Free markets 'boosting world living standards'

The spread of free markets is driving the world’s living standards higher, US Federal Reserve Chairman Alan Greenspan said.

“Despite worrisome pockets of violence and destruction, commerce and wealth-building continues apace,” he said yesterday in remarks prepared for delivery at New York University. Mr Greenspan was accepting an honorary degree from his alma mater.

“On average, world standards of living are rising in large part because of the widening embrace of competitive free markets, especially by populous and growing China and India,” he said.

A copy of his remarks was distributed in Washington.

Since the autumn of 2001, global gross domestic product per capita has grown more than 8%, according to Mr Greenspan. Growth in developing Asia, where many of the world’s poor reside, has been considerably faster, he said.

Open and competitive markets have made the global economy more flexible and better able to withstand jolts from terrorism and other problems, he said.

Personal trust, he said, was a key to the smooth functioning of markets.

He added that the wave of corporate accounting scandals that rocked Wall Street in 2001 dented that crucial trust.

“Corporate scandals in the US and elsewhere have clearly shown that the plethora of laws of the past century have not eliminated the less-savoury side of human behaviour,” he said.

“We should not be surprised, then, to see a re-emergence in recent years of the value placed by markets on trust and personal reputation in business practice.”

Greenspan, 79, will retire from the Fed on January 31 after 18-plus years at the helm.

On Tuesday, policymakers boosted a key short-term interest rate to its highest level in four and a half years to keep inflation under control.

Greenspan has received degrees in economics, including his PhD, from New York University.