Alan Greenspan and the Death of Ayn Rand

US Economist Alan Greenspan has been giving his testimony before the Financial Crisis Inquiry Commission, criticised for failing to implement rules that would have curbed an overstretched banking system.

As the Telegraph reported:

In one of the most heated moments of his testimony, Brooksley Born, who chaired the Commodity Futures Trading Commission for three years from 1996, blasted: “The Fed utterly failed to prevent the financial crisis. Failed to prevent the housing bubble, failed to prevent the predatory lending scandal.”

Greenspan, who chaired America’s central bank from 1987-2006, said that he hadn’t “regulate[d] sub-prime mortgages because, by 2005, more than half of such home loans were being originated by institutions outside of the central bank’s control.”

For a man otherwise known for his strong libertarian, anti-governmental regulation and pro-laissez-faire views, this was a shock, that his diagnosis for the problem was that the origin of home loans were too far scattered about to be properly managed and controlled, thus the uncontrollable housing bubble that ended in a global economic catastrophe.

William Dudley, the President of the Federal Reserve Bank New York noted that central banks should be putting more emphasis on regulation, just hours before Greenspan went to admit misjudging the severity of the housing bubble.

This is a rather indicative appeal to the one that came about in 2008 when Greenspan, though refusing to accept blame, admitted ‘that his belief in deregulation had been shaken.

This is made all the more significant by the fact that Greenspan has also been considered one of the most well-known and highly regarded champions of the theories of Ayn Rand – the Russian-American novelist and philosopher whose work aims to promote ethical egotism (selfishness as a principle)  in reaction to altruism under the banner of Objectivism; a response to statist political trends of her time – someone who felt that capitalism as an ideal should have no interruptions by the state whatsoever.

Greenspan was an associate of Rand’s during the early fifties all the way until 1982 when Rand died. They were so close in fact that Rand stood beside Greenspan while he was being sworn-in as Chair of the Council of Economic Advisors in 1974.

He by no means downplays this now. In a recent ABC interview, Greenspan defended Rand and made note that the financial crisis did not ‘indict her’. He said of her theory, and the free market itself, that ‘there is no alternative if you want to have economic growth, higher standards of living, in a democratic society, to have competitive markets.’

His answer serves as a short-sighted defence of capitalism and trade free from tariffs, but it is not a defence of Rand’s theory of capitalism; an economic theory that, for Rand, represents our natural selfish urges and the belief that “Man’s … own happiness [is] the moral purpose of his life.

But really the crash that Greenspan was instrumental in producing (on a list of 25 people to blame for the financial crisis, Time Magazine placed him at # 3) is proof that markets need regulation so as they don’t spin out of control. By his own admission (see above) this was why it was impossible to oversee sub-prime mortgages – because they were so far removed from a central control.

Furthermore, it is not good enough to say that capitalism is the best “alternative” for “higher standards of living” in a “democratic society” – Rand didn’t say that capitalism was the better of a bad lot of systems (like Churchill did) but she insisted this was best because human nature rendered it so.

In short, the crash – and others before it – does indict Rand; Greenspan should be informed enough now to acknowledge this.

To say the markets do not need regulation all the time is like saying a child doesn’t need supervision all the time because a child does not always hurt itself – if you’re not watching, you won’t be able see the problem before it comes to fruition, and if you are watching, you might be able to stop an accident from occurring.

Comments on this article are also taking place at Liberal Conspiracy

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16 Responses to Alan Greenspan and the Death of Ayn Rand

  1. byafi says:

    You wrote: “… Greenspan has also been considered one of the most well-known and highly regarded champions of the theories of Ayn Rand …” This is more than misleading, it’s an attempt to conflate Rand’s free market advocacy with the Fed’s forced depression of interest rates. Greenspan is just another in a long line of elitists who thought they could correct problems with force, totally contrary to the ideas of Rand. He may say the right things – a free market IS necessary to a successful economy – but his actions belie his words.

    • Well two things; I don’t think the statement Greenspan has also been considered one of the most well-known and highly regarded champions of the theories of Ayn Rand is anything other than a true statement.

      But where I could be accused of conflating these two things (policy of the Fed/Rand’s theories) I disagree: The Fed’s error (and, thus, Greenspan’s) was that it didn’t apply the necessary caps in order to stop interest rates skyrocketing – where he said that he hadn’t “regulate[d] sub-prime mortgages because, by 2005, more than half of such home loans were being originated by institutions outside of the central bank’s control.” It was this that scared him into changing his mind on government regulation.

      When he was asked by ABC about whether this indicted Ayn Rand, the question was on the financial crisis as a whole, and regulation (or lack of) in general, to which he avoided the question (defending a simple definition of capitalism, as opposed to Rand’s version of capitalism).

      For this reason I don’t think I am conflating Rand’s free market advocacy with the Fed’s forced depression of interest rates, though both do have to do with ones sensible attitude to financial regulation.

