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Requiem for Alan Greenspan the Bubble Master

Greenspan enthusiastically promoted the deregulation that characterized the era of high neoliberalism.

Alan Greenspan, an early follower of Ayn Rand who rose through Republican political circles to become chair of the Federal Reserve from 1987 to 2006, has died at the age of 100. In this, he matched fellow ruling-class ghoul Henry Kissinger, though it must be conceded that Kissinger had more blood on his hands than Greenspan, whose major crimes were in economic management, not mass murder. But both were treated with undeserved admiration in life and death. Let’s see what we can do about correcting Greenspan’s record.

As a young economic consultant in New York in the late 1950s, Greenspan fell into wacko libertarian Rand’s circle and began to preach her gospel: Markets are great; government stinks; winners should be rewarded generously, and losers punished with no pity. When her massive novel Atlas Shrugged was published to mostly bad reviews in 1957, Greenspan defended it in a letter to The New York Times as “a celebration of life and happiness.” But while her worldview might seem harsh to the uninitiated, “justice is unrelenting,” and those who won’t get with the free-market program have only themselves to blame if they fail to prosper. As Greenspan put it, “Parasites who persistently avoid either purpose or reason perish as they should.”

In his days with the cult, he denounced the creation of the Fed, an institution he would later head for longer than anyone else, as a “historic disaster,” because it removed the discipline of the gold standard. The beauty of gold is that it puts severe limits on the growth of money and credit, thereby putting a limit on speculative bubbles of the sort he would later preside over.

Greenspan soon found his way into Republican politics, trying to push Richard Nixon in a libertarian direction that Nixon wasn’t too keen on because it would have been politically suicidal. It wasn’t an ideal role for the Randian in him, but the Rand circle itself was falling apart, and he’d discovered that counseling a president “could be an addictive habit,” as his biographer Sebastian Mallaby put it.

Nixon nominated him to be his chief economic adviser in 1974, just before his resignation. Greenspan’s confirmation hearings were stormy, given his history of libertarian provocations, but he won over skeptical senators, including Joe Biden, who found him sharp and honest despite his politics. By the time Greenspan was confirmed and sworn in, Nixon had resigned and Gerald Ford was president. One of the few guests at the swearing-in was Ayn Rand.

Enjoying his taste of power, Greenspan accommodated himself to the inevitable compromises of political life. Although he would later view his Randian period as a youthful phase, he never dropped his faith in what Ronald Reagan liked to call “the magic of the marketplace.”

After Ford left office, Greenspan went back to the economic consulting firm he’d headed since 1955; he’d stay there until Reagan appointed him chair of the Fed in 1987. Two months after he took charge at the Fed, the stock market staged one of the greatest crashes in history. Greenspan ignored the Randian scripture and instead issued a statement that would become the canonical response to a financial crisis in the ensuing decades: “The Federal Reserve,........

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