Greenspan - Introduction

Greenspan on the hot seat

This turns out to be as close as he comes to actually admitting he was wrong. His book, which will be the source of my comments, tells a totally different story from his hedged remarks here, which don't actually add up to a shadow of apology. Basically, he blames bankers (his closest friends) for not being as trustworthy as he thought. His "world view" is wrong just in this respect: the idea that self-interest of bankers and generally people in the financial industry are not as "rational" as he thought

Subsequently, one can search in vain for any backtracking on Greenspan's core world view. I
take this world view to be accurately and comprehensively laid out in his writings.  Agree or disagree, Greenspan's views have sweeping applicability and are backed up with by impressive fine-tuned historical analysis.

Even so, it seems to me that Greenspan and the "real conservative" world view is wide open to serious challenge. In a nutshell, these objections have some common themes:

• The assumption that money=value and the larger corollary that society is an economy with all other aspects of society being a drag on "efficiency".
• The circular assumption that "growth" of the economy is good when measured against criteria that leave out human happiness. This is usually trotted out to defend capitalism - don't worry about all the bodies in the ditch - just look how much better we are, "we" being people with money - precisely those who love to think of money as equal to value.
• There is no place whatever for what economists call the "commons", which includes such basic things as the environment. 
• He has no answer to the fact that his system incentivizes "downloading" costs onto the public, such as cleaning up oil spills and pollution in general.
• Cherry-picking examples of "creative destruction" - always in terms of economic growth, never in terms of self-evident destruction of value by, for example, leveraged buyouts forcing previously successful companies into bankruptcy. Nor does the human cost (often an actual body count) figure into Greenspan's vision of creative destruction.
• Lumping. The vocabulary of conservatives tends to include "lumpy" groups with fuzzy or even totally fictional definitions, often starting with the phrase: "those who". On the "left", we see a whole different set of lumps which is one reason why left and right are always talking past each other.  
• On a broader issue, it is worth delving into Greenspan's vocabulary which is, at times, deliberately vague. However, one's world view is strongly influenced by the vocabulary you use to describe it. In fact, it seems that Greenspan rarely speaks of "things" and "events" that are not relevant to his personal bubble - banking.
• H G Wells pointed out that lumping is the Achilles heel of those who would design a Utopia. Greenspan (following his idol Ayn Rand) is a Utopian. It's easy to get lost in the labyrinth of proposals and criticisms coming from Mr. Greenspan and not see that his ideal world is impossible.

I will add to this list as I go along ...

This is what I said to a good friend about this project:

Wading further into this book, I finally get to the chapter where he sings the praises of the financial instruments that lead to the great crash of 2008, which lost me my last real job.

This is all instructive since his *later* book will undoubtedly rationalize the whole thing - not to say I don't want to read that too. 

Greenspan seems to represent the clearest form of the "pure conservative", reflected in his undying admiration for Ayn Rand and Ronald Reagan. Although he regards Reagan as mainly a "communicator" rather than a thinker, his praise of Ford and Clinton is also worth unpacking. The main criterion seems to be that both of them gave him a seat at the table and put his ideas into practice. This was completely effective according to the way he sees things (not entirely insane) - for example, leading to Clinton's surplus. 

On the other hand, Greenspan himself keeps coming back to the idea that the "proof of the pudding is in the eating". He is constantly being surprised by actual, real life economic performance. There are also doubts raised as to the effectiveness of his tools. The most interesting comment I ran across in the last day was his insight that if the Government actually eliminated the debt, the Fed would be left with nothing to do and no way to influence the economy since it's main lever of control is the sale and purchase of Government debt. If the debt gets too small, this lever becomes irrelevant. Actually he hints that it is already irrelevant since government debt is only one way for investors to reduce risk. Famously, offloading of risk was key to the 2008 crash, where some of us personally experienced where the risk actually wound up.  Greenspan himself attribures the crash to the rather unexpected human qualities of incompetence, greed and inattention among his most trusted friends (the bankers).

Greenspan is merciless in his criticism of Bush and son, revealing a split between the "real conservative" and the "conservative" (i.e. Republican) politician. Even conservatives are unhappy with "politicians" in general and Government policy in particular. Again, this is an instructive insight. Trump, as expected, is at war with the Fed and, along with his Republican backers, shows not a trace of fiscal responsibility. 

On a personal note then, this may be a source of broad agreement between the two of us: that the economy is a real thing and fiscal responsibility is a rare but important attribute of any government, no matter what its official name might be.  There seems to be no point in addressing the "ideology" of a politician since they don't actually have one - Trump being the most famous example, but it's just a matter of degree.

It remains to ask whether the "real conservative" view is correct, in the sense that it covers the real situation we find ourselves in as human beings. I remain convinced that the entire outlook is built on a house of cards, namely the assumption that money = value. Ultimately, there is no moral content in Greenspan's world view. The market is what it is and we need to let it run free to bring prosperity (on average) to humanity. 

Even so, I think it's a good idea to become familiar with Greenspan's outlook, since it is shared by a big swath of smart and powerful people. To counter it, you need to know what it is. There are many, many moving parts and consequences. Among the most obvious is that it seems that those who preach fiscal responsibility seem to have built a system that specifically avoids responsibility under the cover of offloading risk. 

So I'm taking Greenspan and a big yellow marker to the coast with me with the intention of creating one or more blog posts that dive into all of this. I will also take Chomsky's "Anarchy" with me - this is 180 degrees away from most of the assumptions that underlie the conservative world view. Chomsky also loves facts and history, but his bottom line is that whatever they theory may be, the end result is very bad news for most of humanity both in the short and long run. 

Neither of these books is an easy read, but who said deep insight was free? Along side these two schools of thought, I think there are other totally "orthogonal" ways of seeing the situation, such as asking ourselves about the actual structure of a culture (its networks of influence, its heirarchies...). Like Ayn Rand, Greenspan's starting assumption is that the individual person is the "atom" of society, even though Greenspan himself rarely deals with anything but vast abstractions, such as the GDP. In reading Grenspan, you get to understand his strong bent to build from tiny details up into grand abstractions but the "tiny details" never drill down to the powerless victims of his policies. He's a "lumper" whose "lumps" systematically include lumps like "people going bankrupt due to medical expenses" or "the homeless".