- Hello, I'm Ray Dalio, and I'm happy to be here
with Paul Volcker, who is my greatest hero.
And, probably to many people,
the greatest living American, and that's a big statement.
I've watched Paul evolve since 1970,
when he was Under Secretary of the Treasury
and Monetary Affairs, all the way through the present.
And, during those years, he had more affect
on the world economy, and built up more credibility,
and has been at the center of more economic decision making
than any man alive.
In his 91 years, he's affected the world in profound ways,
some of which are very famous,
and some of which are just a reflection of his credibility.
For example, when the issue, the controversial issue,
of the monies that Jews lost in the holocaust
went into Swiss banks, and that very delicate subject,
very different from regular economics,
the man that they chose to examine that question
was Paul Volcker.
Paul, in many, many different occasions,
and at many different times,
shaped many, many different issues.
So, this is a man who has extraordinary principles.
I've known him to be the most principled person that I know,
and also to have been at the center
of most important economic decision making
during those many, many years, for many decades,
and to see things from the top.
This is a man with great perspective,
and, so, I'm here today to pull out the principles from Paul
and to understand how he got those principles.
So, Paul, to start off, please give me what you consider
to be what your most important principles are.
- Well, first of all, thank you
for those very generous comments,
and let me say I'm glad to see you here at this point.
I've been a little under the weather, I hope I'm recovering.
But, you know, it's a book I just wrote,
we got something to talk about.
You ask about my principles and the first thing
that comes to mind, which I'm sure we'll get to later,
is my first principle is effective governance.
And I go back and we can discuss this in more detail.
Alexander Hamilton put it all in a nutshell.
Alexander Hamilton is an old treasury guy,
he's a financial guy, he restored the credit
of the United States, so he's a hero of mine.
He said, "The true test of good government
"is it's ability to administer."
Not the great policy but can they carry out the policies
effectively and economically?
And good government is not just high policy,
it's making the machine work, day after day, efficiently.
Faith of the American people in our government today
is really distressing.
There have been polls taken every year,
ask the same question, see how the trend changes.
Do you trust your government to do the right thing
most of the time?
Doesn't sound, the right thing most of the time,
Doesn't sound like all that difficult a test.
You get maybe 20% that say yes.
You ask about the Congress, it'll be less that 20%.
And, it's no great secret, that we're torn apart
by ideological and other differences now.
So, we got a real challenge.
So when you ask my principles,
my first principle is good governance.
When you talk about principles, they go down in the family,
and we were not a family that spent money easily.
We liked to economize and be sure
how we were spending money.
I'd like to think we carry this over, or I carry it over,
when I had some responsibilities in government,
to try to do it sufficiently.
Not only as accurately, but as efficiently as possible.
You know, my father, he took over
as city manager of this bankrupt town in 1930,
and lasted for 20 years.
But he became the principle figure in the town,
and, no question, he was the best known
and, fortunately, highly respected.
But he was a fanatic for disclosure.
He would do a very detailed budget every year
and distribute it to everybody in town.
And it went down to how many police cars they bought,
how many fire engines they bought,
and he professionalized the police department
and the fire department.
Two departments that are essential, obviously, in any town.
And he was a bug for not spending more than he had to spend,
but spend what was necessary for a professional operation.
- It appears that he had a profound impact on your life.
You were born in 1927, this was two years
before the stock market crash and the Great Depression.
In 1930, at the beginning of the Great Depression,
he took you and the family to Teaneck, New Jersey.
By the way, read about this in this book
because it's the building of a great man
and a system, to build a great system.
And he came as the manager of that town.
I'm gonna read a quote of your father's
that relates to what you're saying.
"Government is a science, and I'm happy that the officials
"and the people of this community,
"agree that the man who is the manager
"should be thoroughly trained in the science of government."
And in that part of the book,
you also refer to
that it was a solidly, middle-class town
and you refer to his good education,
his basic, good, solid education.
And in the book you talk about your good, solid education.
You talk about the importance of family
and the science of government,
the idea of that good management,
and you refer to its outcomes.
That there was no crime in Teaneck, New Jersey.
The Saturday Evening Post wrote an article
that's entitled, There is No Crime in Teaneck, New Jersey.
Because it was well managed, because there's a middle-class,
because there's good education.
