Mention of Bill Clinton naturally brings zipping flies to mind. But at this juncture of history, it is the type of fly that zipped round the muzzle of the cart horse in La Rochefoucauld’s fable. That particular fly (no-one has accused the president’s fly of being particular) thought that he was pulling the cart – horse and all – which La Rochefoucauld considered presumptuous for an insect. However, for a president it is merely hubris in its humblest form, so Bill Clinton has taken credit for a hitherto booming US economy. But will he be as eager to take the beating if the current stock market bust segues into a recession?
Just a few days after Clinton had beaten Bush in the November 1992 election, indicators showed that the economy had already begun to grow after years of recession. However these figures were not made public until after the election. A cynic might assume that someone got a huge pay-off for sitting on the numbers in a notoriously leaky city like Washington. On the other hand, the simplest explanation is that the high moral standards and non-partisanship of the civil service in Washington were being maintained. Or maybe they felt a pressing need to recheck the numbers.
Since then Clinton has buzzed around the nose of the economy as it plodded solidly in the hoof prints of his GOP predecessors. While George Bush had the integrity to call it ‘voodoo economics’ as he carried on practicing it, the current president’s only significant macroeconomic deviation from his predecessors was to reappoint Alan Greenspan to the Fed. In some circles, to speak ill of Greenspan has been akin to suggesting that Mother Theresa may have met the president for a private session in the Oval Office. You could almost forget that Greenspan held the same office for the years of recession before the Goldilocks economy minced onto Wall Street.
At best, Greenspan is a sort of optional stone in the cart horse’s hoof. The economy has grown because he has not inserted himself as often and as painfully in the beast’s foot as an incompetent Congress and administration have empowered him to, or indeed as his previous career suggested he would. Obsessed as he is with inflation, Greenspan’s inflated interest rates have kept growth in the US limping along at an historically and ploddingly low rate. After the earlier stagnation, of course, a weary public welcomed any growth as a miracle, much as a prisoner hung upside down in the dungeon for eight hours a day will think kindly of the jailer for hanging him by his arms for a special treat on Sundays.
For the last few decades of voodoo economics, governments themselves have been economically gelded, if we follow the cart horse metaphor. They have been deprived of most of the tools they need to cope with the economy. In the name of free trade and globalization, they relinquished control over capital flows, with the result that tsunamis of currency have been swooshing to and fro across the Pacific, behaving like an economic anti-neutron bomb that leaves people intact but destroys their livelihoods.
All of this has been done in the name of the market and its omniscience. Excuse me! Any political agent that takes some of the fastest growing economies in the world, and turns them into roadkill, putting the rest of us on the edge of global recession, has an IQ that would comparatively qualify my pet rock as a brain surgeon.
In the case of the US, all branches of the government – and to a large extent the market – have effectively abandoned what is left of their economic powers to Greenspan. Sadly, Goldilocks’ porridge is now turning into thin and bitter gruel and Greenspan’s erstwhile fans watch apprehensively as the big bad bear looks set to consume her, porridge and all. Even the most loyal Greenspanner realizes that a quarter percentage drop in interest rates is hardly going to turn back the tidal forces pushing us to disaster.
However, while the Fed, the Bank of England and probably the Bundesbank are all killing their respective industries with deflationary inflated interest rates, the Fed ran to the rescue of Long-Term Capital Management, which just happened to be run by friends of Alan. It is as if the World Health Organization decided in the opening stages of a world plague epidemic that its main priority was conservation of the bubonic plague bacillus. This is not crony capitalism, as inveighed against in East Asia. This is rewarding criminal incompetence.
The banks that once slushed money into Mexico and Zaire, then into the Russian mafia who snaffled it before you could say Ferdinand Marcos, who rushed in and out of Korea, Malaysia and Indonesia, had also put billions into an organization that had gone so far out on a limb that its exposure equaled the GDP of China. You may have gathered that I am no fan of the president, who was merrily being fellated as the world falls apart. But I wish Starr had investigated Greenspan and his colleagues in finance with the same assiduity as he chased up young Monica. This is truly indecent exposure, and calculated to make us all join the Japanese in keeping our savings under the mattress.
