Viewpoint: The Greenspan Nomination


The new chairman of the Council of Economic Advisers is Wall Street investment advisor Alan Greenspan. Since Greenspan is a one-time contributor to The Objectivist, was—and perhaps still is—a leader of the Ayn Rand movement, and has written on behalf of the free market, the Greenspan appointment was hailed in conservative and libertarian circles as a highly significant move on behalf of the free market and sound economics by the Nixon Administration. But is it; are hosannas really in order?

Surely, we should have learned the hard way to be far warier than all that. The Nixon Administration compiled a black record of appointing free market economists—or at least economists who had compiled a free market record before assuming public office—and then using them precisely to defend and apologize for a grisly series of statist and anti-free market policies. George Shultz, Paul McCracken, Herb Stein, and on and on have come in as champions of the free market and have spent most of their terms of office arguing on behalf of a whole raft of statist and inflationary measures. The process is known as "co-optation," cleverly designed to draw conservative and free market teeth by appointing their leaders and then inducing these appointees to swing the confused conservative masses behind policies which they would protest to the very heavens if identifiable liberals or leftists were in power. We are told, of course, that Shultz, Stein, et al, did their best in private to oppose price-wage controls or deficit spending—which does not do any of us a hell of a lot of good when these worthies then spend their energies in public loyally arguing on behalf of the Nixonite policies. Why should we expect Greenspan to be any better, or any more resistant to the lures and seductions of Power?

In fact, Greenspan's July 13th interview in Business Week does not give us much cause for hope. He comes out in favor of the current "anti-inflationary" measures of the Administration, and in particular expresses the hope for an eventual balanced budget. Nowhere in the interview does he indicate that he understands the root cause of inflation to be the expansion of the money supply by the Federal Reserve System. His misplaced emphasis on the Federal budget is a Keynesian rather than a "monetarist" (whether Austrian or Chicagoan) approach, and since the budget has only a loose relation to the continuing inflation of the money supply, we could not expect a cessation of the Administration's inflationary policies even if Greenspan's policies should prevail.

Still further, there is no reason to expect that they will prevail. Greenspan will be only one economist among a host of economists and government agencies. In the ultimate analysis, moreover, it is the politicians who decide economic policy, and it is the economists, as we have seen, who are expected to provide the "scientific" apologetics for measures decided on strictly political grounds.

One or two free market economists appointed to government posts will not amount to a hill of beans. All it will do is to keep conservatives and free market oriented citizens confused and tied to the President's apron-strings.

And that of course was the major reason for the Greenspan appointment. It is an open secret that Nixon was relying for his political life (and perhaps, even, for staying out of jail) on conservative support in Congress. And since conservatives have historically been more impressed by rhetoric and personnel than by actual policies, what better way to insure conservative votes than by throwing them such sops as a Greenspan appointment? In the immortal words of P.T. Barnum, "there's a sucker born every minute," and conservatives have long shown themselves to be suckers for that sort of political ploy.

It will be instructive for all of us to keep close tabs on Greenspan in high office, particularly to see (a) if his public statements and official reports will be any better than those of Stein, Shultz and the rest, and (b) if he has any appreciable free market impact on government policy. My strong guess is a firm No to both questions.

All of this brings up vitally important questions of strategy for libertarians and free-marketeers. Just how do we go about expanding our educational function outward or upward to actually rolling back the tide of the Leviathan State? My view is that this cannot be done by sending a few people into high office and then hoping for some major conversion of the system. The statist system is far too strongly entrenched for that sort of maneuvering, which can only end by co-opting conservatives and libertarians to do the work of the State in defusing popular opposition to statism. The only hope is for a mass movement, for mass pressure from below, through such vehicles as the Libertarian Party and other organizations, which will force the State to roll back its power. Any other short-cut route will only end by reinforcing State power and further diminishing the extent of individual liberty.

Murray Rothbard is professor of economics at the Polytechnic Institute of Brooklyn. Dr. Rothbard's viewpoint appears in this column every third month, alternating with the viewpoints of Tibor Machan and David Brudnoy.