Alan Greenspan, the former Federal Reserve chairman whose free-market orthodoxy defined an era of global finance, has died at the age of 100. For the City of London, his passing marks the end of a chapter, but his legacy remains a contentious force in British economic policy.
Greenspan’s tenure at the Fed from 1987 to 2006 coincided with a period of unprecedented market liberalisation. His belief in deregulation and the self-correcting nature of markets became gospel for a generation of policymakers. The 'Greenspan put' – the implicit guarantee that the Fed would intervene to prop up asset prices – fuelled a speculative frenzy that culminated in the 2008 financial crisis. Yet his influence on UK fiscal and monetary strategy was profound.
When the Bank of England gained independence in 1997, it adopted a framework that mirrored Greenspan’s faith in inflation targeting and minimal intervention. The result? A housing bubble, soaring household debt, and a decade of austerity. Today, as gilt yields spike and the pound wobbles, policymakers are still wrestling with the consequences of his doctrine.
The irony is palpable. Greenspan’s free-market legacy has left the UK with a bloated financial sector and a hollowed-out industrial base. The very mechanisms he championed – easy credit, deregulation, and global capital flows – now threaten fiscal stability. Capital flight is a constant risk, and the Bank of England’s inflation-fighting tools are blunt in a world of supply shocks.
Critics will say Greenspan was a man of his time, a product of the post-war consensus that markets always know best. But his death forces a reckoning. Has the UK been trapped by his ideology? The Treasury’s current obsession with 'fiscal responsibility' is a direct echo of Greenspan’s catechism. Yet the bond market is not fooled. Yields on 10-year gilts remain elevated, reflecting a lack of confidence in the government’s ability to manage debt without choking growth.
In the City, there is a quiet unease. The old certainties are crumbling. Even as we mourn a titan, we must ask whether his intellectual inheritance has become a straitjacket. The next chancellor would do well to read beyond the headline numbers. Greenspan’s world was one of stable inflation and rising asset prices. Ours is one of stagflationary risks and geopolitical fragmentation.
His death is not just a personal loss; it is a historical marker. The era of Alan Greenspan is over. But its shadows will fall over Threadneedle Street and Whitehall for years to come. The question is: will we have the courage to turn the page?