I'm interested in what you think is happening
to infrastructure, education,
family, middle-class, and government management.
And you expressed worries about the United States' position
in the world.
Do you think these things are related?
What are your thoughts on this?
- Yeah, and all these things you say are very familiar.
But I grew up, precisely at the time,
when I graduated from high school or college,
World War II was over, the United States had won the war,
in our opinion.
It rules the world, it developed, presumably,
a multicultural, multilateral
system of governance
and mutual growth.
It all seemed very successful,
we kind of forget that we had two miserable wars,
in Vietnam and then in Iraq.
But, by in large, I grew up in a world
where I moved into the United States Treasury,
I felt the kingpin of treasuries around the world
because-- - You were!
- Well, I wasn't, the US Treasury was.
- Yes, the US Treasury was.
- And the Federal Reserve.
It's different now, we're learning in a world
where we're still top dog, maybe,
but top dog isn't so readily recognized by others as it was.
And we obviously had the rise of China
as a clear competitor
for world influence.
And how that all works out, we'll see,
but it's not the comfortable world of assumed leadership
that I grew up with.
And that's what I struggled with in the Treasury
and, later, in the Federal Reserve.
There are other forces, the rest of the world is growing,
some of them more rapidly than we.
When I was in the Federal Reserve,
Japan was the big question as to the rival
of the United States, and growing very rapidly.
Has very good success economically.
We kind of forget about that now, as things change,
now it's China.
But we have to learn in a world
in which leadership
by America is not taken for granted anymore.
And I'm afraid that's been speeded up
by what's been happening in Washington, and the country,
in the last four or five years.
- How so?
- I think we, obviously, got these dividers,
divisiveness in the Congress, divisiveness in the country.
It's made it impossible to take very coherent,
consistent approaches to our domestic problems,
but particularly toward foreign policy.
And that sense, again,
that we are the natural leader,
we have certain allies that seemed permanent
10, 15 years ago that don't seem so permanent anymore.
It's the toughest situation that we have to accommodate to
that makes some emphasis on effective government
all the more important, in my mind.
Who is going to appreciate the United States as a leader
if we don't seem to be able to manage
our own affairs at home?
- You keep referring to management of the government,
and your father was the manager,
and you've been around the management of all governments
around the world.
You've also explained that the discouragement
of government workers to be professional managers.
Could you embellish on that point?
I know this is, maybe, probably, your greatest mission,
is to have a beneficial impact on that.
- Yes, you know there are
two million federal employees,
Not counting the Army, the Air Force, and so forth.
Two million civilian employees,
which is exactly the same amount we had
back in the Kennedy administration, which is 80 years ago.
And you ask how is the government operating,
same number of people?
It does an awful lot of outsourcing, out-contracting.
The defense department, itself, outsources
300 billion a year, or more.
Who's minding the store?
And I'm not sure we're well enough equipped
for those two million people.
I headed a commission on the civil service
when I left the Federal Reserve, which was in 1987,
and there was a big commission,
we had ex Vice Presidents, we had ex cabinet officers,
we Congressmen, we had a lot of people.
We issued a good report.
What impact did it have, very little.
About how you needed to develop a
more effective civil service.
Make it easier to hire, make it easier to fire,
get the right leadership in there,
which some departments have and some do not have.
Five years later, I headed another commission.
Much smaller commission with another good report.
But what impact did it have?
Not enough.
One of the observations that's often struck me
is there's a feeling by many business men,
the government's not efficient, doesn't do things right,
shouldered a lot of time, service, and not very helpful,
which, obviously, there are isolated places
where all those things are true.
But, by enlarge, I have been struck by the number
of businessmen who have been called into government
for secretary or something or other, under secretary,
in the White House or wherever,
who, after two or three years in government
say I didn't realize there were so many people
in the government that knew what they were doing,
and can do it effectively.
And it's one of the biggest experiences I take away
from my years in government.
That it's much more effective, potentially,
with a better staffing than I thought.
But that's a hard lesson to sell, generally.
And it's not always true.
We have to improve the damn thing
and that's what I'm after.
- At this point in your life,
the thing that you have devoted the most to
is the proper, professionalization, education
of government managers.
You've created the Volcker Alliance,
in which you've devoted most of your net worth to,
in order to foster the proper development
of government workers in that way.
