What the butler saw

Maestro: Greenspan's Fed and the American boom

Bob Woodward <em>Simon & Schuster, 270pp, £17.99</e

Alan Greenspan is arguably the most influential human being in the world. As chairman of the US Federal Reserve Board since 1987, he has steered the US economy through potential crises threatened by market scares, bank crashes, wars and presidential impeachments - and underwritten the longest boom in US history. This is a very significant book, shining a welcome light on the internal mechanisms of the US economy - and, de facto, that of the world. There are small omissions. The account misses substantial chunks of the pivotal year 1992, with George Bush up for re-election, when Greenspan might have cut rates further to the Republicans' benefit - but instead left Bush to his fate. But overall, Woodward's account of Greenspan's evolution from partisan appointee to national icon deserves plaudits for exposing the daily dealings of possibly the world's very greatest modern public servant.

This is the kid who buried himself in baseball stats to displace his anguish over his parents' divorce - and found his way to recognising the potential of the US's new, IT-driven economy. He is also the egghead elf whose interpersonal dexterity dominated often unwieldy interest-rate-setting committees. Most remarkably, in 1992-93, he triumphantly jumped ship from Bush to Clinton, not just saving his job, but bagging a seat next to Hillary at Clinton's first state of the union address.

The Greenspan that emerges is the ideal all-time master-courtier: not merely expert in his field, but also wily and obfuscatory, diplomatic to his bosses' faces, often scathing behind their backs. Appointed largely through the exertions of his Princeton soulmate James Baker, he apparently spent rather few hours with Ronald Reagan. Encountering a newly anointed George Bush Sr, he pronounced America's 41st president "not unknowledgeable".

He gave little help to Bush in his recession-hit re-election battle against Clinton in 1992, responding to frantic White House hair-tearing over interest-rate inaction with studied motionlessness. When Clinton won office, Greenspan observed that the Arkansas Comeback Kid was "close to being an intellectual".

With the Clinton administration under way, Greenspan emerges as the guarantor of American prosperity - resembling an irreplaceable butler who knows infinitely more about the house and its grounds (and probably the family as well) than do any relatives. With James Baker gone, he glides towards the patronage of another decades-long patrician buddy, Clinton's treasury secretary, Lloyd Bentsen. As the Nineties boom gathers pace, our man teases his way like no one else along the financial catwalk of Congressional hearings and delphic TV utterances. Markets soar. Previously omnivorous bond dealers swoon.

Greenspan's achievement in steering by facial expression rather than actual policy shift - now an ambition of the Bank of England's Monetary Policy Committee, its general credibility now established - is substantial. But it is the term "maestro" that cuts directly to the bone of modern central banking. Maestro in what? Woodward never specifies.

Maestro in economics, perhaps, as practised by a non-political technocrat. The apparent eternal boom might imply it. But look again. Greenspan's craft seems profoundly political: courting elected officials to ensure his reappointment, gathering gossip, staving off adverse rumours, defending hard-won reputations, prevailing over committees. Proof again, as Woodward implies, that however power is apportioned - by election, appointment, coup or murder - its exercise remains an irredeemably political art.

The genuinely perplexing issue is whether Greenspan risked his long-term standing by accepting a fourth four-year term in January this year. One cautionary tale for Greenspan might be that of Nigel Lawson who, until 1988, enjoyed a similar reputation. Should the US suffer economic reverse, Greenspan could, like Lawson, be pilloried for failing his nation. But unlike Lawson, Greenspan seems too canny to find himself exposed so severely. The moral is that while Lawson, an elected politician, behaved in office as would an unelected technocrat, Greenspan has spent more than 13 years doing precisely the opposite.

The enduring impression is of a seasoned, cynical, if largely benevolent tactician, soaking in his daily two-hour baths (with armrests for reading purposes), plotting how next to manipulate a series of what he evidently views as cerebrally ponderous elected heads of state. He is, as Woodward writes, the craftsman who once explained his recipe for defusing media-fuelled rows: "I'll just say a little bit this way . . . and then a little bit that way and then I'll completely confuse them so there'll be no story."

So perhaps he will make it through another recession, after all.

This article first appeared in the 04 December 2000 issue of the New Statesman, Goodbye to the dirty mac image