What Ayn Rand didn't teach: Cronyism

April 16, 2010 12:36 am

CHARLOTTESVILLE

--Alan Greenspan's connection to Ayn Rand, the fiercely free-market novelist and philosopher, is well- known. Less well-known is what Rand thought of Greenspan: At his core, he was a social climber. Based on Greenspan's reluctance to rein in his powerful buddies in high finance, it looks as if Rand was right.

When Greenspan met Rand in the mid-1950s, he was an unknown economics student, she a best-selling novelist. He quickly became a regular at Rand's weekly New York salons. Rand dubbed Greenspan "the Undertaker" because he was so serious. But his knowledge of economics impressed her. Soon he was one of her favorites.

Still, Rand harbored her doubts. One day she asked a mutual friend: "Do you think Alan is basically a social climber?" She began to develop an elaborate theory to explain his behavior. The mind, she hypothesized, had roughly two parts, which she labeled "sub-basement" and "super-structure." In each category, there were two options: People could be motivated by what they thought, or by what others thought. She sorted her closest friends into those categories.

The verdict on Greenspan was damning: In both categories, he was guided by the opinions of others. Like the rest of Rand's students, Greenspan professed to embrace a philosophy of individualism. According to the master, he had missed the point.

But maybe Rand had a bit of social climber in her, too. Whatever she thought of him in private, Greenspan was going places and Rand wanted to be along for the ride. Greenspan joined the Nixon campaign at the invitation of another student of objectivism, Martin Anderson. From there his ascent through the Republican ranks was swift. In 1976, he invited Rand and her husband to the White House when he was named an adviser to President Gerald Ford.

Greenspan brought some of Rand's ideas into the highest reaches of politics. One was her belief in free markets, widely shared on the right. More damaging in the long run was her assumption that investors were rational.

As Greenspan's recent congressional testimony makes clear, he was never able to recognize that economic activity, far from being cooly rational, is often dominated by emotion, wishful thinking, irrationality, and plain old greed. The idea that reason is the defining characteristic of human beings was the most lasting legacy Greenspan took from his years with Rand.

What Greenspan left behind was the most valuable thing Rand had to offer: a willingness to stand against the crowd. Brooksley Borne, the courageous head of the Commodity Futures Trading Commission, stands out in today's drama as a real-life Rand heroine, unafraid to confront the powers that be. By contrast, Greenspan's career looks like something Rand spent her life railing against: crony capitalism at its worst.

Jennifer Burns is the author of "Goddess of the Market: Ayn Rand and the American Right."