Leonard Peikoff Excommunicates Alan Greenspan

On February 22, 1998, on his syndicated radio program "Philosophy, Who Needs It?" Leonard Peikoff denounced Federal Reserve Chairman Alan Greenspan for allegedly supporting government affirmative action programs. The source of Peikoff's fury was a short quote from a speech given by Alan Greenspan, that appeared in a half-page advertisement that ran in the New York Times on February 18, 1998, by the Greenlining Institute; an organization dedicated to the preservation of affirmative action.

The following is a transcript of Peikoff's denouncement of Greenspan, on Peikoff's radio talk show:

BEGINNING OF PEIKOFF QUOTE:

"Now my next item pertains to Alan Greenspan; the Federal Reserve chairman with whom I was friendly in the fifties, and who is widely known as a one-time follower of Ayn Rand; a supposed pseudo, or quasi-objectivist. Something occurred in my copy of the New York Times last week which made me decide it is necessary to set the world straight on Alan Greenspan, once and for all. So when we return from this break, I'm going to tell you why, if I were the Pope, and I had the power of excommunication, I would now formally excommunicate Alan Greenspan from any connection with Objectivism. If I were the Pope (which I am not), and if he really said what they say he did. I'll be back."

[Station Break]

"I was just introducing the fact that I am now on the outs with Alan Greenspan (not over anything personal); Alan Greenspan being the Federal Reserve chairman; an alleged sympathizer of Ayn Rand; and I'm saying I'm on the outs with him. I do not regard him as an Objectivist or as an admirer of Ayn Rand, on the basis of a half-page ad which appeared in the New York Times, this week, on February 18.

Let me read the headline:

"Why Does Alan Greenspan Support Affirmative Action And Inner City Economic Development?"

And then there's the following quote, ascribed to Federal Reserve chairman Alan Greenspan:

"It is good for business. It is good for our society, and it is the right thing to do."

Now it might have been taken out of context; it might be incomplete or made up out of whole cloth. If so, forget what I'm about to say. But if it's true... This group that sponsored it, by the way, is the Greenlining Institute, made up of all kinds of minority groups who want special economic aid to their section of the inner city, and who want affirmative action.

Now, Alan Greenspan has muffed his chance, time and again, in Washington. I don't ever hear him making a strong, pro-capitalist statement. I don't see him taking any actions in his year-after-year, of tenure, to free anything in the economy. And this despite the fact that I know from first-hand knowledge that he's a highly intelligent man who knows better. He knows what Capitalism is, and does. When he was on the Social Security commission, he helped them to save the rotten institution, rather than to phase it out. He knows enough about markets to know that you do not denounce a market for being irrationally exuberant. This man is going against every one of the ideas that I know he understands. For him to say it's good for business, which means affirmative action is good for business, to hire unqualified people, or to say it's good for our society, which means it's good for our society to have forced relationships at the point of a governmental gun, or for him to say this is the right thing to do, which means to elevate alleged collective demands over individual rights, and to prey on guilt, sacrificing those who are qualified to those who are needy, regardless of what the source of the need or the qualification is, this is complete, utter betrayal of everything that I know Alan Greenspan knows.

As far as inner-city economic development, that's a way of using the tax code to engage in social engineering, on the premise that the government owns our wealth, and can do with it what it wants. And Alan Greenspan knows everything that's wrong with that, too. So the only out I give him, in my eyes, is this quote is made up or taken out of context. But if it isn't, and if he doesn't sue, or in some way contest it, he is out, in my eyes. I will never again say a kind or favorable word about him, and never again argue with Objectivists who say he's really trying, and he's doing his best. That is my obituary on an old friend."

