Book of the week
The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
As formidable as Alan Greenspan was as an economist, he was “an even better politician,” said Justin Fox in The New York Times. Eight years after the U.S. economy collapsed and the longtime Federal Reserve chairman was blamed for letting it overheat, journalist Sebastian Mallaby has produced an impressive, “fun to read” biography of the once vaunted central banker that suggests why Greenspan’s political instincts might offer the key to understanding his signature failure. Mallaby’s Greenspan is not a free-market ideologue, but a pragmatist. He is also a shy man who craved acclaim. A New Yorker born in 1926 to modest means, he climbed to power on the strength of his intellect and his survival instincts. He “comes across as a decent, likable guy. Just not as an innocent, and also not as a hero.”
Even at some 700 pages, The Man Who Knew proves “hard to put down,” said Randall Kroszner in The Wall Street Journal. Mallaby has “a knack for finding just the right sparkling quotation to back up his points,” and he “judiciously” sprinkles in enjoyable anecdotes from Greenspan’s life of fine cars, power dinners, and famous women. Greenspan had quit a brief career as a jazz clarinetist and established himself as a brilliant young economic analyst when he became an acolyte of novelist Ayn Rand (who nicknamed the plainly dressed numbers cruncher “the undertaker”). But Greenspan was not a Rand-style free-market fundamentalist for long, revealing a more pragmatic streak when tapped to advise Richard Nixon and after Ronald Reagan appointed him Fed chair. He intervened to right markets quickly after the 1987 stock market crash, then won praise for his restraint a decade later, when he declined to raise interest rates after correctly deducing that rising worker productivity made inflation unlikely.
“I have problems with Mallaby’s bottom line,” said Ben Bernanke in Brookings.edu. In his otherwise astute book, he resorts to pop psychology to explain why Greenspan failed to act more forcefully when he spotted danger signs in the pre-2007 economy. But Greenspan didn’t lie back because he was innately passive; he did so because he had reason to believe the fallout from a new crisis would be as easily managed as the 1987 and post-9/11 downturns had been. The bigger problem with Mallaby’s criticism is that it doesn’t go far enough, said Ryan Cooper in The Washington Monthly. Greenspan failed Wall Street just once, and meanwhile built a consensus that the Fed’s purpose is to protect the investor class, not jobs. That idea remains “a major obstacle” to saner policies.