You've spoken to me in the past
about how they're not respected,
and, also, how it's difficult at universities,
and various places, to get them to be attracted in there
because they're not given a good career path,
they're not given good training,
and they're not given much respect.
And that that is undermining the effectiveness
of the system.
What are your thoughts about that?
- Thank you, you preached my sermon very well.
I have been concerned about the strength
of the civil service.
People who want to go in the civil service
often can be selected, maybe in a school
or public administration, say, okay, you got a job,
it's February, but we can't have you, we can't pay you
until the new fiscal year, which is six months away.
So, these people can't sit around with no pay
or anything for six months,
so they go get a job on Wall Street, or some place, instead.
And that's typical of the kind of thing
that needs to be repaired.
But what concerned me is the attitudes
toward government itself and the difficulties
in getting and attracting and keeping the best people.
Paralleled by the growing lack of interest, as I see it,
in universities.
50 years ago, 100 years ago, schools had departments,
so schools of public administration.
Public administration's a bad word now.
People associate public administration
with a bunch of time servers,
sitting in some government office, producing nothing useful.
Administration, people don't think that
when you say business administration,
but they think it when you say government administration.
But we have a problem in these schools.
Many of them have lost sight of how to teach.
What are they teaching, what should the curriculum be?
How do we train people to oversee all that outsourcing?
Hundreds of billions of dollars being outsourced.
Who's minding the store?
Are people equipped to do that?
Have we taught them the right thing?
Have we taught them how to manage?
Have we taught them how to debate issues
as a right of good memorandum?
How to deal with other people, other departments.
And, so, this little Volcker Alliance
is trying to get a kind of marriage, a new marriage,
between universities and the government.
State and local government as well as federal government,
to see whether we can develop a stronger sense
of interest and efficiency.
Last time this was true in the United States
was before World War I,
when there was a great movement for improving government.
And the civil service came in to effect.
And up to the Depression years,
there was a lot of pressure, a lot of done
to improve government organization.
And a lot of people wanted to go in the government.
Now we are, what, 80 years later, we've lost much of that.
- So, would you say a principle of yours
is that in order to have effective government
you have to have effective civil servants.
- Whether you call them civil servants,
or whatever you call them,
you have to have people running it.
I'm with Alexander Hamilton, the true test to government
is the ability to get something done efficiently.
And we lapse in that respect.
- You've been in contact with economics in every country,
every major country.
Is that a distinguishing characteristic
of those that are successful and those that are not?
- You have to have a great feeling of commitment
to whatever you're doing, whether it's economists
or civil servant.
They still exist, there's still a lot of people
in government who have a great sense of commitment
to doing what's going on and, you know.
Look at this present change in government.
I think there's something like 700, maybe more,
potential presidential appointments in the new government.
All the secretaries and the secretaries assistants,
secretaries judges, so forth and so on.
About a third of those offices have failed.
Now, nobody's paying attention.
Now, who's running those departments
while the civil servants are left there,
maybe in good form, maybe not, but leaderless, basically.
That isn't the way to run a government.
And that's just one example of the difficulties
we're having these days.
- Looking around the world, what are the principles
of great government?
- Well, obviously, you need a strong leader at the top,
that helps, quite a lot.
But what we are running into
is a life of democracies.
Are democracies really able
to do the kind of thing I'm talking about,
or do they eventually, as Plato said,
end up with some plutocracy?
And you can't really maintain a democracy
over a period of years.
But you have countries like France and Germany,
had a very disciplined, very prestigious civil service.
So did the UK, that's deteriorated a lot in recent years
because it's considered too elitist,
too far removed from the public aspect.
And I guess this a great shake.
How can you get the expertise that you need,
and the leadership that you need,
and still respect the popular desire?
And the vote, in the end, the politicians
are going to decide the direction in which to go.
- You referred to Plato's cycle,
in the republic,
the idea, of course, that democracies are threatened.
Describe that and describe how you feel
that that pertains to today's situations.
- Well, I think if you look at the United States,
that we're very familiar with,
you have a very divisive
new administration.
You have the kind of gridlock that we saw
in the Obama administration.
I was friendly with Mr. Obama,
I was disappointed he couldn't get more done,
but here you got a situation where the Congress,
in effect, said, the Senate said,
whatever Mr. Obama is for, we're against.
