As the world reflects on the life and legacy of former Federal Reserve Chairman Alan Greenspan, economist Yanis Varoufakis offers a reminder that the debate Greenspan helped shape is far from settled. For decades, Greenspan was celebrated as the high priest of market fundamentalism, championing the belief that markets could regulate themselves and that private self-interest would ultimately serve the public good. The financial crisis of 2008 shattered that faith, prompting Greenspan’s now-famous admission that he had “found a flaw” in the model that defined his understanding of the economy.
Yet long before Greenspan’s confession, critics were warning that the flaw was not hidden at all. Among the most persistent was Robert Scheer, who spent decades challenging the bipartisan embrace of deregulation, financialization, and corporate power. While Greenspan and his allies promised that freer markets would deliver prosperity, Scheer documented the growing costs: concentrated wealth, weakened public institutions, taxpayer-funded bailouts, and an economy increasingly detached from the needs of working people.
In a 2019 interview with Kate Aronoff, Varoufakis argued that a majority of people now recognize that Greenspan’s faith in self-regulating markets was “a particularly toxic form of idiocy.” But he also warned that exposing the failures of neoliberalism is not enough. The challenge is building a new political and economic consensus capable of addressing both economic insecurity and the climate crisis. As Varoufakis put it, “We have to talk to people in a way that combines addressing these anxieties with the issues of the environment. Unless we manage to do that, we will fail.”
What follows is not merely an obituary for a central banker. It is a reflection on an economic ideology that dominated the world for a generation, the critics who challenged it before its collapse, and the unfinished struggle over what should replace it.
Alan Greenspan bade us farewell today. A man who was celebrated as the central bankers’ central banker based on the conviction that markets are divine and volatility is a virtue.
His epitaph? A singular, glorious confession: “I found a flaw in my model of the world.” A flaw, he said, as though it were a leaky pipe, not a total collapse of the intellectual architecture that anointed him Oracle. For decades, he preached that the self-interest of the predator was the invisible hand of the common good.
Then, in 2008, the beast devoured the table, and to his credit he blinked, admitting that his entire worldview—the one that central bankers canonized and the world swallowed—was a fairy tale for rentiers.
He did not, of course, admit to culpability. That would require a moral compass, a device notably absent from his Ayn Randian toolbelt. No, he merely noted the flaw, as a meteorologist might note a gust of wind, and returned to his well-earned silence.
So farewell, Maestro. You helped erect a broken global casino economy, but at least you had the decency to read the autopsy report aloud. Alas, countless millions are still paying for your asterisk.
Yanis Varoufakis
Alan Greenspan bade us farewell today. A man who was celebrated as the central bankers' central banker based on the conviction that markets are divine and volatility is a virtue.
His epitaph? A singular, glorious confession: “I found a flaw in my model of the world.” A flaw, he…
But as Varoufakis argued in this 2019 conversation with journalist Kate Aronoff, exposing the failures of neoliberal economics is only the beginning. The more difficult challenge is building a political and economic alternative capable of addressing both economic insecurity and the climate crisis. While public confidence in unregulated markets has weakened, Varoufakis warns that the vacuum has often been filled not by progressive solutions but by nationalist and far-right movements that exploit economic anxiety while leaving the underlying system intact.
For Varoufakis, the Green New Deal represents more than an environmental program—it is a framework for transforming excess global wealth into investments that create dignified jobs, reduce inequality, and confront the climate emergency. “We have to talk to people in a way that combines addressing these anxieties with the issues of the environment,” he argues. “Unless we manage to do that, we will fail.”
At a moment when Greenspan’s legacy is once again under discussion, Varoufakis’ reflections offer a broader question: if faith in market fundamentalism has collapsed, what comes next?
An Interview with Yanis Varoufakis
“We have to talk to people in a way that combines addressing these [economic] anxieties with the issues of the environment. Unless we manage to do that, we will fail.”Kate AronoffSummer 2019
Aronoff: In the 1930s and ’40s there was this real change in how people were thinking about the role of the state in the economy and what it is governments should be doing and providing. There was a similar paradigm shift in the 1970s that created an opening for neoliberals. Does the climate crisis offer that kind of opportunity today to folks looking to put a new paradigm into place that can actually deal with it?
Varoufakis: I think that this shift has already happened. A majority of people in every country realize that Alan Greenspan’s touching faith in the capacity of markets to self-regulate was nothing but a particularly toxic form of idiocy. The question now, however, is this: how do we go from the serious weakening of the libertarian paradigm to creating a political consensus toward a Green New Deal? This is the task ahead for all of us.
