I have to give Alan Greenspan props for doing this. The host is hostile, economically quasi-literate, allows the other guest to act as co-interrogator, interrupts him every time he says anything sensible in a desperate attempt to stop the flow of information, and beats Greenspan with weird & untrue "facts" (the Iraq war has cost trillions) that have nothing to do with his job as chairman of the Federal Reserve. My favorite moment is when Naomi Klein accuses Greenspan of having pursued a crisis of faith in capitalism through his income-inequality producing policies of privatisation, deregulation, and free trade, which is a terrific twofer: not only have none of these things been convincingly linked to income inequality; but also, none of them have anything to do with Alan Greenspan's job at the Federal Reserve Nonetheless, Greenspan a) doesn't point out that she's completely ignorant b) keeps his temper and c) tries to actually explain the problems of income inequality. I doubt I'd be so well behaved.
Update Now listening to Naomi Klein on Latin America. It is impossible to overstate how little she knows about Latin American economic history. One could glean a more accurate and comprehensive view of Latin American economic conditions by renting Evita.
Update II NOOOOOOOOOOOOOOOOOOOOO!!!! She just defended import substitution!
Update III Then, when Greenspan says "What works better?" she claims she's just talking about not socialism, but mixed economies, which would be compelling if it were a good description of pre-Pinochet Chile, the original topic of conversation. Also very, very hard to get import substitution going without central planning.
Update IV Now he has to explain the difference between Indonesian-style crony capitalism, and America purchasing war planes from Lockheed Martin. She does not try to reconcile her view that America purchasing equipment from private suppliers=crony capitalism, with her previously stated faith in mixed economies.
Jesus.
Chill. You're making yourself ridiculous right now.
Great post, Megan. It's ridiculous that they'd have Alan Greenspan and Naomi Klein on at the same time. There surely are people that could challenge Greenspan in a rational way.
Wow -- that transcript is pretty weird. That's like Bob Rubin doing "The Power Hour".
Look, this is definitely a...different interview but I don't see why it's not legit. Should Greenspan only talk to other traditional economists?
Doesn't it strike anyone as a little strange that Greenspan had no knowledge of the massive withdrawals from the Fed Bank? I mean, this was only the largest single cash withdrawal in US history and he doesn't seem to be aware of it at all. Yes, it was Iraqi money but it ended up God-knows-where. Greenspan seems to think this incident didn't happen when we're sure the underlying facts stand up well.
A couple of comments (especially relevant for those who don't click through and read the rush transcript):
-Greenspan was not being interviewed as chairman of the Federal Reserve. In fact, he is not the chairman of the federal reserve. In fact, he is retired. Actually, he is the author of a newly published book in which he makes the remarkable claim that on Iraq, he is anti-war, and on tax cuts, he is against them, even though he appeared to have held the opposite positions before he retired. While the merits of those positions are debatable, I would certainly expect him to be called into account for them no matter who does the interviewing.
-whether Greenspan or McArdle like it or not, the amount of private contracts issued by the Aerican government under the Bush administration have skyrocketed. For some reason, Greenspan chose at first to pretend that Klein's question was regarding Federal reserve contracts (which is, at best, not paying attention, and at worst, condescending and obtuse), and then misstated her position as being about supply and equipment purchases, which I have to believe shows he hasn't been paying attention for the past 15 or so years. Under federal personnel guidelines (as shown here: http://management.energy.gov/a76_052903.pdf ) government functions must show that they cannot be performed by the private sector, and if studies show that they can, such functions are contracted out. This started under the Clinton mantra of "reinventing government", but has really taken off under Bush. Considering that two of the effects of this process have been Walter Reed and the INS California Service Center scandal (where contractors went to jail for shredding 90000 original legal documents to "reduce backlog"), I would think that the question of crony capitalism is a legitimate one. Acting like Naomi Klein is pissed that Boeing sells more planes than she likes is a cheap dodge.
I have no idea who Naomi Klein is... and having read this, I'm glad of it. What a twit!
Megan wrote: "also, none of them [including rising income inequality] have anything to do with Alan Greenspan's job at the Federal Reserve"
I'm afraid you have no idea what you are talking about. and you are talking about economics!
See: Created Unequal by James Galbraith
http://www.amazon.com/Created-Unequal-Crisis-American-Pay/dp/0226278794/ref=pd_bbs_sr_1/002-3922252-1807229?ie=UTF8&s=books&qid=1191011583&sr=8-1
Rick, leaving aside my opinions of James Galbraith's scholarly work, "none of them" referred to trade, privatization, and deregulation, none of which have anything to do with Alan Greenspan's job, unless Klein wants to argue that bank regulation is a driving force behind income inequality.
the whole thing is on youtube. watch yourselves.
