Volcker’s lessons

“I hope this memoir provides lessons, particularly in matters of financial and monetary policy to which I have dedicated most of my life.” – (Paul Volcker, Keeping At It)

John Taylor, professor of economics at Stanford, ended his reflection on the life of Paul Volcker thus, “The American economy still needs change. Despite tax and regulatory reforms, the federal deficit remains large and the federal debt is rising. The answers are as simple as they were in Volcker’s time: Get back to sound and predictable budget policy. Paul Volcker’s career shows the way. Good economics leads to good policy, which leads to good results.” Replace American with Barbadian and his statement would, sans the federal bits, still be pretty accurate.

Volcker died on Sunday, December 8 at the age of 92. With a 6-foot-7 frame he was a literal and an intellectual giant of a man. One commenter put it best, “Volcker was our last true central banker with the resolve to do the right thing regardless of the political and Wall Street pressures.” A sentiment shared by President Jimmy Carter (now 95), who appointed him as chairman of the Federal Reserve Board in 1979 (and lost his re-election bid in the midst of the 1980 recession): “Paul was as stubborn as he was tall, and although some of his policies as Fed chairman were politically costly, they were the right thing to do.”

It is hard to imagine any politician saying that about a central banker today. Carter’s statement ended, “His strong and intelligent guidance helped to curb petroleum-driven inflation, easing a strain on all Americans’ budgets.” Commenting on Professor Taylor’s conclusion one person said, “Voters don’t want good economics, they want Santa Claus. And candidates’ willingness to pander to them lately has become obscene.” Therein lies the root cause of much of our modern economic maladies, leaders who do not bother with reality, enabled by an electorate who look forward to Santa’s bag of goodies.

In remembrance of Volcker, I can do the reader no better favour than to recommend Keeping At It. Read it and you will come away with a much better sense of reality. “I’d lived through enough financial crises,” writes Volcker, “and enough Federal Reserve Boards and chairmen, to know that there had been repeated lapses in attention paid to potential threats to financial stability.” Hence the title of his memoir, which reminds us all, leaders and electorate alike, of the need to be ever vigilant in the never seemingly ending quest for sound money and good government. I leave you with a selection of his thoughts from the end of his memoir.

“National educational policy, international cooperation, and other challenging subjects are attractive to scholars and students alike. But policy alone, no matter how brilliantly conceived, doesn’t get the job done. […] At the end of the day, good policy is dependent on good management.” To that end, he setup the Volcker Alliance that sponsors research in “public management, by bringing together leading civil servants and academics.” As for Academe, he asks, “Are the university curricula relevant to emerging needs? Indeed, is there any consensus on the approaches and talents that are needed?”

What about the outdated way we work: “Does the structure of the civil service need serious review in the light of today’s technology and lifestyles?” Then, of course, there is the old battle that is new again: “Potentially most significantly, China and Russia seem determined to set out competing economic and political models.” In the light of these and other challenges facing his country, Volcker suggests some advice from his mother (who also lived for almost a century): “Get back to work.” Not redistribution, work. (After December of course).

Adrian Sobers