Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

  Greenspan’s rise to the top is one of the great scams of our time. His career is the perfect prism through which one can see the twofold basic deception of American politics: a system that preaches sink-or-swim laissez-faire capitalism to most but acts as a highly interventionist, bureaucratic welfare state for a select few. Greenspan pompously preached ruthless free-market orthodoxy every chance he got while simultaneously using all the powers of the state to protect his wealthy patrons from those same market forces. A perfectly two-faced man, serving a perfectly two-faced state. If you can see through him, the rest of it is easy.

  Greenspan was born in 1926, just before the Depression, and boasts a background that reads a little like a generational prequel to the life of Woody Allen—a middle-class Jewish New Yorker from the outer rings of the city, a gaggle-eyed clarinet player who worshipped the big bands, used radio as an escape, obsessed over baseball heroes, and attended NYU (the latter with more success than Woody), eventually entering society in a state of semipanicked indecision over what career to pursue.

  In his writings Greenspan unapologetically recalls being overwhelmed as a young man by the impression left by his first glimpses of the upper classes and the physical trappings of their wealth. In his junior year of college he had a summer internship at an investment bank called Brown Brothers Harriman:*

  Prescott Bush, father of George H. W. Bush and grandfather of George W. Bush, served there as a partner before and after his tenure in the U.S. Senate. The firm was literally on Wall Street near the stock exchange and the morning I went to see Mr. Banks was the first time I’d ever set foot in such a place. Walking into these offices, with their gilded ceilings and rolltop desks and thick carpets, was like entering a sanctum of venerable wealth—it was an awesome feeling for a kid from Washington Heights.

  Greenspan left NYU to pursue a doctorate in economics at Columbia University, where one of his professors was economist Arthur Burns, a fixture in Republican administrations after World War II who in 1970 became chief of the Federal Reserve. Burns would be Greenspan’s entrée into several professional arenas, most notably among the Beltway elite.

  Remarkably, Greenspan’s other great career rabbi was the objectivist novelist Ayn Rand, an antigovernment zealot who was nearly the exact ideological opposite of a career bureaucrat like Burns.

  Greenspan met Rand in the early fifties after leaving Columbia, attending meetings at Rand’s apartment with a circle of like-minded intellectual jerk-offs who called themselves by the ridiculous name the “Collective” and who provided Greenspan the desired forum for social ascent.

  These meetings of the “Collective” would have an enormous impact on American culture by birthing a crackpot antitheology dedicated to legitimizing relentless self-interest—a grotesquerie called objectivism that hit the Upper East Side cocktail party circuit hard in the fifties and sixties.

  It is important to spend some time on the seriously demented early history of objectivism, because this lunatic religion that should have choked to death in its sleep decades ago would go on, thanks in large part to Greenspan, to provide virtually the entire intellectual context for the financial disasters of the early twenty-first century.

  Rand, the Soviet refugee who became the archpriestess of the movement, was first of all a perfect ancillary character in the black comedy that is Greenspan’s life—a bloviating, arbitrary, self-important pseudo-intellectual who recalls the gibberish-spewing academic twits in Woody Allen spoofs like “No Kaddish for Weinstein” and “My Speech to the Graduates.” In fact, some of Rand’s quirks seemed to have been pulled more or less directly from Allen’s movies; her dictatorial stance on facial hair (“She … regarded anyone with a beard or a mustache as inherently immoral,” recalled one Rand friend) could have fit quite easily in the mouth of the Latin despot Vargas in Bananas, who demanded that his subjects change their underwear once an hour.

  A typical meeting of Rand’s Collective would involve its members challenging one another to prove they exist. “How do you explain the fact that you’re here?” one Collective member recalls asking Greenspan. “Do you require anything besides the proof of your own senses?”

  Greenspan played along with this horseshit and in that instance reportedly offered a typically hedging answer. “I think that I exist. But I don’t know for sure,” he reportedly said. “Actually, I can’t say for sure that anything exists.” (The Woody Allen version would have read, “I can’t say for sure that I exist, but I do know that I have to call two weeks in advance to get a table at Sardi’s.”)

  One of the defining characteristics of Rand’s clique was its absolutist ideas about good and evil, expressed in a wildly off-putting, uncompromisingly bombastic rhetoric that almost certainly bled downward to the group ranks from its Russian émigré leader, who might have been one of the most humor-deprived people ever to walk the earth.

  Rand’s book Atlas Shrugged, for instance, remains a towering monument to humanity’s capacity for unrestrained self-pity—it’s a bizarre and incredibly long-winded piece of aristocratic paranoia in which a group of Randian supermen decide to break off from the rest of society and form a pure free-market utopia, and naturally the parasitic lower classes immediately drown in their own laziness and ineptitude.

  The book fairly gushes with the resentment these poor “Atlases” (they are shouldering the burdens of the whole world!) feel toward those who try to use “moral guilt” to make them share their wealth. In the climactic scene the Randian hero John Galt sounds off in defense of self-interest and attacks the notion of self-sacrifice as a worthy human ideal in a speech that lasts seventy-five pages.

