Note to the Illustration: Illustration by Joe Ciardiello
October 14, 2007
By MICHAEL KINSLEY
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.
Wait. It gets worse. Not only can Greenspan discourse lucidly on economic matters, but he has also written the most unexpectedly charming Washington insider memoir since Katharine Graham’s a decade ago. The books are very different. The charm of Graham’s was its frankness. The publisher of The Washington Post dished and dissed, starting with her mother. Greenspan is the soul of tact. Far too many people are labeled as his “friend.” Even the mildest criticism is prefaced by a statement of high regard and/or followed by an expression of regret. He doesn’t lay a glove on his mother.
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 dismisses all popular music since (and including) Elvis as “on the edge of noise.” (Note the characteristic qualification.) 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 not 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.”
Those weekly meetings sound like the famous “Beyond the Fringe” comedy routine about Bertrand Russell trying to “trap the then young, and somewhat beautiful, G. E. Moore into a logical falsehood by means of a cunning semantic subterfuge” involving apples in a basket. Before he met Rand, Greenspan was a logical positivist. He refused to accept the reality of anything that could not be verified by “significant empirical evidence.” His own existence, for example. Rand started calling him “the undertaker” and would ask friends, “Has the undertaker decided he exists yet?”
Rand, Greenspan explains deadpan, was “a devoted Aristotelian” and believed in “an objective reality that is separate from consciousness and capable of being known.” It is hard to imagine any other Washington power figure — one thinks of Henry Kissinger — raising the question of whether he exists in his own autobiography. (Penguin Press, the publisher that reportedly paid Greenspan $8.5 million for this book, must have thought he damn well better exist for that kind of money.)
As for an objective reality apart from consciousness — in this age of spin, the less said about that, the better. Greenspan ultimately concluded that these basic issues didn’t actually have to be settled before breakfast in order to make it through the day. Democracy implies disagreement, and “compromise on public issues is the price of civilization, not an abrogation of principle.” He credits Rand with broadening his outlook and making him more tolerant of new ideas — not qualities she is often associated with.
Rand’s inner circle was a cauldron of politics and sex, but Greenspan (he says) participated only in the former. He was married for less than a year to Joan Mitchell, whose best friend’s husband was Rand’s lover (got that?). Discreet as always, Greenspan says only that “I’d made an intellectual choice, not an emotional one.” He and Joan are “friends to this day.”
He also remains good friends with Barbara Walters, who took him up after he became C.E.A. chairman. Or at least they were friends until this book. Walters took him to parties and introduced him to the beautiful people. Greenspan comments, in a rare lapse of tact: “I usually thought the food was good but the conversation dull.” Soon he became one of the beautiful people himself. For years after Walters, Greenspan was seen around with Andrea Mitchell of NBC News. His intentions about marriage were as hard to fathom and as eagerly speculated upon as his intentions about interest rates. They finally wed in 1997.
Today, Greenspan and Mitchell are at the pinnacle of society in Washington and New York, invited everywhere and actually showing up more often than most people in their position would bother. Even in his 80s, Greenspan is a happy and energetic socializer. But he still gives every appearance of enjoying the food more than the company. He remains an unapologetic dweeb. His discussions of the high life in this book are perfunctory — except for one bizarre reference to “a cut-velvet burgundy and black Badgley Mischka” (it’s a dress) in which his wife looked especially fetching — while a discourse on the economics of the tin can brims with the excitement of discovery.
Although the “Alan Greenspan” of this book is a self-conscious creation of the author, even he may not realize how truly awful he is at telling a joke. “I am only half joking,” he says about what is at most a quarter of a joke about forbidding people who want to be president from becoming one. He says “only an economist could appreciate” a joke about the size of the Mobil Oil company compared with that of the federal government, which he then proceeds to demonstrate.
The hostesses who invite Greenspan to their dinner parties presumably have only the slightest clue of why he is, or was, or actually still is, so important, and the business executives who pay him hundreds of thousands of dollars for speeches don’t know much more. Television pundits bring vast mountains of expertise and wisdom to a discussion of the Iowa caucuses. But throw a cut in the discount rate at them and you can see fear in their eyes as they blather toward the next commercial.
