Paul Keating is entitled to feel a little miffed. In Alan Greenspan's 531 page tome, The Age of Turbulence: Adventures in a New World, published on Monday, the former chairman of the US Federal Reserve spends entire chapters documenting his 18-year fight against inflation.
Greenspan praises John Howard, Peter Costello, Bob Hawke and Ian Macfarlane. But he can't find any space for Keating. As Keating can take much of the credit for forcing Australians to realise the importance of defeating inflation, the omission of an entry for Keating in the index of Greenspan's book is a glaring omission. The only mention of anyone named Keating in The Age of Turbulence is a reference to Charles Keating, who was jailed in the early 1990s for fraud committed while running an American savings and loan company. The collapse of the company cost taxpayers $US3 billion. Somewhat unfortunately for Greenspan his consulting firm had artifled the financial health of Keating's business a few years before it went broke.
People will read The Age of Turbulence for many reasons. No doubt some of the people who queued for hours in New York bookstores to buy it on the day of its release did so in the belief that Greenspan would reveal the secrets of how to make money on the stockmarket.
However, anyone who purchases the book for this purpose will be disappointed. Greenspan endorses the sentiment of Robert Rubin, Bill Clinton's Treasury secretary. "There's no way to know for certain when a market is overvalued or undervalued". Greenspan happily admits that identifying turns in the business cycle before they occur is more an art than a science. For example, in 1997 he feared that US stocks were overvalued and that the bull run was coming to an end. He was wrong. The bulls reigned supreme for another three years.
On reading The Age of Turbulence one of the reasons for Greenspan's success quickly becomes obvious. He understands that economics is not actually about economics -- at least not economics as it is taught to graduates these days, which is as an endless series of mathematical equations of ever-increasing complexity.
For Greenspan the study of economics is the study of what people and businesses buy and sell. He had an intuitive feel for what was happening in the real economy. Because he was at the Fed for such a long time it is often forgotten that Greenspan ran a successful business consulting firm for 20 years. This, combined with his directorships of companies such as Alcoa, Mobil, JPMorgan and General Foods gave him an insight into how the economy worked in practice, as opposed to how it was supposed to work in theory.
John Howard might buy The Age of Turbulence because of the particularly nice things that Greenspan says about him. "Howard impressed me with his deep interest in the role of technology in American productivity growth. Whereas most heads of government steer clear of such detail, he sought me out on such issues during numerous visits to the United States between 1997 and 2005".
What will be less attractive to the Prime Minister is Greenspan's attitude to things such as the Future Fund. He finds the concept "truly scary". Greenspan doesn't believe it is "politically feasible to insulate such huge funds from government direction". And this is exactly what we've already seen in Australia. Labor has promised to raid the Future Fund to build a broadband network.
There's something else that should attract the attention of Liberal MPs. Greenspan (a lifelong Republican) despairs at the refusal of the Republican Party to address the growing US government deficit or to care about its consequences. This grim assessment of economic policy making under George Bush has already gained wide publicity. What has received less coverage is his broader critique of the party.
Greenspan says the Republicans have abandoned their core beliefs. Instead they have accommodated themselves to the "new political realities", which are that voters like big government and the best that can ever be hoped for is to slow the growth of government. This attitude, combined with a willingness "to loosen the federal purse strings any time it might help add a few more seats to the Republican majority" resulted in the Republicans relinquishing any claim to their "libertarian small-government ideal".
Greenspan's conclusion following the loss of the Republicans' control of the Congress after the 2006 elections is devastating. "The Republicans in Congress lost their way. They swapped principle for power. They ended up with neither. They deserved to lose".
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