The WEEK ending 7 January 2001
Cult of the Central Banker
Federal Reserve Chairman Alan Greenspan upstaged president-elect George W Bush's tax-cutting summit by cutting American interest rates a full half percent. The move, designed to offset a US recession by making credit cheaper, underscores the Fed Chairman's reputation, summarized by Businessweek: 'In Greenspan We Trust'. Dubbed 'the Olympian symbol of financial stability' by Washington investigative journalist Bob Woodward (Maestro, 2000, p212), Greenspan's influence over the economy is wildly exaggerated. On reappointing him to a fourth term at the Federal Reserve, outgoing president Clinton suggested 'taking Alan.com public; then we can pay the debt off even before 2015' - a proposition that seems appropriately hollow given the fall in dot com companies since.
Greenspan's 'Olympian' reputation for financial rectitude arises out of the peculiar political conditions of the early nineties. Appointed by Republican president Ronald Reagan, Greenspan had every reason to assume that he would find few friends in the Clinton Whitehouse. His reputation as a right-winger goes back to 1974, when he testified to Congress that 'percentage-wise' the people who were most hurt by a recession were Wall Street brokers. But what Greenspan did not count on was the Democrat Administration's need to allay business fears of a tax-and-spend government. Reappointing Greenspan was Clinton's message to the markets that they could do business with him.
As the administration played up Greenspan's authority, he played the part by acting stern, but heaping praise on the President's deficit- reduction plans. Building up the Fed's supposed independence from government interference, and Greenspan's austere persona, Clinton effectively cut back on social programs while shifting responsibility onto Greenspan. Far from being an effect of the Fed Chair's personal will, Central Banks throughout the Western world - from Eddie George at the Bank of England to Wim Duisenberg at new European Central Bank - were being granted new 'independence' as political elites shirked off responsibility for their actions onto impersonal 'economic realities'. In practice the central banks' one policy lever - raising and lowering interest rates - is more symptom than cause of economic cycles. When a crash comes, demand for credit is high, and interest rates with it, as money is sought to meet payments; when recession takes hold, demand falls, and with it the rate of interest. The central bank as a rule is only anticipating the trend - making the US cut less good news than it appeared.
In practice Greenspan was much more seduced by politics than he claimed. The Federal Reserve bailed out speculative investors in successive collapses, from the Savings and Loans, through the bubbles in Mexico, East Asia and Russia. He publicly worried about the 'irrational exuberance' of the stock market in December 1996, and, borrowing a term from development studies, wondered whether the market 'raised questions of sustainability' at the Senate Banking Committee (26 February 1997). When Lazard Freres' CEO Felix Rohatyn proposed that the old rules did not apply to the New Economy, and that growth would not necessarily lead to inflation, Greenspan secretly torpedoed his old friend's appointment to become his deputy at the Fed. But soon after rubbishing Rohatyn's claims, it was Greenspan who took the credit for a New Economy, in which things went up but not down again.
Gamekeepers turned gamekeepers
Germany's Green Foreign Minister Joseph Fischer apologized for attacking a policeman during what he called "the darkest chapter in our and my history". Fischer's past re-emerged during the trial of Hans-Joachim Klein on three counts of murder stemming from the 1975 attack on the OPEC conference in Vienna. Klein, of the Frankfurt group 'Revolutionary Struggle' said that "Joschka Fischer was my role model." He could not only fight, but could quote Marx, Hegel and Adorno.
Fischer is not the only Western leader with a radical past. In 1975 Britain's 'Iron Chancellor' Gordon Brown was writing in the Marxoid language of the day that 'the private control of industry has become a hindrance to the further unfolding of the social forces of production' ('The Socialist Challenge', Red Paper on Scotland, EUPSB, p. 14). Brown's aide Geoff Mulgan, former Marxism Today writer heads up the Prime Minister's Policy Unit, and another MT veteran, Charles Leadbeater wrote the government's economic policy, for his old chum Peter Mandelson, whose own British Youth Council trip to Cuba with Communist Party leader Nina Temple was exposed in the British press. British Deputy Prime Minister John Prescott, as a member of an unofficial strike committee in the National Union of Seamen denounced by the then Prime Minister Harold Wilson as a 'tightly-knit group of highly motivated men'. Outgoing President Clinton not only dodged the draft, but campaigned for anti-war candidate the Reverend Joseph Duffey, who defeated the incumbent Democrat in the Senate election of 1970. Another witness in Klein's trial is Green Euro-MP Daniel Cohn-Bendit, expelled from France when he gained notoriety, as 'Danny the Red' in the May '68 riots. France's Prime Minister Lionel Jospin was once a member of the Trotskyist International Communist Organisation - many who rose in the late president Mitterand's time were veterans of 68, like advisor Regis Debray.
Far from disqualifying them from high office, the youthful radicalism of the 68-generation has suited them well for the post of capitalist defender. For the most part, the radicalism of 68 was more show than substance, and the specific role that most of these future Western leaders played was as a moderating brake on social change. Today, when Gordon Brown writes that 'the future of the global economy depends on business creativity' (in A Elwes, ed, Creativity Works, BMP, 2000, p.ix), it seems a million miles from his condemnation of private property back in 1975. But even then his aim was only to save Scottish capitalism from its own short-termism through state support for private enterprise. John Prescott cashed in his radical reputation for a place at the 'Labour College' at Ruskin, training for a more respectable career as an official representative. The intellectuals of Marxism Today were known for their 'daring' embace of the free market in the eighties. Bill Clinton's route from anti-War campaigner to respectable politician took him back into the Democrat fold though McGovern's youth-oriented candidacy.
In Europe, the Green Party is the proper inheritor of the curious radicalism of the generation of 68 and its more morbid off-shoot, the Red Army Factions. Outwardly militant and extreme, the RAF located the problems of West German capitalism as the domination of Germany by American imperialism, reducing the problem of German militarism to a generational hangover from the Hitler years. With the defeat of the Baader-Meinhof paramilitary group, its supporters filtered into campaigns against American missiles on German soil and environmentalism. Re-stated in green language and humanitarian concerns, Germany's foreign policy once again became more assertive on the international stage. In the seventies, a cautious Germany experimented with international politics through such apparently anodyne issues as North Sea pollution. By 1999, Green Foreign Minister Joseph Fischer had broken the taboo on German militarism, sending troops to Kosovo. Along with Green defence spokesperson Angelika Beer and Cem Özdemir, Fischer today enjoys police protection, and the party even provided Münster police chief Hubert Wimber.
The former radicals turned establishment politicians are well placed to shepherd global capitalism into the twenty-first century. More than any other section of society they have internalized the political defeats that the left suffered in the nineteen seventies and eighties, intellectualized those defeats, and turned them into the contemporary outlook of the elite: a philosophy of lowered expectations and caution: an unspoken resignation to the rule of capital coupled with a romantic retreat from the consequences of mass industrial society. -- James Heartfield