Episode 1: Love and Power
In the first episode, Curtis traces the effects of Ayn Rand’s ideas on American financial markets, particularly via the influence on Alan Greenspan.
Ayn Rand was born in Russia and moved to America in 1928. She worked for Cecil B. DeMille, receiving inspiration for what would later become The Fountainhead. Later, she moved to New York and set up a reading group called The Collective where they considered her work. On advice from a friend, Greenspan (then a logical positivist) joined The Collective.
When published, although critically savaged, Rand’s Objectivist ideas were popular, and influenced people working in the technology sector of California. The Californian Ideology, a techno-utopian belief that computer networks could measure, control and help to stabilise societies, without hierarchical political control, and that people could become ‘Randian heroes’, only working for their own happiness, became widespread in Silicon Valley.
Rand had an affair with Nathaniel Branden, another married person in The Collective, which she justified in terms of her value of “rationality”, and with the approval of his wife. After several years, the affair ended violently and it was revealed to the rest of The Collective, which disbanded. Rand ended up alone in her New York apartment, although Greenspan continued to visit.
Greenspan entered government in the 70s, and became Chairman of the Federal Reserve. In 1992, he visited the newly elected Bill Clinton. He persuaded him to let the markets grow, cut taxes, and to let the markets stabilise themselves with the help of computer technology, to create the New economy. This involved using computer models to predict risks and hedge against them, in accordance with the Californian Ideology. However, by 1996, the production figures had failed to increase, but profits were nevertheless rising, and Greenspan suggested that it wasn’t working. After political attacks from all sides, Greenspan changed his mind and decided that perhaps the New Economy was real after all, but that it couldn’t be measured using normal economic measures, and so the apparent boom continued.
In 1994, Carmen Hermosillo published a widely influential essay online, “Pandora’s Vox: On Community in Cyberspace”, and it began to be argued that the use of computer networks had led not to a reduction in hierarchy, but actually a commodification of personality and a complex transfer of power and information to corporations.
Although the Asian miracle had led to long-term growth in South Korea and other countries, Joseph Stiglitz began warning that the withdrawing of foreign financial investment from the Far Eastern economies could cause devastation there. However, he was unable to warn the president having been blocked by Robert Rubin, who feared damage to financial interests.
The 1997 Asian financial crisis began as the property bubble in the Far East began to burst in Thailand, causing large financial losses in those countries that greatly affected foreign investors. While Bill Clinton was preoccupied with the Monica Lewinsky scandal, Robert Rubin took control of foreign policy and forced loans onto the affected countries. However, after each country agreed to be bailed out by the IMF, foreign investors immediately pulled their money out of those countries, leaving their taxpayers with enormous debts and triggering massive economic disasters.
After his handling of the economic effects of 9/11, Alan Greenspan became more important, and in the wake of the Enron scandal he cut interest rates in a bid to stimulate the economy. Unusually, this ostensibly failed to cause inflation. It seemed the New Economy was working to stabilise the economy.
However, in reality, to avoid a repeat of the earlier collapse, China’s Politburo had decided to manage America’s economy via similar techniques to those used by America on other Far Eastern countries. By keeping China’s exchange rate artificially low, they sold cheap goods to America, and with the proceeds, bought American bonds. The money flooding into America permitted massive loans to be made available to those who would previously have been considered too risky. In America, the belief was that computers could stabilise and hedge the lending of the money. This permitted lending beyond the point that was actually sustainable. The high level of loan defaulting led ultimately to the 2008 collapse due to a housing bubble similar to that which Far Eastern countries had previously faced.
Curtis ends the piece by pointing out that not only has the idea of market stability failed to bear out in practice, but that the Californian Ideology has also been unable to stabilise it. Indeed, the ideology has not led to people being Randian heroes, but has trapped them in a rigid system of control from which they are unable to escape.