blog all dog-eared pages: the age of turbulence
I’ve been reading Alan Greenspan’s autobiography, “The Age of Turbulence,” and encountering some rather remarkable passages I felt compelled to share. Thankfully, Mike Migurski’s been pursuing a similar idea for quite some time now, with his “Blog all Dog-Eared Pages” format. I’ll simply follow that, and note that I use Bob’s Your Uncle’s wonderful sticky page markers (semantic page marking!) to remember where to come back to. Here goes.
Page 27, on the ludicrously unlikely fates of his fellow members in the Henry Jerome orchestra (in which he played saxophone, circa 1944):
It was by far the best band I’ve ever played with. Henry Jerome was part of the avant-garde; his band later brought the bop sound of Charlie Parker and Dizzy Gillespie to conventional big-band fare by adding a lot of percussion and flash. And though the band never achieved lasting fame, a surprising number of my fellow musicians and our successors went on to memorable careers. Johnny Mandel, one of our trombonists, went to Hollywood and wrote “The Shadow of Your Smile” and the them music for M*A*S*H and won an Academy Award and four Grammys. A drummer, Stan Levey, later played with Charlie Parker. Larry Rivers became a major pop artist. And my fellow sax player, Lenny Garment, became President Nixon’s lawyer.
Page 127, on the ultimate inefficiency of centrally planned economies:
No wonder centrally planned economies have great difficulty in raising standards of living and creating wealth. Production and distribution are determined by specific instructions from the planning agencies to the factories, indicating from whom and in what quantities they should receive raw materials and services, what they should produce, and to whom they should distribute their output. The workforce is assumed to be fully employed, and wages are predetermined. Missing is the ultimate consumer, who in a centrally planned economy is assumed to passively accept the goods planning agencies ordere produced. Even in the USSR, consumers didn’t behave that way. Without an effective market to coordinate supply with consumer demand, the consequences are typically huge surpluses of goods that no one wants, and huge shortages of products that people do want but that are not produced in adequate quantities. The shortages lead to rationing, or to its famous Moscow equivalent – the endless waiting in line at stores.
Page 175, on Clinton economic advisor Robert Rubin’s beliefs about talking the condition of the market:
Bob thought that a federal finance official should never talk about the stock market in public. An inveterate makers of lists, he offered three reasons noted subsequently in his memoirs. “First, there’s no way to know for certain when a market is overvalued or undervalued,” he said. “Second, you can’t fight market forces, so talking about it won’t do any good. And third, anything you say is likely to backfire and hurt your credibility. People will realize you don’t know any more than anybody else.”
Sound advice, surely. The only thing I would question is, in relation to point #2: What happens when, like Greenspan became, you are a market force?
Page 205, on the precautions the Fed and the major banks took to avert catastrophe during the “Y2K changeover”:
The U.S. financial industry had sent many billions of daollars replacing and updating old systems and programs; crisis-management teams stood ready in every Federal Reserve district and in every major bank. The FOMC had released billions of dollars of liquidity into the financial system, using options and other innovative techniques. And in the event America’s credit card system or ATM networks broke down, the Fed had even positioned stockpiles of extra cash at ninety locations around the United States.
Page 232, on the disparity between economic barometers and national opinions on the state of the economy:
By 2004, real GDP was expanding at a healthy 3.9 percent a year, unemployment declined, and aggregate wages and salries weren’t doing all that badly either. Yet most of the rise in average incomes was owing to disproportionate gains among the highly skilled. There are a lot more workers who earn at the median income, and they have not been doing all that well. Thus, it is no surpiprise that researches who telephoned a thousand households found that 60 percent thought the economy was awful, while only 40 percent thought it was just fine. Two-tier economies are common in developing countries, but not since the 1920s have Americans experienced such inequality of income. It used to be that when the aggregate numbers were good, the polls would be positive as well.
Pages 257-258, on the dangers of suddenly discovering that your nation has a wealth of natural resources:
The danger takes the form of an economic affliction nicknamed “Dutch disease.” (The Economist coined the term in the 1970s to describe the travails of manufacturers in the Netherlands after the discovery there of natural gas.) Dutch disease strikes when foreign demand for an export drives up the exchange value of the exporting country’s currency. This increase in the currency’s value makes the nation’s other export products less competitive. Analysts often cite this pattern as a reason why relatively resource-poor Hong Kong, Japan, and Western Europe have thrived while oil-rich Nigeria and others have not.
Page 262, on Adam Smith’s “invisible hand,” and the inevitability of self-interest as a market force:
The expression “invisible hand” does not seem to have been very important to Smith; in all his writings, he used it only three times. The effect it describes, however, is something he discerns at every level of society, from the great flows of goods and commodities between nations to everyday neighborhood transactions: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”
Pages 264 to 265, on the origins and legacy of the Fabian socialists:
Unlike Marx, the Fabian Socialists of the late nineteenth century were not looking for revolution. The group named itself after the ancient Roman general Fabius, who held off Hannibal’s invading army with a military strategy of attrition rather than all-out confrontation. Similarly, the Fabians aimed not to destroy capitalism but to constrain it. Government, they believed, should actively safeguard public welfare from the harsh competitiveness of the marketplace. They advocated protectionism in trade and the nationalization of land, and counted among their ranks such luminaries as George Bernard Shaw, H. G. Wells, and Bertrand Russell.
The Fabians laid the groundwork for modern social democracy, and their influence on the world would end up being at least as powerful as that of Marx. While capitalism succeeded in brilliantly in delivering higher and higher standards of living for workers throughout the nineteenth and twentieth centuries, it was the tempering effect of Fabian socialism that many argued would make market economies politically palatable and keep communism from spreading. Fabians took part in founding Britain’s Labour Party. They also had a profound influence on British colonies as the colonies gained independence: in India in 1947, Jawaharlal Nehru drew on Fabian principles to set economic policy for one-fifth the world’s population.