Years ago, I was told a story that somehow seems relevant to this memoir. It’s about a lonely old man. His wife had died, his children were gone, his business was closed. Yearning for company, he decided to buy a parrot. Off to the local pet store he went, pointed a finger at the first parrot he saw, and asked the price.
The proprietor said, “He’s a fine parrot, and he costs $5,000.”
“How is that one parrot worth $5,000?”
“Well, his native language is English, but he also speaks French, German, Italian, and Spanish—all of the important languages of the European Union.”
“I’m old, I’m not working anymore, and I don’t give a damn about the European Union. Give me that young one over there.”
“Okay, but he’s $10,000.”
“How can he be $10,000? What’s so special about him?”
“He’s young but he’s learning. He already knows Mandarin, Cantonese, Japanese, and he’s working on Korean. He is just the right parrot for the twenty-first century.”
“Look, I’m not going to live for long in the twenty-first century. How about that old one up in the corner with his feathers falling out and glassy eyes. He’s for me. I’ll take him.”
“I understand, but he’s $25,000.”
“How can that grizzly old guy possibly be worth $25,000?”
“None of us can figure it out. All we know is the other parrots call him Mr. Chairman.”
I’ve told that story maybe a hundred times. This will be the last. Even now I’m called Mr. Chairman fairly often and I actually still chair—these days mostly “honorably”—a few small organizations. One is the Volcker Alliance, which I created in 2013 as part of my effort to encourage training and education for public service. But when somebody stops me on the street or on the bus, which still happens every once in a while, they’re usually thinking of when I was one particular chairman, of the Federal Reserve Board in Washington, some forty years ago. Inflation rising to record levels, 10 percent unemployment and interest rates topping 20 percent made a lasting impression.
We’ve seen plenty of financial crises since then, including the Great Recession that began in 2008. Sweeping reforms in financial regulation, including the so-called Volcker Rule, have followed.
Important as those events were in shaping my life, they aren’t the reason I decided to write this memoir. I’m driven by a growing, and much broader, concern. We have for some time been experiencing a breakdown in the effective governance of the United States.
Polarization between (and even within) political parties, accompanied by the ever-growing influence of highly concentrated wealth, has paralyzed key elements of public policymaking: prudent budgeting able to finance programs ranging from our military services to old-age retirement; sensible strategies for international affairs, immigration policy, health care, and much more. Even needs as self-evident as rebuilding our infrastructure seem, for all the talk, beyond our capacity for action.
Less understood is the erosion in what Alexander Hamilton insisted at the very beginnings of the republic would be the true test of government: “its aptitude and tendency to produce a good administration.” There has been a lack of attention for years to the need for effective governmental organizations staffed by talented, dedicated public servants. The result has been too many breakdowns, too little efficiency, and, most critically, too much distrust of government itself. Polls show fewer than 20 percent of Americans trust government to do what’s right most of the time, down from about 75 percent sixty years ago.
In the early 1950s, when I first took a government job, it was a matter of personal pride, as it was for others. With strong leadership in both political parties, America supported Europe’s economic recovery, helped restore democracies in the free world, and opened global trade and investment. The result seemed evident: unprecedented gains in the human condition, marked by growing populations over most of the world that were healthier and wealthier than ever before.
Looking back, I am forced to recognize that the United States, in leading the grand coalition of free and emerging states, could not entirely escape the mortal sin of hubris. We embarked on long, unnecessary, and ultimately unwinnable wars far from home. We failed to recognize the costs of open markets and rapid innovation to sizable fractions of our own citizenry. We came to think that inventive financial markets could discipline themselves. We underestimated how much the growing size, economic weight, and ambitions of other countries, most critically China, would come to upset the easy assumption of America’s unique global reach.
The collapse of the Soviet Union and a more open, prosperous China at the end of the twentieth century made some believe we had come to the end of history—a victory of democratic values and perpetual growth around the world. Now, we find ourselves in a different mood. Our historic allies are perplexed and questioning our leadership. The vision of spreading democracy and the rule of law is in jeopardy.
Over the seventy years of my adult life I have had the good fortune of playing a small part in American governance, observing its great strengths—and some large blunders—firsthand. I hope this memoir provides lessons, particularly in matters of financial and monetary policy to which I have dedicated most of my life.
But I have come to understand something broader and more important: the need to restore trust in the full range of our governmental processes. My hope is that the Volcker Alliance can play a part.
It will not be easy.