END OF PEIKOFF QUOTE

Was Alan Greenspan actually saying what the ad claims that he said? Maybe yes. Maybe no. If you're willing to drop context, a prolific public speaker like Alan Greenspan can be made to appear to support almost any position. Note that the words "affirmative action" appear nowhere in the actual Greenspan quote. Greenspan merely says "It is good for business." What is the "it"? We don't know. All we know is that the Greenlining Institute claims Greenspan was referring to "affirmative action and inner city economic development."

And even if Greenspan WAS referring to affirmative action, which form of affirmative action was he referring to? The sort of affirmative action where a company makes certain that its hiring policies are based strictly on merit and qualification, and not on race or religion? Or the sort of affirmative action where a company makes a special effort to find qualified minority applicants for its jobs? Or the kind of affirmative action, mandated by the government, that requires the company to hire a certain percentage of minority workers to fill its jobs, with little or no concern for their qualifications?

Needless to say, there's quite a difference between these various types of affirmative action. The first two types are both voluntary and moral. They can be worthy attempts to bring minorities into professions that have been largely closed to minorities in the past, due to discrimination or simple inertia. The last type of affirmative action is both involuntary and immoral. It is a gross violation of the right of the business owner to hire whomever he pleases. It is an attempt, by the government, to help one class of citizens by violating the rights of another class of citizens. It is frequently an attempt to buy the votes of minority citizens.

So before we can evaluate Alan Greenspan's remark, we need to know two things:

1) Did Greenspan actually say it?
2) Was Greenspan actually referring to coercive, government-inflicted, affirmative action?

(As we will see later, the answer to the first question is "yes." The answer to the second question is "no.")

If we attempt to evaluate Greenspan's remark without obtaining the above information, we are acting on incomplete information. Worse yet, we are knowingly acting on incomplete information. This is both dishonest, and grossly unjust. A man's statement should be judged on the basis of what he actually said; not on the basis of what we believe he may have said. And certainly not on the basis of what a special-interest group claims that he said.

Needless to say, Leonard Peikoff did not bother to obtain any of the above information. He simply accepted the claim of the Greenlining Institute that Greenspan was actually supporting affirmative action. Nor did Peikoff make any effort to determine what sort of affirmative action Greenspan might be endorsing.

Could it be that Peikoff was simply looking for an excuse to denounce Alan Greenspan? It's certainly possible. But more likely, Peikoff was simply going off on another of his witch hunts.

Unlike Peikoff, let us look at the actual facts of the quote in question. I've taken the trouble to locate the source of Greenspan's quote. It was taken from a speech, given by Greenspan, on January 16, 1998, in New York City, at the Wall Street Project Anniversary Conference of the Rainbow/PUSH Coalition. The entire text of Greenspan's speech is reproduced below.

The only way to see the full enormity of the injustice that Peikoff perpetrated on Greenspan, is to read what Peikoff had to say about Greenspan's quote, and then compare it with what Greenspan actually said. Otherwise we're simply getting our facts second-hand, from individuals who may be extremely biased.

Now let us read Greenspan's speech, from which the quote that so angered Peikoff, was taken:

BEGINNING OF GREENSPAN QUOTE

Remarks by Chairman Alan Greenspan At the Wall Street Project Anniversary Conference of the Rainbow/PUSH Coalition, New York, New York, January 16, 1998

"I am pleased to be able to contribute to this conference's discussion of the challenges and opportunities associated with achieving diversity throughout the ranks of the American business and financial community.

Yet, although the image of free market capitalism has been elevated throughout the world from its sorry state at the end of World War II, the application of it within the United States, its largest adherent, is regrettably incomplete: Too many barriers still prevent the free flow of capital and people to their most productive employment. This conference is addressing one result of those barriers, the underemployment of a significant segment of our population. I trust that from yesterday's workshops and in subsequent discussions you will be able to identify ways to utilize more fully the talents of our increasingly diverse workforce to meet the challenges of a dynamic, global, financial services industry.

I would like to address two aspects of the issue of underemployment of minorities: first, the implications of ignoring the potential that already exists and, second, the need to encourage young people to seek the types of education and training that will meet the demands of work in the twenty-first century.