  It goes without saying that only a person possessing a mathematically inexpressible level of humorless self-importance would subject anyone to a seventy-five-page speech about anything. Hell, even Jesus Christ barely cracked two pages with the Sermon on the Mount. Rand/Galt manages it, however, and this speech lays the foundation of objectivism, a term that was probably chosen because “greedism” isn’t catchy enough.

  Rand’s rhetorical strategy was to create the impression of depth through overwhelming verbal quantity, battering the reader with a relentless barrage of meaningless literary curlicues. Take this bit from Galt’s famous speech in Atlas Shrugged:

  Rationality is the recognition of the fact that existence exists, that nothing can alter the truth and nothing can take precedence over that act of perceiving it, which is thinking—that the mind is one’s only judge of values and one’s only guide of action—that reason is an absolute that permits no compromise—that a concession to the irrational invalidates one’s consciousness and turns it from the task of perceiving to the task of faking reality—that the alleged short-cut to knowledge, which is faith, is only a short-circuit destroying the mind—that the acceptance of a mystical invention is a wish for the annihilation of existence and, properly, annihilates one’s consciousness.

  A real page-turner. Anyway, Alan Greenspan would later regularly employ a strikingly similar strategy of voluminous obliqueness in his public appearances and testimony before Congress. And rhetorical strategy aside, he would forever more cling on some level to the basic substance of objectivism, expressed here in one of the few relatively clear passages in Atlas Shrugged:

  A living entity that regarded its means of survival as evil, would not survive. A plant that struggled to mangle its roots, a bird that fought to break its wings would not remain for long in the existence they affronted. But the history of man has been a struggle to deny and to destroy his mind …

  Since life requires a specific course of action, any other course will destroy it. A being who does not hold his own life as the motive and goal of his actions, is acting on the motive and standard of death. Such a being is a metaphysical monstrosity, struggling to oppose, negate and contradict the fact of his own existence, running blindly amuck on a trail of destruction, capable of nothing but pain.

  This is pure social Darwinism: self-interest is moral, inte
rference (particularly governmental interference) with self-interest is evil, a fancy version of the Gordon Gekko pabulum that “greed is good.” When you dig deeper into Rand’s philosophy, you keep coming up with more of the same.

  Rand’s belief system is typically broken down into four parts: metaphysics (objective reality), epistemology (reason), ethics (self-interest), and politics (capitalism). The first two parts are basically pure bullshit and fluff. According to objectivists, the belief in “objective reality” means that “facts are facts” and “wishing” won’t make facts change. What it actually means is “When I’m right, I’m right” and “My facts are facts and your facts are not facts.”

  This belief in “objective reality” is what gives objectivists their characteristic dickish attitude: since they don’t really believe that facts look different from different points of view, they don’t feel the need to question themselves or look at things through the eyes of others. Since being in tune with how things look to other people is a big part of that magical unspoken connection many people share called a sense of humor, the “metaphysics” of objectivism go a long way toward explaining why there has never in history been a funny objectivist.

  The real meat of Randian thought (and why all this comes back to Greenspan) comes in their belief in self-interest as an ethical ideal and pure capitalism as the model for society’s political structure. Regarding the latter, Randians believe government has absolutely no role in economic affairs; in particular, government should never use “force” except against such people as criminals and foreign invaders. This means no taxes and no regulation.

  To sum it all up, the Rand belief system looks like this:

  Facts are facts: things can be absolutely right or absolutely wrong, as determined by reason.

  According to my reasoning, I am absolutely right.

  Charity is immoral.

  Pay for your own fucking schools.

  Rand, like all great con artists, was exceedingly clever in the way she treated the question of how her ideas would be employed. She used a strategic vagueness that allowed her to paper over certain uncomfortable contradictions. For instance, she denounced tax collection as a use of “force” but also quietly admitted the need for armies and law enforcement, which of course had to be paid for somehow. She denounced the very idea of government interference in economic affairs but also here and there conceded that fraud and breach of contract were crimes of “force” that required government intervention.

  She admitted all of this, but her trick was one of emphasis. Even as she might quietly admit to the need for some economic regulation, for the most part when she talked about “crime” and “force” she either meant (a) armed robbers or pickpockets or (b) governments demanding taxes to pay for social services:

  Be it a highwayman who confronts a traveler with the ultimatum: “Your money or your life,” or a politician who confronts a country with the ultimatum: “Your children’s education or your life,” the meaning of that ultimatum is: “Your mind or your life.”

  A conspicuous feature of Rand’s politics is that they make absolutely perfect sense to someone whose needs are limited to keeping burglars and foreign communists from trespassing on their Newport manses, but none at all to people who might want different returns for their tax dollar. Obviously it’s true that a Randian self-made millionaire can spend money on private guards to protect his mansion from B-and-E artists. But exactly where do the rest of us look in the Yellow Pages to hire private protection against insider trading? Against price-fixing in the corn and gasoline markets? Is each individual family supposed to hire Pinkertons to keep the local factory from dumping dioxin in the county reservoir?