At the moment, instead of progressives getting together and planning a new Bretton Woods, what we have is a neo-fascist international led by people like Matteo Salvini in Italy, Marine Le Pen in France, the Alternative für Deutschland in Germany, Orban in Hungary, Steve Bannon—who is traversing the continent spreading his poison—Donald Trump in the White House, Bolsonaro in Brazil, Modi in India.
We are trying to create a progressive international but we are just at the very, very beginning. And the rallying call of the neo-fascist nationalist international is: Make America Great Again, Make Greece Great Again, Make Italy Great Again. On the one hand they’re saying they are nationalist, but on the other hand, they’re combining forces very efficiently across the world. What we need to do is effectively emulate their success but not by emulating their tactics. They are using xenophobia: they’re blaming Muslims, Jews, Greeks, and all sorts of categories and sets of people and nationalities and religions. They claim to be doing it on behalf of the people, but once in power they employ the worst offenders from Wall Street. Donald Trump took Goldman Sachs personnel and implanted them in the Fed and in the Treasury.
We need to use the Green New Deal as a rallying call across the world. The Green New Deal is a positive message of realism. We have excess liquidity. The world has never had savings as high as we have today. So all we need to do is find ways to turn those savings into good quality green jobs.
Long before the 2008 financial crash exposed the flaws in Alan Greenspan’s free-market philosophy, Robert Scheer was sounding the alarm. In this prescient 2000 column for The Nation, Scheer argued that deregulation was not unleashing prosperity but creating a cascade of crises—from energy markets and telecommunications to finance and public health. Challenging the prevailing faith that markets could police themselves, Scheer warned that government regulation was essential not to undermine capitalism, but to prevent corporate greed from destroying it. More than two decades later, the article reads less like commentary and more like a forecast of the economic turmoil that would soon follow.
But in recent decades, conservative economists and their fat-cat corporate sponsors have led us down the yellow brick road of deregulation. Getting government out of the market would free creativity and investment, leading us to the magic kingdom of Oz, where all would prosper. If anything went wrong, the wizard of Oz–a k a Alan Greenspan–would make it all better.
Well, in real life, Greenspan is a competent fellow, but he knows better than anyone that, while fiddling with interest rates can modulate the business cycle, it is hardly an adequate remedy for all of the problems of a modern economy. Setting the interest rate does not ensure safe water, air, tires or medicines.
The criticism of Alan Greenspan’s economic worldview did not begin with the 2008 crash. Years before the financial system imploded, Robert Scheer was warning that the deregulation championed by Greenspan, Robert Rubin, and their allies was creating a fragile economy built on speculation, consolidation, and corporate impunity. In a 2000 Nation column titled “These Messes Are What Deregulation Gets Us,” Scheer argued that government regulation was necessary “not to build socialism but to save capitalism.” More than a decade later, he would make a similar case against Jack Lew’s nomination as Treasury secretary, criticizing both Democratic and Republican leaders for embracing the same deregulatory ideology that Greenspan helped popularize. While Greenspan eventually admitted there was a flaw in his model, Scheer spent years documenting the real-world consequences of that flaw: foreclosures, lost jobs, taxpayer bailouts, and an economy increasingly tilted toward Wall Street at the expense of everyone else.
As tributes pour in for Alan Greenspan, it is worth remembering that his most important legacy may not be his years at the Federal Reserve, but his brief moment of honesty after the system he championed collapsed. “I found a flaw,” he famously admitted. Yet the flaw was not merely technical. It was the belief that markets left to themselves would produce outcomes that were not only efficient, but just.
Yanis Varoufakis argues that most people now understand that Greenspan’s faith in self-regulating markets was a dangerous illusion. Robert Scheer spent decades documenting the consequences of that illusion long before it became conventional wisdom: deregulation, corporate concentration, financial speculation, taxpayer bailouts, and an economy increasingly detached from the needs of ordinary people.
The question Greenspan leaves behind is not whether his model failed. History has already answered that. The question is whether we will finally learn from that failure. As Varoufakis suggests, the challenge before us is not simply to reject the old neoliberal orthodoxy, but to build something better in its place—an economy that serves people rather than markets, democracy rather than concentrated wealth, and the public good rather than private greed.
Millions are still paying the price for Greenspan’s asterisk. The least we can do is refuse to forget the lesson.
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