I haven’t seen this get much play yet, but:
Later this year, Alan Greenspan’s memoir will be released, titled "The Age of Turbulence."
Publication date is Sept. 17 (you cannot yet pre-order it
on Amazon). Greenspan’s editor is pushing the rumor that the Maestro’s promotional tour will include an appearance on the Tonite Show with Jay Leno.
There are lots of books about The Maestro (including Bob Woodward ‘s Maestro). Many are less than flattering, with titles like Greenspan’s Fraud; Who Shot Goldilocks?; and Bubble Man;
I still get a chuckle every time I recall the Onion quote about his retirement: "I guess the crash-and-burn lifestyle of a ‘chairman of the Federal Reserve’ finally caught up with the guy."
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Update: February 3, 2007 10:41am
This showed up on Bloomberg:
One "funny story” Moyers recounted stems from the saxophone-playing Greenspan’s days in a jazz band in the 1940s, before he embarked on a career in economics.
"When his band mates were out back smoking funny cigarettes, he was doing their tax returns for them at the table,” Moyers said. "He got to know a certain pungent smell well during breaks from his gigs. He didn’t partake himself and he certainly didn’t inhale.”
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Greenspan Book Set for Sept. 17
Scott Lanman
Bloomberg, Jan. 26
http://www.bloomberg.com/apps/news?pid=20601068&sid=a7BnS720ePUE&
I really cannot imagine this book selling any more than say GW’s bio. You can’t understand either one of them.
This seems like a decent topic to make a contribution about last evening’s Larry Kudlow show and the discussion that centered on the writings and philosophy of Adam Smith.
It seems reasonable to put this piece alongside the statue of Alan Greenspan, since in many ways he’s a direct philosophical descendent of Adam Smith himself, and he’s both quoted Smith and referred us to his reading and re-reading of Smith’s ‘Wealth of Nations.’
On the show, P.J. O’Rourke, when asked by LK (paraphrasing), “Is there anything you found in Smith’s ‘Wealth of Nations’ [or his other writings] that would lead you to believe he wasn’t always a supporter of free-market capitalism?”
I would have thought that O’Rourke, after an exhaustive study of Smith, would have at least discovered his suspicions in this regard, as are stated in Smith’s own summary of part of his book: ‘An Inquiry into the Nature and Causes of The Wealth of Nations’ –Adam Smith, 1776.
Specifically these suspicions are found in his personal summation at the end of Book I: ‘On the Causes of Improvement in the Productive Powers. On Labour, and on the Order According to Which its Produce is Naturally Distributed Among the Different Ranks of the People.’
I’ve read every word of ‘Wealth’ as well as having read every word of Keynes’ ‘General Theory.’ Those who think Adam Smith was in all ways an advocate of unrestrained free-market capitalism haven’t read his book. I doubt if more than 1% of all PhDs in economics have read it… really I doubt if more than .1% have read it cover-to-cover.
He was indeed a champion of free-markets (rightfully so), as well as being a forceful advocate for personal rights and freedoms, and for morality in both business and personal life. It’s just that he wasn’t blind to the risks that can derive from a lack of vigilance regarding the lesser attributes of capitalism.
Both the texts of Smith and Keynes are available in complete form online:
‘Wealth’ here:
http://tinyurl.com/2n34uz
‘General Theory’ here:
http://tinyurl.com/yr3tyj
I haven’t read P.J. O’Rourke’s book yet, but it can be found here:
http://tinyurl.com/yuftgl
I am looking forward to reading it, and I must say that he may have expressed contrary sentiments in the book to what he said on Kudlow about Smith’s views on free-market capitalism, so I’ll eventually get the book and see if he did.
O’Rourke’s book is said to be a sort of Cliff’s Notes version of ‘Wealth of Nations’ written by a very clever, funny and entertaining writer. I’m sure it’s so.
Here’s another condensed version of ‘Wealth’ composed in a mere 12,500 words!:
http://tinyurl.com/24pk8l
…but you won’t discover the strength of Smith’s concerns about capitalism here in the squashed version, (concerns that I’m about to illustrate for you), because the author squashes right past them.
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Old Adam has been credited with everything from the success of the American Revolution, the birth of macroeconomics (generally true, but what we call microeconomics today was just as important to him, really his passion I think) and the religiosity of monetarism, right on through to the supremacy of unrestrained free-market capitalism.
Here’s what Adam Smith had to say about the 3 singular sources of income (3 cardinal sources and there are NO others). First, he correctly identified income as coming either from:
-the rent on land (rent or royalty paid for the use of land, for any reason), or
-the wages of labor, or
-the profits of stock (essentially the ‘return on equity’ in terms of our common understanding)
“These are the three great, original, and constituent orders of every civilised society, from whose revenue that of every other order is ultimately derived.”
He also identified that, in some cases, all these sources might derive to the benefit of a single individual who served all three functions. But, how did he feel about the independent functions of each of the 3 sources and their interrelationships?
