Paul Volcker has spent most of his professional life in public service. In this WooCast, he discusses the importance of public service, its role in good governance and his advice for students charting career paths in public service. He also talks about the papers he donated to Princeton’s Seely G. Mudd Manuscript Library.
>> Elisabeth Donahue: Paul Volcker has spent a lifetime in public service, and he is passionate about good government. Mr. Volcker served two terms as chairman of the Fed under Presidents Carter and Reagan, where he is credited with bringing high levels of inflation to an end. After the 2008 financial crisis, he served as economic advisor to President Obama and chairman of the Economic Recovery Advisory Board. During this time, he created the Volcker Rule, which later became part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In 2013, Mr. Volcker launched the Volcker Alliance to address ineffective public policies and distrusting government. He has degrees from Princeton, Harvard and the London School of Economics and has had multiple prominent positions in the public and private sector. He joins us on this WooCast to talk about public service, why government is in desperate need of a makeover and his vision for good governance. Mr. Volcker, thank you so much for being here today for our conversation about public service. You have been a proponent and a champion of public service your whole career, and so you really are the right person, I think, for us to talk to about this. So just starting off, public service is clearly something you hold in very high esteem. And so can you define for us what you actually mean by public service and why you think it's so important for young people to go into public service?
>> Paul Volcker: Well, I think public service is important because government is important. Let's start with that fundamental [laughs]. I think government's important to civilization. Government's important in United States. Government is in trouble right now. That's no secret for anybody in the United States but a lot of other places too, and it's in trouble different levels. If government's going to work right, we have to have good people in government, and that's becoming increasingly difficult actually. And I do think-- I kind of made a life of thinking-- engaging yourself in public service, in government directly can be a source of considerable satisfaction when it works out right. Can be a source of a lot of frustration too. So we've got to get the balance right between the satisfaction and frustration, but I do think it is important. And it's not in style anymore in many universities and elsewhere, including-- I suspect-- Princeton [laughs], to the extent I would like to see it anyway. You know, very few students turned on, for understandable reasons, for going into government. I think we got to be reversing that, but it's all part of a decline in respect for government generally, which I think is dangerous.
>> Elisabeth Donahue: So why do you think, at this point in history, we're seeing this decline?
>> Paul Volcker: I don't know. It's a time of confusion. Obviously, internationally, things are very upset and without any clear sense of message that we had let's say, when I was here back in World War II. And after World War II and United States was leaving the world, and everybody wanted to go into government. Everybody was excited. That sense of mission is gone and for a lot of reasons which I can't totally explain. But it certainly is not what it used to be and it never will be again in the sense that United States isn't as dominant a position as it was, which, still this country has a lot to contribute to the world. But it's got a lot to contribute to itself in better government services.
>> Elisabeth Donahue: Do you think the distaste is for government per se or is it for politics?
>> Paul Volcker: Politics is involved in government, and they're inseparable, but part of my mission, at the moment, is to improve the execution of public policies, whether the policies are left, right or center. Whatever is decided as a reasonable policy ought to be well executed and sometimes it is, but too often it is not. We have too many examples when it was not executed well. So that's an important part of the problem a sense that it isn't executed well. But, you know, like, I don't like to go to Washington anymore because it oozes lobbyists. It oozes money. I didn't used to feel that way, but there is a major question as to the extent to which our government is being distorted by the power of money and lobbying.
>> Elisabeth Donahue: So when you came to speak here at the Woodrow Wilson School a couple years ago, you gave a wonderful talk based on this theme, and one of the things you said was that you thought skepticism has actually turned into cynicism.
>> Paul Volcker: Right.
>> Elisabeth Donahue: So is that part of the problem of how people see government?
>> Paul Volcker: Yes, I think it's a fundamental [laughs] reflection-- Like, when people ask-- I may have the latest figures all wrong-- but there's a standard question that pollsters have asked for 20, 30 years. Do you trust your government to do the right thing? Most of the time, doesn't sound so difficult, you know? Fifty-one percent of the time, do they get it right? People answer that question now, 20% or less say they trust their government to do the right thing most of the time. Now, if you ask them whether they like the Congress, it's even less. And it's also true of US journalists. Journalism is not very high either. All these institutions are under attack, but I think it's important we get some sense of respect and effectiveness back into very basic thing, good government in the United States.
>> Elisabeth Donahue: Do you think the ire is directed mostly at the federal government, or do you think people distrust their state and municipal governments as much?
