Online at: http://politicalaffairs.net/article/articleview/7564/

Some Reflections on the Turbulence of Alan Greenspan

By Thomas Riggins
Archives - Dates and Topics 2008 – online October 1 – 31, 2008 click here for related stories: economy

10-15-08, 9:13 am


The current meltdown of the world financial system provides a good backdrop for some reflections Alan Greenspan's introduction to his 2007 memoir, The Age of Turbulence, which is subtitled "Adventures in a New World." However, the “New World" Greenspan now finds himself in is not the world of his dreams but the old world found in the pages of Das Kapital.

Greenspan makes an interesting observation with respect to the brief panic that ensued after 9/11. The worst result of the terrorist attacks would have been the collapse of the financial system, which he thought "highly unlikely." “The Federal Reserve,” he writes, “is in charge of the electronic payment systems that transfer more than $4 trillion a day in money and securities between banks all over the country and much of the rest of the world." Greenspan was worried because "We'd always thought that if you wanted to cripple the US economy, you'd take out the payment systems."

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Well Mr. Greenspan didn't have to worry about al-Qaeda taking out the financial system, since it was recently brought down, unlike the Twin Towers, by an inside job. If he had paid more attention to Karl Marx than to Ayn Rand, he would have known that the financial collapse of world capitalism would be brought about by its own internal contradictions (the greatest of which is the private control of socially-created wealth), not by attack from without.

It is the economist and political leader Sam Webb, chair of the Communist Party, not Alan Greenspan, who hits the nail on the head when he writes, "The prevailing ideologies and practices that have driven US capitalism for the past three decades have run up against their own contradictions and conjured up new and old oppositional forces both domestically and internationally." (People’s Weekly World, Oct. 4-10, 2008)

In his introduction, Greenspan also makes this announcement about the 9/11 attacks: "President Bush rallied the nation with what will likely go down as the most effective speech of his presidency.... America was targeted for attack because we're the brightest beacon for freedom and opportunity in the world. And no one will keep that light from shining.”

What is wrong with this statement, besides the fact that Bush and Congress are the ones most responsible for dimming the light of freedom, is that it misrepresents the reasons for the 9/11 attack. Al-Qaeda has listed specific aspects of American foreign policy that led it to attack the US. It objected to US troops being stationed in Saudi Arabia (and Bush moved them out) and it objected to US Middle East policies, including uncritical support of Israel and of undemocratic and dictatorial regimes in the region.

Bush's speech, referred to here by Greenspan, was empty propaganda designed to mislead the American people and lay the foundation for invading Iraq (actually an enemy of al-Qaeda in the region), in order to control its oil reserves, and with the obliging cooperation of the mass media, the American people were, in fact, misled.

At any rate, Greenspan thinks the post 9/11 world is a "new world." It is "the world of a global capitalist economy that is vastly more flexible, resilient, open, self-correcting, and fast-changing than it was even a quarter century earlier." His book, he tells us, "is my attempt to understand the nature of this new world."

Greenspan’s book came out in 2007 and here we are in 2008 with Greenspan's resilient and self-correcting "new world" pretty much on the scrap heap. In fact, we need to go back three-quarters (not a quarter) of a century to the Great Depression to be able to understand the "global capitalist economy."

When Greenspan tells us in the introduction to this book that at the end of his book he "will bring together what we can reasonably conjecture about the makeup of the world economy in 2030," he has taken the fatal plunge that all utopian thinkers take by trying to see into the future. If you cannot see from 2007 to 2008, I doubt that you will have anything to say about 2030. The Oracle has run out of steam.

There is a lot more to criticize in Greenspan's introduction. For example, Greenspan says that "the defining moment for the world's economies was the fall of the Berlin Wall in 1989, revealing a state of economic ruin behind the iron curtain far beyond the expectations of the most knowledgeable Western economists." Careful, Alan, “de te fabula narratur,” (“the tale is told of you”), as the exact same words can be applied to the collapse of the American housing and mortgage markets in 2008.

He also tells us that "central planning was no longer a subject for debate.... it was dropped from the world's economic agenda." Well, guess what? That debate is coming back with a vengeance. It was lack of planning and regulatory oversight that led to the current mess, and it is the lack of some/a central plan that prevents us from seeing the best way out of it. The international collapse of the financial system has also flummoxed European and Asian powers that the only way forward they have agreed to is nationalization of banks.

But Greenspan is just warming up. "The reinstatement of open markets and free trade during the past quarter century,” we are told, “has elevated many hundreds of millions of the world’s population from poverty. Admittedly many others around the globe are still in need, but large segments of the developing world's population have come to experience a measure of affluence [he's talking about $2 a day], long the monopoly of so-called developed countries."

What a difference a year makes! These gains are being wiped out by the current crisis and the spiraling cost of food. Where the gains remain strongest, and where most of them have occurred, is in China, whose "socialist market economy" does not qualify yet, by Greenspan's economic philosophy, as an "open market" – it is too regulated.

"If the story of the past quarter of a century has a one-line plot summary," Greenspan writes, "it is the rediscovery of the power of market capitalism." But this time the past is not prelude. The story of the next quarter century will be the rediscovery of the need for state-regulated capitalism, a shift towards economic central planning, and the steady growth of socialist and communist parties, as the world moves toward the eventual socialization of the means of production, which is the only way to eliminate global poverty and environmental destruction.

--Thomas Riggins is associate editor of Political Affairs.


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