A Conservative Who Can Compromise

By Barbara Rudolph

Alan Greenspan has always been bold enough to make momentous changes in his life. After studying music at Manhattan's prestigious Juilliard School and touring for a year as a clarinet and saxophone player in a dance band, he decided at age 19 to forsake his musical career for college and the arcane discipline of economics. Eight years later, while studying for his Ph.D. at Columbia University, Greenspan abandoned academia to become a partner in a new consulting firm. In 1974, having never held a government position, the economist waltzed into Washington as chairman of President Gerald Ford's Council of Economic Advisers -- just in time for the worst recession in postwar history.

The man who will now become the next chairman of the Federal Reserve Board has proved forceful and adroit in adapting to most of the roles he has played. As a conservative economist with a profound faith in the free market, Greenspan has earned the attention of thinkers in every ideological camp. As a White House official, he displayed the dedication and dexterity needed to fashion difficult political compromises. And, unlike many economists who flourish mainly in the confines of a college classroom, Greenspan scored a solid success in the corporate world. His highly profitable, 34-year-old Townsend-Greenspan consulting firm numbers among its clients some of the largest U.S. corporations.

Personally, Greenspan is something of a study in contrasts. Soft-spoken and shy, he nonetheless cuts an impressive swath on the social circuit that revolves around Manhattan's Upper East Side and Washington's Georgetown. The economist, who favors custom-made shirts and conservative suits, can be spotted at parties thrown by the likes of Fashion Designer Oscar de la Renta and Publisher Malcolm Forbes. A longtime bachelor (a one-year marriage to Artist Joan Mitchell was annulled in 1953), Greenspan once dated Television Personality Barbara Walters, who calls her former escort an "excellent dancer." His current companion is Susan Mills, a managing producer of the MacNeil-Lehrer NewsHour.

As an economist, Greenspan also resists easy classification. Though unmistakably conservative, he has never joined any of the doctrinaire factions of right-wing economics, such as the monetarists or supply-siders. He is a technical whiz who ponders computer printouts on everything from yesterday's price of steel scrap to next week's projected cost of cocoa beans. Says Frank Ikard, a former Texas Congressman who is a friend of Greenspan's: "He is the kind of person who knows how many thousands of flat-headed bolts were used in a Chevrolet and what it would do to the national economy if you took out three of them." But Greenspan can also debate larger social and political issues, a talent that eludes many of his number-crunching colleagues.

Economists who know Greenspan admire him personally and professionally. University of Minnesota Professor Walter Heller believes Greenspan has the perfect temperament for his new post. Says Heller: "He doesn't show his emotions. The Fed chairman has to have the capacity for forthright evasion and controlled obfuscation, and Alan is very good at that. ((Former Chairman)) Arthur Burns puffed on a pipe. Volcker puffed on cigars. Alan does not smoke, but when required, he can set up a nice smoke screen with words."

In or out of Government, Greenspan has kept a high profile. In 1985 he appeared in television commercials and newspaper and magazine ads as a pitchman for Apple's IIc computer. He makes about 20 speeches a year (his & standard fee: $22,000) and sits on the boards of six corporations, including Alcoa, Mobil and Capital Cities/ABC.

Greenspan often flashes an understated sense of humor and irony. At a TIME Board of Economists meeting in 1984, for example, he talked about the need for political leaders to hammer out a federal budget compromise behind closed doors. Said he: "The old smoke-filled room probably will have to be resurrected, even if it has a NO SMOKING sign in it."

Born in Manhattan as the only child of Stockbroker Herbert Greenspan and his wife Rose, young Alan had displayed a natural affinity for numbers by the time he was five. He could add large sums in his head and rattle off baseball players' batting averages. A mediocre student at George Washington High School, Greenspan went on to receive his bachelor's degree in economics summa cum laude from New York University in 1948. He entered the doctoral program at Columbia University, where he came under the tutelage of the soon-to-be- legendary Arthur Burns. Greenspan left to go into business for himself in 1953 and never got around to completing his degree (finally granted by New York University) until 1977.