>> Paul Volcker: Well, I think the polls actually tend to say the distrust is more in the federal government than the local, but local doesn't come off too well either [laughs]. But I must say, from the standpoint of a student and somebody interested in government, you may get more satisfaction, more sense of responsibility if you're getting things done if you're in local government or state government where you're, in a way, closer to the action and where action is needed. And I think a lot of young people have found avenue for satisfaction in local government.
>> Elisabeth Donahue: I was going to ask a question precisely about that is so, you know, I think, especially this afternoon, you'll meet students who are committed to service. And so if you could give them some advice about how to serve best, what would you tell them to do?
>> Paul Volcker: It's a tough question. I get more complaints-- And one of the things I worry about is how difficult it is, if you want to work for the federal government, to get a job in the federal government and to get it with any degree of efficiency in a sense that they say, yeah, we like you to come back and talk about it six months later. Well, students can't wait until six months later. But it is true that, in many cases, federal government has a big bureaucracy. It's got a classification system. You start at the bottom, and you gradually work your way up. And sometimes it's hard to get through the bureaucracy and may be easier in state and local governments that are smaller and more flexible. But there are lots of interesting things to go in the federal government too.
>> Elisabeth Donahue: If someone wants to work in service-- This might be a tough question, but, you know, if someone who's sort of committed to good governance but has a distaste for the political theater that's going on, what advice would you give to that person?
>> Paul Volcker: Well, I think that is a tough question. And so you got to work for the federal reserve that's sort of removed from the political theater [laughs]. No, but, you know, it works both ways. A lot of people go into government these days to get closer to the political side. Much more attraction, I think, unfortunately in relative terms, to go up on Capitol Hill and work on the senate staff or senator himself or congressman and participate in this political byplay. And we need good people up there, but it's a little out of balance, I think, that it becomes more interesting to work in the non-executive position than an executive position.
>> Elisabeth Donahue: Right. So as a dedicated public servant, could you share with us your own path to service? What motivated you to go into service, and how is it changed over the years? You have an amazing biography.
>> Paul Volcker: You get out of college, you get out of graduate school. You go look for a job [laughs]. And I was basically in economics, but I had a relationship to public service too, so I was natural, I guess. Well, actually when I got out of college, I went to work for the Federal Reserve Bank in New York, but I was on a weigh [assumed spelling] station on the graduate school. Well, when I got out of graduate school, I spent one summer in the Treasury, and I go back to the Treasury where I had a good time. I go back to the Federal Reserve, and I looking for a job, and I was getting married. So there I went. But I was basically interested in job in government one way or another for whatever reason. And as an economist, it was kind of natural, you know? You were interested in public policy and.
>> Elisabeth Donahue: But do you think today young people who might have an interest in finance and sort of fiscal policy with the salaries that Wall Street offers? It's just so hard for government to compete for good talent.
>> Paul Volcker: Absolutely.
>> Elisabeth Donahue: Because of the salaries that are coming out.
>> Paul Volcker: I think the salaries were always, you know, below the private sector, but now it's particularly for the young people, if you choose between going to Wall Street and working like crazy but with the prospect, you're getting pretty well paid down the road, even before you get the really big money. But it's a question of whether got to decide whether you get the same satisfaction or not. And a lot of people sitting there on Wall Street, and they're working very hard, and they're making pretty good money, but they're not very happy about what they're doing [laughs]. Now, some people, if your real intent is seeing how much money you can make, don't go into government.
>> Elisabeth Donahue: Right.
>> Paul Volcker: Or at least don't go into government until you made all the money.
>> Elisabeth Donahue: Right. I think some people say that another competition-- if you will-- for young talent for government is the entrepreneurial sector. You know, everyone wants to start their own company or nonprofit. How much is that really cutting into talent?
>> Paul Volcker: Well, you know, it's a lot more feeling about that now than there was when I was young. If that is where your yearn is, go ahead [laughs]. Go be an entrepreneur. I got two grandchildren who are in the process of doing that. I understand [laughs] the desire, and some of them be successful and some won't, but there's nothing the matter with [laughs] doing that. But I don't think everybody can do it, and if your interest is broader than that or different than that, think about government.
>> Elisabeth Donahue: Has government gotten so big that part of the frustration that people might feel going into it is that the bureaucracy is so big.
>> Paul Volcker: Yup.