Greenspan did a good job remaining patient, honest and informative.
I generally sympathize with Klein's arguments, but I agree that Greenspan deserves a huge amount of credit for appearing on this. What a concept: actually having a real debate between two people who disagree completely. Very refreshing.
One thing I'm curious about. Did I understand this correctly? When asked about income inequality Greenspan seem to say the problem is demand is too high for high skill jobs, pushing up high skill wages and thereby increasing inequality. The solution he says is to increase the number of high skill imigrants. Larger job pool, less demand wages go down.
This is in stark contrast to the classic answer a New Democrat would give, which is to improve education and training on the less skilled to bring their wages up. Of course, perhaps high skill job wages would also decline, but the New Dem focus on reducing inequality is to bring up the bottom rather than bring down the top (apparently the Greenspan approach).
Does Greenspan really believe that? Megan do you agree?
tt, here's what Greenspan said:
Note the last sentence: 'And we have to confront this both at the education level and on the immigration level.'
Yes, and note the sentence before: "we would lower the average wage of skills and reduce the degree of income inequality in this country."
Yes, Patrick - that was a beautiful answer, one of many. I also liked how he summarized in a nutshell the demographic issue in the private pension context (despite some bizarre and random attempt by the host to distract with war costs).
All he said was workers are going to have to save more for their own retirement because of the demographic pressures. I don't think anyone challenges that, but that is hardly an argument for privatizing Social Security. We could certainly raise taxes if wanted to. There may be no political support for that, and it is difficult to see how we could afford that with current defense expenditures, but it could be done.
Here's my rant. Thanks for your post. It's surprising I havent' read your stuff before. But I found it tonight. Thanks, again, for your post.
Actually, jonathan, the document you cite (OMB Circular A-76) goes all the way back to the Johnson Administration, in 1966. And every administration since then has used it to a greater or lesser degree to replace longtime government functions.
Indeed, the dreaded Halliburton contract for field logistics support started out under the Clinton Administration as an A-76/reinventing government initiative. So it really is just one of those things.
There may be more contracts now--I don't doubt that there are--but the real question would be (ISTM anyhow), is there a lot more being contracted out or only about as much as would be consistent with our having a substantial military (and civilian) presence in Iraq for the last five years?
When I worked for DOD back in the 80s and 90s, we issued about ten million contract actions a year. Of those, all but about two hundred thousand were below what was then called the "small purchase threshold" (which was $25,000 at the time), and accounted for about 20 percent of the money spent by DOD. So two percent of DOD contracts accounted for about 80 percent of the dollars: the ships, airplanes, tanks etc.
BTW, one of the reasons that the total number of contracts issued has increased is because there have been some changes to the process that effectively require some contract actions that were previously not counted in the numbers to be counted as discrete contract actions, where previously, they would not have been but would have included in antecedent, related contract actions. I won't bore you with the technical details, but it is the truth: this is why it's more germane to see how many dollars are involved rather than the number of contract actions per se. I assume we can all agree that a billion dollars is a billion dollars, whether it takes one contract action to spend it or a hundred?
Someone should have asked Klein for an example of her model "mixed economy".
I suspect it exists only in her mind.
Ha ha ha! Such ignorant lies. Truly, you need the loving guidance of Fidel.
I invite you all to visit my socialist paradise. Free cigars and health care for all! Please leave your free speech with the guards as you enter.
Boy, some of you guys just don't get it. 1) We build a wall around the entire US and keep out everything except illegal immigrants. 2) We tax the crap out of everyone. 110% if necessary. 3) We spend bazillions on important stuff, like pensions for UAW workers and teachers and money for teachers unions in inner cities. 4) Everything is perfect.
Hell, it worked for the greatest economy and workers paradise in the world, the USSR.
Get on the train, doggone it.
Most moronic Klein remark, among many: something to the effect that of course "populist" simply means "of the people." Apart from her definition's essential falsehood, even if she were right, one might want to bring to her mind (such as it is) the naming habits of various political tendencies and regimes around the world in recent hisotry. How "democratic" was East Germany, for example? How democratic is North Korea?
Of course Alan Greenspan knows what "populist" means, and it doesn't mean what Klein says it does. And even if it did, she'd still be wrong. She'd be a sad figure if she weren't so self-satisfied.
think twice | September 28, 2007 6:18 PM,
I'm sure education will make a high school drop out into a rocket scientist.