The chairman of the Federal Reserve Board has always been a big deal. Greenspan’s predecessors include William McChesney Martin, whose sonorous name alone lent dignity to paper currency. And there was Arthur Burns, who cut exactly the right image with his omnipresent pipe, but who sold his soul to Richard Nixon by engineering a phony boom for the 1972 election. And then there was Paul Volcker, Greenspan’s immediate predecessor, also with a pipe and 10 or 11 feet tall to boot. But Greenspan owns the role of Fed chairman the way Zero Mostel owned the role of Tevye in “Fiddler on the Roof.”
Milton Friedman deserves some of the credit. Greenspan became Fed chairman just as Friedman’s theory of monetarism — that the money supply determines the inflation rate — became 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 hearings, stirred the mixture, drank it and turned into a wizard.
Why did Guess What Greenspan Is Thinking become such a serious sport during his tenure at the Fed? Why can his word move 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’s — but 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 this 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 cuts if the surplus didn’t materialize. (“I can’t be in charge of people’s perceptions. I don’t function that way. I can’t function that way,” he quotes himself saying piously to Robert Rubin, a former Clinton Treasury secretary, who begged him not to support the cuts.)
This was an eccentric episode in several ways. According to his book, Greenspan — whose Senate confirmation hearing was the same day Nixon went on television to resign — dreamed that George W. Bush would be a reincarnation of Gerald Ford, whom he idealizes as the kind of man who could restore economic sanity to the nation through the combination of principled conservatism and bipartisan civility. Greenspan was deeply disappointed when this didn’t happen. He says that “behind the scenes” he begged Bush to veto a few spending measures and was told that the president was afraid of antagonizing Dennis Hastert, of all people. Never before or since has anyone expressed fear of this already-forgotten figure who, as House speaker, was just a front man for the authentically scary Tom DeLay. When Congress passed Bush’s tax cut in May 2001, Greenspan writes, “I knew how Cassandra must have felt.” It’s a self-serving analogy. When Cassandra warned you, you knew you’d been warned. She didn’t say, “I can’t be in charge of people’s perceptions.”
Although Greenspan was the best at inhabiting the role, the greatest Fed chairman of our time was Volcker. Greenspan would agree, I think. He writes of his immediate predecessor: “What he masterminded ... was arguably the most important change in economic policy in 50 years.” The Fed decided “that it would no longer try to fine-tune the economy by focusing on short-term interest rates; instead it would clamp down on the amount of money available to the economy.”
A wonderful thing about monetary policy is the way it disguises political or even moral decisions as theoretical or technical ones. You could describe what Volcker did as officially accepting the theory of monetarism, or as contracting the supply of M1. Whatever. But put bluntly, what he did was to purposely engineer the deepest decline since the Great Depression in order to wring inflation — and the expectation of future inflation — out of the economy. This set the stage for the generation of prosperity that Greenspan presided over.
Greenspan deserves enormous credit for staying the course. And yet — as he himself tells it in this book — he also helped Ronald Reagan in 1980 to demagogue economic policy as a way of attacking Jimmy Carter. He wrote a speech for Reagan blaming Carter for “one of the major economic contractions in the last 50 years.” Reagan changed that to “a new depression — the Carter depression.” Within a week, this had turned into: “A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his!” Greenspan says, “What attracted me to Reagan was the clarity of his conservatism.”
As Greenspan surely knows but doesn’t admit, Reagan achieved this appealing clarity by ignoring the “objective reality separate from consciousness” that Greenspan used to treasure. And Greenspan does the same. Early in Reagan’s administration, as a member of the president’s economic advisory board, he supported Reagan’s tax cuts “if spending was restrained” and if the Fed kept money tight. Volcker’s Fed continued to do its bit but Reagan, famously, did not, leading to enormous deficits. Greenspan says, “Congress shied away from the necessary restraints on spending.” But the data — those good old data — show that the budgets Reagan proposed were only slightly smaller than the budgets Congress eventually passed.
The data also show that George W. Bush has done a better job than Reagan did at controlling government spending. Spending has averaged 19.7 percent of G.D.P. during Bush’s first six years — Iraq war and all — while it was 22.4 percent during Reagan’s eight years. (If you assume a year’s lag between policy and result, it’s 22.3 percent.)
Half this book — the half that is getting no attention — isn’t memoir: it’s what Greenspan calls “detective stories”: just Alan riding the data wherever it takes him, having the time of his life, trying to solve all the world’s economic puzzles, like why it took so long for computers to affect productivity, why incomes are becoming more unequal and what to do about it, the energy crisis, immigration, entitlements and so on. Not all of this is wildly original, but there are great nuggets and aperçus. And it is all written in English and fully comprehensible.