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Greenspan: The Man Behind the Money

Greenspan: The Man Behind the Money

6 Min.
January 26, 2012

December 2000 -- Let me be clear from the first: Justin Martin’s biography of Alan Greenspan is a fun read. Written in a vigorous, journalistic style (the author was a long-time writer for Business Week), the book treats two very interesting subjects: the career of Alan Greenspan, from professional swing-band clarinetist to chairman of the Federal Reserve, and the pageant of political, economic, and intellectual events and personages with which Greenspan has been associated.


Belying its title, however, Martin's biography tells us relatively little about Greenspan the man. The author describes his subject as reserved, private, pragmatic—which means, apparently, empirical. But none of this has great weight, as Martin had no intimate access to Greenspan or his papers. We are told that Greenspan came from an obscure family background and has risen to the highest eminence of prestige and influence. But was young Alan Greenspan a remarkable student, one in a thousand to his teachers? Although the hindsight anecdotes that Martin relates are naturally hagiographic, they are not convincing. All that we end up with, therefore, is the outline of a remarkable and even contradictory man: an Objectivist ideologue who is the ultimate negotiator; a dry, aloof figure who is also successful in romance and in maintaining friendships over time. We grasp the outline, and it fascinates us, but the content remains mysterious.

We are left equally uninformed about Greenspan's professional competence. He studied economics at Columbia and New York University, and went on to create a highly successful economic consultancy specializing in macro-economic predictions of growth, inflation, and development in various industrial sectors. He was the chairman of the Council of Economic Advisors under President Gerald Ford and is now the longest serving Federal Reserve chairman in the history of that lamentable institution. But what I most want to know is: What kind of economics does he do? What does he know about the subject? What theories does he use? What statistical techniques?

I know what I read in the Wall Street Journal:that Greenspan is a stickler for detailed, often obscure bits of data—statistics that he takes to indicate the overall state of the economy. Among the several examples that Martin cites: Greenspan closely followed paperboard production in the 1960s on the theory that all product sales required paperboard for boxes, so paperboard was a good proxy for overall production. But Martin tells us no more than this, leaving me quite puzzled: is Greenspan an economist who approaches the economy scientifically, tests models, relates different streams of data, and develops theories of economic causation from them? Or is he a data-mystic, bamboozling CEOs and U.S. Presidents with an "obscurantical style" of economic jargon that comes across as "Nepal Katmandu language?" (pp. 68–69)


The trouble is that Martin is not able to tell the difference, because he has no real knowledge of economics. That is a severe shortcoming in the writer of a biography focusing on economic history and economic policy-making. To convey a sense of the importance of Greenspan's work as Fed chairman, Martin gives us brief, rip-roaring accounts of events from the Great Depression to the Asian Crisis of 1997–98. But these are accounts related in metaphor (for example, "The Asian Contagion was growing virulent." p. xii) and, , worse still, the metaphors often represent a mixture of different explanations, heating the narrative up without enlightening the reader.

As an example of Martin’s limitations, consider the distinction—which is key to discussions of monetary policy— between real production (the goods people produce and trade) and nominal output (the dollar or other money account of those exchanges). Martin does not seem to understand the difference. Thus, he implies that one could cite the fact that real productivity exploded during the nineteenth century—a real phenomenon—to refute the claim that that the U.S. economy in that period had a "deflationary bias"—a nominal phenomenon. (p. 29) In fact, deflation—that is, falling prices—is a natural effect of a productivity increase, because increases in the quantity of a good that is for sale, other things being equal, make it sell for less. This is not rocket science, and, to make the Greenspan story intelligible, at least some grasp of such issues is necessary. The book did not need an economist for its writer, just a writer from The Economist.

Fortunately, the clearest part of Martin’s discussion comes as he outlines the Federal Reserve's functions. (pp. 160–161) Unfortunately, Martin is at his worst when he describes the Fed's history. He asserts that inefficiencies under free banking and financial crises under the gold standard show the need for fiat money and a de jure central bank, while the universal inflation of the twentieth century goes unremarked and the Fed's contribution to creating the Great Depression is put down to pilot error.

AYN RAND THE MENTOR  For Objectivists, of course, Greenspan exerts the special fascination of having been, and perhaps still being, a proponent of their philosophy. So one especially wants to know: how does Martin handle Greenspan’s association with Ayn Rand? The answer is that Martin gives Greenspan's involvement with Rand and Objectivism relatively ample attention and an awkward, bewildered respect.

