarks”: budget line-items directing funds to specific projects without public hearing or review. Yet in his five years as Bush’s chairman of the Fed, he was largely docile and accepted at face value his re-appointment for a fifth term a full year ahead of schedule. Greenspan is right to upbraid Bush for failing to wield his veto, and strangely reticent in talking about his own, theoretical but powerful.
The best of The Age of Turbulence is actually not the very limited self-assessment but the parts of the book devoted to economic themes. Particularly good is Greenspan’s account of visiting Moscow two months before the fall of the Berlin Wall and meeting his counterparts in Soviet economics at the planning bureaucracy Gosplan, where he obtained insights into the genius of capitalism from the decrepitude of communism. “The Fed’s job was challenging,” he writes. “Gosplan’s was surreal.”
He shows an enthusiasm for the illuminating datum and a flair for the counter-intuitive fact, especially where consumerism and oil consumption are concerned. Unfortunately, this is not what readers have come for. And, having stepped down from his bully pulpit in favour of Ben Bernanke in February last year, Greenspan is really just another economist - which perhaps he knew all along. His views are now simply views; on his pauses, nothing hangs.
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