Or some one who failed high school biology a brain surgeon.
You might as well make computer chips with a bucket of sea water (given current technology).
Ever hear that "you can't make a silk purse out of a sow's ear"? Education will not make up for lack of ability. If it could we could save a lot of effort by filling classrooms with fence posts. In fact it is possible that in many cases that is exactly what we have done. With commensurate results.
Posted by think twice | September 28, 2007 7:42 PM,
Chile privatized social security under Pinochet. Retired worker's income has been going up.
It is such a good deal that the socialist now running government in Chile dare not mess with it.
Think about it: investing in companies grows the productive economy. Investing in government grows what? Taxes? Which is better for an economy? More production or more government parasites?
My respect for Greenspan definitely went up while watching that. In Canada the media has been a tizzy over Klein since her latest book came out, which from everything I have seen and heard sounds like one of the most confused of the year.
She seems to spend a good deal of time lately slandering Milton Friedman, and it's a pity that he isn't alive to face off with her directly. Anyone who has watched the original Free to Choose videos knows how gracious he was in debate with those who disagreed with him, particularly when demolishing their arguments or pointing out inconsistencies in their thinking (which are legion in Klein's case).
Naomi Klein debating Alan Greenspan on economics is like Katie Couric debating physics with Stephen Hawking. I mean, it's more surreal than anything.
M. Simon:
I agree that education will not make up for lack of ability. However, the education system is so messed up that many with ability, but not means (money), cannot get the correct education to enable them to take advantage of the high tech jobs.
"we would lower the average wage of skills and reduce the degree of income inequality in this country." That sentence was a bit puzzling - a true Greenspan-ism. But he might mean that an increased supply of high skilled labor from immigration will lower the average wage in that sector. The improved performance of the economy, resulting from the increased capacity supplied by these new workers, will boost productivity and thus average wages in the lower skill categories. Maybe negative, at least initially, for highly skilled workers, but good for the economy and labor as a whole.
"demographic pressures... is hardly an argument for privatizing Social Security." True, but there are many other worthy reasons for privatization, including improving the miserly rate of return for the "investor" in Social Security of approximately 1% a year and creating an enormous pool of investable resources to grow the economy from a privatization of retirement savings. Government revenue, including Social Security, is a cost to the economy, which has to produce the surplus to pay the voracious tax demands of bureaucrats.
I think that too many are too quick to judge Klein's arguments as bankrupt. Joseph Stiglitz, by contrast, is among those who commend Klein for shedding light in dark places in her book The Shock Doctrine. Stiglitz is not too fond of Greenspan's economics either, blaming Greenspan for, among other things "egging on" the recent credit bubble: http://forestpolicy.typepad.com/economics/2007/09/who-gets-it-jos.html
Here's a snip from Stiglitz's, Sept.39 NY Times review of The Shock Doctrine: http://www.nytimes.com/2007/09/30/books/review/Stiglitz-t.html
"Klein is not an academic and cannot be judged as one. There are many places in her book where she oversimplifies. But Friedman and the other shock therapists were also guilty of oversimplification, basing their belief in the perfection of market economies on models that assumed perfect information, perfect competition, perfect risk markets. Indeed, the case against these policies is even stronger than the one Klein makes. They were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets — for instance, whenever information is imperfect, which is to say always.
"Klein isn’t an economist but a journalist, and she travels the world to find out firsthand what really happened on the ground during the privatization of [practically everything/everywhere] … These chapters are the least exciting parts of the book, but they are also the most convincing. …
"Some readers may see Klein’s findings as evidence of a giant conspiracy, a conclusion she explicitly disavows. It’s not the conspiracies that wreck the world but the series of wrong turns, failed policies, and little and big unfairnesses that add up. Still, those decisions are guided by larger mind-sets. Market fundamentalists never really appreciated the institutions required to make an economy function well, let alone the broader social fabric that civilizations require to prosper and flourish."
Import substitution was a good (or at least near-consensus) idea at the time, 1930s/1940s when depression and then war impacted previous notions of comparative advantage and market access. Heck, the US government supported it in the 1940s-60s because it created a market for US capital goods.
Jane Jacobs uses a different definition and description of import substitution in Cities and the Wealth of Nations, one that I recall as not being incompatible with free trade, free markets, etc. (and certainly not requiring central planning).
To her it is in fact an entrepreneurial phenomenom: small local businesses replacing foreign suppliers, who then begin trading with each other, building up the economy (and the city).
Comments?