Money  /  Argument

When Alan Met Ayn: "Atlas Shrugged" and Our Tanked Economy

We owe at least part of the 2008 financial crisis to Ayn Rand's philosophy of objectivism.

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Ayn Rand interviewed by Mike Wallace.

Although the Collective never really recovered from the events of 1968, Alan Greenspan never broke with Ayn Rand. In his 2008 memoir, The Age of Turbulence, he writes, “[o]f all my teachers, Arthur Burns and Ayn Rand had the greatest impact on my life… Ayn Rand expanded my intellectual horizons, challenging me to look beyond economics to understand the behavior of individuals and societies.” He speaks warmly of her throughout the book, even knowing all that he did about her skeleton-packed closet; his loyalty elicits both sympathy and exasperation.

In his own way, Greenspan had inherited in toto Rand’s short-sightedness, egocentrism and total and utter lack of understanding of “the behavior of individuals and societies.” Though he would play his delusions out in a very different arena and not, so far as is generally known, be going around slapping anybody in the foyer. His big scene came forty years later, in a Congressional hearing room.

Greenspan was no mere theorist when it came to Objectivism and was, in time, in a position to put its theories into practice on a massive scale. He believed fervently that business should not be regulated by us parasitic consumers, and had written to that effect from the ’60s onward. In 1987, he became Fed Chairman, succeeding the towering (6’7″, and wholly un-Objectivist) Paul Volcker. The results of Greenspan’s convictions, made manifest in that role, were far-reaching. It has been argued in many quarters that his rock-ribbed laissez-faire policies resulted in a succession of bubbles — first in the dot-com boom, then in real estate and credit — that led directly to the 2008 crisis.

Part of the blame lies in his attitude toward derivatives. The efforts of the CFTC’s Brooksley Born to compel the regulation of derivatives trading began in 1994, but came to nothing owing largely to Greenspan’s objections. After the Enron debacle, which, thanks to “the smartest guys in the room,” left California holding the bag on about $9 billion of natural gas bills, Senator Dianne Feinstein commenced to pester Greenspan about the need to regulate derivatives. In 2004, Alan shrugged: he wrote to Congress in response to Senator Feinstein in what had by then become the signature Greenspan style of floaty, oracular, narcoleptic polysyllables:

Businesses, financial institutions, and investors throughout the economy rely upon derivatives to protect themselves from market volatility triggered by unexpected economic events. This ability to manage risks makes the economy more resilient and its importance cannot be underestimated. In our judgment, the ability of private counterparty surveillance to effectively regulate these markets can be undermined by inappropriate extensions of government regulations.