adminAuthor: Bob Woodward
Publishers: Simon & Schuster
Year: 2000
At a princely US$25 this must-have-book written by one of my favourite journalists, Bob Woodward, whose first book (All the President’s men) co-authored by his colleague at The Washington Post newspaper, Carl Bernstein, published in the same year I was born (1974) introduced me to the fascinating world of journalism which has become my life.
His grasp of issues, contextualisation of politics, business and economy makes reading his book seem like a real believers’ journey to the inside of the White House and Capitol Hill. Making the Federal Reserve of the United States of America a simple case of explaining complex world issues and crucially the domestic politics of the US presidency in the boom period (1987-2000), was a brave effort from this journalist who has been in the newsroom for 40 years, at his beloved The Washington Post.
In a country where one either has to be a Republican or Democrat and no other, the politics of appointing people to key posts always has such political correctness overtones and Alan Greenspan, the eponymous chairman of Federal Reserve, a New York Republican purist, started off serving four Republican Presidents — Richard Nixon, Gerald Ford, Ronald Reagan and George W Bush.
But due to his wonderful understanding of inflation and its attendant importance in driving the economy, even the Democrat William Jefferson Clinton reappointed him to control the levers of the economy in his first and second terms as US president. That said a lot about Greenspan, the man and chairman of the Fed. And reading the book, it clearly was not an overstatement — the man deserved to be as highly placed as occupying such a haughty pulse position.
The two immediate past chairmen of the Fed Arthur Burns (1970-78) and Paul Volker (1979-87) all had massive respect for the Columbia University graduate. Crucially they both spoke about the Fed job with honesty something that made Greenspan have no illusion about the task.
But when President Reagan appointed him after 91-2 Senate confirmation on August 3 1987, America and indeed the world began to live a market driven economy. The crisis in Mexico, Thailand, Japan and South Korea in the period Greenspan was the Fed chairman offer the reader a real global understanding of how far the tentacles of the US can go, but still retaining international leverage.
It did not even matter that the Gulf War erupted when Greenspan was just fine-tuning his imprint in the era of the Democrats with Clinton, 20 years his junior, in power at White House. He still pulled the strings and often the punches too, from Constitution Avenue in downtown Washington DC helped by his Sanhedrin, the Federal Open Market Committee (FOMC), some kind of economic priesthood of 12 — seven Fed governors and five of 12 presidents from the Federal Reserve districts around the country, aura of a man who ruled the universe.
Hitting the ground running, Greenspan chaired the team that controlled seemingly the smallest variable of the economy — federal fund rate, which is the interest charged by banks on each other for overnight loans. This gave the Fed the power to control the American economy by monitoring the money market and its behaviour.
Reading through the book, albeit a decade late, I was left with a picture of our own Reserve Bank Governor, Dr Gideon Gono whose wrestle against run away inflation during the casino economy period of this country prior to dollarisation, is well documented. With hindsight, nobody, even the 12 apostles of Jesus could have done any better than Gono did under the circumstances and few understood why he took some decisions and not others that appeared more intelligible.
Even though the levels of crisis in Zimbabwe were not as those of US, the mechanics at play were the same so much that I see shades of Greenspan in Governor Gono at the time. Periodic if not regular monetary reviews, necessitated by crisis had become the order of the week and as did Greenspan when the Mexican crisis threatened to tank US economy, Gono in Greenspansque tenor sowed in unchartered waters.
It did not matter much that Mexico were paying the economic price of hosting the FIFA World Cup just across the US northern border. Woodward never bothered to offer any explanations to why the Mexican economy was tanking, suffice to say Greenspan could not allow the crisis to spiral out of control and a US$6 billion bail-out was mooted. Congress grudgingly agreed to dole out billions to Mexico City and in days, the situation stabilized and the US banked billions from the loan repayments.
What I find appealing in Woodward’s narrative is the way he weaves in and out of White House, going even beyond the curtains to tell an otherwise mystique of the American economic hegemony.
How he weaves through the Presidency with Fed sound-tracking, is something readers of his book find priceless. Those who wonder at the working of the Fed and how they fight to control the global economy will find this book rather a Sermon on the Mountain like rhetoric.
It is not a coincidence that all the US presidents since the 60s who managed the economy well got re-elected and as providence would have it, the last three who had little respect for the Dow Jones or NASDAQ figures all lost — Ford, Jimmy Carter and Bush who in his anger at losing to Clinton in 1992 blamed it on Greenspan.
Any US presidency that mismanages the economy or is perceived to have mismanaged the economy paid by losing and the Fed chairman rarely missed the guillotine either. Greenspan understood that very well by studying the two Fed chairmen before him especially Burns who mentored him during his PhD and in business prior to becoming a Fed chair.
His biggest card was the understanding of a concept that there is a certain rate of unemployment that a country can sustain without severe inflation. Economists who believe in non-accelerating inflation rate think that if the unemployment rate dips below the NAIRU, the workforce will insist on wage increases and trigger inflation. Greenspan’s entire service of the US from the Fed chair never shrieked from that belief and his successes were based on that concept.
Woodward captured all the key moments in both politics and economy to exhibit some excellent talents of Greenspan whose consummate understanding of the workings of the US economy and the world trends endears him to his readers. His selection of language and diction was fitting while his understanding of the workings of the US governance is unmatched.
From reading his first book, All the President’s Men which I did in my second year at college, through to the second The Final Days (1976) The Agenda (1994) and Shadow (1999), Woodward has wealth of knowledge of the works of all US presidents from John F.Kennedy, so much that his simplicity becomes the dominant genre.
He never missed that politicians have a multi purpose function while professionals like him have one — to serve and do so well. That is how he managed to increase rates if that was to help the economy against the wishes of a President crying for re-election in the case of George Bush senior. In other establishments, that is unheard of.
His humility in detail is mesmerising, yet his knowledge of what goes on in the White House and Capitol Hill makes him a must read author, but then for someone to be a journalist at the same paper for over 40 years is a commitment only a few can achieve.
Any rubbish he writes, I read. Anything he says I write. Anything he does is non fiction, so is everything he has ever written, but this one — Maestro — appropriately titled, must be on the shelf somewhere at the New Reserve Bank Building on Samora Machel Avenue.
Sadly, I borrowed this copy to read, then again, felt compelled to.
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