And they maintained that position for three years, really.
And did the government suffer from that? Yes.
Did it have a really well designed,
efficient healthcare system
for the uninsured?
They tried very hard but it was very difficult
to develop it and maintain it.
And you see symptoms of that sort
all over the place now.
An inability to reach some reasonable consensus
on how to administer certain programs,
or how, in the first place, to get agreement
on what the program ought to be.
And it's not a phenomenon just for the United States,
unfortunately.
Obviously, in Eastern Europe, Latin Americas,
the hardship case, almost, from top to bottom.
But even within the established democratic countries
in the euro zone,
we're all having some trouble
in maintaining the progress
that we made internationally.
And developing a set of international rules
and developments that suit everybody,
and the feeling that they don't suit everybody,
and that too many people have been left out.
I think that's a real problem
that Mr. Trump has touched upon
and kind of the real base for his support.
But whether we're handling in the right way is,
in my mind, pretty doubtful at the moment.
- You had, probably, the greatest economic challenge,
and you were both also the greatest, most powerful man
in the country, in the world actually,
in terms of your control over monetary policy.
So, 14.8% inflation is where we hit
in March of 1980,
and as a result of that, you tightened monetary policy,
I remember it very well.
You set an M1 target of 5.5%.
And, as a result of that,
interest rates went up to 20%.
- More than we ever expected.
- And when you tighten monetary policy like that,
it drove the unemployment rate up to 10%
and it caused
the worst downturn in that period of time
since the Great Depression.
And you held tight in that.
There were protests, there was anger,
and you held tight in that and you followed it through.
And as a result of that, you broke the back of inflation,
and in 1983, that inflation rate went down
to 3% inflation, at that time.
And we began a decade of prosperity,
of strong growth with low inflation.
Now, you had to have a vision of what it was like,
you had to fight through that vision,
despite all the opposition.
That's an example of leadership under,
people now look back and they say
that was a great accomplishment.
But, at that time, that must have been very difficult.
Can you describe it and then, also,
tell us more about what you've seen to be the qualities
of great leadership that you've seen in others as well?
- Well, this all happened, the fight on inflation,
inflation itself, 50 years ago, roughly.
And people, today,
people my age, are all dying off,
and even middle-aged people with children then.
Now, you may not remember the atmosphere
as it was experienced, the inflation rate had gone up.
For more than a decade, there were kind of feeble efforts
to deal with it.
During the Ford administration, they handed out buttons.
Whip Inflation Now, but it had more buttons than policy.
And there was always this conflict, it's always existed,
don't tighten monetary policy too far,
you'll get some unemployment.
So, we went a decade that way and we got more inflation
and more unemployment.
And, when I took over the Federal Reserve,
at the end of Carter's administration,
President Carter was totally frustrated
because he seemed to be unable to take
any initiative anyway,
because all this inflation was backfiring on him,
he couldn't do anything in the budget,
couldn't do anything on energy,
all these things he would've liked to have,
seemed to be stalled by this fear of inflation,
it was very real at that time.
And, so, he asked me to become
Chairman of the Federal Reserve.
Well, it was obvious that existing policies weren't working.
And, actually, I was in the Federal Reserve before that,
voting against some of those policies.
But I decided we had to change in approach
and we've got to stop worrying about increasing unemployment
at any time, we've got to deal with this inflation
or it's going to get worse and worse.
'Cause it was accelerating when it
got close to 15% annual rate.
And if we pussy-footed much longer, we're going to be 20%.
And people were really fearful
about the stability of the country.
So, we did tighten, it took a long while, actually,
for the unemployment rate to go up.
It was very stubborn and the inflation rate
was very stubborn, and we made one or two false moves
that we had to take back, it took a little longer
than we thought.
But I saw no other way to approach this,
other than kind of a bulldog biting at it, straight out.
And I got plenty worried in '82
when we did begin getting unemployment,
and the damn inflation rate wasn't coming down,
and the money supply wasn't coming down the way we wanted.
But I felt that we were stuck, we couldn't back off
or all the effort we were making would be for naught.
Fortunately, by the summer of '82,
the money supply came down, inflation rate became
coming down, we had a recession.
But by the end of the year, it looked like the recession
could be over, or at least stop getting worse.