      • MichaelM says:

        Well two things yourself; the truth of the statement Greenspan has also been considered one of the most well-known and highly regarded champions of the theories of Ayn Rand is not nearly as important as if those who consider him that actually know anything about the actual theories of Ayn Rand. They don’t, and he isn’t.

        Regulation vs. no regulation is not the crux of Rand’s capitalism. It is rather freedom vs. force. The free market you disparage is not free from regulation, it is free from force initiated by any person or persons to gain, withhold, or destroy any value owned by another who created it or acquired it in a voluntary exchange. Rand’s capitalism requires strict and diligent regulation of force to guarantee that all human interactions are voluntary.

        In order to oppose her politics, one must craft a moral foundation to support the use of coercion to take values from some to give to others. It is and has been a common practice, and the moral foundation asserted is altruism.

        Therefore, the only choice that matter is egoism, freedom, and capitalism vs. altruism, coercion and statism. To argue that one can improve on freedom by introducing some regulation is the equivalent of arguing one can improve on one’s health by mixing it with a little cancer.

        Discussions of more or less regulation are frivolous diversions from the fundamental issues. They imply that demonstration of some desired social or economic result from enacting a coercive regulation would justify it. Rand’s position is that regardless of the result, coercion of other human beings for any purpose whatsoever is immoral and for that reason alone impractical from the get go.

        You are welcome to disagree with that position. But no honest mind will take your disagreement seriously unless it is accompanied by a refutation of the Objectivist ethics on which it is founded. Dragging Greenspan through the mud won’t help you in that task.

      • It is necessary to refute an Objectivist ethics, and I would perhaps like to do this elsewhere – but for the moment a market expression of Rand’s theory is on the cards here.

        Greenspan isn’t a moral philosopher, and so I haven’t seen it necessary to lay out my opinions on Objectivism as a whole, especially since this is both an article on Greenspan himself, his background (which includes Rand), and Greenspan’s wake-up from his libertarian slumber, influenced by Rand’s theories on freedom and advocated by Rand.

        Rand said that she wasn’t primarily an advocate of capitalism, but an advocate of reason, to which advocacy of capitalism followed. I will perhaps note the stupidity of this position another time, but for the moment I don’t apologise for skipping over Rand’s first principles.

      • MichaelM says:

        I would be happy to discuss Rand with you, but not if you do not inform yourself better first. Your understanding of what ethics is and its position in the chain of logical identifications that philosophy is not sufficient to enable you to engage in a meaningful discussion on Objectivism. That is not a criticism, it is just a fact in the history of your own thinking. I was there once too.

        Before you attempt to deal with the subject, your best bet would be to read “Objectivism: The Philosophy of Ayn Rand” by Leonard Peikoff. It provides a fairly comprehensive overview of the philosophy in the order of its derivation. It is very clear, easy to read, and easy to understand. He has a remarkable ability to present complex ideas in uncomplicated prose.

        GoogleAlerts will let me know when you publish your resulting conclusions if the words “Ayn Rand” and “Objectivism” are in it. Or you may email me at the address submitted with my comments.

      • I find your tone extremely patronising and your words rude; remember I do not owe you anything and the way you have commented last is not the way anyone should write by way of request. I shall post more specifically on Rand in my own time, but if you feel yourself intellectually superior to the subjects posted on this blog I’d recommend taking your comments elsewhere.

        Or, look back over the post, and take note that it is the expression of Rand’s theory of capitalism through Greenspan that I’m writing about here; please look on other websites for something more appropriate to you.

      • MichaelM says:

        Statements of fact cannot be insults. Nor can indignation rebut them.

      • Where is your fact?

  2. Lemuel says:

    You describe Greenspan as being “known for his strong libertarian, anti-governmental regulation and pro-laissez-faire views”. Why, then, did he become essentially the nation’s economic dictator?

    Laissez-faire means “hands off”, which means to neither hinder NOR HELP. Greenspan’s constant suppression of interest rates helped (some) in the short-term, but it encouraged irresponsible lending, and led to a collapse. The net result is the same as if he had continually pushed interest rates higher and higher for 20 years: a crash in home purchases and business lending, widespread distrust of lending institutions, and public vitriol towards investment brokers.

    Alan Greenspan is not the paragon of free market economics; he is its antithesis.

    • Well he is known for those things, but he also said that the only reason why he didn’t regulate sub-prime mortgages was because more than half the home loans had been originated by institutions outside of the central bank’s control; he also admitted that his belief in deregulation had been “shaken”: he is the antithesis in that he realised, and himself embodied, the shortfall in libertarian economics.

  3. MichaelM says:

    Except that is the particular brand of stupidity that you are nurturing by not grasping the logical reason-egoism-capitalism chain that blinds you to Greenspan’s overt contradiction of Rand’s principles that invalidates your claim she is at the root of Greenspan’s follies.

    Neither Greenspan nor you nor I need to declare ourselves moral philosophers to give our positions philosophical significance. All political positions imply the ethics that underlies them whether one is aware of that implication or not. Politics is just ethics in the individual context extended to the social context.

