Age of Turbulence – Part 1

Have finished Greenspan’s massive Age of Turbulence. The author’s extensive experience and advanced age warranted the inclusion of about 8 autobiographical chapters, where Greenspan talks about his experiences in the context of the economic history of his day. The final chapters of the book describe some of his views and are of particular interest.

As a person, Greenspan impresses as a much more diverse personality than you would otherwise imagine: a musician and a small business owner, things that are not normally associated with economists. Greenspan also sat on the boards of the most American corporate icons, which in my opinion is invaluable for an economist. One more thing that is often not appreciated is the length of Greenspan’s public service: since 1968 after working for Nixon’s presidential campaign.

The second part of the book starts with the chapter with a grand title: “Universals of economic growth”. The gist is best presented in quotes: “competition … a primary driver of economic growth and standards of living in the US”, “three important characteristics influencing global growth: 1) the extent of competition domestically and … extent to openness to trade and its integration with the rest of the world, 2) quality of countries institutions that make an economy work and 3) success of its policymakers in implementing measures necessary for economic stability”, “state-enforced property rights … key growth-enhancing institution”. One of the key arguments is that growth requires individual risk-taking, which is not plausible if the risk-takers can’t be guaranteed to own the rewards. The rest of the chapter is dedicated to the narrative of Adam Smith’s work.

In the “Modes of capitalism” Greenspan acknowledges that intellectual battle for capitalism has not been won for two principal reasons: uncertainty that competitive nature of capitalism creates and the high levels of inequality. He goes on to discuss the differences in the types of capitalism, ascribing them mainly to the trade-off between material wealth and human stress, resulting from competition: the more laissez-faire the particular mode of capitalism is, the higher the wealth of that society. He then describes how these ideas apply to the circumstances in various developed countries.