Thursday, January 26, 2012

Now Greenspan: Capitalism Needs Adjustment

Oh brother, Ayn Rand is rolling in her grave. As I have chronicled here at EPJ, the World Economic Forum in Davos, Switzerland has become a haven to discuss the "problems" with capitalism. Alan Greenspan, a former follower of Ayn Rand (author of, Capitalism: The Unkown Ideal), has joined the Davos chorus subtly finding problems with capitalism.

Murray Rothbard nailed Greenspan correctly decades ago when Greenspan became Fed chairman:
The press is resounding with acclaim for the accession to Power of Alan Greenspan as chairman of the Fed; economists from right, left, and center weigh in with hosannas for Alan's greatness, acumen, and unparalleled insights into the "numbers."...

Greenspan's real qualification is that he can be trusted never to rock the establishment's boat. He has long positioned himself in the very middle of the economic spectrum. He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp. In fact, his views are virtually the same as Paul Volcker, also a conservative Keynesian. Which means that he wants moderate deficits and tax increases, and will loudly worry about inflation as he pours on increases in the money supply.

There is one thing, however, that makes Greenspan unique, and that sets him off from his Establishment buddies. And that is that he is a follower of Ayn Rand, and therefore "philosophically" believes in laissez-faire and even the gold standard. But as the New York Times and other important media hastened to assure us, Alan only believes in laissez-faire "on the high philosophical level." In practice, in the policies he advocates, he is a centrist like everyone else because he is a "pragmatist."
At Davos, and in an FT op-ed, Greenspan is saying, "on the high philosophical level," many good and correct things about capitalism:
Capitalism, since it was spawned in the Enlightenment, has achieved one success after another. Standards and quality of living, following millennia of near stagnation, have risen at an unprecedented rate over large parts of the globe. Poverty has been dramatically reduced and life expectancy has more than doubled. The rise in material well-being – a tenfold increase in global real per capita income over two centuries – has enabled the earth to support a sixfold increase in population.

While central planning may no longer be a credible form of economic organisation, the intellectual battle for its rival – free-market capitalism – is far from won...

Anti-capitalist virulence appears strongest from those who confuse “crony capitalism” with free markets. Crony capitalism abounds when government leaders, usually in exchange for political support, routinely bestow favours on private-sector individuals or businesses. That is not capitalism. It is called corruption.
But, at the same time the "pragmatist" Greenspan that Rothbard warned us about shows up:
Capitalist practice needs adjustment.
And this howler, about his crony bankster buddies (Remember, before he joined the Fed, Greenspan  sat on the boards of J..P. Morgan & Co. and Morgan Guaranty Trust)
I was particularly distressed by the extent to which bankers, previously pillars of capitalist prudence, had allowed their equity buffers to dwindle dangerously as the financial crisis approached.
And so he lets the entire non-capitalist, government controlled banking system (through the Fed) slide and instead calls for more anti-capitalistic interventions:
Regulatory capital needs to be increased.
Yes, on the "high philosophical level" Greenspan is pro-capitalism, but the elitist can count on him to see the pragmatic case for whatever intervention they want.

And that's how Alan Greenspan rolls.


  1. The world is indeed a sickening place! Its time for a revolution... Maybe a Ron Paul revolution to clean up the mess? If the people try a revolution they will then become the elites and the game goes on unchanged.

  2. IOW, Greenspan is a poseur.

  3. This fixing capitalism crap is really a code word for finding a way to preserve the power of the power-elites. What is failing are the government manipulated capitalist economies that have been weighed down with more socialist programs then they are capable of generating enough wealth to support. While it would be nice have a free ride for anyone that needs it, there just isn't enough wealth creation potential to cover the cost. I'm sure the proposed solution will be something along the lines of destroying new wealth and preserving old wealth. The left wing zealots are usually suckers for this strategy.

  4. Increase regulatory capital?! Isn't this the same guy who proposed eliminating margin requirements? This guy has been a total disgrace.

  5. Robert Stadler...although Rand modeled him on J Robert Oppenheimer, Greenspan would've done nicely.