Alan Greenspan: hero or villain?

Cover of The Man Who Knew: The Life and Times of Alan GreenspanThe Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published by Bloomsbury (£25)
(Buy at Amazon)

“The former chairman of the Federal Reserve was once a hero…now he is being called a villain,” says Martin Wolf, the Financial Times’ chief economics commentator, in The Economist. However, Mallaby’s new book will help “history make up its mind about Alan Greenspan”. This “superb” biography takes readers on a long journey from Greenspan’s childhood through his spell as an acolyte of Ayn Rand to his leadership of the Federal Reserve and on to “the post-crisis collapse of his reputation”.

It also “throws a sharp light on American policy and policymaking over four decades”. Ultimately the big lesson of the book is that “the forces generating monetary and financial instability are immensely powerful”.

For all its length and detail, it’s also a hard book to put down, says Randall S Kroszner in The Wall Street Journal.Mallaby has a “knack for finding the right example or sparkling quotation to illustrate his points”. And it is not just the story of one central banker’s career, but equally of America’s “economic triumphs and failures over five decades”. It is a carefully researched and elegantly written book that will be essential reading for anyone who aspires to make policy or who wants to know what drives the choices leaders make.

Mallaby should though have put a little more emphasis on Greenspan’s “adherence to asymmetric monetary policy, whereby he put safety nets under collapsing markets but chose not to curb bubbles”, says John Plender in the Financial Times. However, this criticism is only a “quibble” that “does nothing to undermine the achievement that this deeply researched and elegantly written biography represents”. Indeed, “as a description of the politics and pressures under which modern independent central banking has to operate”, the book is “incomparable”.

The narrative is also a “perfectly timed morality play about putting too much faith in oracles”, reckons Rana Foroohar of Time magazine. However, she finds it “odd” that the author thinks Greenspan was wrong to apologise for his role in the financial crisis. In her view the apology “is one of the turns in his story that redeem him”.

After all, “many others who played a part in the events leading up to the Great Recession failed to do so”. Far from being unnecessary, or disingenuous, Greenspan’s mea culpa was “an important counterexample in the ongoing fiction of the omniscient central banker”.

At more than 700 pages, this biography is a substantial read. Indeed, if you’re not already familiar with American politics it will be easy to get over-whelmed by the huge amount of detail provided about Greenspan’s personal and professional life. Mallaby also tries hard to be even-handed, so those looking for an anti-Greenspan, or anti-Fed, polemic are likely to be disappointed.

However, if you enjoy reading about politics and want to understand how central bankers can be swayed by outside pressure and ambition, this is the book for you. Even if you don’t want to read the entire work, we felt that the early section on how Greenspan came up with the economic beliefs that shaped his response to the various crises on his watch is itself worth the cover price.