These are times when those with money at risk will do well to pay less attention to what the great men among us say than to how they say it, or what they do. I have even interrupted my perusal of the seminal texts of Mugwumpery, The Gilded Age Letters of E.L.Godkin (State University of New York Press, 1974) and Godkin’s Problems of Modern Democracy (Harvard, 1966), to consider the evidence.
A reader of this column, a money manager to whose wit and perspicuity I would entrust my funds, if the equitable distribution provisions of the Divorce Code of the State of New York had left me any, quite properly draws enraged attention to the spectacle, almost dazzling in its impropriety, of the chairman of the Federal Reserve attempting to talk out of existence all the money he has pumped into the stock market this decade. Mr. Greenspan reminds me of a child who believes he can undo whatever damage he has wrought simply by saying, “I’m sorry.” I have explained to Francis that this is not generally the case; I suspect I would have more difficulty convincing Mr. Greenspan.
A couple of numbers back, Business Week ran a commentary by Rich Miller headed “The Fed’s Dangerous Liaison With Wall Street.” The piece quoted a currency specialist: “The Fed is too wrapped up in what the markets think. It’s as if they’re making policy on the basis of CNBC broadcasts.” I think this is true; I also think it was entirely predictable. When I first saw Mr. Greenspan plain, some 20-odd years ago at a lunch at the Gilder Lehrman Institute, I said to myself, “Hullo, here’s a fellow ready to lick a boot or two.” The intervening years have given me small reason to change my mind. What remains to be seen is whether the footwear that gleams with the chairman’s saliva will cease to caper gaily up the High Street and tramp sullenly down our fiscal backbone.
Not that I can talk the boom of the 10 past years out of existence. And who would want to? But I do think some perspective remains in order. Our nonstatist, decentralized economy pulled itself out of the slump of 1991-2; the lodestone-centralized economies–Japan and Germany–that might have provided competition for world resources, and thereby put a different face on American prosperity in the 90′s, did not. Germany continues to pay the heavy cost of reunification, the cost of which may not be amortized for another decade or so, and Japan’s banking system is still not out of the woods.
We enjoyed the position, unique (I believe) in world history, of furnishing essentially all the demand in the global economy. We have been able to buy at “our price,” thanks to the persistence of the slump elsewhere, which among other things held down the cost of overseas manufacturing labor, which held down the cost of U.S. manufacturing labor. A similar linkage has obtained in agriculture, on the price side. And–to complete this unprecedented trifecta of comparative advantage–we could pay for the stuff with markers: greenbacks and T-bills no longer held to a fixed standard of exchange.
Nothing–even other nations’ bad luck or bad sense–goes on forever, however. A sense of equity urges that it would be nice if other nations could afford some of the stuff they are currently producing essentially for our gratification. This will come to pass, and when it does, we had better be ready for the effects of a poison more toxic to our global situation than inflationary-deflationary competition, than any exchange rate or overseas demand. Namely, what I sense to be, from what I hear and read from overseas, a hatred of this country more widespread and bone-deep than we can imagine. They hate us for our moral arrogance, and they hate us for our economic good fortune, and they hate us because we aren’t them. It doesn’t matter whether we deserve this antipathy. Among nations, motives matter only to historians.
We can try to convince ourselves that we are so rich that the good will of others really doesn’t matter, but I am at pains to see how we can square this with the nationally held assumption that the key to our future lies in the continued exploitation of a truly “global” economy. In the old days, when the United States played the role of world sheriff, it didn’t really matter if the folks we were protecting thought us a sonofabitch. But at a time when we are running unprecedented trade deficits and flooding the world with chips that may someday have to be cashed, I suspect it does. This is why I think we should have passed a test-ban treaty of some kind. It is why debt relief is essential: to lift from the backs of Bengalis and Jamaicans the burden laid upon them long decades ago by the unholy league of OPEC and Walter Wriston in the name of “petrodollar recycling.” Around the world, the International Monetary Fund is the enemy, and around the world–I suspect, if you ask most people–the I.M.F. is thought to be us.
The decisions made by supposedly really smart people often give us mortals a sense of what’s what, how things may go. Take Robert Rubin. Everybody’s been waiting to see which way he would jump. It reminded me of that old story, apposite in view of the Yankees’ splendid World Series victory, about the time Lefty Gomez was pitching with one out and runners at the corners. The batter tapped back to Gomez, whose play was either to the plate or to second to start a double play. Instead, he wheeled and fired the ball to second baseman Tony Lazzeri, who–with a left-handed hitter up–was minding his own business in the hole between first and second. Everyone was safe; a run scored. Lazzeri came huffing up to Gomez.
“What the hell was that about?” he demanded.
“Oh,” said Gomez, smiling, “we always hear how you’re the smartest player in the game, so I just wanted to see what you’d do.”
Mr. Rubin’s supposedly the smartest guy in the high-finance game, and so we all have been speculating where he’d end up. Most of us saw him going for the big money, the kind of bucks he would have taken out of the Goldman Sachs public offering if he hadn’t gone to Washington. Working with Ted Forstmann, for example, where Clinton major-domo Erskine Bowles is a partner. So everyone I’ve talked to, including the guy in my mirror, has been bowled over by Mr. Rubin’s decision to join Citigroup Inc.
Bowled over, fascinated, mystified. I can’t think of a more inappropriate move in the big time since Punch Sulzberger agreed to become chairman of the Metropolitan Museum of Art and put himself in the position of soliciting funds and art from people The New York Times might well have found it worthwhile to look into. I’m not saying this had anything to do with the Gray Lady’s essentially chickenshit financial reporting during Mr. Sulzberger’s tenure at the Met, but I’m also not saying it didn’t. Many of us still think the Met was charging too little for trusteeships during that period, and if $10 million also bought silence from 43rd Street, it was really a good deal. Of course if whoever is our next President appoints Bill Clinton head of the Federal Communications Commission, all bets are off!
So much for all the blather about how Bob Rubin wants to keep out of the public eye. A higher-visibility Wall Street job, there just isn’t. And on another level, Mr. Rubin’s choice puts paid to the popularly held conviction that this is one of the really super-ethical paragons of our time. On Oct. 28, the New York Post ran an editorial, “Robert Rubin’s Ethical Dilemma,” which pointed out that even as the former Treasury Secretary must have been mulling the Citigroup offer, he was lobbying Congress for financial-services reform, namely the repeal of the Glass-Steagall Act, in which his prospective employer has more than a passing interest.
Near term, it will be kind of fun to watch: a sort of Cavalleria Rusticana in pinstripes, in which one of the master operators of our time will join up with Sandy Weill in Act I to send John Reed packing, with an Act II finale featuring Mr. Weill’s dying declaration of ” Et tu, Bob? ” More importantly, what does Mr. Rubin’s decision tell us about his view of the future?
He has chosen corporatism as opposed to entrepreneurialism. Maybe it’s simply because he’s used to big staff, big footings, etc. But maybe he senses the end of an era. We’ll just have to see. Somehow, I can’t help feeling, more as a matter of experience and instinct than rationale, that Mr. Rubin’s jump to Citigroup ties in with the utterances of another dog that’s still barking in the night, but in what suddenly seem muted tones: I refer to Jeff Bezos’ thudding announcement of Amazon.com Inc.’s third-quarter earnings. I love his business, I’m a loyal and regular customer, but I wouldn’t want to have a nickel in it at this point.
But then again, I don’t have a nickel–which means readers should take these reflections with a grain of silver.