And it ended pretty quickly.
But it took that last year
of sticking with it
that I think was necessary to do the job.
Now, you talk about how unpopular it was, yeah.
The farmers had tractors outside the Federal Reserve,
we had community groups, we had one Congressman
spent every day, for two years, asking for my impeachment.
But my sense was the country as a whole understood
that inflation was getting us by the throat,
and they were willing to sit back
and not be too aggressive
because they thought I was attacking a problem
that needed to be attacked.
And I had more support, I think, well, I know I did.
A good measure of that was when my reappointment came on,
at the end of this process.
I was first nominated, it was unanimous.
Nominated four years later, it was not unanimous,
I had eight democrats voting against me,
eight republicans.
They were eight left-wing democrats,
eight right-wing republicans, and 84 votes with me.
And I think that was a fair representation that people,
things were getting better then,
but people tolerated what it took
to deal with the inflation problem.
And I don't think there was any other answer, frankly.
I consoled myself, it was a tough time,
but do you have any other answers, or what do you think?
- No, I remember going through it.
Every single day, I was wondering what Paul Volcker
was thinking since you said that.
You set the M1 target of 5.5%,
and I did the calculations of velocity,
and I thought, oh, my God, is that really
going to be happening?
Because you have a 14% inflation,
that means the interest rates have gotta go up.
So it was a time.
People don't have any understanding
of how challenging that time was.
We think of 2008, but the 1982,
the unemployment rate rising to 10%.
The rate at which the economy plunged,
all of those conditions were worse
than in 2008.
So it was a more dramatic time,
even in terms of volatility of interest rates.
- But people forget about, going back then
as compared to 2008.
We had a bankrupt Latin America,
and the banks had head over heels
in lending to Latin America.
They had one and a half to two times the capital,
not just big American banks,
but big international banks elsewhere,
invested in Latin America.
One day Mexico said, we can't pay anymore.
- August, 1982, I remember it well.
- August, 1982.
Then, what happened?
Well, we hook and by crook and with the help of the IMF,
which is very important, we stalled, stalled for time,
and they go, oh, this is not very dramatic.
We got the banks 'cause it was in their own interest
to continue lending enough, to pay interest anyway.
We forced constructed reforms,
we saw it on Mexico, Brazil, Argentina,
a lot of that's been lost since.
But that was with the help of the IMF.
And it held together, we didn't have a banking collapse.
It wasn't subprime mortgages,
it was subprime Latin American borrowing.
- It was a good example of how you could roll things forward
from 1982 until 1991 when they had the Brady--
- That is correct.
Things as capital had been restored,
some of the debts had been lowered,
and he could finish it off
with the so-called Brady Plan, yes.
- You have known most world leaders
for most of the
last 50, 60, 70 years.
Tell me, what are your principles about
what makes a great world leader,
or a great leader in general?
- Well, sometimes when you get close to them
they don't seem so great.
When you look around at world leaders in recent years,
when you begin thinking of, I think Mrs. Merkel
did a pretty good job in Europe and Germany.
- We had dinner with Lee Kuan Yew, you and I,
you might remember.
- Lee Kuan Yew was the next name I was going to mention.
And the third name I was going to mention is,
I don't know how much you ran into Zhu Rongji.
- He's been a hero of mine, I didn't know him personally.
- Well, he was a hero of mine.
This was in the 1990s when I was in China quite a lot,
I don't go to China, very little now,
and I don't know the leaders now.
But I knew the leaders in the 90s,
when they seemed to be a blossoming, capitalist economy,
to exaggerate a bit.
With hopes for an open, democratic society.
Doesn't look that way, quite, now,
but back when Dung and Zhu Rongji were there,
it looked very promising.
And they'd come to us for advice,
they don't come to us for advice anymore.
They might come to us and tell us what to do, but. (laughs)
- Well, they seem to be doing pretty good--
- Yeah, that's right.
That's right, they say we don't have to follow you anymore.
But Lee Kuan Yew, of course, is a special case.
Here he is--
- But what are those qualities?
- Well, he knew what he wanted to get done and he did it.
And in a small, relative enclave
and he did a lot of things that we tutted about,
in terms of democracy, he was
a little too eager to put people in jail
to quiet down opposition
and worry about what the newspapers said about him
and so forth.
