Ayn Rand devotee says Greenspan’s philoshopy ‘not anything resembling a free market’
Much has been written about the influence of Ayn Rand, who has been called the high priestess of unfettered capitalism, on former Fed chairman Alan Greenspan, who was a member of that author’s inner circle during the 1950s when he was in his twenties. He was said to be among those who read her 1957 novel, ”Atlas Shrugged,” before it was published, a work intended “to glorify the real kind of productive, free-enterprise businessman in a way he has never been glorified before,” according to Rand.
In the wake of Greenspan’s testimony yesterday before a Congressional panel, in which he said the current financial crisis had exposed a “flaw” in his concept of a free market, the executive director of the Ayn Rand Center for Individual Rights felt it necessary to issue a “commentary” Friday. Unlike Atlas, Yaron Brook was in no mood to shrug at such heresy.
“Opponents of the free market are giddy at Alan Greenspan’s declaration that the financial crisis has exposed a ‘flaw’ in his ‘free market ideology.’ Greenspan says he is ‘in a state of shocked disbelief’ because he ‘looked to the self-interest of lending institutions to protect shareholder’s equity’…and it didn’t. But, he added, “any belief Greenspan ever had in truly free markets was abandoned long ago… (Greenspan) proceeded to work for two decades as leader and chief advocate of the Federal Reserve, which continually inflates the money supply and manipulates interest rates… Greenspan should have recognized that what he wrote in 1966 of the boom preceding the 1929 crash applied here: ‘The excess credit which the Fed pumped into the economy spilled over into the stock market…triggering a fantastic speculative boom.’ Instead, he superficially blamed ‘infectious greed.’”
We’re not sure how Brook can juxtapose the pejorative “blamed” near the self-evident good, at least to Rand, of the phrase “infectious greed,” but there you are. Were we in Kensico Cemetery in Valhalla, N.Y., we might discern the sound of Rand rolling in her grave.
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Ayn Rand has been my idol since I was a child. My only daughter’s middle name is Ayn. I also respect her protege Alan Greenspan very much. Were she now alive, what advice would she give? Where is John Galt??
Whether Alan Greenspan believes in free markets or capitalism or not doesn’t really matter. Capitalism is based on the political principles of individual rights and limited government. These political principles are based on the ethics of selfishness or rational self-interest. The US has not been a capitalist society for a long time or really ever at all. An economy that doesn’t have a free market banking system and one based on a quasi-government institution called the Federal Reserve is not a capitalist society no matter how loudly the statist scream it is. Government intervention into the economy has caused the present “crisis” and more government intervention into the economy will only lead to more pain and suffering.
Well, you know, there are scare quotes for a reason. And you know, Oliver Stone aside, Objectivism isn’t really about “greed,” as most people think of the word. Rather, it’s about rational self-interest. So, no contradiction there.
I’m sensing some sarcasm here, so I’m assuming you’re not a fan of Ayn Rand or Objectivism. But, I do hope you understand that Brook is entirely correct, that Greenspan is no supporter of the free market–as Fed Chairman, he spent almost two decades regulating a market that certainly wasn’t free.
First off the term “infectious greed” is incompatible with any positive conception of greed. I cannot conceive of a meaning of that phrase that I could see Miss Rand endorsing. And she never would have regarded her own concept of greed as self evidently good. There is nothing self evident in ethics, nothing self evidently good. The science of ethics as a whole is grounded on a great deal of external evidence and reasoning from it.
Perhaps if you knew as much about her as would have justified you in righting this you would have had enough respect for her to not have made your shameful “rolling in her grave” comment.
You fail as an author. If you’re going to write about something: know something about the subject or keep you statements restricted to as much as you know. And you fail as a person. I don’t think this last part require elaboration or explanation.
Brook didn’t blame infectious greed; it was Greenspan who blamed infectious greed. People should read what Greenspan wrote in the 1960’s book, “Capitalism, The Unknown Ideal.” Capitalism is still unknown to most people, unfortunately, especially to those who have influence and power to govern.
I suspect the reason Jack Davis does not understand the meaning of Yaron Brook’s last comment is that Davis is not very familiar with Ayn Rand’s thoughts on ethics, as opposed to the straw-man characterizations so wide-spread among her opponents and the general public. To understand Ayn Rand’s revolutionary ethics, read her essays in “The Virtue of Selfishness”.
And for anyone who wishes to understand our current economic plight, I encourage you to read Ayn Rand’s collection of essays “Capitalism: The Unknown Ideal” with particular attention to the the essays Greenspan wrote in the 1960’s when he was still an idealist and not a power-wielding pragmatist.
