Former Federal Reserve Chairman Alan Greenspan said the political revolution in Egypt won’t have the same impact on the global economy as the collapse of the Berlin Wall two decades ago.
Greenspan, who now heads his own consulting firm, Greenspan Associates, made the comments in a telephone interview from Washington. Goldman Sachs Asset Management’s Jim O’Neill said on Feb. 14 that the end of Hosni Mubarak’s 30-year rule in Egypt resembles a “Berlin Wall moment” because it may open Middle Eastern countries to world trade.
“If Egypt adopts a more competitive, free-market system, its rate of growth will certainly rise. While that will doubtless enhance growth in the Middle East, it cannot match the consequences the fall of the Berlin Wall initiated.
“The fall of the Berlin Wall was a seminal event that led to the widespread adoption of competitive markets that, in turn, created a dramatic rise in income in China and the rest of emerging Asia.
“Since they didn’t have either a consumption culture or financing capabilities to consume those large incomes, the incomes were largely saved. That, in my judgment, is the major reason why long-term interest rates came down worldwide and global economic growth soared.”