Executive Times






2008 Book Reviews



The Age of Turbulence: Adventures in a New World by Alan Greenspan








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The Age of Turbulence: Adventures in a New World by Alan Greenspan is a dangerous book. By starting this book with his recollections of growing up in the Washington Heights area of New York, studying music, and being a regular guy, readers are lulled by his charm from the very start of the book. Two interesting insights remain prevalent throughout the book: Greenspan wants to understand data, and he wants to please others when he can. The Age of Turbulence is a captivating book, and fans of Greenspan will applaud him on every page. Readers who found that Greenspan’s inaction on many matters represented negligence will find signs of this at many critical junctures in the episodes he includes in this book. Here’s an excerpt, from the beginning of Chapter 13, “The Modes of Capitalism,” pp. 267-269:

Amid the remarks of the speakers in the large, crowded meeting room at IMF headquarters, I could hear the chanting and shouts of the antiglobalization dissidents on the street. It was April 2000, and somewhere between ten thousand and thirty thousand students, church group members, unionists, and environmentalists had converged on Washington to protest the spring meeting of the World Bank and the Inter­national Monetary Fund. While we finance ministers and central bankers in the room couldn't make out the words of the chants, it wasn't hard to un­derstand the gist. They were protesting what they viewed as the depreda­tions of increased global trade, particularly the oppression and exploitation of the poor in developing countries. I was, and am, saddened by such events, since were the protesters to succeed in destroying global trade, those most harmed would be hundreds of millions of the world's poor, the very people in whose name the protesters had chosen to speak.

While central planning may no longer be a credible form of economic organization, it is clear that the intellectual battle for its rival—free-market capitalism and globalization—is far from won. For twelve generations, capitalism has achieved one advance after another, as standards and quality of living have risen at an unprecedented rate over large parts of the globe. Poverty has been dramatically reduced and life expectancy has more than doubled. The rise in material well-being—a tenfold increase in real per capita income over two centuries—has enabled the earth to support a six­fold increase in population. Yet, for many, capitalism still seems difficult to accept, much less fully embrace.

The problem is that the dynamic that defines capitalism, that of unfor­giving market competition, clashes with the human desire for stability and certainty. Even more important, a large segment of society feels a growing sense of injustice about the allocation of capitalism's rewards. Competi­tion, capitalism's greatest force, creates anxiety in all of us. One major source of it is the chronic fear of job loss. Another, more deeply felt angst stems from competition's perpetual disturbance of the status quo and style of living, good or bad, from which most people derive comfort. I am sure the American steel manufacturers I advised in the 1950s would have been quite happy if Japanese steelmakers hadn't improved their quality and pro­ductivity so markedly. Conversely, I doubt that IBM was thrilled to see computerized word processors upstage the venerable Selectric typewriter.

Capitalism creates a tug-of-war within each of us. We are alternately the aggressive entrepreneur and the couch potato, who subliminally prefers the lessened competitive stress of an economy where all participants have equal incomes. While competition is essential to economic progress, I can't say I always personally enjoy the process. I never thought kindly of rival firms seeking to lure clients from Townsend-Greenspan. But to compete, I had to improve. I had to offer a better service. I had to become more pro­ductive. In the end, of course, I was better off for it. So were my clients, and I suspect so were my competitors as well. Down deep that is probably the message of capitalism: "creative destruction"—the scrapping of old tech­nologies and old ways of doing things for the new—is the only way to increase productivity and therefore the only way to raise average living standards on a sustained basis. Finding gold or oil or other natural wealth, history tells us, does not do that.

There is no denying capitalism's record. Market economies have succeeded over the centuries by thoroughly weeding out the inefficient and poorly equipped, and by granting rewards to those who anticipate con­sumer demand and meet it with the most efficient use of labor and capital resources. Newer technologies increasingly drive this unforgiving capitalist process on a global scale. To the extent that governments "protect" portions of their populations from what they perceive as harsh competitive pres­sures, they achieve a lower overall material standard of living for their people.

Regrettably, economic growth cannot produce lasting contentment or happiness. Were that the case, the tenfold increase in world real per capita GDP over the past two centuries would have fostered a euphoric rise in human contentment. The evidence suggests that rising incomes do raise happiness, but only up to a point and only for a time. Beyond the point at which basic needs are met, happiness is a relative state that, over the long run, is largely detached from economic growth. The evidence shows it is determined mainly by how we view our lives and accomplishments rela­tive to those of our peers. As prosperity spreads, or perhaps even as a result of its spread, many people fear competition and change that threaten their sense of status, which is critical to their self-esteem. Happiness de­pends far more on how people's incomes compare with those of their per­ceived peers, or even those of their role models, than on how they are doing in any absolute material sense. When graduate students at Harvard were asked a while back whether they would be happier with $50,000 a year if their peers earned half that, or $100,000 if their peers earned double that, the majority chose the lower salary. When I first saw the story, I chuck­led and started to brush it off. But it struck a chord that unearthed a long-dormant memory of a fascinating 1947 study by Dorothy Brady and Rose Friedman.


As in the excerpt, Greenspan reveals throughout this book the many disparate connections he made throughout his life. On the 500+ pages of The Age of Turbulence, Greenspan comes across as curious, insightful, hard-working, brilliant and consistently unflappable. It’s a delight to read, whether you love or hate what Greenspan did during the decades he led the Federal Reserve.


Steve Hopkins, February 21, 2008



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The recommendation rating for this book appeared

 in the March 2008 issue of Executive Times


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