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Wednesday, September 26, 2007

Alan Greenspan versus Naomi Klein

This is part of a longer interview of Alan Greenspan and Naomi Klein:

Alan Greenspan vs. Naomi Klein on the Iraq War, Bush's Tax Cuts, Economic Populism, Crony Capitalism and More, Democracy Now [Watch 128k stream, Watch 256k stream]: AMY GOODMAN: ...We welcome you both to Democracy Now! ... You worked with six presidents, with President Reagan, with both President Bushes. You worked with President Ford, and you worked with Bill Clinton, who you have called a Republican president; why?

ALAN GREENSPAN: That was supposed to be a quasi-joke. ... I’m a libertarian Republican, which means I believe in a series of issues, such as smaller government, constraint on budget deficits, free markets, globalization, and a whole series of other things, including welfare reform. And as you may remember, Bill Clinton was ... doing much that same agenda... [H]e is a centrist Democrat. And that's not all that far from libertarian Republicanism. ...

AMY GOODMAN: Alan Greenspan, let's talk about the war in Iraq. You said what for many in your circles is the unspeakable, that the war in Iraq was for oil. Can you explain?

ALAN GREENSPAN: Yes. The point I was making was that if there were no oil under the sands of Iraq, Saddam Hussein would have never been able to accumulate the resources which enabled him to threaten his neighbors, Iran, Kuwait, Saudi Arabia. And having watched him for thirty years, I was very fearful that he, if he ever achieved -- and I thought he might very well be able to buy one -- an atomic device, he would have essentially endeavored and perhaps succeeded in controlling the flow of oil through the Straits of Hormuz.... Had he decided to shut down, say, seven million barrels a day, ... he could have essentially also shut down a significant part of economic activity throughout the world.

The size of the threat that he posed, as I saw it emerging, I thought was scary. And so, getting him out of office or getting him out of the control position he was in, I thought, was essential. And whether that be done by one means or another was not as important, but it’s clear to me that were there not the oil resources in Iraq, the whole picture ... would have been different.

AMY GOODMAN: We’re also joined in studio by Naomi Klein, author of the book The Shock Doctrine: The Rise of Disaster Capitalism. Your response to that, Naomi Klein?

NAOMI KLEIN: Well, I’m just wondering if it troubles Mr. Greenspan at all that wars over resources in other countries are actually illegal. Mr. Greenspan has praised the rule of law... Mr. Greenspan ... Are you aware that, according to the Hague Regulations and the Geneva Conventions, it is illegal for one country to invade another over its natural resources?

ALAN GREENSPAN: No. What I was saying is that the issue which, as you know, most people who were pressing for the war were concerned with were weapons of mass destruction. I personally believed that Saddam was behaving in a way that he probably very well had, almost certainly had, weapons of mass destruction. I was surprised, as most, that he didn't. But what I was saying is that my reason for being pleased to see Saddam out of office had nothing to do with the weapons of mass destruction. It had to do with the potential threat that he could create to the rest of the world. ...

I’m fully aware of the fact that that is a highly, terribly important issue. And as I said in other commentaries, I have always thought the issue of what essentially amounts to what is often called pre-emptive, preventive action on the part of some countries to secure resources or something else like that, it's an issue that goes back to the Cold War, when we had the very difficult moral dilemma of what do you do when you think a missile is coming in our direction and you’re not sure whether it’s an accident or not an accident. And that is a problem which I think is a deep moral problem in civilized society. And the issue is one which I don't think we’re going to resolve very easily. And as you point out, yes, I am a believer in the rule of law, and I think it is a critical issue, not only for domestic economies, but for the world economy as a whole. ...

AMY GOODMAN: ...I wanted to move forward to your work as head of the Fed, ... ask you about that piece by Paul Krugman called "Sad Alan's Lament," that goes to that issue of supporting President Bush’s tax cuts. In his piece, Paul Krugman says, “Mr. Greenspan has just published a book in which he castigates the Bush administration for its fiscal irresponsibility.

“Well, I’m sorry,” says Paul Krugman, “but that criticism comes six years late and a trillion dollars short.”

He says that “Mr. Greenspan now says that he didn’t mean to give the Bush tax cuts a green light, [and] that he was surprised at the political reaction to his remarks. “ ...

He says that, again and again you were offered the opportunity to say something that would help rein in runaway tax-cutting; each time evading the question, often replying by reading from your own previous testimony.

He said, “If anyone had doubts about Mr. Greenspan’s determination not to inconvenience the Bush administration, those doubts were resolved two years later, when the administration proposed another round of tax cuts, even though the budget was now deep in deficit. And guess what? The former high priest of fiscal responsibility did not object.”

And he goes on from there. He says in 2004, you “expressed support for making the Bush tax cuts permanent -- remember, these are the tax cuts he now says he didn’t endorse -- and argued that the budget should be balanced with cuts in entitlement spending, including Social Security benefits, instead. Of course, back in 2001 he specifically assured Congress that cutting taxes would not threaten Social Security.”

Your response, Alan Greenspan?

ALAN GREENSPAN: Well, I find it very unfortunate. Paul is a good economist. I have known him for years. He is wrong as fundamentally in many of the facts -- in fact probably all of the ones you’ve just cited.

