Last year in testimony before Congress, Alan Greenspan admitted that one of his foundational ideological beliefs about ‘the way things work’ in the world of global finance was wrong. After years as a prime-mover behind the deregulation of financial markets, he confessed that his fundamental trust in self-regulation was ‘flawed.’ When I heard it at the time, I was both surprised and grateful at his honesty. At last, the most influential architect of our current financial ruin acknowledged that his ideological inaccuracy had significantly contributed to the global crisis. I thought…naively…that this admission by the former Chairman of the Federal Reserve Bank would certainly mean that reform legislation would be written rigorously and enacted quickly…well, it hasn’t. On the contrary when the false hope of Libertarian-like beliefs should be most evident, a ground-swell of support for what Greenspan admitted was a failed ideology is growing. I think we’d be wise to talk about the visible consequences of Libertarian-like policies as they have been applied during the past thirty years or so.
It’s been well documented that the financial worldview of Alan Greenspan was decisively shaped by the Libertarian-like views of Ayn Rand. Rand created a philosophy she called ‘Objectivism’…emphasizing individual rights and responsibilities, and promoting totally free-market capitalism with zero interference from government. Most important, however, about ‘Objectivism’ is it’s complete dependence on reason as the basis for all decisions…from the most mundane to the most critical. In ‘Objectivism’ decisions are made on objective and verifiable facts. Those who make decisions better than others rise in power and wealth…and ultimately the most successful of these individuals become the protectors of the capitalist system. It’s a great theory…but, sadly, it doesn’t work. Alan Greenspan applied this theory throughout his career, and finally last year he had to admit the utter failure of his mentor’s foundational beliefs.
We’ve been the lab rats in a 30-year experiment, and now the results are in. The application of Libertarian-like policies of systematic deregulation…particularly concerning mergers, acquisitions, trusts and financial markets…leads to catastrophic economic failure and great societal suffering. I know many people have fond feelings about President Ronald Reagan, but his rigid belief that ‘government is the problem’ decisively started stacking the financial dominoes for the recent sequential fall. Of course, corporate interests saw this trend as beneficial, so they increased their political footprint with focused campaign contributions and lobbying efforts. Even the ‘Christian Right’ was co-opted into supporting the experiment by those who convinced them that God prefers to work through hierarchies rather than participatory government. Republicans and Democrats through the years have followed this Libertarian-like direction, culminating in a 16-year acceleration in deregulation policies during both Clinton administrations and both George W. Bush administrations. The raw data in this experiment is available now, but it’s uncertain if any real analysis or action will follow.
All generalizations are false…probably this one too. Nevertheless, I believe we can make a generalized statement with some confidence: there is no magical ideology or philosophical extreme that can be trusted without checks and balances…not liberalism, or conservatism, or libertarianism…none of them. Each of these ideas must be weighed carefully in each specific context by an informed public as policy and practice are decided. As we try to put the pieces of our shattered global economy back together, one thing should be crystal clear: WE need to be more engaged in our civic life. It doesn’t really matter where we individually start in this engagement…neighborhood, city, state, national or global. It matters that we start somewhere…and that we integrate a greater civic engagement into our culture.