In particular, I think he will catch some of the blame for the excesses of the late 1990s boom for not increasing interest rates earlier to help contain it. I think he will also be judged to have been too tardy in increasing interest rates this cycle, encouraging the US housing boom and leaving his successor with some nasty decisions next year and beyond.But that is just one view. What is pretty widely accepted is that decisions by Dr Greenspan have had enormous influence over the performance of the US economy. You do not win the confidence of the financial markets easily, and the fact he has done so has encouraged international investment in the US, which in turn has made possible its rapid growth. So the answer to the question - is the job really so powerful? - is pretty much yes.What does this say about power in the world? Well, it says that the world economy is driven by private-sector financial and trading flows. China has sustained a growth rate in excess of 8 per cent for two decades, and is on course to pass the UK as the world's fourth largest economy this year. That is because it has attracted huge investment from the US and has a huge market in exporting to the States.
China's power and influence has increased because it has grown so strongly.Much the same point could be made about India, another huge beneficiary of globalisation. Its take-off has been more recent, but the world listens to India now to an extent that it did not a couple of decades ago.One could go further and cite the rise in the influence the UK has within Europe. In 1992, the country was humiliated when sterling was forced out of the Exchange Rate Mechanism. But because it has grown more swiftly than Germany, France or Italy and has been much more successful in creating jobs, our European competitors are forced to acknowledge that there are elements in the UK economic model that they must adopt.All this has happened because of the rising importance of flows of capital between countries. As recently as 1980, foreign-owned assets were equivalent to one quarter of world GDP; by 1990 they were half; and by 2000 they were as large as world GDP.
Attract those funds and you do well; repulse them and you do badly. So politicians who follow market-friendly policies have countries that prosper, and vice versa. But the overall eye over these world markets - insofar as there is a single eye - is the chairman of the Fed.So how will Ben Bernanke fare? What we can say is that he was the safest pair of hands available. He is a respected economist (like Mervyn King), which in this context is a recommendation. And the US markets initially liked the appointment, which is also good news.The global outlook is less sunny. Since the early 1990s recession, there has been a long period of low-inflationary growth That continues, but it is under strain.