>> Elisabeth Donahue: That it's really hard to make a difference?
>> Paul Volcker: Well, that's true with the federal government, I think, at least a fear [assumed spelling]. Now, that's one of the reasons why local and state government may be more attractive, where a young person can get in a very influential position partly by accident [laughs] maybe sometimes, but the opportunities are considerable. If the federal government does have a more stultified bureaucratic aspect, which you got to work on to deal with that. But, you know, the federal government now-- One of the things that's become obvious-- people don't understand. The size of the civilian labor force in the US government is no bigger now than it was in the Kennedy years. How many years ago was that? Sixty years ago, 50 years ago? And because there's a lot of pressure to keep the employment down, but the government's spending a lot more money. So some of the critical positions in the federal government are outsourced. The functions are outsourced. And one of the key issues is who is minding the store, [laughs] so to speak? These outside contractors being properly overseen? Are the contracts drawn up appropriately? And I think in a lot of cases, the answer is no. Now, who is minding that store? Are you sitting here with the Woodrow Wilson School training people so that they can deal with contractors who have big legal force and technical force and are going to try to extract as much money as he can out of the federal government? Which side of that equation you want to be on?
>> Elisabeth Donahue: Right. So do you think that was part of the problem with the Affordable Care Act rollout was that so much was it been contracted out?
>> Paul Volcker: Affordable Care was outsourced [laughs], and for whatever reason, it was not done effectively, and it's a classic case of loss of confidence in government. They couldn't get it straight. Now, there was a lot of political pressure to find problems in it, but that was an outstanding case. A case that many people talk about still now is Hurricane Katrina, where you had a new agency that was supposed to be expert in dealing with natural disasters and other disasters. It was highly politicized and fell flat on its face. But, you know, I worry about more trivial things. Nobody questioned the Secret Service and its competence and reliability. And then you begin reading stories about drunkenness and prostitution and all this stuff. [Inaudible] knows what's going on. And that's happened with other.
>> Elisabeth Donahue: Right.
>> Paul Volcker: Respected agencies too, so we've got to maintain a discipline ethic too often has been lacking. And that's what I sense, you know? And all the money converging on Washington is kind of lost.
>> Elisabeth Donahue: And it also seems too that, with the 24-hour news cycle, even small things get blown up in the news cycle, and the time it takes to repair the damage from bad publicity takes so much longer than it used to.
>> Paul Volcker: And the good things are overlooked. I always like to point out people very unhappy about government. Do you really want to get along without the Center for Disease Control? Every time a new bug comes along, where is the government? And there is a feeling of great competence in that agency. I hope it's justified and it has been through the years, but there's an example of where government absolutely essential and necessary, and it better have good people in it. The FDA better have good people in there to make a very difficult balancing decision between new drugs and which ones are safe and which ones are not safe. And, you know, enormous challenges in government. And I suppose if you're a young nuclear engineer, going to NASA isn't the worst thing in the world when you're sending people up to figure out what's going on on Mars and so forth. Where else can you do it? I'm sure they're relying on a lot of outsourcing too, but is there somebody in the government, enough people in the government to allocate those funds correctly? You see what the outsourced contractors are doing. Are they doing it most effectively? And there are all sorts of challenges in government that can provide a lot of challenge for somebody that's interested and a lot of satisfaction in getting it right.
>> Elisabeth Donahue: Do you think part of the problem is that government, because of funds or because of bandwidth, doesn't necessarily tell its own good story enough? So for people across the country, sometimes it gets lost even the things that they like that it's actually government. I don't know if it's a hypocriphal [assumed spelling] story, but, you know, the story went around about the person saying, "Get government out of my Medicare" [laughs]. And so, like, you know, there's an educating to remind people about the services that government gives, right?
>> Paul Volcker: I mean, a classic one that's been around [laughs] forever of course is social security.
>> Elisabeth Donahue: Yes, exactly.
>> Paul Volcker: I don't know how many millions of people on social security, but, you know, it seems to work pretty well. The check arrives in your bank account or arrives by a check or whatever. And a lot of people are dependent upon it. You don't read many scandals about social security. I'm sure somebody will dig some up, but most of the people that are entitled to it get it. And they know what they're getting, and they're getting according to a correct formula, and it's done reliably and efficiently. Now, probably can be done even more efficiently.
>> Elisabeth Donahue: Right.
