Former Fed chief Volcker warns of US descent into ‘plutocracy’
Former Federal Reserve Chairman Paul Volcker said in an interview published Tuesday that the United States is “developing into a plutocracy” and suffering from a crisis in good governance.
Volcker, 91, told The New York Times that he feared the the skill and reputation of the U.S. government has been corroded by self-interested elites shaping law through lobbying and campaign donations. He said the country was “in a hell of a mess in every direction.”
“Respect for government, respect for the Supreme Court, respect for the president, it’s all gone,” said Volcker, who was an economic adviser to former President Obama. “Even respect for the Federal Reserve.”
“How can you run a democracy when nobody believes in the leadership of the country?” he added.
Volcker discussed his upcoming memoir, “Keeping At It: The Quest for Sound Money and Good Government,” which will be released Oct. 30. The book’s publisher moved up its release date by a month after Volcker fell ill, and the Times said the legendary economist has been sick “for several months.”
Volcker warns in his memoir, “There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process.”
He told the Times that the U.S. has “an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive.”
“And they don’t like government, and they don’t like to pay taxes,” Volcker said. “I grew up in a world in which good government was a good term.”
Volcker, who served as Fed chairman from 1979 to 1987, told the Times that Washington has lost the American people’s respect and pays insufficient attention to bridging that divide. He blamed the influx of money into politics and a lack of attention on effective governance from elite public affairs colleges and think tanks.
“They can argue war and peace and poverty and everything else,” he said. “But when you go to a school of public policy, you’re not learning how to run the goddamn government. You’re learning how to debate political issues.”
Volcker earned praise for curbing inflation under Presidents Carter and Reagan. He later chaired an economic recovery advisory panel for Obama; Volcker said the president had asked him about serving as his Treasury secretary.
Volcker also lent his name to a polarizing provision of the 2010 Dodd-Frank Wall Street reform law meant to ban banks from making risky investments with their own capital. Five federal regulators are moving forward with a plan to loosen the so-called Volcker Rule at the behest of the nation’s largest banks.
“They’re in a stronger position than they were, but the honest answer is I don’t know how much they’re manipulating,” Volcker said of banks. “The lesson of all this is we need better, stronger supervisory powers.”