  Rand’s answer to all of these questions was to ignore them. There were no two-headed thalidomide flipper-babies in Rand’s novels, no Madoff scandals, no oil bubbles. There were, however, a lot of lazy-ass poor people demanding welfare checks and school taxes. It was belief in this simplistic black-and-white world of pure commerce and bloodsucking parasites that allowed Rand’s adherents to present themselves as absolutists, against all taxes, all regulation, and all government interference in private affairs—despite the fact that all of these ideological absolutes quietly collapsed whenever pragmatic necessity required it. In other words, it was incoherent and entirely subjective. Its rhetoric flattered its followers as Atlases with bottomless integrity, but the fine print allowed them to do whatever they wanted.

  This slippery, self-serving idea ended up being enormously influential in mainstream American politics later on. There would be constant propaganda against taxes and spending and regulation as inherent evils, only these ideas would often end up being quietly ignored when there was a need for increased military spending, bans on foreign drug reimportation, FHA backing for mortgage lenders, Overseas Private Investment Corporation loans, or other forms of government largesse or interference for the right people. American politicians reflexively act as perfectly Randian free-market, antitax purists (no politician beyond the occasional Kucinich will admit to any other belief system) except when, quietly and behind the scenes, they don’t.

  The person of Alan Greenspan was where this two-sided worldview first became a polished political innovation. He was able to play the seemingly incompatible roles of believer and pragmatist fluidly; there were no core beliefs in there to gum up the works. It’s not hard to imagine that even as Greenspan sat in Rand’s apartment cheerfully debating the proofs of his own existence, he was inwardly cognizant of what complete goofballs his friends were, how quickly their absolutist dictums would wilt in actual practice. One of the surest proofs of this is Greenspan’s schizophrenic posture toward his future employer, the Federal Reserve System.

  Rand’s objectivists were very strongly opposed to the very concept of the Federal Reserve, a quasi-public institution created in 1913 that allowed a federally appointed banking official—the Federal Reserve chairman—to control the amount of money in the economy.

  When he was at Rand’s apartment, Greenspan himself was a staunch opponent of the Federal Reserve. One of Rand’s closest disciples, Nathaniel Branden, recalled Greenspan’s feelings about the Fed. “A number of our talks centered on the Federal Reserve Board’s role in influencing the economy by manipulating the money supply,” Branden recalled. “Greenspan spoke with vigor and intensity about a totally free banking system.”

  Throughout the fifties and sixties Greenspan adhered strictly to Rand’s beliefs. His feelings about the Federal Reserve during this time are well documented. In 1966 he wrote an essay called “Gold and Economic Freedom” that blamed the Fed in part for the Great Depression:

  The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.

  Foreshadowing alert! In any case, during this same period Greenspan drew closer to Rand, who as self-appointed pope of the protocapitalist religion had become increasingly unhinged, prone to Galtian rants and banishments. One of her rages centered around Branden, a handsome and significantly younger psychotherapist Rand met when she was forty-four and Branden was nineteen. The two had an affair despite the fact that both were married; in a cultist echo of David Koresh/Branch Davidian sexual ethics, both spouses reportedly consented to the arrangement to keep the movement leader happy.

  But in 1968, eighteen years into their relationship, Rand discovered that Branden had used his pure reason to deduce that a young actress named Patrecia Scott was, objectively speaking, about ten thousand times hotter than the by-then-elderly and never-all-that-pretty-to-begin-with Rand, and was having an affair with her without Rand’s knowledge.

  Rand then used her pure reason and decided to formally banish both Branden and his wife, Barbara, from the movement for “violation of objectivist principles.” This wouldn’t be worth mentioning but for the hilarious fact that Greenspan signed the excommunication decree, which read:

  Because Nathaniel Branden and Barbara Branden, in a serie
s of actions, have betrayed fundamental principles of Objectivism, we condemn and repudiate these two persons irrevocably.

  The irony of a refugee from Soviet tyranny issuing such a classically Leninist excommunication appears to have been completely lost on Rand. But now here comes the really funny part. Almost exactly simultaneous to his decision to sign this preposterous decree, Greenspan did something that was anathema to any good Randian’s beliefs: he went to work for a politician.

  In 1968 he joined the campaign of Richard Nixon, going to work as an adviser on domestic policy questions. He then worked for Nixon’s Bureau of the Budget during the transition, after Nixon’s victory over Humphrey. This was a precursor to an appointment to serve on Gerald Ford’s Council of Economic Advisers in 1974; he later ingratiated himself into the campaign of Ronald Reagan in 1980, served on a committee to reform Social Security, and ultimately went on to become Federal Reserve chief in 1987. There is a whole story about Greenspan’s career as a private economist that took place in the intervening years, but for now the salient fact about Greenspan is that this is a person who grew up in an intellectual atmosphere where collaboration with the government in any way was considered a traitorous offense, but who nonetheless spent most of his adult life involved in government in one way or another. He told the New York Times Magazine in 1976 that he rationalized his decision to join the government thusly: “I could have a real effect.”