Free Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession by Frederick Sheehan Page A

were removed from the price index. 9 Next went used cars, children’s toys, jewelry, and housing—about half the costs that consumers absorbed in their daily struggle with rising prices. 10
    Today, three decades after the anchovy shortage, without much ado from the economics guild, the media announces the monthly ex-food, ex-energy CPI, produced by the Bureau of Labor Statistics. This gently rising CPI—a charade—has compounded at a much lower rate than the true costs paid by Americans. This is one reason the collapse in living standards among the lower half remains a mystery to those who trust government press releases and the media that report them.
    The science of economics as applied to national statistics was (and is) more a confiscation of the truth than a midwife to it. Incumbent and future politicians, including future Fed chairman Greenspan, introduced and nurtured such hullabaloo as “hedonics” and the “birth-death rate” in the highly publicized but little understood calculations of economic growth rates and unemployment numbers. The figures were a disgrace, and so were the parties responsible for their introduction and dissemination. Greenspan’s turn at the Council of Economic Advisers was to be a screen test for a future role in the charade, a dress rehearsal for his political, acting, and dissembling talents, the inestimable qualities needed by a Fed chairman in an economy that was rocketing off its moorings.
    7 Roach would be chief economist at Morgan Stanley during the Greenspan years, where he used his bully pulpit to decry the Greenspan legend.
8 Grant’s Interest Rate Observer , July 21, 2000, p. 1.
9 Ibid. Grant’s quotes taken from Stephen Roach, “The Ghost of Arthur Burns,” Global: Daily Economic Comment , Morgan Stanley, June 26, 2000.
10 “A Nasty Whiff of Inflation,” Economist , September 24, 2005, p. 85.
    In any case, numbers cannot capture inflation. Inflation generally works hand in hand with deterioration. What was money buying?
In a 1966 Lou Harris poll, 75 percent of respondents thought that American goods were of “good” or “excellent” quality. By 1977, this had fallen to 47 percent. 11 A poll conducted by the University of Michigan in 1977 found that only 27 percent of American workers would buy the products they made. 12 Absences at Ford and General Motors had risen steadily during the 1960s, then spiked upward in 1969 and 1970. By 1970, 5 percent of General Motors’s workers went fishing on any given day; more than 10 percent played hooky on Mondays and Fridays. The overpaid and disgruntled workers took to sabotaging the cars. Fortune magazine found that “screws have been left in brake drums, tool handles welded into fender compartments (to cause mysterious, unfindable and eternal rattles), paint scratched, and upholstery cut.” 13
At the same time, Americans were thinking big. The average size of a new house in the United States was 953 square feet in 1950; by 1970, it was 1,500 square feet. In 1950, 66 percent of new houses had two or fewer bedrooms; by 1970, that had dropped to 13 percent. 14 Americans wanted more. The “bigger is better” trend leads to other questions: if less had been OK, would oil prices and shortages have made headline news in the 1970s?
    Mr. Greenspan Escapes from New York
    Greenspan’s Washington tour may have been a welcome opportunity to escape New York—he was one of more than 1.1 million New Yorkers who emigrated from the city in the early 1970s. 15 Many companies fled the cities for less expensive headquarters, reversing the trend that had begun in the 1950s. By 1960, New York was the world’s financial capital, and much of the building over the next decade was to accommodate finance. 16 But between 1968 and 1970, 18 major corporations left New York and 14 more announced plans to leave. 17 The wave was just beginning. The financial companies generally remained in New York City. They could afford to.
    11 David Frum, How We