But he had a drive to develop Singapore
with a very strong civil service,
very effective, corrupt-free government,
as near as I can see, and he pulled it off,
and he maintained a very strong position.
And Singapore is, economically, I don't know
where it ranks in the world by pro-capita income, but it's--
- Way up there.
- [Paul] Very high, come up from nothing.
- So, your principles, if I get it correctly,
your principles would be a great leader
has an accurate vision of where to go.
A great leader has,
will fight the opposition
in pursuit of that, and deliver.
A great leader has a deep caring for the people
that they're leading.
A great leader also seems to be leading
with an effective management
of civil service
in government, or a effective bureaucracy
to carry those things through.
Are those the principles?
- Well, I think we have to add a principle, the one you had,
you gotta have a respect for the people.
I don't know if you included that.
Some of the qualities you mentioned,
you could apply to Adolf Hitler.
But we don't want an Adolf Hitler,
we want somebody who's got some democratic instincts
and recognizes that he's only there temporarily.
And that he wants to lead the country effectively,
but peaceably,
and without dictatorial demands.
So, it's a nice balance to be in charge,
and maybe less efficient when you have to deal with
public opinion and different points of view.
But it's obviously essential if democracies going to last.
We legitimately worry about democracy now.
My mother, who was quite a character herself,
I recall, vaguely, whining to her when I was,
probably, a young man in government,
Vietnam War or something, rioting in the streets...
We were threatened, the country was threatened
to survive all these tensions.
She said, sonny boy, she didn't call me sonny boy, (laughs)
she said we're 200 years of democracy,
we've been a longer democracy
than anybody else in the world,
we've gotten over worse than this before,
go get back to work and do something.
And I take a little comfort in that thought,
that we can straighten ourselves out
after this little turmoil, not so little turmoil.
- What do you see the United State's future,
and China's future, over the next 10 years, let's say.
- Well, you know, I sometimes, it sounds terrible,
but I respond more favorably
to what the President of China
is saying than the President of the United States.
The President of China at least says
that he's looking forward to a harmonious relationship
over time and that he's looking for the world
being divided up through different spheres of influence,
and that China will take care of the Asian sphere.
But looking for peaceable outcomes,
where we're all threats and demands,
and, so it's a different story being told.
Now, there's some justice, of course,
in what Trump is doing.
It is true, during our period of leadership,
we tended to overlook, in our own country,
some of the problems that world leadership implied
in terms of willing to accept a lot of imports,
in particular.
And we began getting overwhelmed with imports
and it's only part of the sections,
didn't bother Wall Street, doesn't bother California,
but it bothered all those small manufacturers,
and not so small manufacturers, that were losing out.
And it's true, we do have a big current account deficit,
it's not all China, and China no longer
has the big surplus that it had worldwide.
So, we may not be analyzing this all correctly,
but there's no doubt we've had some unevenness
and repercussions in the United States,
Which was, then, a real political problem,
And we've got to resolve it.
- That political problem is the polarity,
that political problem is the wealth gap?
Describe the political problem.
- Well, to reach some agreement upon what
an appropriate influx, under what conditions,
immigrants are.
We've, in recent years, taken a lot of immigrants,
maybe we don't want so many, but what should the rules be?
Both in terms of our economic needs,
but in terms of our moral needs?
When people are being oppressed in different ways.
And how can we develop an economy that's more balanced
between the great middle part of the country
and the two coastal areas,
where a lot of the vigor seems to exist?
And that's a big challenge,
it's not gonna be healed over night.
What are we gonna do about the big issues of,
from my point of view, climate change?
We don't seem to be able to reach and work with
other countries effectively in that area,
which may kill the whole next generation
if we don't worry about it.
So there are a lot of issues that, somehow,
have been polarized to the extent,
we're having great difficulty in achieving the consensus
that we need.
- Paul, what would you like your legacy to be?
- Oh, God, my legacy, I'd like to see my legacy
in more effective government in general.
I haven't got any control over the high politics,
or any influence,
but I would like to see a general acceptance
of the need for an efficient public service ethic.
And see people attracted to our public service
because they can take satisfaction
that they're doing something concrete
for the country and the people, generally.
And it can certainly test their own acumen
and intelligence, and energy, to do that kind of thing.