Regrettably, when faced with choices among otherwise similarly educated or experienced job candidates, some may simply select those with whom they are more comfortable by dint of familiarity--those who come from the same schools, who belong to the same clubs, or who are recommended by their colleagues--rather than look deeper into the unfamiliar for untapped talent. A similar tendency may explain at least some of the large disparity in mortgage application acceptances between whites and minorities that was investigated by the Federal Reserve System and others in recent years. After accounting for the obvious differences in income, assets, and previous credit histories, a significant gap remained. Upon detailed examination, the data showed that those clearly qualified for a loan, or clearly not qualified, were accepted, or rejected, independent of race. The gap may have stemmed at least partly from the extent to which those reviewing loan applications, mainly whites, were prone to give more assistance to whites than to minorities in correcting application deficiencies in marginal applications. I believe it is reasonable to surmise that, if minorities had had the same advantages of application enhancement, the banks would have uncovered many additional, profitable lending opportunities.

I was reminded during a recent visit with Jesse Jackson of a related episode half a century ago: the confrontation just after World War II of the decades-old racial discrimination in major league baseball. At that time, the leagues were somewhat less than "major" in that a significant segment of baseball talent was excluded. I suspect that many league owners realized that hiring black ballplayers could enhance their teams' competitive skills, an improvement that would eventually show up at the box office and on their financial bottom line. Of course, in the late 1940s, aside from those prone to prejudice, most owners were simply more comfortable with the status quo, taking the path of least resistance, that is, doing nothing. Almost as bad, were the procrastinators, who saw what needed to be done but were dilatory. Fortunately, Branch Rickey was neither. He had the courage of his convictions and was smart enough to know that, in bringing Jackie Robinson into the major leagues, he was moving ahead of his fellow owners and could thereby gain an advantage. It also was the right thing to do.

I do not want to argue that minorities today are being excluded systematically from our business and financial major leagues in the same way that black ballplayers were blocked from baseball half a century ago. However, I believe that, like the major league owners, business and financial industry decisionmakers are subject to some inertia in expanding their vision to seek talent wherever it lies. Our experience with mortgage applications is one that underscores the role that free market competitive pressures can play in undermining discrimination and improving the profitability of business activity. Discrimination is patently immoral, but it is now increasingly being seen as unprofitable.

Prices, interest rates, stock prices, and other signals produced by market economies to encourage the distribution of productive resources have no inherent moral content. However, to the extent that market participants discriminate--consciously or, more likely, unconsciously--the setting of wages and prices and the distribution of output are distorted. In the end, costs are higher, less real output is produced, and national wealth accumulation is slowed. If markets were fully efficient--that is, if all resources were allocated optimally and fully employed without discrimination--profit maximizers would arbitrage away such non-economic differences in the returns to human capital and other productive resources.

I do not doubt that most participants in business and finance have the same aversion to the misuse of human talents that they have to the misallocation of capital resources. Thus, efforts such as those at this conference to demonstrate the potential gains from broader approaches to hiring and to the choice of business counterparties seem wholly appropriate. It is in these areas that I believe sustained progress in diversifying the marketplace of business and finance is feasible.

We need also to make further progress in establishing business relationships between the financial services sector and the rapidly expanding number of minority-owned businesses. Indeed, the growth of minority-owned small businesses is truly impressive. The number of black-owned firms increased nearly 50 percent and the number of Hispanic-owned firms jumped 80 percent between 1987 and 1992--between two and three times the rate of growth of non-minority-owned firms. More recent data are not available, but I suspect that trend has continued since 1992 as the strong performance of the economy, coupled with generally ample availability of credit, has created an environment conducive to the birth and growth of innovative enterprises of all ownership types.