First of all, I was in favor of tax cuts of any type when it looked as though, according to all the technical experts, we were confronted with very large potential increases in surpluses. If we allowed those surpluses to run when the debt of the United States essentially went to zero, we would find that the federal government was beginning to accumulate huge amounts of assets of corporate business. There was to be no alternative to that. And if you look at the possibilities of what Lyndon Johnson or Richard Nixon would have done under those circumstances, it becomes extremely scary. It was only when it appeared that the forecasts were false, that, indeed, we were not running in -- or not likely to run into these large surpluses, and, indeed, they disappeared.

At that point, I reverted to my older position: namely, I was in favor of tax cuts, but only if they are matched by cuts in spending. And I, therefore, reverted to that position in congressional testimony in 2002 and 2003, in fact, to the point where I recall a number of congressmen asked me, “Do I understand you correctly? You’re saying that you are in favor of the tax cuts, but only if spending is cut. If spending is not cut, were we to read from you that you are not supporting the tax cuts?” And I said, ‘That is correct.” So Paul Krugman's view that somehow I didn't change my mind until after I got out of office is factually false. And, indeed, I did change my mind. I changed my mind in 2002 and 2003, largely because the whole notion of which fundamentally got me in favor of significant tax cuts without offsetting expenditures was a very special event which probably had not occurred in the United States for 150 years -- namely, division of our total federal debt effectively going to zero.

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: Just another piece of the puzzle here that I think is important to remember is that ... you are ideologically very much a supporter of the principle of privatizing Social Security and, in fact, were very disappointed that the Bush administration did not pick this up after the elections in 2000. ... So doesn't creating a shortfall because of tax cuts bolster the case for privatization of Social Security that you have written you are an ideological supporter of?

ALAN GREENSPAN: Well, first of all, ideology is not what I hold. I try to learn what are the facts, and I let my opinions, judged on the facts, not by some preconception, which I regret is what ideology as a notion means.

First of all, let me just suggest something to you. Social Security, as it now exists and is now currently funded, will be a very small part of overall retirement income in the years ahead. There is no -- in fact, no alternative, as things now stand, that a very substantial part of the so-called replacement of income that one talks about when one retires is going to have to come from the private sector. And so, no matter what is done with federal Social Security, the average person is going to have to rely ever more increasingly on private sources of income, whether it’s private savings or working or whatever. But if you look at the future of Social Security and the demographics we’re now dealing with, the extent to which it replaces lost income when you retire is decreasing.

AMY GOODMAN: Alan Greenspan, the issue of whether we have enough money in this country, do you think that that also calls into question the war in Iraq, how the US can afford to continue this war?

ALAN GREENSPAN: ...There is no question that a significant amount of money is being wasted in war. That is what happens in war. And that's -- clearly we’re talking hundreds of billions. The issue here is that --

AMY GOODMAN: I believe the figure is in the trillions.

ALAN GREENSPAN: -- even if the war spending were not there, we would have these problems. So it’s true that there’s a good deal of waste going on. But the problems to which I’m referring to existed before the war and will continue after the war. ...

NAOMI KLEIN: There is something that I was quite interested in in your book, which was your definition of corruption and crony capitalism. You said, “When a government's leaders or businesses routinely seek out private sector individuals or businesses and, in exchange for political support, bestow favors on them, the society is said to be in the grip of crony capitalism.” You say, “The favors generally take the form of monopoly access to certain markets, preferred access to sales of government assets, and special access to those in power.” I kept thinking about Halliburton, Blackwater, Lockheed and Boeing. You were referring to Indonesia at the time, but I’m wondering, ...[if] we’re seeing contracting emerging as ... a fourth arm of government. ... I’m wondering whether you think the United States is a crony capitalist economy, according to your definition?

ALAN GREENSPAN: Every economy exists, no matter what the level of democracy, has elements of crony capitalism. It’s -- given human nature and given the democratic structures, which we all, I assume, adhere to, that is an inevitable consequence. The major issue is, is it the dominant force within an economy? It was the dominant force under Suharto. It is not the dominant force in this country.

NAOMI KLEIN: Well, how about this: in 2003, when you were head of the Federal Reserve, the US government handed out 3,500 contracts to companies to perform security functions. In 2006, the year that you left the Federal Reserve, they handed out 115,000 such contracts. It seems to me that it is becoming a dominant force.

ALAN GREENSPAN: Are you talking about the contracts that the Federal Reserve put out?

NAOMI KLEIN: I’m talking about the crony capitalist system of a Republican government handing out an extraordinary level of contracts to private companies, who then support these politicians with the political favors that you’re describing in your book, in your definition of crony capitalism. ... I’m saying that the US government is doing it.

ALAN GREENSPAN: Well, the US government has to purchase equipment from the private sector. It doesn't produce it itself. And you may characterize it in many different ways. And, obviously, I’m not going to deny that there’s all sorts of corruption, which goes on in every country. The problem, essentially, for a democratic society is to maintain the civil liberties of the society and suppress that. Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff.

AMY GOODMAN: Well, on that note, we’ll have to wrap up this discussion...

    Posted by on Wednesday, September 26, 2007 at 01:35 PM in Economics, Iraq and Afghanistan, Monetary Policy, Oil, Social Security, Taxes | Permalink  TrackBack (0)  Comments (86)


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