qualities of a man that make him an effective leader of the most intricate process in the modern world? Since taking the chairmanship of the Federal Reserve, Alan Greenspan has demonstrated that whatever these qualities are, he has them. His wisdom and insight into the workings of U.S. economy have helped guide numerous administrations to construct positive economic policy. He as helped guide the nation out of the recession of the mid-70’s, the hyper-inflation of the 1980’s, and the fiscal short sightedness of the Clinton administration. His wisdom surprisingly does not ascend from any one particular classroom, but a life time of pursuing that which he loves. He has, according to biographer Stephen Beckner, been in the right place in the right time, making friends and influencing people for the purpose of personal well-being, and that of the nation.
Born in New York the only child of a Wall Street broker, Greenspan developed the traditional aspects of a first and only born child. He has a strong personality, and is not afraid to step into eth gap when policy decisions have to be made. He can joke with reporters at high level Washington dinners, and learn new sports in order to have access to the Washington power circles. Greenspan is not hesitant to set the lead, yet he does not take himself too seriously
Beckner starts out by calling Greenspan somewhat of an ‘enigma’ (p. 9) Like the economy, he is influenced my many different elements and developed his personal understanding of the economy as a result of a lifetime of learning. His ability to understand the economy may be augmented by his first career choice – professional music. As the themes and subcurrents in musical compositions flow together, the details giving birth to the larger composition, so flows the economy. After studying at Julliard, Greenspan decided that he didn’t have what it took to be a professional musician, and guided his life in the direction of his second love, the details of economic behavior. Early in his career as an economist, he developed a relationship with Russian born author Ayn Rand which would have a formative and lasting influence on his approach to the economy.
As unlikely as it seems, it took a Russian born author to instill the passion of free market economics in Greenspan. Rand has written a novel about a lone wolf architect called The Fountainhead. Her ideas were inspiring, and she often toured, speaking on freedom, and the willingness to take the risk of a new, and unsupported direction. No one would cherish these ideals more than a Russian who had found freedom in the U.S., and the fervor which she felt was soon built into Greenspan. Beckner writes that it was Rand who believed that “free people acting in free markets can accomplish great things” (p. 12) under her tutelage, Greenspan came to believe that free market ‘capitalism was not only efficient and practical, but it was also moral.” (p.12) From this principle-based ethical foundation, rather than theory-based educational belief; Greenspan also began traveling with Rand, speaking on the subject.
Greenspan has demonstrated the knack of building friendship with the right people at the right time. He became a member of the presidential transition team supporting Nixon’s entry into the Whitehouse, and then though a series of event, returned to Washington as the head of the Council of Economic Advisors (CEA) under President Ford. Under ford, Greenspan faced his first real test of his free market thinking.
Inflation had been held artificially low under Nixon as a result of Nixon’s price controls. As Nixon stepped aside, the inflation was like a chained lion, not yet loose, but straining at the chain, ready to devour economic well being. Three choruses were sung to President ford. The first came from Greenspan and the CEA. They advised him to reduce taxes and reduce government spending as a way to fuel the private sector. Other advisors suggested cutting taxes and raising government spending as a way to stimulate the economy through increased demand. Still other tax and spend democrats in Washington suggested the same course of action which had been pursued since Roosevelt and the new deal, increase taxes in order to increase spending, and thereby spur the economy.
Greenspan, no doubt because of his time with Rand and his commitment to free market economics rather than government controlled economics was successful in advising the president to reduce taxes and reduce spending. This approach took more of government out of the way of the economy, and left more money in the hands of private enterprise which fuels the economic expansion. The results were like feeding the lion. Happy and content, inflationary pressured diminished, and the economy began to rebound.
This conflict between tax and spend policy is one which is fought every year in the halls of Washington. For Greenspan, the personal political game is no more, and no less a part of managing the economy than raising monetary rates and tracking economic data. Greenspan has learned, according to Beckner, that the Fed chairman’s position is not powerful because of what he can do with monetary policy, but rather he is powerful because of who he knows, and who listens to him. In his first test of economic leadership, his ability to communicate and convince the president of the value of free market Keynesian economics paved the path for greater opportunities in the future.
The Carter administration followed, and Greenspan returned to private life. From a distance, he became vocally opposed to the Carter administration’s tax and spends approach to stimulating the economy. From the vantage point outside of the Beltway, Greenspan knew that free markets expand the economy, and increased government spending and higher taxation was the opposite of a free market. Because Greenspan viewed the economy from the perspective of ethics and principles, rather than theories which changed from day-to-day, or administration to administration, he was able to build his reputation as a person who could be trusted to be involved in running the economy.
Maybe it was Greenspan’s ability to move at ease with the high power Washington elites without taking himself too seriously that made him a great candidate for the position. Certainly it was his prior experience, and sound advice given to previous administrations which earned him the right to be heard form the chairmanship of the Fed. Greenspan also maintained his dry humor, which gave him the opportunity to joke and prod at his friends and foes without creating lasting enemies. According to Beckner, five weeks after he took office, in a public meeting he said “I have learned to mumble with great incoherence since becoming the central banker. If I seem unduly clear to you, you must have misunderstood what I said.” (p. 18)
Non-one likes to work with a know it all who lets everyone else what he knows. Greenspan however was able to manage with his great knowledge without becoming overly infatuated with either his position, or his great knowledge. His successfulness over the years has depended on it. According to Beckner, when Greenspan took the fed position, he inherited a number of fairly stiff relationships between the fed and key bankers around the nation. He wasted no time changing the tone of fed as well as the policy by warming these relationship, and building trust between himself and the key players in the system.
Greenspan’ success has also been built on the amount of economic research he amasses on a routine data. He is able to put the details of the individual market sectors together with the larger picture, and not get lost in either. He was able to infect the regional boards and private side of the banking industry with the love of, or the…