Greenspan on Sensible Economic Policy

In a column for WaPo, David Ignatius discusses Alan Greenspan’s views on sensible economic policy, noting his Rand influence in the process:

It’s a delicious irony of Washington that Clinton’s heir in the trade debate is the balding, obscurantist, Ayn Rand-reading chairman of the Federal Reserve, Alan Greenspan. He gave a speech last Friday in Omaha that should be required study for every Democrat this year. It expressed the hard fact that escapism isn’t an economic policy.

The Fed chairman began by agreeing with the trade-worriers that intense global competition has brought stress and anxiety. “There is a palpable unease that businesses and jobs are being drained from the United States, with potentially adverse long-run implications for unemployment and the standard of living of the average American,” he said.

Greenspan went on to summarize some of the growth statistics that make economists so confident that the long-term benefits of free trade and open markets outweigh the short-term costs. But he counseled workers that they must have the skills to compete. “By far, the greatest contribution during the past half-century to our average annual real GDP growth of three-quarter percent has been the ideas embodied in both our human and physical capital.” And he warned that if workers don’t get the skills required by a changing economy, the result will be growing inequality of incomes.

Greenspan’s gospel is simple, and backed by hard numbers: “Over the long sweep of American generations and waves of economic change we simply have not experienced a net drain of jobs to advancing technology or to other nations.” That was Clinton’s faith, too, and it gave him the discipline to resist politically popular policies that would have undermined economic growth.

Democrats are right to challenge the poor economic record of the Bush administration, which has squandered many of the gains of the 1990s. But they should base their critique on sound economics and honest advice to America’s working people — not on the false hope that the United States can somehow opt out of a world that is growing more competitive by the day.

See the full article for more details.