Perhaps the most important of Greenspan's early gurus was Ayn Rand, the best-selling author of novels like Atlas Shrugged. Though Rand is now generally viewed as a pop philosopher who was neither a rigorous nor original thinker, she was fresh and influential when Greenspan met her in 1952. The economist became taken with her theory of objectivism, which argues that society is best served by "rational selfishness," in which people act only to further their own private interests. Greenspan, who was a friend of Rand's until her death in 1982, credits the writer with teaching him that "capitalism is not only practical and efficient but also moral." During the 1960s, as a contributor to the Objectivist, Rand's monthly journal, Greenspan expounded some extreme economic views. "The welfare state," Greenspan wrote, "is nothing more than a mechanism by which governments confiscate the wealth of the productive members of society."

His writing was only a sideline, though. After launching his consulting firm with partner William Townsend, Greenspan devoted his energies to building the business. This was especially evident after Townsend died in 1958 and Greenspan acquired 99% of the stock. Today Townsend-Greenspan provides a wide variety of financial data and detailed forecasts about how the economy will perform. The cost to clients: between $15,000 and $200,000 a year.

As an economic forecaster, Greenspan has had his share of hits and misses. In early 1986 he predicted a year-end unemployment rate of 6.6% and was right on the button. In December 1984, though, Greenspan estimated that in 1986 inflation would be running at a 6.8% rate. In fact, prices increased 1.1% last year.

A call from Nixon's 1968 presidential campaign propelled the economist into the political arena. As the candidate's director of domestic-policy research, Greenspan showed he could adapt and, when necessary, subordinate his own economic opinions to the realities of politics. He proved, in short, to be a pragmatist.

Greenspan agreed to become chairman of the President's Council of Economic Advisers in July 1974, just a month before Nixon resigned. President Ford supported his predecessor's choice, and Greenspan took over in September. He would become one of Ford's closest advisers and a golfing partner as well.

During his tenure in the Ford White House, Greenspan recognized the perils of inflation but nonetheless had to defend an especially lame program to combat price hikes: the "Whip Inflation Now" campaign concocted by Ford. The President's calls for Americans to conserve energy and shop wisely -- and wear WIN buttons -- had little impact. The subject of inflation also inspired one of the most embarrassing gaffes of Greenspan's career. Speaking at a Government hearing in 1974, he declared, "Everyone was hurt by inflation. If you want to examine percentagewise who was hurt most . . . it was Wall Street brokers." Following a public outcry, Greenspan backed off. "Obviously the poor are suffering more," he said.

Even after Greenspan left the White House in 1977, he was regularly drawn back to politics. In 1979 Edward Kennedy consulted Greenspan for advice about making a bid for the presidency. During the 1980 Republican Convention, Greenspan played an important role in the behind-the-scenes jockeying to name Ford as a vice presidential candidate on the Reagan ticket.

Four and a half years ago, as chairman of Reagan's bipartisan National Commission on Social Security Reform, Greenspan displayed his knack for forging compromise on the most sensitive of political issues. The group was charged with the critical job of recommending steps to save the Social Security system from insolvency. After 13 months the panel proposed raising + the payroll tax, extending Social Security coverage and delaying cost of living increases for retired workers -- all controversial measures that would be largely adopted by Congress.

While Greenspan's consulting firm has continued to thrive despite the owner's periodic political forays, at least one of his business ventures has turned sour. In 1984 Greenspan joined two partners in opening a money- management firm called Greenspan O'Neil Associates. The company, with $3 million in backing from Talent Agent Marvin Josephson, hoped to manage pension-fund accounts. But Greenspan O'Neil never attracted enough clients, and early this year the firm closed.

Despite his hectic schedule, Greenspan occasionally finds a few hours for tennis at the Century Country Club in Purchase, N.Y. Music remains a passion. These days he listens most often to the baroque composers Handel and Vivaldi and occasionally plays the clarinet. Another favorite pastime, the economist has said, is staying in his five-room Manhattan apartment, "nibbling on things from the fridge and reading a thriller." One favorite author: Eric Ambler.

Greenspan will soon need such diversions more than ever. Of all the wrenching transitions in his eventful career, none rivals the challenge he is about to take up.

With reporting by Frederick Ungeheuer/New York