Well, he goes on to tell us in that summation I’ve mentioned by a particular examination of the interests (speaking in the sense of motives) of each class or order. You can read his entire summary or “Conclusions of the Chapter” here:
http://tinyurl.com/22c9e9
I’ll now make my observations of his conclusions and continue to use his own words as exact quotes where it seems appropriate. I’ll first say that it would be very easy to overlook this section of his book, and particularly so if one is predisposed to always relish Smith as an ever champion of unrestrained and unopposed free-market capitalism.
—
Smith said that those who own land and receive rents or royalties for its use, the first order, were vested with motives that were in his words, “strictly and inseparably connected with the general interest of the society. Whatever either promotes or obstructs the one, necessarily promotes or obstructs the other.”
He explained that they were either more or less capable of understanding their best interests, because of their various levels of education or because of a sort of “indolence” that comes from requiring “neither labour nor care” for the convenience of their source of income, but that they could in no way mislead the public, “with a view to promote the interest of their own particular order.”
I’ll note here that later Keynes did not feel so benignly, if in fact we can classify Smith’s feelings as benign, about those who merely earn rents or royalties on land, but would’ve preferred that the property would bear some considerable tax in order to force it into a higher marginal productivity.
He felt the same way about deposited money, and even generalized a support for enacting a procedure for requiring money funds to be periodically stamped for a fee and thus perpetually reduced in value. He wanted to see money being spent and wanted the landed gentry to convert their property to business enterprise rather than remaining, as Smith called them, indolent.
Next Smith addressed the order of those who earn their livings from labor.
“The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first,” he wrote, and he clearly understood that laborers have no choice in the matter. The interests of the labor class rise and fall with the economy, and while “proprietors” might benefit more with an economic improvement, that “no order suffers so cruelly from its decline.”
“But though the interest of the labourer is strictly connected with that of the society, he is incapable either of comprehending that interest or of understanding its connection with his own.”
Later he notes, “In the public deliberations, therefore, his voice is little heard and less regarded, except upon some particular occasions, when his clamour is animated, set on and supported by his employers, not for his, but their own particular purposes.”
The third order, those who live by profits, with the two classes among the order that employ the greatest capital, merchants and manufacturers, is the order that raises Smith’s suspicions, that O’Rourke either did not discover or elected to ignore when asked about Smith’s views on free-market capitalism.
Smith addressed these concerns by explaining that the business of merchants and manufacturers, and their superior knowledge of their own best interests, could put them into conflict with the interests of both land owners and the general public, and that they were liable, by co-opting the interests of less knowledgeable land owners to their own purposes, to attempt to use that influence to deceive the public. He was rather tart in expressing this concern:
“It is by this superior knowledge of their own interest that they have frequently imposed upon his [‘his’meaning: landed gentry, the first ‘order’] generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction [not their conviction, but, again, that of the landed gentry] that their interest, and not his, was the interest of the public.”
However, Smith reserved his most ardent suspicions and warnings for the dealer subclass within the order that incorporates merchants and manufacturers. Here he begins:
“The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public.”
No objective person who has studied Smith’s economic thoughts as vigorously as I have could then, after reading this last quotation, assume he had no reservations about unrestrained free-market capitalism.
“The proposal of any new law or regulation of commerce which comes from this order [dealers] ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
Most Excellent Comment, Eclectic!
The views of Adam Smith are the strongest argument against legislative action to impede the current version of globalization. I am interested in your interpretation of the applicability of Adam Smith’s philosophy in light of the foreign currency peg policies and FCB driven credit expansion.
Will he show up on “Jon Stewart”, do you suppose?
Thanks blam for the kind words.
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I’m not able to contribute meaningfully to a discussion on forex or the complexities of FCBs. However, if you’ve paid attention to my writing you may know that I’ve already said here that Communist China will continue to ride the dollar/yuan peg like a bucking bronco, and they’ll do it while blowin’ their horn eight to the bar in boogie rhythm:
http://tinyurl.com/2q48v9
…and they won’t give a good hot damn about what Paulson or Bernanke think, nor will they worry much about what the USD does against a-n-y o-t-h-e-r world currency.
The reason is because those ‘dealers’ I commented on in my opening piece (that Smith in his day recognized for their purposes contrary to the publics’) are their greatest benefactors and partners, and they’d sooner break a Ming Dynasty Vase than double-cross those dealers by makin’ ’em sweat the dollar/yuan exchange rate.
China knows just how its bread is buttered right now, and they know how to help the dealers keep them in the cat-bird seat, and having to hedge containerized shiploads against currency fluctuation is a dog that won’t hunt.
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May I inquire as to your fleshed-out opinion about globalization? I sort of think you’ve hinted at it, but tell me please.
Too, on a scale of 1-10, with ‘1’ representing protectionism and ’10’ being free-market advocacy without bounds, how would you rank your opinion on this scale?
Greenspan bust – Artist did an Excellent job !! Very true likeness and posture . Great work !! Bill
See my earlier comments…..
http://bigpicture.typepad.com/comments/2007/01/greenspan_sculp.html
Trade is an important aspect of the world economy. However, I view trade in the context of an equilibrium that should approach a balance in monetary terms. A macro-trading monopolist is as destructive as a micro-monopolist firm.