Too bad almost his entire government career since then has been opposed to every principle he once believed in. His turning against laissez-faire capitalism did not happen this month; it happened decades ago, and his failures should not be used to attack Ayn Rand or her philosophy. Read those essays and you’ll see.
You quote and link to a New York Times article by Bill Goldstein
published on July 21, 2002, which includes excerpts from a 1963 article by Alan Greenspan. Below are additional excerpts from that article by Greenspan, showing that he made clear that reputation works as an incentive to scrupulous behavior only in an unregulated economy, and that he detailed how regulating an industry undercuts the functioning of reputation in that regard. He also detailed the harmful effects of regulation on the consumer.
It should not be necessary to mention that the financial services industry has been heavily regulated since the Great Depression, and is so today, regardless of all the talk about deregulation.
(From Alan Greenspan, “The Assault on Integrity,” in The Objectivist Newsletter, August 1963, collected in Ayn Rand, Capitalism: The Unknown Ideal, first Signet printing, November 1967:)
“Reputation, in an unregulated economy [please note], is thus a major competitive tool.…
“Government regulation is not an alternative means of protecting the consumer.… At the bottom of the endless pile of paper work which characterizes all regulation lies a gun. What are the results?
“To paraphrase Gresham’s Law: bad ‘protection’ drives out good. The attempt to protect the consumer by force undercuts the protection he gets from incentive. First, it undercuts the value of reputation by placing the reputable company on the same basis as the unknown, the newcomer, or the fly-by-nighter. It declares, in effect, that all are equally suspect and that years of evidence to the contrary do not free a man from that suspicion. Second, it grants an automatic (though, in fact, unachievable) guarantee of safety to the products of any company that complies with its arbitrarily set minimum standards. The value of a reputation rested on the fact that it was necessary for the consumers to exercise judgment in the choice of the goods and services they purchased. The government’s ‘guarantee’ undermines this necessity; it declares to the consumers, in effect, that no choice or judgment is required — and that a company’s record, its years of achievement, are irrelevant.
“The minimum standards, which are the basis of regulation, gradually tend to become the maximums as well. If the building codes set forth minimum standards of construction, a builder does not get much competitive advantage by exceeding those standards and, accordingly, he tends to meet only the minimums. If minimum standards are set for vitamins, there is little profit in producing something of above-average quality. Gradually, even the attempt to maintain minimum standards becomes impossible, since the draining of incentives to improve quality ultimately undermines even the minimums.
“The guiding purpose of the government regulator is to prevent rather than to create something. He gets no credit if a new miraculous drug is discovered by drug company scientists; he does if he bans thalidomide. Such emphasis on the negative sets the framework under which even the most conscientious regulators must operate. The result is a growing body of restrictive legislation on drug experimentation, testing, and distribution. As in all research, it is impossible to add restrictions to the development of new drugs without simultaneously cutting off the secondary rewards of such research — the improvement of existing drugs. Quality improvement and innovation are inseparable.
“Building codes are supposed to protect the public. But by being forced to adhere to standards of construction long after they have been surpassed by new technological discoveries, builders divert their efforts to maintaining the old rather than adopting new and safer techniques of construction.
“Regulation — which is based on force and fear –undermines the moral base of business dealings. It becomes cheaper to bribe a building inspector than to meet his standards of construction. A fly-by-night securities operator can quickly meet all the S.E.C. requirements, gain the inference of respectability, and proceed to fleece the public. In an unregulated economy, the operator would have had to spend a number of years in reputable dealings before he could earn a position of trust sufficient to induce a number of investors to place funds with him.
“Protection of the consumer by regulation is thus illusory. Rather than isolating the consumer from the dishonest businessman, it is gradually destroying the only reliable protection the consumer has: competition for reputation.…”
The concept of enlightened self interest in Ayn Rand’s philosophy does not countenance the use of force or fraud against others. When government issues fraudulent paper money and mandates the use of that money by everyone, it opens the door to massive fraud by government and banks. The financial environment today is shot through with coercive and fraudulent practices actually required by government regulation. Ayn Rand’s concept of self-interest applies only in the context of un-coerced, voluntary actions. To apply that concept in today’s environment does great violence to her thought. Today, legions of politicians and business people are empowered to pursue their “self interest” by means of force and fraud against others. This is categorically prohibited in Ayn Rand’s philosophy. In fact, it is the very thing her political philosophy is conceived to prevent. If we would get the government out of banking and fraudulent paper money, self-interested, voluntary actions would indeed provide a stable financial system not prone to catastrophe, as economic history amply demonstrates. In that system, the efforts of bankers and financiers would be directed toward ferreting out unreliable financial schemes instead of reading the minds of government officials, and the standard of living of everyone would be exponentially higher as a result.
He’s chastising Greenspan for making greed pejorative by saying he “superfically blamed it.