My father, I'm sure, got restive
about spending so much time in government.
But I'm sure that, in the end,
he found that a satisfying career.
And, didn't make a lot of money, he made enough to live on,
Simply enough, I would like to see
that kind of spirit permeate in a wider population.
And it once did, there's no doubt about it.
When I grew up, when I got out of college
and I got out of graduate school,
going into government was a popular thing to do.
Now people scratch their head and say,
why would you ever want to do that?
And that's not a very healthy sign,
which goes along with the 20% confidence
in government to do things right.
Back when Kennedy came in, it was overdone.
With all the spirit that he had, and I was a young man,
and full of Kennedy glamour,
or a respect for it.
You asked that same question, do you trust your government?
60% or 70% said yes, now that's a healthy,
we should be skeptical, I want 30% to be skeptical.
I want more than 30% to be skeptical.
Being skeptical is one thing,
but being anti-government is another thing.
We repair it, we don't dismiss it.
- What does the Volcker Alliance do?
- We are a young and small organization.
But we're trying to get some cohesiveness
is what we perceive, many people perceive,
about the needs of government for effective administration
and effective people.
And get better connection between the needs
of the government and the universities,
with schools of public administration or public policy
that can feed this potential demand
more effectively than has been done recently.
The recruitment between the federal government
and young people, and between these universities is so lax
it's almost disappeared.
And that's not right, these universities
have to review what they're doing
to see how they can really educate effectively.
And the government has to cooperate with them
and see what kind of people they need
and how they need to be trained.
How they can be employed with a minimum of red tape
and delays, and be given satisfying jobs.
Because there's no doubt there are a lot
of challenges in government,
a lot of opportunities for challenging jobs.
- How would you hope that the government
would work with the Volcker Alliance
to visualize that goal?
What parts of the government would you want--
- Well, you ask a sensitive question.
We're examining precisely that issue.
There are people in the OMB,
Office of Management and Budget.
The management part of that has been very weak
but it still exists.
It's been there, I guess, since the, I don't know,
the Truman administration.
That should be a central focus for government management.
With a few experts and interested people.
They now are taking an initiative to do precisely
what I'm talking about.
So we had seven or eight questions, we asked all 50 states,
with the help of some of the universities,
how are you doing in budgeting?
How are you doing, [do you have] funds
to reserve for emergencies?
How's your pension system?
And three or four other questions.
We published a nice, shiny book.
All the states were ranked, we didn't rank them in order
but we said are you doing a good job,
bad job, impossible job?
And this attracted a lot of attention
because it's a competition between the states.
So people say, oh my God, here we got a report
by the Volcker Alliance that says
we don't have good budgeting arrangements.
So, some of them have actually changed
their budgeting procedures.
- That's a good example of the impact
of the Volcker Alliance.
By being able to put the grades on those
for everybody to see, it changes behavior.
- Everybody talks about infrastructure.
Nobody's doing anything about it.
That I can see, anyway, ever.
It's obvious infrastructure projects
is new rail tunnels under the Hudson.
We're sitting here with leaking tunnels,
totally dependent upon these two very fragile
existing pieces of infrastructure
that we built more than 100 years ago?
What are we wasting time on a few blocks
at Second Avenue Subway?
Why are we wasting a lot of time with
some elaborate way of bringing two or three
Long Island trains into Grand Central Station?
When big, obvious needs are going undone.
So, I'm trying to make a little project
to bring out some of those problems.
And does it take a federal government leadership
to somehow bring people together to see which are the
most urgent of these infrastructure problems?
And to what extent should the federal government,
that inevitably gets involved, be doing the financing?
And checking its viability,
working with the states and cities.
And it's just not being done now
in the way it should be done.
And the states are all being squeezed financially,
which makes it all the more difficult.
- How can others help you achieve your legacy
and the Volcker Alliance to--
- Well, they can look it up on their iPhone, (laughs)
I guess they can see.
But we do need some money and we're at a point
where we've got some money to function this year, next year,
but if we're gonna continue after that,
we're gonna need some influx of real money.
And we're a very small organization,
but it's interesting what you can do
with a small organization.
But we do have to get, and we're gonna spend this year
making another try of demanding more cooperation
from the universities themselves.
Because they, potentially, have more resources than we have.