>> Paul Volcker: But that's okay. That's a nice challenge.
>> Elisabeth Donahue: But you're right. That story isn't told, but yet, if the government shuts down and people stop getting their social security checks, that story's certainly told. They see government as getting in the way of their getting this but don't necessarily give it credit for them getting it in the first place.
>> Paul Volcker: The mandate in the Treasury back when I was [inaudible]. Maybe we can't send out our social security checks this month. That'll get their attention [laughs].
>> Elisabeth Donahue: That's right. So you have such an amazing career trace. Can you just tell us looking back, if you could say, like, two of the highlight of your-- And you can be more if you want but-- of your career.
>> Paul Volcker: I've been out of government quite a long time now [laughs].
>> Elisabeth Donahue: You can talk about other things in your career that you've enjoyed.
>> Paul Volcker: No, no, but when you say that, I just think of two things outside of government, outside of government directly. When, you know, by way of a accident, I was asked to lead an investigation into UN World Food Programme and the corruption therein which had become a big political issue and a big issue for the secretary general who himself was accused of being part of a corrupt process. And we put together an investigation, and I was wise enough, at that stage, to tell them it's going to cost a lot of money, and I don't want any problem in getting enough money to hire the right people to do the job. But we had a force of investigators and attorneys from around the world that were interested in it, and they were all turned on because the objective was very clear. Well, these were largely inxperienced people. They'd never done anything quite so exciting [laughs] in their life as they thought this investigation was. It was eye-opening to me to see how professional investigators could, with zeal, go about finding things I never thought they could find. And we made a series of reports I think were very good, demonstrated a lot of stuff, raised a lot of rumpus here and there. That was the good side because here was a case of attorneys coming in mostly from government, some from private, who were obviously excited by the challenge. The disappointing part was look forward the UN instituting great reforms so it wouldn't happen again, and one wondered how deep it went. Now, I think we did have some impact. And the World Bank followed this [inaudible] conducted investigation into corruption in World Bank programs, not so much the World Bank itself, but in their programs. And the World Bank was not very happy about this. They didn't want to be investigated [laughs] and have their programs reviewed. But they had to do it, and again, it was a very good report. They adopted the whole report from beginning to end. It's still, I think, effective in the World Bank, and it's changed the approach of the World Bank, and, you know, there were two things in my old age [laughs].
>> Elisabeth Donahue: Yeah, that's terrific.
>> Paul Volcker: But, you know, in the government itself, I was the principal guy in the Treasury in charge of international financial stuff as well as domestic. And when we went off gold and devalued. And that's an experience you don't have [laughs] very often being right there when a major change is made in the international financial system.
>> Elisabeth Donahue: Because of the Volcker Rule, you will be forever known, and so you've gotten into the vernacular. Are you proud of that?
>> Paul Volcker: Well, it's kind of interesting and always a great surprise to me that president has a little press conference where he's announcing his support for Dodd-Frank and particularly this rule. And he turns to me and says, "We're going to call it the Volcker Rule" [laughs].
>> Elisabeth Donahue: Right, right. [Inaudible]. Right.
>> Paul Volcker: There I am. It's a good rule.
>> Elisabeth Donahue: It's a real important rule. I hope it's followed as, you know, as carefully as you constructed it.
>> Paul Volcker: So do I.
>> Elisabeth Donahue: Looking back, this is always a hard question. Would you do anything differently?
>> Paul Volcker: Not a thing. No. You know, the things that make you go in one avenue or another or something you easily get accident of some sort.
>> Elisabeth Donahue: Right.
>> Paul Volcker: So you just wait for the accident to happen [laughs].
>> Elisabeth Donahue: I think that's terrific advice for young people in some ways, right?
>> Paul Volcker: Yeah.
>> Elisabeth Donahue: Sometimes they want their whole roadmap laid out for them, and, you know, they miss the accidents.
>> Paul Volcker: Entrepreneurial talent. They're going to be an entrepreneur. Half of those entrepreneurial ventures are not going to work out.
>> Elisabeth Donahue: Right.
>> Paul Volcker: There's a half that does, and if you take satisfaction and zest for the chase, it's all fine. But my career has been fairly straightforward. Didn't exactly follow a map [laughs]. I never imagined when I was a junior person in the Federal Reserve that I was going to be chairman of the Federal Reserve at a difficult time. But that's.
