Lawmakers in the US struggle to come to terms with the scale of the financial crisis, the Paulson solution, and the role of government in resolving this crisis. Republicans, particularly conflicted, sabotaged the $700 billion bail-out last Thursday. At this moment Alan Greenspan proferrs advice from the lofty heights of the pedestal he still, astonishingly, stands on. “As a practical matter” he and others write in the Wall St. Journal (26.09.08) and “at the current stage of the crisis, the only way that financial institutions can continue to function is for the government to provide financial support.”
I remind readers that only a month ago, on the 4th August 2008, Greenspan, writing in the Financial Times, celebrated the fact that “the past decade has seen mounting global forces (the international version of Adam Smith’s invisible hand) quietly displacing government control of economic affairs” (my emphasis). He went on to conclude that the world faced a danger, not the danger of financial collapse, mind you, but “the danger that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs.”(See my blog on Greenspan, Putin and Hu in the August batch.)
Right now Congress, the White House and the Treasury, are struggling to ‘reassert their grip on economic affairs”. Indeed Hank Paulson and Greenspan’s successor, Ben Bernanke are prostrating themselves before lawmakers, figuratively and literally, in a vain attempt to reassert “government’s grip on economic affairs.”
It was Greenspan and his friends in the halls of economic orthodoxy, and in the finance sector, that helped loosen that grip. That celebrated de-regulation of credit creation, and the de-regulation of the finance sector as a whole. It is Greenspan that now has the audacity to call on government ‘to provide financial support so that financial institutions can continue to function’.
No wonder Republican lawmakers feel conflicted and embarassed by the flawed ideology, the double standards and the audacity of Alan Greenspan and his students, George Bush, Ben Bernanke and Hank Paulson. They have all compromised Republican electoral chances, but have also, unforgiveably, irreparably damaged the Conservative Republican ‘brand’, which if not threatened by extinction, can nevertheless look forward to a long sojourn in the wilderness.