Paul Krugman performed a useful public service yesterday by highlighting the willingness of the former Fed chairman Alan Greenspan to give his still-held-in-undue-esteem name to wingnuts. From Krugman’s blog:
But it’s his track record since leaving office that is truly remarkable. He has been an inflation and debt fear monger, helping to make his successor’s already hard job a bit harder — and famously complained about ungrateful markets that keep failing to deliver the crises he predicts. After a brief moment of doubt about the wisdom of financial markets, he went right back to denouncing regulation while proclaiming that markets get it right “with notably rare exceptions”.
Now I have in my inbox a notice that as the Fed holds its annual meeting in Jackson Hole, Greenspan will address a counter-conference organized by a group called the American Principles Project. The group combines social conservatism — it’s anti-gay-marriage, anti-abortion rights, and pro-“religious liberty” — with goldbug economic doctrine.
The second half of this agenda may be appealing to Greenspan, a former Ayn Rand intimate — as Paul Samuelson remarked, “You can take the boy out of the cult but you can’t take the cult out of the boy.” But the anti-gay stuff? And helping these people attack his former colleagues?
However, the introduction to the post is a tad disingenuous:
When Alan Greenspan left the Fed, he had nearly divine status in the eyes of the financial press and, I’m sorry to say, quite a few economists.
While Krugman may never have worshipped Greenspan, he fails to admit that he too was a fan in the Maestro’s heyday. From a 1999 Fortune article:
There’s been a lot of bad news out there in the world economy lately. Supposed economic superpowers like Germany and Japan have fallen on hard times; Asian tigers that thought the future belonged to them suddenly find that it belongs instead to Westerners with ready cash; Latin Americans who thought they had put their past behind them are watching with horror as financial crisis strikes once again. And yet there are also some surprisingly happy economic stories out there. What do they have in common?
The biggest favorable surprise is, of course, the amazing performance of the U.S. economy. But there is Australia as well–smack-dab in the middle of the crisis zone….There is Ireland, the recently dubbed “Celtic tiger,” growing at an amazing 8% rate for the past five years. Then there are the British….not long ago they had the highest unemployment rate among major European countries, and now they have the lowest. Nor should we forget Canada….While it has lagged behind the U.S., it has strongly outpaced Europe and Japan in growth and job creation.
A lot of effort has gone into figuring out what the world’s crisis countries have in common….Yes, the common denominator of the countries that have done best in this age of dashed expectations is that they are the countries where English is spoken…
So what do the English-speaking countries have in common that might explain why they are all doing relatively well right now? I’ve done some research–namely, talked to a couple of colleagues over lunch–and come up with the following speculations:
First, there’s the Alan Greenspan theory–or is it the Larry Summers theory? Economic policy in English-speaking economies tends to be run by smart economists with one foot in the academic world, who therefore make better decisions than the doctrinaire mandarins who run ministries of finance. And in a world where the rules have suddenly changed, the story goes, clever men and women who went to MIT are better able to adapt than bureaucrats whose only expertise is in office politics.
A slight variant is the Margaret Thatcher theory. In the 1980s there was an ideological groundswell in the English-speaking world in favor of markets and against government intervention….
Then there’s the globalization theory. English is the language of the global economy….That means people who have grown up speaking English have an automatic head start.
Finally, there’s the Internet theory….One particular point that a friend made to me is that e-mail and the Internet put people who use nonalphabetic writing, like the Japanese, at a particular disadvantage.
On the whole, I’d probably place most of the emphasis on Greenspan and Thatcher. But one thing is clear: Something about the zeitgeist–sorry, I mean the spirit of the time–favors those of us who speak English. Let’s enjoy it while it lasts.
Paul Krugman’s praise of Greenspan as an economist with “one foot in the academic world” is quite a stretch. As Greg Mankiw pointed out in 2013, Greenspan received a PHD from NYU at the age of 51, long after he had become well known in DC, based on his business articles, not on scholarly work. And you also see Krugman praising deregulation via his thumbs up for Thatcher, when Greenspan was every bit as gung ho for letting the private sector, particularly banks, run
While Krugman demonstrated considerable courage in being early and forceful in criticizing the Bush Administration over the war in Iraq, he’s been loath to venture beyond leading edge conventional wisdom as far as economics is concerned and has been all too willing to carry one for Team Dem, even when the party is pursuing destructive policies, such as the mislabeled “trade” deal, the TPP and the TTIP. Perversely, Krugman seems unable to recognize that it would enhance, not diminish his stature to ‘fess up that he had changed him mind on Greenspan rather than try to finesse his earlier fandom.