Greenspan, A. (2007). The age of turbulence: Adventures in a new world. New York: Penguin Books Ltd.

Reading The Age of Turbulence is like reading the subtext to modern US history. While the Presidents and other famous congressmen are making news, the economists are in the backrooms with their abacuses, slide rules, calculators, and computers quietly guiding the country and the rest of the world. Admittedly, Alan Greenspan became one of the most famous and glamorous economists of the 20^th century. CNBC would track him on his way to meetings of the FOMC claiming that the size of his briefcase might indicate whether or not interest rates were about to change. This became known as the “briefcase indicator” (pp. 197-198).

Greenspan had the good fortune of being born with strong logico-mathematical ability. I suspect he has a sharp mind capable of retaining amazing amounts of facts. Through his life, he had the opportunity to meet some of the most interesting and powerful of learned people including Ayn Rand, several Presidents and numerous world leaders. His anecdotes about Presidents Ford, Regan, Bush Sr., Clinton, and Bush Jr., are interesting and insightful, yet respectful. Indeed, there is much to be learned from what Alan does not say directly.

Throughout the book, it is clear that Mr. Greenspan is fiercely capitalistic. He refers frequently to Adam Smith’s invisible hand. His optimism derives from his belief that the economy will constantly seek equilibrium. Even in his discussions of globalization, he suggests that the cost of labour and prices of commodities will eventually adjust depending on the inputs and outputs from activities around the world. He even goes on to suggest that governments are losing control over their citizens as they become more active participants in the global economy. One would think that through globalization, the importance of the individual would decline—drowned by sheer numbers—swept into a vortex of economic activity far beyond their control or, even, their concern. We are constantly being tested and stretched through the process of creative destruction.

The most interesting chapter for me was Chapter 12: The Universals of Economic Growth. Greenspan outlines what he considers to be the most important factors promoting healthy economic activity. The first is “state-enforced property rights” (p. 251). He refers to examples of behaviour in societies in which the workers have little if any right to property. In China and the former Soviet Union, for example, farmers produced a substantial amount on their small, private plots of land in comparison to the state-owned collective land. He also cites a statement by Amartya Sen, a Nobel Prize winner in economics: “In the terrible history of famines in the world, no substantial famine has ever occurred in any independent and democratic country with a relatively free press” (p. 253). Now, that is quite a statement to ponder. Are there any documented examples?

Another important factor promoting economic growth is trust. Business deals cannot be completed if the participants will not fulfill their obligations. An excellent example of this, which Greenspan does not include in his book, is eBay. It is fascinating to read through the comments that buyers and sellers write about each other. It is equally fascinating how important these comments are when you are actually considering purchasing something on eBay.

Greenspan’s comments about the developing world are particularly compelling. I have spent a lot of time recently reading about the history of Africa and the Middle East, and I am perplexed by the poor economic, political, ecological, and social difficulties—without hope of alleviation. Some African countries, such as the Congo, are incredibly resource-rich with oil, diamonds, and all kinds of mineral deposits. Yet, the people live in such poverty. “Paradoxically, most analysts conclude that, particularly in developing countries, natural-resource bonanzas tend to reduce rather than enhance living standards” (p. 257).

Dutch disease strikes when foreign demand for an export drives up the exchange value of the exporting country’s currency. This increase in the currency’s value makes the nation’s other export products less competitive. Analysts often cite this pattern as a reason why relatively resource-poor Hong Kong, Japan, and Western Europe have thrived while oil-rich Nigeria and others have not. (p. 258)

Through personal initiative, the possibility of  high returns for effort, being able to work smarter with less effort, the protection of property, the ability to trust others, as well as other environmental and social factors, people within an economy are more or less risk averse. According to Greenspan, “the degree of willingness to take risks” differentiates varieties of capitalism. Being a strong capitalist, Greenspan prefers deregulation to regulation. During his tenure as head of the Federal Reserve, he did tinker with interest rates in an effort to stabilize the economy, but he never seemed eager to intervene either to over- or under- stimulate the economy.

This book reviews the economies of a variety of different countries. I was surprised at how far the Chinese have yet to go when it seems that everyone is fearful of the competition China represents. India, not surprisingly, is fraught with bureaucracy. (I say “not surprisingly” because that was my impression of it when I visited the Golden Triangle in 2003.) Russia is on a slow road to economic development because of the lack of protection for property rights. There is also a section on Latin America, but I was disappointed that Greenspan did not write about Bolivia. Bolivia is undergoing a very interesting political period at the moment. (I am looking for a book about Bolivia right now.) Instead Greenspan focuses on the American bailout of Mexico.

I was hoping that Chapter 21: Education and Income Inequality would present more information about other parts of the world. Nevertheless, Greenspan did tackle some issues in the American school system. “One of the skills too many high school graduates lack is proficiency in math. It is that skill more than any other that is required to achieve skilled-job status” (p. 404). Personally, I would suggest that proficiency in language is more important—but then, I never liked math. In the final chapter of the book, Greenspan discusses the GDP of 1946 compared to that of 2006. “The weight of the inputs of materials required to produce the 2006 output . . . is only modestly greater than was required to produce the 1946 output. This means that almost all of the real-value-added increases in our output reflect the embodiment of ideas” (p. 493).   He suggests that this is because the outputs are more “conceptual” than “tangible.” As we move into a knowledge economy, our education system must keep up.

Of course, this is only a brief summary of The Age of Turbulence. There are many references to economic indicators, many interesting anecdotes, and many fascinating arguments. After the attack on the Twin Towers, Greenspan recounts how the economy was able to maintain its stability. It is a seemingly subdued discussion of the functioning of the underlying economy during some of the tensest times in US and world history.