    Debating political differences that stem from underlying ethical contradictions without resolving the latter first is an idle and fruitless pastime.

    • I don’t think that that is true; if I understand you right you’re saying that politics must be matched with ethics, but I’d contend that with many political theories an ethics follows a judgement, say on fairness, inclusion equality, or an ethics may follow most political judgements, like you say all political positions imply an ethics, so it is therefore possible for us to talk of politics without explicit reference to the ethics contained in them because they are, by your own admission, underlying in them.

      Further, I didn’t say I was ignorant to the notion of reason-egoism-capitalism as Rand’s principles; in fact I’d be prepared to do a blog entry more specifically on Rand – I hope you come back to judge.

  4. MichaelM says:

    Fact #1 is that this comment reveals that you do not have a clear understanding of the significance of the relationship between ethics and politics nor of Rand’s derivation of same:

    “I’d contend that with many political theories an ethics follows a judgement, say on fairness, inclusion equality, or an ethics may follow most political judgements, like you say all political positions imply an ethics, so it is therefore possible for us to talk of politics without explicit reference to the ethics contained in them because they are, by your own admission, underlying in them.”

    Fact #2 is that a discussion with you about Rand could be far more productive if you would read “Objectivism: The Philosophy of Ayn Rand”.

    Indignation thrust at such harmless facts is a cheap reply, as is your advance notice that you will be THE ONE who will finally prove the “stupidity” of the reason-egoism-capitalism trinity. Both of those tactics are hallmarks of intellectual insecurity.

    And when someone like you who has barely cracked the surface of Objectivism interprets comments by an Objectivist of 43 years like me as a claim to know more about the subject than you do, you shouldn’t totally disregard the possibility that I actually do.

    And when such a person benevolently offers you assistance, how is that rude?

    • This is crucial; I’m happy to take your book recommentdation, as I am happy to note that your 43 years of objectivism will out-nuance my somewhat shorter knowledge of objectivism. But what I’m not happy about is your statement you do not have a clear understanding of the significance of the relationship between ethics and politics which you can have no proof of whatsoever.

      My statement, which you have quoted, did not outline my understanding of the relationship between politics and ethics, but rather qualified why I am able to criticise Greenspan’s vision of capitalism, via Rand, without having to refer to the ethics in particular. Being aware of Rand’s ethics and the relationship they have to her outlook, I know the importance, and I do not dimiss it, but my entry here was a political criticism, and I continue to hold that when one asserts a political position, it follows that an ethical judgement has been made.

      It’s no surprise that what counts as an ethics for Rand is man’s reason, man’s purpose and his self-assertiveness in the world. This is to ethics what capitalism is to economy. Therefore I saw fit to criticise the wrongdoings of a man who holds Rand in quite high esteem – and that is the basis of the entry – without explicit reference to Rand’s ethical character; however I have said that I’ll put something together, but I haven’t said that I will be THE ONE to anything, which is an absurd statement to make, and I should like you to note, therefore, that I have not expressed any hallmarks of “intellectual insecurity” – which is an insult, it is unnecessary ad hominem attack, and frankly has made me want to stop participating in this dialogue.

      But on a personal level, I don’t think you are benevolently offering me assistance, you’re criticising me on irrelevant grounds, for not writing an article on the ethics of Ayn Rand. In the meantime, I would like to offer a little something on Rand’s ethics to this debate since I think it is relevant today, and if you want you can read it, but I cannot justify spending to long on it since I’m a very busy person.

      • MichaelM says:

        This is the proof of the accusation:

        “This is made all the more significant by the fact that Greenspan has also been considered one of the most well-known and highly regarded champions of the theories of Ayn Rand – the Russian-American novelist and philosopher whose work aims to promote ethical egotism (selfishness as a principle) in reaction to altruism under the banner of Objectivism; a response to statist political trends of her time – someone who felt that capitalism as an ideal should have no interruptions by the state whatsoever.”

        If you understood what you assert you do, you never would have written this without clarifying the fact that only know-nothings could possibly see him as a champion of Rand’s philosophy. You cannot be an Objectivist and choose to try to manage the money supply at the Federal Reserve at the same time. Greenspan ceased to be a champion of the philosophy on the day he was sworn in to that office. He pursued his version of the politics while abandoning the ethics. The title and subject of this post should have been: “Ayn Rand and the Moral Death of Alan Greenspan”

        I did not expect a treatise on her ethics from you. I expected you to know enough about her ethics and politics to know that you cannot sever them as Greenspan did.

        Both he, and you see this as a regulation vs. deregulation issue. Rand did not. She saw it as freedom vs. force. She consistently warned that while deregulation resulted in less force, one should not expect it to save us from the dire consequences of the coercive regulations that remained.

        Coercive regulations are a cancer. Less is better, but you won’t survive unless you get rid of it all.

  5. Pingback: Can an INTJ doubt themselves? - Page 3 - Typology Central

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