>> Elisabeth Donahue: So speaking of your time there, you have had times where you've had to make decisions that were not politically popular. So one of the questions we had is "How did you go about this, you know, the process of taking the stand that you knew was right?"
>> Paul Volcker: Yeah, well, I was pretty single-minded about what the challenge was before the Federal Reserve at that time. And, you know, was not popular in one sense. And there was a lot of opposition. But in fact, you can say very strong actions tremendously high interest rates never expected to happen. And how did it happen? How did it go on? It went on because-- I'm convinced of this-- that, at that time, for different reasons than now, there was a feeling that the wheels were going off the economy, so to speak. You go into a decade of so-called stagflation, you know, inflation rate was rising. Everybody was assuming the inflation rate would go up. They were changing their behavior. It made them uneasy. And they were prepared to swallow distasteful stuff if they thought that this was an honest attempt to do something about the economy. Now, if this were going on another two years or something, they probably would have been guillotined. But fortunately, things turned better before I got guillotined [laughs].
>> Elisabeth Donahue: Right.
>> Paul Volcker: But, you know, it happened because the public was ready for it.
>> Elisabeth Donahue: Right.
>> Paul Volcker: And they weren't ready for 20% interest rates. They didn't know what they were ready for, but they were ready for somebody to take a strong position.
>> Elisabeth Donahue: But it sounds like you'd made the decision. You knew what was right.
>> Paul Volcker: Well, because my bag [laughs] was stability and.
>> Elisabeth Donahue: Right.
>> Paul Volcker: Dealing with inflation, so that was pretty single-minded.
>> Elisabeth Donahue: Right. You must have had some ability, though, to tune out the noise of the news cycle and whatnot that perhaps politicians today don't have.
>> Paul Volcker: Well, you know, it was President Carter who appointed me. Couldn't say much about it because he just appointed me [laughs]. It was only a couple years left. And he appointed me because he recognized there was a problem [inaudible]. Because he knew that he didn't know what he was in for, but he knew was in for difficulty. And then you had President Reagan who I am sure, in my mind-- I was not close to him-- but I'm sure that his view was that, you know, something was the matter. I'm not going to criticize this guy when he's not part of my team or whatever. I inherited him, but he seems to be trying to do what he [inaudible] I'm not going to bother him. I'm not going to get on his back. His staff didn't necessarily agree with [laughs] that view.
>> Elisabeth Donahue: Right, right.
>> Paul Volcker: But he did, so that's my interpretation. That helped in the political atmosphere. When you didn't have the-- If the President of United States had been on my back.
>> Elisabeth Donahue: Yeah.
>> Paul Volcker: Life would have been more difficult.
>> Elisabeth Donahue: Let's talk a little bit about your papers. I know the university is incredibly grateful for your donation of your public service papers. And they'll be housed at Mudd Library. And so this is our archive library where people can come and scholars can come and use the papers. What's your vision? How would you want scholars to use your papers?
>> Paul Volcker: Oh, they're going to look very deeply into the success of my policies and the wisdom of all my [laughs].
>> Elisabeth Donahue: Of course.
>> Paul Volcker: Obviously.
>> Elisabeth Donahue: And they're not going to question anything. Right [laughs]. Well, I know that the university's quite grateful that you gave the papers, and I think it'll be a good opportunity.
>> Paul Volcker: [Inaudible] interesting thing is Jim Baker went to Princeton, secretary of the Treasury, part of the time, I was the chairman of the Federal Reserve Board. So we had a certain relationship, harmonious at times, less than harmonious at other times. And when I came and it was a whole [inaudible] Jim Baker's papers. Mine would be on the shelf right below Jim Baker's, so that scholar interested in that period can.
>> Elisabeth Donahue: Right.
>> Paul Volcker: Didn't have to go very far. You can look at the Baker shelf or the Volcker shelf.
>> Elisabeth Donahue: Right.
>> Paul Volcker: To see what the conflicting views were.
>> Elisabeth Donahue: Right. And of course, he'll know the Volcker Rule, but not the Baker Rule, right [laughter]?
>> Paul Volcker: Baker had a few rules of his own.
>> Elisabeth Donahue: Yeah, yeah, right, right. So this is terrific. Really appreciate it. Thank you so much. You've been listening to the Woodrow Wilson School's WooCast. This podcast was produced by Elisabeth Donahue and Bonelys Rosado. Music by Daniel Sturm. Follow us on Twitter @WilsonSchool.
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