Lawrence B. Lindsey, economist and former Federal Reserve Board Governor, targets his new work, Economic Puppetmasters: Lessons from the Halls of Power, to three types of readers. They are: the investor who seeks to protect himself in the market; the student of political economy who wants to understand how decision makers act in the face of crises; and the informed voter who may soon be asked to accept new institutional arrangements that govern world finance.

Presumably, all three are interested in securing a competitive advantage in the global economy. And, if the growth in the stock market is an indicator, all seek to divine the messages of titans such as Federal Reserve Board Chairman Alan Greenspan; Japanese vice minister of finance, Eisuke Sakakibara; former German chancellor, Helmut Kohl; and world-renowned financier, George Soros.

Few insiders can give a better picture of the international monetary system and, more specifically, the American Federal Reserve System than Lindsey. His premise is clear: In spite of public perceptions to the contrary, these strong-willed puppetmasters “may never be masters of the systems over which they hold sway, no matter how much they delude themselves and the public into believing the opposite.” To Lindsey, this is clearest when success eludes the puppetmasters.

Lindsey highlights Greenspan, appointed to his post by three American presidents. The other three puppetmasters stand in his shadow but are able to convince others perhaps unintentionally that they too can part the waters.

Sakakibara manifests the pitfalls of a rigid mandarin who fails to adopt economic dynamism — the ability to use flexible labor markets and the encouragement of an entrepreneurial class. Hence, in its quest for uniformity, Japan has failed to produce a Bill Gates or a Michael Dell or even, for that matter, a marketing icon like Michael Jordan.

Kohl is lauded for his unification of Germany and his vision of a European monetary union. Yet Kohl, despite holding his office longer than anyone since Bismarck, did little to reverse the excesses of the welfare state and rigid work rules.

In truth, these men are constrained by global instabilities from acting like puppeteers. At best they may manage to untangle some of the strings of a world in which there is no alternative to a market economy.

Some (Greenspan, Soros) do better than others (Kohl, Sakakibara) in a game in which the rules are continually being rewritten and growing democratic movements disaggregate economic decision-making into many hands.

In the final analysis, it is triumphant America that the rest of the world should emulate, says Lindsey. Americans have demonstrated “how to get the policies right.” Much has to do with flexible labor markets, lower taxes, technology and its attendant forces of creative destruction. Needless to say, Greenspan's faith in markets and skepticism about government action are the first principles upon which he operates. But his most incisive asset is his “real-time mind.” Able to digest industry-sector information, Greenspan is better able to overcome “decision lag.”

Lindsey believes that the American system allows Greenspan to play the role of contrarian, a role first carved out by British economist John Maynard Keynes. This is not an odd juxtaposition. Another player, Ronald Reagan, for whom Lindsey served as an advisor, also played contrarian by refusing to trade away two key planks of his policy: flexible labor markets and aggressive tax policy.

Given enough latitude, contrarians can rebuff politicians seeking easy money and painless growth. By Lindsey's account, “Alan Greenspan is successful at his job because he found a way of taking unpopular actions without arousing sufficient wrath to cause elected officials to curtail his power. This is a remarkable achievement.” Add to this record, another milestone: Greenspan has never lost a vote on monetary policy, nor, according to Lindsey, even come close to losing one.

Greenspan's steering rather than rowing of the American economy is even more remarkable when one looks long-term. Since the recession of 1982, the United States has enjoyed a continuous 16-year period of economic expansion save for one “relatively mild recession” (1991-92). Since the introduction of Reaganomics (which Lindsey rightfully argues laid the groundwork for the current expansion), the U.S. economy has weathered a 1987 stock market crash; a banking (S & L) crisis; the Mexican peso crisis; an Asian flu; corporate downsizing; and record-breaking 1993 Clinton tax increases. With this prosperity prevailing, observers have perhaps forgotten to ask how the great Greenspan would handle a real crisis. As he did during the October 1987 stock market crash, he would probably play contrarian. By early May 1999, Greenspan was again warning that tight labor markets and rising wages without continued growth in productivity would trigger inflation.

In highlighting the drive toward European Union, Lindsey underscores the benefits of American tax and fiscal policy as well as the composition of its central bank. Any puppetmaster would certainly be wise to steer the EU into the path beaten by the Americans. But this will be difficult. That's because the EU's basic unit rests not on Hamiltonian federalist principles of checks and balances, but on the nation-state in which each member has virtual veto power.

The European Central Bank members are chosen by the nation-states, which means they will reflect the political views of their governments. “While the Fed tends to act like a collective CEO or corporate board of directors, the ECB is designed to work more like a legislature,” observes Lindsay.

As if being a puppetmaster were not bad enough without a nation-state entangling one's strings.