Public administration, public management,
they put a lot of money into business management.
Not putting money in the public management.
Economics, it was a prestigious,
I hesitate to call it a science,
but it's got great prestige, or it did,
until it missed the 2008 crisis pretty completely.
Economists have lost a lot of prestige, I think,
in recent years, and rightfully so.
The amount of money that's been poured
into economic research
as compared to the amount of money poured
into research and public administration is astonishing.
It just hasn't got the same respect.
My old university of Princeton,
once got a huge donation for public managing,
training for public service.
Where's the money, it goes to the economics department
to oversimplify.
When I went to Princeton, the president of Princeton
was a professor of public administration.
I tell people that now, in the economics department,
they don't believe it.
Woodrow Wilson was the father of public administration.
President of Princeton.
One of the things you did not touch upon,
which I think are a big problem,
is the amount of corruption in the world.
Fiduciary responsibility seems to have vanished
from the, doesn't vanish from their statements,
the nice statements of ethics that they print.
But when it gets down to the trading desk,
when it gets down to making a deal with Malaysia,
with the big payoff,
you wonder whether the ethical standards
ever get down to the people doing the work.
And, enormous number of conflicts of interest
that have developed in banks, and elsewhere in finance.
- I did a study of what made countries succeed
and fail with a 10 year time arise,
and looked at different indicators.
And there's a negative 52% correlation,
in other words, a very strong negative correlation,
between the level of corruption
and the level of relative growth.
You recently received a lot of attention
for making the statement that, related to government,
that it's a hell of a mess all around.
And I think you were talking more broadly,
but clarify what you mean by that.
- We have fake news, you don't know what to believe,
what not to believe.
You got presidents that don't seem to mind
either personal behavior or making outrageous statements,
true or not.
You have a Congress that's been unable
to function effectively.
Maybe, hopefully, maybe that'll change a little bit
but we'll wait and see after this past election.
But we have not been on a constructive track.
I think that's fair to say.
We rammed through a massive tax bill,
whatever you think about that tax bill,
shouldn't be rammed through the Congress
without any debates, at midnight, on December 31st,
or whatever was done.
With almost nobody in the Congress
having a very good idea of what was in the bill,
and whether you like what was in it or not,
it wasn't subject to the right kind of debate
that we should've had.
But that seems to be true in other areas as well.
I just refer you to the morning press
if you wanna know a description of
how effective government is these days.
- So, a lot of people have claimed
that we've always had challenges in government,
and we've been through these things.
- Including my mother.
Well, in my lifetime, yes.
I think there was a general, after World War II, again,
when we were king of the crop,
there was a broad consensus about the broad outlines
of foreign policy.
And there was a willingness, of both Republican
and Democratic presidents,
to lead NATO,
lead the World Trade Organization,
lead the whole effort to reduce terrorists,
that all went hand in hand.
There were a lot of debates about it
but the basic core of the policy was generally accepted.
And that's changed.
And we're not always gonna have happy harmony
about what policies should be
but you've got to do a little better
than we've been doing recently.
I go back to, what I think I said some time ago,
of all the presidential appointments,
far less than half anybody's even been nominated,
much less appointed.
The quality of the people appointed to cabinet offices,
and sub cabinet offices,
I think by any estimation is not up to scratch.
That didn't say they were not good
and effective appointments,
but when you see lobbyists
for polluting companies
named head of the agency for anti-pollution,
you wonder about the coherent nature of the appointment.
And it's happening too often.
The state department's ripped apart,
maybe it should be ripped apart.
But it ought to be done in a constructive way.
We haven't had an ambassador in Saudi Arabia.
We have all these problems with Saudi Arabia,
we haven't even got an ambassador there until now,
why not?
Too much policy seems to be out of the back pocket today,
and God knows what happens tomorrow.
Look, for an old government man like me,
it doesn't look very good, hence my comment.
Let's hope it gets better.
- Well, thank you, Paul, for spending this time
and also conveying some of your principles,
and also some of what you're hoping will be achieved
over the next few years, to make up your legacy.
I hope that we can help you achieve that.
- Well, thank you for coming,
I appreciate the opportunity
to rant and rave a little bit
because I think the country needs a little
ranting and raving.
- And you do that so well.
- (laughing) I don't know about that.
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