Greenspan Surrenders in the Battle Over Narrative
I hope this post doesn’t disillusion some of our younger readers, but we don’t hold back here at Free Advice: Ever since the financial crisis became obvious to all, many other free marketeers and I have been consciously trying to make sure government gets the blame for this, not “laissez-faire capitalism.” Obviously we are doing this because we think it is true, but I do want to acknowledge the strategic aspect of it. In particular, I have been trying to drive home the Austrian business cycle theory now that there is a brief window in which many academics, as well as a bunch of nerdy investors, would be far more receptive than ever before.
But alas, with Greenspan’s recent testimony, we lost. He conceded defeat. It doesn’t matter how many impassioned pleas or delectable analogies I write. The single person on earth who bears the most responsibility for the housing bubble is taking responsibility–by saying it was his faulty faith in deregulated markets. Here’s the smoking gun:
Waxman: Dr. Greenspan, I’m going to interrupt you. The question I have for you is… You had an ideology … You had the authority to prevent the lending practices that led to the subprime mortgage crisis, you were advised to do so by many others, and now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wished you had not made.
Greenspan: Well, remember what an ideology is. It’s a conceptual framwork for the way people deal with reality. Everyone has one. To exist, you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is that I found a flaw – I don’t know how significant or permanent it is – but I’ve been very distressed by that fact. But if I may, can I just answer the previous question?
Waxman: You found a flaw in the reality…
Greenspan: I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works.
Waxman: In other words you found that your view of the world, your ideology, was not right. It was not working.
Greenspan: That’s precisely the reason I was shocked because I was going for forty years or more with very considerable evidence that it was working exceptionally well.
Checkmate. Weisberg 1, Liberty 0.
Sure, we will keep writing, just for posterity. People 50 years from now can read our reports to understand precise details that would otherwise be forgotten. But let’s not kid ourselves that we can still spin the narrative to exonerate markets.
Nope, this is about as damning a concession as if Don Rumsfeld testified, “Yeah, I am quite frankly shocked at how badly things turned out in Iraq. I mean, the use of overwhelming firepower worked so well in World War II and the first Gulf War. I have to rethink my views on diplomacy.”
Can you imagine Bill Kristol trying to spin that? So now you feel my pain.*
Oh, at this point it probably goes without saying that Tyler Cowen disagrees with me; he doesn’t think Greenspan conceded much at all.
* Don’t get mixed up, folks. I was against the Iraq invasion. And so I’m saying, it would be hilarious to me to watch an intellectual try to justify militarism in light of the chief architect admitting it didn’t work. So by the same token, how can I possibly be taken seriously by leftists who distrust the market, after its leading “proponent” and architect of the housing bubble admitted that the Invisible Hand doesn’t work after all?