The information that we have on the financial behavior and characteristics of minority-owned firms is still fairly sparse. However, the Federal Reserve's 1993 National Survey of Small Business Finances provides a snapshot of the small business community and the types of financial services used by these firms. Minority-owned businesses accounted for about 12 percent of the business population covered by the survey. They shared many of the characteristics of non-minority firms, but they also reported some important differences: minority firms, for example, were somewhat smaller and younger and were more concentrated in the business services industry. Black, Hispanic, and Asian-owned firms, like their non-minority counterparts, tended to rely heavily on depository institutions as a source of funds; but the percentage that borrowed at all was lower for minorities, reflecting in part their younger age, smaller average size, and relative lack of equity capital. A survey of this type cannot yield a full picture of trends in small business finance for minority firms, but as we continue to analyze these data, we hope to learn more. Nonetheless, the data suggest that a solid base of business relationships between the financial services sector and minority-owned firms already exists, a base on which we should be able to build as the number of minority businesses continues to expand and as the existing ones grow.

Several other recent developments hold the promise of improving links between financial institutions and minority businesses. First, major banks and finance companies are trying mass-market approaches to small business finance, similar to approaches in the consumer area, and this effort has greatly expanded the competition for loans. In addition, new innovative intermediaries--such as community development corporations and multi-bank and investor loan pools--are seeking to develop expertise in specific segments of the small and minority business marketplace. These innovators, working with traditional lenders, are helping to develop new approaches to managing costs and evaluating the risks associated with providing financing for very small and young firms.

But credit alone is not the answer. Minorities must be assisted in finding sources of equity finance. This is an essential part of the financial foundation for the dynamic young enterprises that are so central to our wealth-creating process. Unless minorities can have access to all forms of capital from which to create wealth, they will be denied the full benefits of our vibrant economy, in which all should be able to participate. Looking ahead, more generally we must find ways to prepare the more racially and culturally diverse pool of young people who will be flowing into jobs and operating businesses in the twenty-first century. The fast-paced technological change of recent years and the growth of the conceptual component of our nation's output has brought with it increased demands for workers who are equipped not simply with technical know-how but with the ability to create, analyze, and transform information and to interact effectively with others. The evidence suggests that, across a wide range of industries, including financial services, employers have been upgrading their skill mix. Importantly, these changes represent not only a shift in the occupational mix, but also, to a larger degree, an upgrading of skill requirements of individual jobs, for which the range and complexity of tasks and the scope for problem-solving and decisionmaking has expanded.

Our future entrepreneurs, too, must be prepared to compete in an environment in which the largest part of the growth in output is the result of new insights. Breakthroughs in technology are continually adding to the ever-longer list of wholly conceptual elements in our economic output. The success of our future business leaders will depend greatly on their capacity to develop and apply new technology and to rearrange physical reality to achieve products and services more highly valued by consumers. To do this will demand not only greater specialized knowledge, but also an ability to deal with risk and uncertainty. Unfortunately, we have found that we never can predict with any precision which particular technology or synergies of technologies will add significantly to our knowledge and our ability to gain from that knowledge.

Traditionally, broader human capital skills have been associated with higher education, and, accordingly, the demand for college-trained workers has been increasing rapidly. While the higher demand has induced more people to enroll in college, the supply of college graduates has lagged behind the growing demand. As a result, over the past fifteen years, a wide gap has opened between the earnings of college graduates and those of workers who stopped their formal schooling with a high school diploma or less. Higher proportions of both black and white high school graduates have been going on to college over the past 15 years, and minorities now constitute a higher proportion of the B.A.s, M.A.s, and professional degrees awarded each year. Nonetheless, black and Hispanic college enrollment rates still lag, and the number of college-trained minority workers, while expanding, remains relatively small. Moreover, while the proportion of blacks in professional and managerial jobs has increased, it remains lower for blacks than for whites.

To begin to close these gaps will require attention on a number of fronts. A very fundamental need is to look for ways to begin the learning process as early as possible. In the long run, better basic education at the elementary and secondary school level is essential to providing a foundation that will position students to move on to higher education. The statistics on the proportion of our youth who are high school dropouts remain discouraging.

