The American economy’s explosive growth and low inflation since the early 1990s is due, in part, to the end of the Cold War, said former Federal Reserve Chairman Alan Greenspan in front of a sold-out audience in Lisner Auditorium Monday evening.
Greenspan retired from his 19-year position as chair of the U.S. Federal Reserve in 2006. The Federal Reserve is a governmental institution independent of any federal branch of government that regulates the U.S. economy by controlling interest rates. It also advises the president and the public on the state of the U.S. economy.
Greenspan mostly discussed his new book, “The Age of Turbulence,” which has climbed to the top of most best-seller lists in the two days it was released for sale. Pulitzer Prize-winning author Daniel Yergin lead the discussion on Greenspan’s book, which Yergin described as both an autobiography and an analysis of both the U.S. and global economies.
The most controversial topic in his book, Greenspan said, is his belief that the Iraq War is all about oil. Yergin asked the former chairman to defend this belief.
“Watching what (Saddam) was doing was a scary thing. People are not aware of how crucially dependent we are on oil,” Greenspan said in response to Yergin. “If Saddam had gained control of the oil fields, it would have crippled the industrial world.”
Greenspan added that Osama Bin Laden poses nowhere near the same threat that former Iraqi dictator Saddam Hussein posed in terms of oil before his execution in late December 2006.
“I was happy with what happened initially in this war, not what happened subsequently,” Greenspan added.
Greenspan said his goal in writing the book was to evaluate the myriad of challenges facing the economy by detailing his rise to chairman of the Federal Reserve. Yergin asked Greenspan to share how he “almost missed the call” to become the Federal Reserve chairman.
“I remember I was at my orthopedist’s office when Reagan called to officially offer me the job,” Greenspan said. “Someone came into the room where I was and said, ‘There is someone calling from the White House. They want to talk to you.’ It was Reagan.”
Greenspan expressed exasperation over the drift of the Republican party from a party focused on small government. Greenspan said he no longer identifies himself with either political party and said his political ideology is libertarian, which he described as emphasizing individual rights.
“The (Republican) party has drifted,” Greenspan said. “I don’t know where it is going, but it is not the party that I recall.”
He also described the difference between former President Richard Nixon, who resigned amid an impeachment investigation, and former U.S. President Gerald Ford, who was Nixon’s vice president and successor.
“Gerald Ford is one of the most decent people I’ve ever met here in Washington,” Greenspan said. “He had character.”
Greenspan, who until recently worked alongside the Bush Administration, now finds himself estranged from the White House. Yergin commented that recently, both President George W. Bush and Vice President Dick Cheney have issued public statements disagreeing with Greenspan.
Greenspan also discussed the power of the Federal Reserve and the public perception of its role.
“I believe that there is a tendency to mystify the Fed as a powerful institution. In recent years, I believe it is much less powerful than we think,” Greenspan said. “We’re in a turning point here. My successors will not have it as easy as I did.”
The event, which lasted nearly two hours, came to a close with a question and answer session, in which Yergin read questions audience members had written. The questions covered topics ranging from China’s rise to economic power to Medicare to the rise in income inequality in the United States.
In reference to Medicare, a tax-funded retirement entitlement for qualifying American citizens, Greenspan said that the country is on the cusp of a huge demographic shift. The Medicare program, he said, is significantly under-funded and will eventually require an increase taxes or a decrease benefits.
“The baby-boomers are about to retire, and they are expecting to have the same benefits that currently exist,” Greenspan said. “What we are not telling them is that that may not arrive . and if we wait until they retire, that’s going to be a terrible situation.”
Greenspan concluded the question and answer session by discussing his advice to someone just starting his or her career.
“What helped me most was a voracious hunger for knowledge,” he said. “No matter where you are, if you’re smart, it pays!”
GW junior Aakif Merchant said he attended the event because of Greenspan’s legacy at the Federal Reserve.
“When he talks, the whole world listens,” Merchant said.
The event was hosted jointly by Politic and Prose, a local D.C. bookstore, and MAVA, a firm that represents private equity and venture capitalists with investment interests in the mid-Atlantic.