The Fall of a Free Market Prophet

The most interesting, and perhaps the most important, moment in philosophy in the last decade occurred on October 28, 2008, in a hearing of the House Oversight Committee, chaired by Congressman Henry Waxman.

The statements were made by Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006.

Ah, Alan Greenspan .... The Maestro, the Wizard. Just one year ago when CNBC did a TV special about him, its title was Judging a Giant!

"By the dawn of the new millennium, it was nearly impossible to find anyone in America who wasn't gaga over Greenspan. Democrats and Republicans, Wall Street, and Main Street, dogs and cats -- all were high on the Fed chairman."

Justin Martin, Greenspan: The Man Behind Money

Now it's 2008. The NY Times ran a piece called "The Reckoning: Taking a Hard New Look at the Greenspan Legacy," and Alan's in the Bubble Hall of Shame.

Alan Greenspan was an Objectivist.

It's hard to know if he's still one or, if he's not, when and why he stopped.

Even the Objectivists don't know. Their official website says: Although he is not famous as an Objectivist (nor is it clear that he still considers himself an Objectivist), arguably the most famous person associated with Objectivism is Alan Greenspan.

What, you may ask, is an Objectivist?

An Objectivist is a follower of Ayn Rand. She was a writer. Her most famous book is a novel, Atlas Shrugged. In it, the capitalist entrepreneurs go on strike against the collectivist shlubs -- government, the unions, and the working class in general -- all of whom leach off of the great men, and the world collapses.

The capitalist leaders go off to the wilderness to form their own little utopia, where they build railroads that run on time and airlines that never crash, and have hot, gorgeous, young, college educated heiresses desperate to bed them. They are also very fit and hunky -- the entrepreneurs, that is, -- who are all male.

It's sort of a post-Nietzsche vision of supermensches. In it the only route to virtue is "a full, pure, uncontrolled, unregulated laissez-faire capitalism -- with a separation of state and economics, in the same way and for the same reasons as the separation of state and church."

She established a group. She was the leader, was surrounded by acolytes and devotees. Alan was among them.

Objectivists like to walk around with gold jewelry, a broach or a tie pin, in the shape of a dollar sign.

Ayn Rand's real name was Alissa Rosenbaum.

She was a Russian Jew. Suddenly, I had a whole new vision. I understood.

There's this thing about Jews. Pardon me, as I plunge into ethnic stereotyping here. But as one, via Latvia and Belarus, I claim a certain latitude.

Even after saying that, please, if you are without a sense of humor, if you find yourself watching the Daily Show or Bill Maher, and don't laugh, please stop now. If you are an actual anti-Semite or feel inclined to assault Christians, Muslims, Communists, nuclear physicists, or encourage others to so, please stop now, and don't quote me. If you are under 18, that's completely irrelevant.

Here's the thing about Jews.

They like to think. Nudge one, and a philosopher begins to spout. They have a theory, about the world, God, food, love, human relations, politics. It's happy, it's sad. It is, especially, utopian. Jews always have these theories about how the world could be made perfect.

They're good at it. They make up great theories. Partly because they're just theories, and partly because Jews are normally the underdog, there's almost always a humanistic heart beating beneath the ideologies they invent.

But then, from time to time, a gentile gets hold of one of those theories, and, boy oh boy, there's trouble.

For example, you have Jesus. Nice ideas, very friendly, be good to the poor, "he who is without sin, cast the first stone," like that.

The goys take it over, and next thing you know, you have the Spanish Inquisition.

The Arabs pick it up, turn it into Islam, and what's the first thing they do? They make the Jews and Christians second class citizens. Which is nothing to what they do to polytheists.

Karl Marx, Fredrich Engels, they're saying "from each according to their abilities, to each according to their needs." Saintly sentiments. They write a couple of books, a movement starts, you turn around and you're looking at Joseph Stalin and Mao Tse Tung and a few million peasants are uprooted and slaughtered.

Albert Einstein figures out that mass can be turn into energy. The gentiles find out, and it's bye-bye Hiroshima, syanora Nagasaki.

So I figure she meant what she said, and she wanted to be taken seriously, and she wanted people to believe her. But in her heart of hearts, she didn't ever really think that people would live that way. Or in her head of heads, she never understood what happens when they try in the real world.

Anyway, that's where Alan Greenspan came from.

His mind was full of Objectivist ideas. A belief that humans were rational. That self-interest would guide unregulated capitalists to do only sane and sensible things. Not every capitalist all the time, but enough of them often enough, that a capitalist system would be inherently beneficent and operate for the good of all.

Free market capitalism -- as a faith -- really is an inverse of Marxism. It is a theology that believes their system will bring paradise on earth and moral perfection. When their system is in power in the real world, their true believers claim that any problem only happened because their ideology has not been applied with sufficient purity.

Alan did very well for himself. He ran a consulting company that made tons of money. He was on the board of directors for Alcoa, Capital Cities/ABC, Inc., General Foods, Inc., J.P. Morgan & Co., Inc., and more. He dated Barbara Walters.

In 1987, Ronald Reagan appointed him as Chairman of the Federal Reserve.

He stayed on through Bush I and Bill Clinton.

Then along came George W. Bush.

He was one of those gentiles. The kind who would take a Jewish idea, whether it was Christianity or free market economics, and ride its ideology as far as circumstances would allow, unaware that he'd left its humanistic heart behind.

With nobody to restrain him, Greenspan put his full faith in the markets. He kept interest rates low. Which pumped money into the credit markets. He resisted regulations. When he was warned that real estate was blowing a big, big bubble, he refused to act.

Why?

Because he believed in the inherent virtue of markets.

So there he was, being quizzed by one of the heroes of the House of Representatives, Henry Waxman.

First, Greenspan said, in a prepared statement, "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief."

Well, yes. One of the fundamentals of conservative, free market, laissez-faire, Objectivist economics is that business people will act sanely and sensibly, thereby protecting people who trust in them. That's a theological belief. Now, watching the bubble burst, Greenspan was doing a remarkable thing, and he does deserve some credit for it. He was acknowledging reality!

Then he said, "I made a mistake in presuming they were best capable of protecting their own shareholders." Which means they need to be regulated. By someone else. By government.

"In other words, you found that your view of the world, your ideology, was not right, it was not working," Waxman said. Meaning this notion that individual greed would, as if "guided by an invisible hand," lead to the greatest social good.

"Absolutely, precisely," Greenspan replied.

The acolyte of Alissa Rosenbaum, the apostle of Adam Smith, the enabler of George W. Bush, had acknowledged that their god -- the free market -- had failed.