Another trend that is gaining a great deal of attention is the growing propensity of private employers to provide training and education to their workers. The development of human capital is increasingly perceived by many corporations as adding to shareholder value. With this incentive, private industry, I believe, can succeed where government programs have, at best, had limited payoffs: in training and upgrading workers with deficient or outdated skills. Moreover, corporate sponsorship of in-house universities and external formal education can be a resource for furthering the development of talented minority professionals.

Clearly, we still have a long way to go in overcoming the economic consequences of discrimination. Despite the progress that has occurred in educational attainment and occupational upgrading among minorities, the available information on whether there has been an improvement in the earnings differentials between minority and white workers in recent years is ambiguous. More conclusive data are available on trends in capital asset accumulation. The Federal Reserve's Surveys of Consumer Finance indicates that the median real net worth of minority families more than doubled between 1989 and 1995. That said, a sizable gap still exists between the net worth of the two groups.

I have no illusions that the task of breaking down barriers that have produced the gaps in income, wealth, and employment will be simple. I applaud the efforts that Jesse Jackson has undertaken to arrange this two-day seminar. I trust these discussions will raise the level of consciousness in our community about choices involving hiring and developing business relationships with minorities and their businesses and will encourage our business and financial leaders to work harder to identify opportunities to put underutilized talent to work productively and profitably. It is good for business. It is good for our society. And--it is the right thing to do."

END OF GREENSPAN QUOTE

Where is Greenspan's support for government-enforced affirmative action? There is none.

Where is Greenspan's support for hiring unqualified people? There is none.

Where is Greenspan's support for forced business relationships at the point of a gun? There is none.

Where is Greenspan's support for collective demands over individual rights? There is none.

Where does Greenspan prey on guilt? There is none.

Where does Greenspan call for sacrificing those who are qualified, to those who are needy? There is none.

Yet Peikoff accuses Greenspan of all of these things. Where is the actual evidence to support Peikoff's denunciation of Alan Greenspan? There is none. Absolutely none.

It's obvious that Leonard Peikoff hasn't even read Greenspan's speech, and hasn't the faintest idea what he's talking about. Unlike Leonard Peikoff, let us look at Greenspan's quote, in context:

"...and will encourage our business and financial leaders to work harder to identify opportunities to put underutilized talent to work productively and profitably. It is good for business. It is good for our society. And--it is the right thing to do."

Who can be against that? We could say that Leonard Peikoff is against it. According to him, what Greenspan said, shows that Greenspan is no longer an Objectivist, and is no longer an admirer of Ayn Rand. Except that if we said that, we'd be no better than Peikoff. We'd merely be repeating his sin of denouncing a man without first getting the actual facts of the matter; of denouncing a man on the basis of second-hand information.

Obviously what Greenspan said, that we should put underutilized human talent to work, is perfectly in accordance with the principles of Objectivism. Obviously Leonard Peikoff unjustly smeared Alan Greenspan. Why? Because Peikoff simply couldn't be bothered to research the facts before denouncing Greenspan on his nationwide radio talk show. Peikoff was willing to trust the judgment of a liberal organization like the Greenlining Institute, an avowed advocate of affirmative action, that Greenspan was referring to the sort of coercive affirmative action, mandated and administered by the government.

Think about this. It really goes to the heart of Leonard Peikoff's judgment. Rather than get the facts, Peikoff was willing to TRUST THE JUDGMENT of a liberal organization like the Greenlining Institute, an avowed advocate of affirmative action, that Greenspan was referring to the sort of coercive affirmative action administered by the government. Peikoff was willing to condemn and denounce Alan Greenspan on the basis of a single quote, attributed to Greenspan, that appeared in a PAID ADVERTISEMENT by a LIBERAL SPECIAL INTEREST GROUP, in the NEW YORK TIMES!!!

