Earlier today I received the following email:
Dear Mr. Holzer,
I came across your posting on your weblog in which you say that
your essay on Mr. Greenspan had disappeared. I am interested in reading
it, having been a student of Objectivism since the late '60s. (My husband
and I waited avidly for each copy of The Objectivist Newsletter, and
then of The Objectivist.)
I am unable to control my urge to Detect, so I repaired to the
Wayback Machine. I imagine that by now you've retrieved the essay
yourself, but just in case, the part "Objectivist to Statist" exists
on archive.org, at
Intrigued, I followed the link and realized that the essay is worth resurrecting from the ashes.
Sunday, March 1, 2009
The Alan Greenspan Story: From Objectivist to Statist
By Professor Henry Mark Holzer
In the mid-1960s my wife, Erika Holzer, and I were members of a small circle the hub of which was Ayn Rand, whose magnum opus, Atlas Shrugged, had been published in 1957.
Another member—who by then had been associated with Rand for several years—was Alan Greenspan.
In addition to our social relationship with Rand we were also her lawyers, so frequently we made “house calls” to her apartment to conduct legal business. On more than one occasion when Erika and I arrived, Ayn and her husband would be finishing a private dinner with Alan Greenspan. It was apparent to us that Ayn had a special relationship with him, an impression buttressed by comments Ayn made occasionally to the effect that Alan was a brilliant man.
In those days, Rand and her erstwhile “intellectual heir,” Nathaniel Branden, edited and published The Objectivist, a journal devoted to expounding and disseminating her ideas.
One was allowed to write for The Objectivist only if the content was in accordance with Rand’s philosophy, and could withstand the laser-like editorial scrutiny she unmercifully delivered (but to the great advantage of the essay’s author). Erika and I were victims/beneficiaries of Rand’s almost supernatural abilities as a non-fiction editor.
In the July 1966 issue of The Objectivist there appears an essay entitled “Gold and Economic Freedom.” Its opening paragraph is as follows: “An almost hysterical antagonism toward the gold standard is one issue that unites statists of all persuasions. They seem to sense—perhaps more clearly and subtly than many consistent defenders of laissez-faire—that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.” (My emphasis.)
The essay goes on to explain the role of gold in a free society, the meaning of money (see my Blog of February 12, 2009), and the history of the Federal Reserve System. Then, the author notes critically that “[w]hen business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. * * * The Fed succeeded: it stopped the [British] gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result the American economy collapsed.” (My emphasis.)
The balance of “Gold and Economic Freedom” emphatically endorses the gold standard, disdains government interference in the economy, and condemns the statists who repudiated the former while fostering the latter.
The essay’s penultimate and concluding paragraphs eloquently reiterate this point: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [see my Blog of January 25, 2009]. If everyone decided, for example, to convert all their bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. * * * (My emphasis.)
The author of “Gold and Economic Freedom” is, of course, Alan Greenspan.
The “statists” whom Dr. Greenspan rightly condemned are adherents to, and promoters of, “Statism”: “concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry.” (Merriam- Webster Dictionary, On Line).
Or, as Greenspan’s editor, Ayn Rand, once explained it: “The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good”: (“Introducing Objectivism,” The Objectivist Newsletter, August 1962, p.35).
Since it was Ayn Rand herself speaking through Alan Greenspan in “Gold and Economic Freedom” in the author’s lauding of laissez-faire and condemnation of statism, it was incredible that he accepted Gerald Ford’s appointment as Chairman of the President’s Council of [three] Economic Advisers.
Putting aside four of the Council’s main duties and functions, the fifth is “[t]o develop and recommend to the President national economic policies, to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment.”
What?
An acolyte of the political philosopher who, among other achievements, built a moral foundation for capitalism, signing on with a statist President to “develop national economic policies” (like the bureaucrats in Atlas Shrugged?), “to foster and promote free competitive enterprise” (through stricter anti-business anti-trust laws?), “to avoid economic fluctuations” (by wage and price controls?), and “to maintain employment” (with FDR-like public works projects?)?
Not only did Greenspan sign on with Ford, but Rand signed on with the both of them—sanctioning the new Greenspan-Ford economic partnership by her glowing presence at the new Chairman’s White House swearing-in ceremony.
Soon after Rand died, President Reagan put Greenspan in charge of a boondoggle called the National Commission on Social Security Reform. One of its recommendations was an anti-laissez-faire, pro-statist, large tax increase.
Then came the Fed job, making Greenspan the world’s economic/financial puppet master.
According to a 2007 speech by a Federal Reserve Board member Frederic S. Mishkin, “In a democratic society like our own, the ultimate purpose of the central bank [the Fed] is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977. According to this legislation, the Federal Reserve's mandate is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” (My emphasis.)
So for year after year, the fallen pro-laissez-faire, anti-statist, Objectivist, Chairman of the Fed, went about pulling on the Fed’s strings, doing the government’s business of “promoting the public good” and “fostering social welfare.”
Repudiating everything he had written, and Rand had sanctioned, in “Gold and Economic Freedom,” Greenspan manipulated the “creation” of “money,” opened and closed the credit valve, and virtually if not actually controlled the economic/financial system of the United States and thus of the world.
And then, finally, at the end of 2008 when the system imploded, Rand’s brilliant acolyte finally confessed . . . and his confession continues: Yes, he was wrong about self-regulating capitalism. Yes, this time laissez-faire didn’t work. Yes, the bailouts were/are necessary. Yes—and that noise you hear is Ayn Rand spinning in her grave—the government must now nationalize banks (in the “public interest, and only “temporarily,” of course).
