Greenspan Renews Call To Rely On Free Markets

By Agence France-Presse Federal Reserve Chairman Alan Greenspan, renewing his call against protectionism, said Jan. 26 that free markets have worked best to limit economic downturns in the past few decades and boost living standards. "So long as markets are free and human beings exhibit swings of euphoria and distress, the business cycle will continue to plague us," Greenspan said in a speech by satellite to a London conference and released by the Fed. He noted that "flexible institutions appear to significantly ameliorate the amplitude and duration of the business cycle." Greenspan's speech repeated many themes he has developed over the years as a strong supporter of market capitalism. The U.S. central banker once again warned that creeping protectionism could destabilize the global economy in a misguided effort to protect U.S. jobs and products. Although a million Americans leave jobs each week, he said, more than 94% of the workforce has remained employed year after year. "We can thus be confident that new jobs will displace old ones as they always have, but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process." He added, "the most significant lesson to be learned from recent economic history is arguably the importance of structural flexibility and the resilience to economic shocks that it imparts. The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances." Greenspan repeated his concern about a return to protectionism. "The consequences of moving in that direction in today's far-more-globalized financial world could be unexpectedly destabilizing," he said. Copyright Agence France-Presse, 2004