As far as I'm concerned, Leonard Peikoff simply has no credibility. He is not a reliable source of information. He will readily accept second-hand information, from highly dubious sources, when it suits his wishes to do so.

Was the Greenspan quote taken out of context by the Greenlining Institute? That depends on what the Institute regards as "affirmative action." Note that nowhere in his speech, does Greenspan use the words "affirmative action." It's not difficult to figure out why. Over the years, "affirmative action" has acquired so many different meanings that it has become almost useless as a concept. Does Greenspan support the sort of affirmative action where a company makes an attempt to locate qualified minority workers, who may have been largely absent from a particular profession or industry? Certainly. Does Greenspan support the sort of affirmative action where the government forces a company to hire a certain quota of minority workers? There is not a shred of evidence that Greenspan supports this sort of affirmative action.

Was the Greenspan quote taken out of context? It depends on your definition of affirmative action. The question is as fuzzy as the concept.

When it came to the validity of the Greenspan quote, Peikoff felt that it was quite sufficient to say, "Now it might have been taken out of context; it might be incomplete or made up out of whole cloth. If so, forget what I'm about to say. But if it's true..." This is one of the most grossly irresponsible things Peikoff has ever done. Instead of checking out the facts, Peikoff simply declares, "If this quote isn't true, then never mind." That may be good enough for a Saturday Night Live sketch, but it's NOT good enough when we are talking about real people with real reputations.

Let's look at another Peikoff claim, and see if it squares with the facts:

"Alan Greenspan has muffed his chance, time and again, in Washington. I don't ever hear him making a strong, pro-capitalist statement."

"The decades since World War II have increasingly underscored the superiority of market capitalism. First, the head-to-head competition with the centrally planned economies of eastern Europe came to an abrupt end with the freeing of walled-off eastern Europe in 1989. The results of that experiment in social systems marked an unequivocal victory for the market capitalism of the West. This past year has exhibited a more modest replay of 1989 with the dismantling in many Asian countries of the model of so-called mercantilist capitalism, which involved a good deal of state intervention. Again, the less fettered capitalism that is most prevalent in the West demonstrated its superiority in sensitivity to consumer preferences and market forces."

Let's look at another Peikoff claim:

"For him to say it's good for business, which means affirmative action is good for business, to hire unqualified people, or to say it's good for our society, which means it's good for our society to have forced relationships at the point of a governmental gun, or for him to say this is the right thing to do, which means to elevate alleged collective demands over individual rights, and to prey on guilt, sacrificing those who are qualified to those who are needy, regardless of what the source of the need or the qualification is, this is complete, utter betrayal of everything that I know Alan Greenspan knows."

Let's look at another Peikoff claim:

"As far as inner-city economic development, that's a way of using the tax code to engage in social engineering, on the premise that the government owns our wealth, and can do with it what it wants. And Alan Greenspan knows everything that's wrong with that, too."

"So the only out I give him, in my eyes, is this quote is made up or taken out of context. But if it isn't, and if he doesn't sue, or in some way contest it, he is out, in my eyes."

Several days after denouncing Greenspan, someone sent Peikoff a copy of Greenspan's speech, containing the quote in question. After reading the speech, Peikoff was forced to admit that he had quoted Greenspan out of context, and that there was nothing in Greenspan's speech that justified Peikoff's earlier denouncement of Greenspan. Accordingly, Peikoff withdrew his condemnation and apologized to Greenspan on the next weekly edition of his radio show.

The fact remains, however, that Peikoff did not even bother to give his old friend the benefit of the doubt, or take the time to check out what Greenspan actually said in his speech, before condemning him on a national radio program. That is the height of irresponsible behavior, and clearly demonstrates that Peikoff is unfit to command a radio microphone.

For a man who bills himself as a "champion of reason," Peikoff's behavior was incredibly irrational.

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