Following the credit crunch and the onset of recession, capitalism has come in for a fair amount of undeserved stick. Much of this has been directed at the ideas of Ayn Rand, heralded by Alan Greenspan as the prophet of his own downfall. However, Greenspan’s argument is disingenuous, as an article in Capitalism Magazine makes clear.

The piece shows how Greenspan was in no way a follower of Objectivism by the time he was leading the Federal Reserve. In fact, a true Objectivist would not even be able to work the Fed; Rand championed the gold standard; this is what she thought about the Fed:

All government intervention in the economy is based on the belief that economic laws need not operate, that principles of cause and effect can be suspended, that everything in existence is 'flexible' and 'malleable,' except a bureaucrat's whim, which is omnipotent; reality, logic, and economics must not be allowed to get in the way. This was the implicit premise that led to the establishment in 1913 of the Federal Reserve System.

Greenspan had lost his way a long time ago. Let it not be forgotten that he rose in unison with Hillary Clinton to aplaud Bill Clinton’s State of the Union address calling for socialized medicine.

In the article, the author Harry Binswanger does an interesting thing. He edits one of Greenspan’s own quotes on the 1929 crisis, replacing the words ‘stock market’ with ‘housing market’, inserting Greenspan’s name and changing the date:

The excess credit which the Fed pumped into the economy spilled over into the housing market--triggering a fantastic speculative boom. Belatedly, Alan Greenspan at the Federal Reserve tried to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late: by mid-2008 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed.

The banking industry was never anything close to being free. Greenspan is blaming ideas that he never practised and had given up long before he came to the Fed. History is being written by the losers, and badly.