Alan Greenspan ran away from a band to join the bank. RichardAdams finds him speaking frankly about Nixon and how, although there were things about Clinton he did not understand, what he did find was an extraordinary intelligence".The swanky end of Connecticut Avenue in Washington DC might not seem the right place to find the offices of Alan Greenspan. As the most powerful figure in the international economy for the 18 years that he presided overthe US Federal Reserve, Greenspan's gnomic remarks made him a household name - but hardly a celebrity.
Close to such upmarket retailers as Burberry and Brooks Brothers, Greenspan works above a branch of Filene's Basement, a chain famous for its bargains and an annual event known as "the running of the brides", whendesigner wedding gowns are sold so cheaply that in 1992 one store's racks were cleared in 37 seconds.
Now aged 81, and with his memoir-cum-tour of the economic horizon The Age of Turbulence published this week, Greenspan is indulging in one luxury he never allowed himself in office - talking on the record to journalists and appearing on chatshows, a rarity for a man who once remarked, and not in jest: "If I turn out to be particularly clear, you've probably misunderstood what I've said." Since the publication of his book has coincided with a period of turbulence in the markets, with the Federal Reserve announcing a sharp cut in US interest rates on Thursday, people have been queueing to hear what Greenspan has to say. His warning that Britain faces rising interest rates and inflation made headlines earlier this week, and on September 20 he talked to the London Guardian about the difficulties facing the Bank of England governor Mervyn King, pledging support and saying he believes King deserves to be reappointed when his current five-year term comes to an end.
He sympathises with the central bankers in the current credit crisis, arguing that scenes such as the queues outside the British bank Northern Rock?s branches earlier this week pose real challenges for policymakers, who must respond to both "those who have had very prudent investment policies, but also those who are very egregious speculators, who deserve to be punished". The difficulty, he argues, is that "in order to punish those who are undeserving, you have to punish the whole economy and the deserving".
This week's dramas notwithstanding, he still believes the US is at greater risk of recession than the UK, and has some reassuring words for British homeowners. "So far, consumer spending is holding up more than the economic models would suggest. Most people's suspicion is that that is not going to continue. We have very significant downside potential in house prices here [in the US], which is not true in Britain." His book includes some surprising conclusions for a man who describes himself as a "lifelong Republican libertarian". He comes out against widening income inequality in the US, arguing that it could spark a backlash andlead to "cultural ties" being undone. He calls for reform of the US school system, and for more immigration of skilled workers. And in the interview he refers to his fears over climate change, saying "I acknowledge unequivocally that we have a very serious problem" and arguing that politicians must take the initiative: "The purpose of a politician is to be a leader. A politician has to lead. Otherwise he's just a follower." It's hard to avoid the impression that Greenspan would still love to havehis hand on the tiller. What he professes to miss most are the small, intense meetings in his office. His public image is of someone happiest when he is poring over the latest data on industrial productivity, and he certainly knew the value of cultivating a geekish image during his term as Fed chairman. This is a man who delayed his honeymoon for two months because of work. "I studied my calendar and suggested adding a honeymoon tothe tail end of an international monetary conference in Switzerland," he writes in his memoir.
But there is more glamour to Greenspan than such stories suggest. Take the guest list for his 50th birthday party in 1976: it included Este Lauder, Brooke Astor, Oscar de la Renta and Henry Kissinger. Greenspan was then dating Barbara Walters, one of the most famous television presenters in America.
In his youth in the 1940s, Greenspan studied music at New York's prestigious Julliard conservatory and went on to be a full-time musician inthe big-band era. While other band members smoked pot, he recalls, he would complete their tax returns for them. Eventually he gave up music tostudy economics - not quite running away from the circus to become an accountant, but getting close.
Greenspan began as an adept operator within the Republican party. He was an advisor to Richard Nixon before the 1968 election, and worked closely with six US presidents, and judges Nixon and Bill Clinton to have been the smartest - "I would say more specifically the highest IQ, becausesmart implies wisdom," he offers in clarification. He nearly accepted a post in the White House under Nixon - until he spotted the fatal flaw in Nixon's personality. Shortly before the Republican convention in 1968, Nixon's campaign convened a meeting near New York. When Nixon arrived he was in a fit of rage. "His speech was so intense and so laced with profanity that it would have made Tony Soprano blush," Greenspan recalls. "I was shocked by it. My whole relationship had been with this staid former vice-president, who spoke in full sentences with perfect syntax. His thoughts were extraordinarily well arranged and he was indisposed to using any four-letter words. And then we go into that meeting, and it was a different man. I'd never confronted something like that before - and I was in myforties, for God's sake." As a result, Greenspan concentrated on building his economic consultancy until the day Nixon resigned, when he agreed to work for Gerald Ford alongside Donald Rumsfeld and Dick Cheney. "I do not know of two more informed and technically superior executives than Rumsfeld and Cheney," he says."They did a superb job." There's a palpable sense of disappointment in the way Greenspan talks about the Bush administration. He had high hopes of working with Rumsfeld and Cheney again, but the reality was very different. Sticking rigidly to pre-election plans, Bush's team ignored shrinking revenues and pushed ahead with tax cuts while allowing spending to balloon out of control.
"It was a Republican party more interested in cementing control rather than implementing policy," he says. "They had the presidency and control of both houses [of Congress] and a budget surplus, and a very capablegroup of people." So what went wrong? He shakes his head ruefully: "I don't know." Greenspan's disdain for the post-2000 Republican party is matched by his admiration for the Clinton administration, though of Clinton himself he says: "There's a certain odd indiscipline about him. It's where the MonicaLewinsky stuff came from. When I heard about that, I said it's not possible. I dismissed it out of hand. So there's something about Clinton which I don't understand. But where I had dealings with him, and I got to see a good deal of him, there was extraordinary intelligence." More surprising, perhaps, is the emphasis Greenspan places on the influence of Ayn Rand, a Russian writer whose bleakly individualistic view of mankind has inspired some and unsettled others. He calls Rand, to whom he was introduced by his first wife in 1953, a "stabilising force in my life", and writes: "I was intellectually limited until I met her." Other forces shaping Alan Greenspan's life and work may be more obscure. When he was a child his parents separated, "before I can remember", and his father, Herbert, a smalltime stockbroker in the midst of the great depression, left behind a gift of a book on investment he had written, optimistically entitled Recovery Ahead!. The inscription, which Greenspan transcribes in his book, reads: "To my son Alan. May this my initial effort with constant thought of you branch out into an endless chain of similar efforts so that at your maturity you may look back and endeavor to interpret the reasoning behind these logical forecasts and begin a like work of your own." Aged nine, Greenspan says, "I was totally mystified." It is only after I leave his office that I realise that this is more or less how Alan Greenspan turned out: an endless chain of logical forecasts.
(GUARDIAN NEWS SERVICE)