To set the context, one must understand that the book is filled out with mini-biographies and anecdotes about people whom Greenspan met or knew. For example, Martin gives us a gratuitous paragraph on Henry Kissinger's experience at George Washington High School in Manhattan, which Greenspan also attended. Another instance is a microbiography of Milton Friedman, which Martin includes for little more reason than that Greenspan and Friedman served together on the commission that assessed the possibility of a return to an all volunteer military in the early 1970s. Due perhaps to her significance in Greenspan’s intellectual development, Rand's life story merits three pages (pp. 36–38).

Unfortunately, Martin's lack of clarity extends from economics to philosophy. Objectivism is never really outlined, but is presented in vague buzz-words.  He tell us that Rand’s first circle of followers thought of themselves as “freethinkers and fierce individualists,” and that Rand expounded an ideal of  “rationality and individualism.” (p. 39) The high point of Martin’s depiction of Objectivism comes late in the book, when he quotes the moving close of Rand's last speech, "The Sanction of the Victim."

In evaluating Rand, Martin comes across like a minor secondhander from The Fountainhead . He can make neither hide nor hair of “her odd, inverted universe” (49), but he cannot bring himself to denigrate her because her books are so popular and Greenspan admired her. Nor does he minimize Rand’s influence on Greenspan Indeed, he names her alongside economist and former Fed chairman Arthur Burns as one of Greenspan's chief mentors. Burns, in this account, represents Greenspan's empirical side, while Rand stands for his principles.

In sum, this is a book that portrays Rand as a notable if eccentric figure in contemporary American culture, and though her philosophy is described as odd, at least it is not portrayed as evil or a cult. TOC supporters may also be gladdened by the thanks that Martin extends to The Objectivist Center in his acknowledgments and will perhaps be amused by the author’s description of Leonard Peikoff as "a slightly less obsequious version of Uriah Heep.”(p. 52)


Because I am a critic of the gold standard and favor a money with a controlled form of supply, in a free banking context—what one might call a fully privatized, free-banking Fed—I do not take Greenspan’s failure to push the Fed back toward gold as evidence that he must have abandoned his Objectivist principles. Nor do I think governmental service—in Greenspan's case, quasi-governmental service—is inimical to Objectivist principles. Still, Martin’s book leave me  wondering to what extent Greenspan remains committed to Objectivist ideas and to what extend he has given them up for public acceptance and political power.

In political activity of any kind, there is a question about whether one is moving policy toward a better system or whether one is a compromised supporter of an unjust polity. Martin offers ample quotations to support either characterization of Greenspan. In one notable scene, Martin quotes Greenspan—urging Ford to run as Ronald Reagan’s vice-presidential candidate in 1980—to accept the come-down as “a matter of duty.” (p. 143) This is hardly a cause an Objectivist would find great reason to espouse, and duty is hardly an Objectivist moral principle. On the other hand, when questioned in the mid-1970s on his philosophical views, Greenspan apparently offered the following rejoinder, one that speaks for itself: “I tend to change my views when credible evidence forces a change. I can’t say I have seen any lately.” (P. 128) Perhaps the best guess, based on the portrait in this biography, is that Greenspan may not so much have lost sight of his principles as always found it impolitic to advance them at fullest strength.


According to the breathless press kit that comes with Martin’s book: “This first-ever intimate biography of Alan Greenspan provides a definitive account of the life and times of the celebrated Fed chief.” In fact, the book is anything but definitive. To begin with, Martin had no access to Greenspan himself. In addition, the author’s treatment of suffers from its unscholarly, journalistic character. The book’s interpretation of economic events and theories are usually untrustworthy, and the reader must wonder about every quotation and fact, because no references are provided.

But give credit where it is due: The work is written in a lively, engaging style, and Martin has assiduously mined the journalistic record and interviewed numerous friends and acquaintances of Greenspan's—including his first wife and long-time friend, Joan Mitchell Blumenthal, who is quoted for a number of interesting recollections. As an enjoyable sketch of a fascinating life, and one of particular interest to Objectivists, Greenspan is a success.

About the author:
Das Leben von Ayn Rand