In the absence of bi-lateral trade,the importing society (US) may become less wealthy as a result of trade. Much of the current “prosperity” in the US and Europe is ascribed to “globalization”. I suspect it has more to do with excessive monetary and fiscal stimulus by governments at the behest of the third order whose financial interests are derived from the “globalization” trade, and not necessarily in the best interests of American society.
Greater societal wealth arises from a wealth distribution that supports a large and growing middle class, rather than a small ultra-wealthy class and shrinking middle class. The wealth of society has as much to do with opportunity, family level wages, and personal freedom and liberties.
Globalization has many of the attributes of a uni-lateral trade structure, supported by currency manipulation and mercantilist government trading monopolists and does not pass the sniff test. Japan, China, and other Asian exporters appear to be taking significant advantage of the open access to the American market.
Adam Smith was an advocate of free trade between countries in opposition to domestic dynasties that seek to maintain control by protectionism. In that sense, trade is a good thing. I doubt if Adam Smith would be particularly supportive of the mercantilist, monopoly practices I see at work in the world today.
My first instinct is to reign in domestic deficit spending and inflationary monetary policies designed to stimulate excess demand and destroy savings.
I am less clear about what should be done to oppose predatory trade practices. A vibrant and strong domestic industrial and service base, tempered by “fair” competition from foreign trade is good. “Gutting” domestic industry on the crest of a government sponsored, leveraged credit binge while saddling future generations with the tax bill and reduced opportunity is not in the long term interests of America.
What is the actual, long term cost of “globalization” ? Inflation, bursting bubbles, chronic domestic unemployment, collapsing social services network, declining average income, skyrocketing bankrupties, high future taxes, deindustrialization, reduced life expentancy ?
Seems like a mighty high price to pay for marginally lower prices on consumer goods.
blam,
It took me a wee moment to perceive your direction in that last writing, but I think that I generally agree with you.
If you’ll allow me to recast your first response, in this fashion:
“The [*assumed] views of Adam Smith are the strongest argument against legislative action to impede the current version of globalization.” …end quote
*my addition
…then the modified statement represents the exact case as I see it. Adam Smith’s ‘Wealth’ is the item most offered by the advocates of the type of unrestrained free-market capitalism that ignores all of the lesser attributes of globalization.
Among those that Smith probably wouldn’t have ignored (if we’re to take him seriously in his other great writing: ‘The Theory of Moral Sentiments’) are: the lack of both intellectual and human rights protections, interference with or outright denial to cross-markets, poor observation of contract law, contrary policies on environmental ecology, and possibly the most significant of the lesser attributes of globalization is the one, that was identified by Smith in his day, in which the dealers among our own people will work for their own advantage at the expense of the common people, all the while attempting to pass it off as being in the peoples’ best interests as well. Smith further recognized that the people were for the most part often incapable of understanding their own best interests, let alone having the means to act to protect them.
Re-read his “Conclusions of the Chapter” that I referenced above, and you’ll see that’s true.
Smith was an idealist, and given that we could experience a true (or close) uniformity among all nations that removed the lesser attributes I mentioned about globalization, then Smith’s philosophy served as a perfect logical architecture for the most efficient form of economy… one driven by free markets… in an environment of reasonable observation of law and common sense.
I read Greenspan’s The Age of Turbulence and the latest book about Mother Theresa at the same time. It provided a perspective from the top to the bottom in our partitioned global economy where only a few celebrate the process.
Prior to that I read The Confessions of an Economic Hit Man by John Perkins about the sinister side of the World Bank and the investors manipulating governments and economics to fit their own mold.
Before that, I read the World is Flat by Thomas Friedman from the New York Times who coins the term flatteners which supposedly are periods in history that paved the way for Globalization and Free Trade.
We do not need any conspiracy theories to know Globalization and Free Trade have not evolved in any natural economic way. They have been driven by powerful forces inside governments, education, the media and vast trans-national corporations.
It boils down to this – workers have no voice in the process and are the real commodities in Free Trade – they are considered units of work used for the manipulation of investments. The owner and worker are separated from each other. With Free Trade, owners and workers are separated conveniently by oceans. The value of stocks grown based on the use of cheaper and cheaper labor in distant lands.
Globalists and Free Traders must keep the process centralized because decentralization would be the end of them.
That is why Gore is a counterfeit. He knows if every farmer grew his own fuels and power his farm with wind technology, centralization would fall apart.
Both Greenspan and Friedman use Adam Smith to defend the process but Adam Smith held labor as the core of societies and something sacred. Everything else was supposed to follow this priority. In Globalization and Free Trade, labor is used as a tool for money making based on values far from what Adam Smith ever said.
This is where the Mother Theresas of the world come in to serve the poorest of poor in a global setting where values are centralized to the advantage of only a few with the trickle down flow blocked in fashioned economic dams by the elite groupings.