Alan Greenspan, Fed Chair, Dies at 100
After taking a job at the Conference Board, a business research organization, he rummaged through libraries to unearth measures of railcar freight loading and trends in short staple cotton prices since the Civil War. “Instead of reading ‘Gone with the Wind,’ I was happy to immerse myself in ‘Copper Ore Deposits in Chile,’” he wrote.
Rand assigned Greenspan a nickname, “the Undertaker,” given his serious manner and because he always wore a dark suit and tie. Greenspan prided himself on his reasoning ability and thought he could beat anyone in an intellectual debate. Arguing with Rand “was like starting a game of chess thinking I was good, and suddenly finding myself in checkmate,” he wrote. “I was intellectually limited until I met her.” They remained friends until her death in 1982.
Walters and Greenspan remained friends but didn’t marry, in part because she didn’t love music in the same way that he did. “That was a filter which separated how I looked at women,” Greenspan told Mallaby.
Years later, Bush blamed Greenspan for his 1992 election loss. “I reappointed him, and he disappointed me,” Bush said coldly. To Greenspan, the whole episode was pitiful. The U.S. economy was “really moving up in 1992, and if he couldn’t make it work, it wasn’t my fault,” Greenspan said in a 2007 interview with the Sunday Times of London.
A few years later, Greenspan earned plaudits again for resisting pressure from colleagues to raise rates aggressively as the unemployment rate tested new 30-year lows. Conventional forecasts relied on something known as the Phillips curve, which predicts that wages and prices accelerate when the unemployment rate falls below some natural, sustainable level that can’t be directly observed. But Greenspan was studying corporate profit margins. He marshaled data to suggest a productivity boom thanks to personal computing was under way. Strong productivity translated to declining or stable unit labor costs, he argued, which would allow the economy to tolerate more growth without higher inflation.
Isn’t this potentially where we are now?
Greenspan believed financial institutions had a self interest in not taking risks that would wipe out shareholders; similarly, he thought they had natural incentives to behave ethically to preserve the value of their reputations. Under Greenspan’s watch, the Fed didn’t blow the whistle on riskier lending practices in which Wall Street used financial alchemy to turn dodgy mortgages into highly rated securities.
Why China Got Rich and India Didn’t
In the five decades since the death of Mao Zedong, China has grown much faster than its fellow Asian giant. China has become a manufacturing superpower and the single fastest-growing economy of the last 50 years; its per capita GDP, on par with India’s in 1976, is now about 2.5 times higher. And so Chinese people have become much better-off than their Indian counterparts. In 1987, median purchasing-power adjusted income in China was $1.88 per day, compared to $2.94 per day in India. Chinese median wages surpassed Indian ones in the early 2000s; and by 2022, China recorded a median income of $13.36, against $5.54 in India. In the 35 years between 1987 and 2022, Chinese median income rose 611 percent, while Indian median income rose only 88 percent.
And in its place, the Chinese state forged a new nation along its preferred ideological lines. Economic development always eluded Mao; but human development—mass education and mass health—proved more attainable. Literacy campaigns and mass education helped raise the literacy rate from roughly 20 percent in 1949 to almost 70 percent by 1982. These gains were concentrated among women: Chinese women went from “virtual complete illiteracy” to a literacy rate of about 50 percent during the same period. The progress in health was similarly rapid: child mortality fell by 80 percent between the early 1950s and the late 1970s. Even with all the horrors of Maoist rule—including, it should be remembered, the largest famine in history—between 1949 and 1976 China recorded one of the largest sustained increases in life expectancy of any country in history, rising from about 41 years in 1949 to 61 by 1976. And for the first time in history, Chinese women were meaningfully included in public life: by the late 1970s, China had a female labor force participation rate exceeding that of many rich countries.
When analysts from the World Bank visited China in the early 1980s, they reported that its low-income groups were “far better off in terms of basic needs than their counterparts in most other poor countries”; if China’s “immense wealth of human talent, effort and discipline can be combined with policies that increase the efficiency of resource use,” their report said, “China will be able, within a generation or so, to achieve a substantial increase in the living standards of its people.” And that’s exactly what happened.
Tbh, in the past, I thought of the period from 1950 to 1976 as brutal for Chinese people. Many old traditions that had been part of China for thousands of years were forcefully eliminated within a decade. But this “modernization” perspective is quite refreshing.
In 1950, 27 percent of Indian children died before the age of five, compared to 32 percent of Chinese children; by 1980 it was 17 percent in India, against 6.3 percent in China.
All of this meant that the Indian state was never able to achieve the social modernization that the Chinese state accomplished. The dense web of kinship obligations and customary authority that governed social life remained intact. Caste panchayats still adjudicated disputes; joint families still pooled and redistributed income; and women remained bound by all the strictures of traditional life.
In the end, it’s human capital that matters. China had the labour force ready for opening up at the end of the 1970s, while India did not.