And with these unrepentant anti-capitalism confessions, Alan Greenspan is nakedly exposed for what he became when first he drank from the inebriating waters of the Washington trough, abandoning not only “Gold and Economic Freedom,” but the moral principles which it implies, and about which he wrote with Rand’s approval those many years ago.
Alan Greenspan is a person whom he, and Ayn Rand, deplored: just another statist.
Another member—who by then had been associated with Rand for several years—was Alan Greenspan.
In addition to our social relationship with Rand we were also her lawyers, so frequently we made “house calls” to her apartment to conduct legal business. On more than one occasion when Erika and I arrived, Ayn and her husband would be finishing a private dinner with Alan Greenspan. It was apparent to us that Ayn had a special relationship with him, an impression buttressed by comments Ayn made occasionally to the effect that Alan was a brilliant man.
In those days, Rand and her erstwhile “intellectual heir,” Nathaniel Branden, edited and published The Objectivist, a journal devoted to expounding and disseminating her ideas.
One was allowed to write for The Objectivist only if the content was in accordance with Rand’s philosophy, and could withstand the laser-like editorial scrutiny she unmercifully delivered (but to the great advantage of the essay’s author). Erika and I were victims/beneficiaries of Rand’s almost supernatural abilities as a non-fiction editor.
In the July 1966 issue of The Objectivist there appears an essay entitled “Gold and Economic Freedom.” Its opening paragraph is as follows: “An almost hysterical antagonism toward the gold standard is one issue that unites statists of all persuasions. They seem to sense—perhaps more clearly and subtly than many consistent defenders of laissez-faire—that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.” (My emphasis.)
The essay goes on to explain the role of gold in a free society, the meaning of money (see my Blog of February 12, 2009), and the history of the Federal Reserve System. Then, the author notes critically that “[w]hen business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. * * * The Fed succeeded: it stopped the [British] gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result the American economy collapsed.” (My emphasis.)
The balance of “Gold and Economic Freedom” emphatically endorses the gold standard, disdains government interference in the economy, and condemns the statists who repudiated the former while fostering the latter.
The essay’s penultimate and concluding paragraphs eloquently reiterate this point: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [see my Blog of January 25, 2009]. If everyone decided, for example, to convert all their bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. * * * (My emphasis.)
The author of “Gold and Economic Freedom” is, of course, Alan Greenspan.
The “statists” whom Dr. Greenspan rightly condemned are adherents to, and promoters of, “Statism”: “concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry.” (Merriam- Webster Dictionary, On Line).
Or, as Greenspan’s editor, Ayn Rand, once explained it: “The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good”: (“Introducing Objectivism,” The Objectivist Newsletter, August 1962, p.35).
Since it was Ayn Rand herself speaking through Alan Greenspan in “Gold and Economic Freedom” in the author’s lauding of laissez-faire and condemnation of statism, it was incredible that he accepted Gerald Ford’s appointment as Chairman of the President’s Council of [three] Economic Advisers.
Putting aside four of the Council’s main duties and functions, the fifth is “[t]o develop and recommend to the President national economic policies, to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment.”
What?
An acolyte of the political philosopher who, among other achievements, built a moral foundation for capitalism, signing on with a statist President to “develop national economic policies” (like the bureaucrats in Atlas Shrugged?), “to foster and promote free competitive enterprise” (through stricter anti-business anti-trust laws?), “to avoid economic fluctuations” (by wage and price controls?), and “to maintain employment” (with FDR-like public works projects?)?
Not only did Greenspan sign on with Ford, but Rand signed on with the both of them—sanctioning the new Greenspan-Ford economic partnership by her glowing presence at the new Chairman’s White House swearing-in ceremony.
Soon after Rand died, President Reagan put Greenspan in charge of a boondoggle called the National Commission on Social Security Reform. One of its recommendations was an anti-laissez-faire, pro-statist, large tax increase.
Then came the Fed job, making Greenspan the world’s economic/financial puppet master.
According to a 2007 speech by a Federal Reserve Board member Frederic S. Mishkin, “In a democratic society like our own, the ultimate purpose of the central bank [the Fed] is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977. According to this legislation, the Federal Reserve's mandate is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” (My emphasis.)
So for year after year, the fallen pro-laissez-faire, anti-statist, Objectivist, Chairman of the Fed, went about pulling on the Fed’s strings, doing the government’s business of “promoting the public good” and “fostering social welfare.”
Repudiating everything he had written, and Rand had sanctioned, in “Gold and Economic Freedom,” Greenspan manipulated the “creation” of “money,” opened and closed the credit valve, and virtually if not actually controlled the economic/financial system of the United States and thus of the world.
And then, finally, at the end of 2008 when the system imploded, Rand’s brilliant acolyte finally confessed . . . and his confession continues: Yes, he was wrong about self-regulating capitalism. Yes, this time laissez-faire didn’t work. Yes, the bailouts were/are necessary. Yes—and that noise you hear is Ayn Rand spinning in her grave—the government must now nationalize banks (in the “public interest, and only “temporarily,” of course).
And with these unrepentant anti-capitalism confessions, Alan Greenspan is nakedly exposed for what he became when first he drank from the inebriating waters of the Washington trough, abandoning not only “Gold and Economic Freedom,” but the moral principles which it implies, and about which he wrote with Rand’s approval those many years ago.
Alan Greenspan is a person whom he, and Ayn Rand, deplored: just another statist.
