The title of the post is taken from Michael Thomas' op-ed in Forbes.com about the iconic former US Federal Reserve Chairman Alan Greenspan, who yesterday admitted before the House Oversight Committee to having made mistakes in regulating the financial markets. [ A savant idiot, according to Thomas, is unlike the idiot savant, "... one who is festooned with credentials, diplomas, laurels and prizes both professional and academic, who pontificates and expounds impressive-sounding "truths" and explanations--what a friend of mine used to call "chinstrokers"--that in the fullness of time and markets prove to be utter b.s. The idiot savant produces substance out of apparent ignorance; the savant idiot produces ignorance from apparent substance.]. His 'mistakes' benefited many during the boom past years, but have led to the 'worst financial crisis in living memory'.Once regarded as the 'greatest central banker' of this generation, Mr Greenspan has fallen from grace, and has increasingly come under attack as the financial crisis unfolds on a daily basis, revealing its roots to his flawed policies of deregulation. Clearly, all this was due to US fiscal imprudence.
But Mr Greenspan's folly is related to something much more insidious. For many years the world has very much admired the US's freewheeling spirit which has led to the development of the world's largest economy. It's dynamism and spirit of entrepreneurial adventurism, has been the envy of many a developing country, including Singapore. Mr Greenspan's philosophies with respect to the economy and financial regulation, although drawn from Ayn Rand's views of laissez faire capitalism, should be seen in this larger socio-political context. While this free-wheeling individualistic culture has inspired and led the world for many years, its negative consequences have become more apparent in recent years as US self-centredness repeatedly lead us into crisis after crisis.
What lessons for Singapore? Apart from having to deal with this engulfing financial tsunami (interesting article here from across the causeway, NST), Mr Greenspan's follies should perhaps give us something to think about. Perhaps the US model is not necessarily the best model to so blindly emulate. The US, for the moment the world's largest economy and much envied epitome of wealth and capitalism, does not clearly hold a monopoly on common sense, ability and wisdom. Otherwise, Greenspan's folly will be Singapore's.
We have too easily and comfortably just followed the US model, imagining it would lead us into roads paved with gold. Perhaps the time has come for us to re-evaluate that strategy. In this tsunami, some Asian paternalism and clear regulatory leadership, seems much more comforting than the free-wheeling, everyman-for-himself culture the US has tried to foist on the world.
Secondly, despite the supposed openness of the democratic system the US is so proud of, there was far too much invested in the wisdom and authority of just one man, the Federal Reserve Chairman. Because he had assumed such a elevated stature and reputation, few had the academic strength to challenge his assumptions or to overrule his decisions. As a result, his assumptions and ideas about the superiority of the free market system held sway even as the bubble grew. None had the temerity to deflate a bubble that was on the verge of bursting.
We should therefore be cautious about investing too much power in the personality and/or the intellectual strength of one man, or some small exclusive group of insiders. No one person knows everything. While a narrow power pyramid may make for swifter decision making, it also predisposes to tsunamis of a different sort, if the narrowly perceived wisdom proves wrong.
health medicine biomedical biomedicine news discussion singaporehealth medicine biomedical biomedicine news discussion singapore health medicine biomedical biomedicine news discussion singapore health medicine biomedical biomedicine news discussion singapore health medicine biomedical biomedicine news discussion singapore education education