The unleashing of the power of human creativity constitutes one main source of vitality behind the free market
Greenspan’s third legend is his ability to command the entire economy with a magic wand. When he was chairman, he was not like a traditional technocrat, but more like a conductor or an animal trainer, mastering the secret of communicating with the market.
Author: GUDORDI | 2024-08-02
The author believes that Greenspan changed the function of the Federal Reserve. (Shutterstock)
The market economy is driven by the concept of “creative destruction” proposed by Professor Schumpeter decades ago.
Market economies are driven by what Professor Joseph Schumpeter, a number of decades ago, called ‘Creative Destruction’.──Alan Greenspan
The author does not have a strong opinion on Ayn Rand’s thoughts and the position of a philosopher. I just think that his views are worth pondering for four reasons. The previous article “Thoughts Caused by Ayn Rand and Wittgenstein” has already explained two of them. This article focuses on the third one, that is, Rand may have had an important influence on Greenspan, and his ideas may also be an important clue to understanding Greenspan.
Strange people in modern history
Basically, Greenspan can be called a strange man in modern history. When he was young, he originally wanted to be a saxophonist, but later he switched to economics, and he has a far better understanding and mastery of it than his peers. He is an economic consultant in the business world, but he has long been interested in entering the US government and even aspiring to become the Federal Reserve. The ambition of the chairman of the bureau. He does not have a great social background or the support of political forces. His promotion to the chairman of the Federal Reserve seems to be based solely on his extraordinary knowledge of economics and the discernment of those in high positions who appreciate him. For many people, this is unimaginable, but Greenspan has proven that he can do it. This is his first legend.
The second legend is the changes he brought to the operation of the Federal Reserve and even global central banks. Many of the founding fathers of the United States opposed any organization similar to a central bank, so there was no central bank in the first 125 years of the founding of the country. Several financial crises were resolved only by the intervention of Mr. JPMorgan Chase. The main reason that prompted the U.S. government to establish the Federal Reserve was not so much to regulate the economy, but to prevent the Morgan family from becoming uncontrollably powerful (perhaps because of this, the Fed was ridiculed the more it helped during the Great Depression), so its spirit It’s more about checks and balances of power. The Federal Reserve is composed of 12 regional reserve banks. The chairman has no additional power except to decide the agenda. Only during Greenspan’s tenure, he was able to convince the committees, which gave people the feeling of having a firm grasp of the Federal Reserve.
Market conductor
There is no doubt that the real protagonists of economic operations are the hundreds of millions of enterprises and individuals. These individuals can be understood as different departments of an extremely complex large enterprise. What they have in common is that they almost only care about the things in front of them, and Whether they can coordinate well will have a huge impact on the overall economic performance. Therefore, how to make them work together is extremely complicated and difficult.
Greenspan’s third legend is his ability to command the entire economy with a magic wand. When he was chairman, he was not like a traditional technocrat, but more like a conductor or an animal trainer, mastering the secret of communicating with the market. He fully understood that the market was too big to allow anyone to issue orders, so he chose to take advantage of the situation, control short-term interest rates, and regulate market participants’ expectations for the future. He established a certain tacit understanding between the Fed and the market in anticipating the future. This is a very profound knowledge created by him.
Does the quote from him at the beginning of this article reflect his feelings?
This leads to three important questions. First of all, how important is it to have someone like Greenspan in society? Second, what kind of society can create people like Greenspan and equip them with the ability to create? Third, what is the connection between Greenspan’s style and what he did and Rand’s vision of the nature of capitalist society and personal behavioral norms? I will discuss these issues further.
