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Greenspan, Ayn Rand, and the End of the Free Market

In case you missed it, a little earthquake has erupted in the world of political economics, and it comes by way of an absolute shocker in the NY Times: “Greenspan Concedes Error on Regulation.

I had to hit F5 on that one. I could barely believe my browser.

Why is this man smilingAmerican history can be broken into a few major economic eras, and one of them may be coming to an end. I’m talking about the Era of the Free Market. Born out of the Chicago School of Economics, led most notably by Milton Friedman, it was an economic philosophy well-suited for the post-War conservatives – soon to be popularized by Reagan – who saw an intellectual opportunity to put a nail in the coffin of their arch-enemy the New Deal.

As Wikipedia puts it, this view holds that “regulation and other government intervention is always inefficient compared to a free market.” It’s the way we live, and have been living, for a generation. It’s why even young people – who know little about economics, politics or history – will, for the most part, almost always espouse a knee-jerk acceptance to the “Dangers of Excess Government”.

Now one of the most visible representations of the Free Marketers – Alan Greenspan – has made this startling admission:

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”

You remember Alan Greenspan. He used to run around with the Objectivists, as a much-favored disciple of Ayn Rand. Objectivists believe that only the free market, when allowed to prosper in pure, unregulated capitalism, delivers the ideal form of human society. That’s because when individuals are free to act according to their own self interest (the theory goes), then you have a society of right-thinking, right-acting folks. According to the Objectivists, such societal freedom can only be realized under complete separation of state and economics, similar to the separation of church and state.

In other words: Regulations: very, very bad. (How a man who ideologically rejects all forms of regulation was allowed to run the Federal Reserve – the most powerful economic regulatory organization in the world – is a head-scratcher. But searching for logic among hypocrisy is often a futile exercise.)

You should check out the Objectivists sometime. They make a lot of sense when you read them, especially when you’re like 18 or 20 (I speak from experience) and have yet to live in the world – and by “live” I mean work, sweat, earn, experience, and interact with people beyond your own immediate family. That’s when you realize that few things ever neatly line up in your day-to-day existence the way they appear to line up when you’re reading books. Sure, many people are motivated by self interest. And just as often they are motivated by compassion and empathy and selflessness. You simply can’t build a social order around one or the other, since both are true.

What Objectivists fail to recognize – just like passionate Free Marketers or Communists, for that matter – is that no single ideology will satisfy every problem. If you ever find an economic or political philosophy that seems to do that, then my advice to you is to run, quickly, for you will have found yourself among zealots.

Here’s hoping for a whole lot fewer zealots running the instruments of power, from here on in. I’ll take a leader with an open mind and intellectual curiosity – I don’t care what party they’re from – over an ideological zealot anytime. Because a person with those skills will have the flexibility to apply a variety of approaches to solve a dilemma, rather than be handcuffed to a single view. Like trying to manage the US economy through 30 years of varied circumstances by eliminating regulations as part of an unquestioned trust in free market-based solutions, every single time. It’s bound to fail, eventually. And so I welcome you to the first economic disaster of the 21st century, brought to you not by “greed” on Wall Street (as if that’s something new and rare) but by an absence of appropriate rules and boundaries to keep things in good working order. Regulations by any other name.

I hope it’s a lesson well learned. We’ll see.

Anyway, getting back to Mr. Greenspan – I’ll say this much for the guy; it takes a lot to admit a major exception to one’s entire life’s rule. Turns out you CAN teach an old dog a new trick or two, at least once in a while.

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October 24, 2008   |  Filed Under Political   |    Permalink

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