As the Guv saw it

Back in the late ’90s, when the American economy was booming and Alan Greenspan was the Chairman of the country’s ‘central bank’, the Federal Reserve Board, someone had an idea what the government should do if (god forbid) Greenspan were to die in the saddle: prop him up in a chair and dress him up in dark glasses and a hat so that no one would notice that he had died. That’s how important was a man whose primary job was to manage inflation and growth in the world’s largest economy. Fortunately for America and Greenspan, the idea never needed implementing. Greenspan retired from the Fed in 2006 after 20 fascinating years at its helm. The Age of Turbulence is his story of himself and a world that changed so dramatically right before his very eyes.

What makes Greenspan so eminently suited to comment on ‘the age of turbulence’ is the unique perch he got to occupy for most of it. Born in New York eight years after the First World War ended, Greenspan developed an interest in economics at a time when the field was just getting more ‘scientific’. For example, when Greenspan started looking at data to forecast trends first at the Conference Board, few knew that this sort of mathematical economics would grow to become econometrics. The International Monetary Fund and the World Bank were set up when Greenspan was passing out of school. And, of course, he served under four different Presidents, ranging from Ronald Reagan to George W. Bush.

For readers in America, the most interesting bits about his autobiography would be the dynamics of policy making in Washington, D.C. and America’s role in influencing economic policies of other countries. But the chapters that readers in India would perhaps find more interesting are the ones that relate to India and China, and the crystal-gazing that Greenspan does on the economic future of the world. The free-market enthusiast doesn’t have too many kind words for India. He lambasts the Fabian socialism that Nehru introduced in the belief that state control and planning would be more important than free market economics to build a new India. Although India has opened up significantly since 1991, Greenspan says there’s a long way to go. “Faced with rising food inflation in early 2007, the (Indian government’s) response was not to allow rising prices to prompt an increase in supply, but to ban wheat exports for the rest of the year and suspend futures trading to ‘curb speculation’— the very market forces that the Indian economy needs to break the stranglehold of bureaucracy.”

But what ought to distress us is Greenspan’s assessment of India’s future. “It is conceivable that India can undergo as radical a reform as China and become world-prominent. But at this writing, its politics appear to be leading India in a discouraging direction.” In contrast, he says, “If China continues to press ahead toward free market capitalism, it will surely propel the world to new levels of prosperity.” The choice, then, is ours to make.