Not too long ago, Paul A. Volcker, one of our country’s most respected public servants and economic wisemen, decided to launch a start-up, The Volcker Alliance. Frankly, we were both surprised and curious, because Volcker has already more than made his mark on the world with more than 30 years in government complementing his private sector career. Volcker first entered the public service arena during the Kennedy Administration as an economic advisor. He went on to serve as Chairman of the Federal Reserve Bank under Presidents Carter and Reagan and most recently helped steer the economic recovery policies of President Obama where his name was co-opted—fairly or not—onto a proposed rule breaking up retail banking from riskier investments like derivatives. Along the way he has led independent inquiries into the UN’s Oil-for-Food Programme, Nazi-looted gold, and the operations of the World Bank. Now he wants to reinvigorate administrative excellence in government—in the United States and eventually abroad. We spoke to the founder and namesake of The Volcker Alliance about his plans for strengthening American governance.
Forbes: You’re an economist and central banker by vocation, and you’ve also become sort of the “go-to” man for bringing independent credibility and integrity to major reform projects, from the United Nations to Wall Street. Why are you focusing on good governance now?
Volcker: We depend on government in so many ways, often unseen and unrealized. But one can’t help but conclude upon seeing our institutions at work—or more accurately not working to their fullest potential—that we need to make some fixes. These institutions, from the UN and the World Bank, to our federal, state, and local governments for that matter—are tools that can improve peoples’ lives. We need them to run well. We have seen what happens when insufficient attention is given to understanding and mastering the basics of execution-- the botched launch of HealthCare.gov, the gaming of the veterans’ medical scheduling system, and, of course, the failure of the financial regulatory system to prevent unacceptable levels of private-sector risk-taking at the expense of the stability of the economy.
Forbes: You’re tacking an interesting course. Some people think good government means less government. Others may think you’re promoting big government.
Volcker: Look, the issue for me is not whether the government is too big or too small. Nor is it the objectives of particular social programs such as the urgency of environmental concerns, the size of the military, or the proper scope of the NSA. Those are truly policy issues to be resolved by political processes and public debate. But, however those choices are made, we need to respect Thomas Edison’s warning, “Vision without execution is hallucination.” That means government should run well. It should implement policies effectively and deliver them efficiently. It should earn and redeem the public’s support every day. That goes for all of our public and international institutions.
Forbes: Is that where your new start-up, The Volcker Alliance, comes from?
Volcker: Yes. The Volcker Alliance grew out of my sense over the past few decades that somehow the craft of governance has been underinvested in and underappreciated not just in government but also in the professional schools that prepare people for public service. When we are not delivering high-quality products and services through our government institutions, it affects the level of public support and approbation our government has among the people. It becomes a vicious cycle that affects our ability to get anything done.
Forbes: So how do we solve this problem?
Volcker: This problem cannot be solved just by one entity. That is why the new institution I founded has taken the name “The Volcker Alliance” - the only important word in that title is Alliance. We need our universities and their policy programs to take to heed Edison’s warning and heighten attention to policy execution, not limit their most creative thinking to politics and policy debate. We need our political leaders– in Congress and the Executive Branch – to pursue excellence in execution. Shouldn’t our candidates for our highest offices – for mayor, governor, and even the Presidency – make clear how they will govern, not just their policy priorities?
Forbes: One of your first projects has been to address the ongoing structural risks in our financial regulatory system. You issued a major report last month outlining your concerns and some solutions. Why financial regulatory reform?
Volcker: Fixing our financial regulatory structure is about making government institutions work. It has been almost a decade since the financial crisis that nearly brought our economy to its knees, and we have simply made no meaningful reforms in the structure of our financial system. This is unacceptable. What’s worse, when I talk to policy makers, bankers, and other participants in financial markets, there is a consensus that we have nothing short of a lousy financial regulatory system. There are inconsistencies, overlaps, gaps, and differing priorities, squabbling over turf. I could go on and on. So, we all agree there is a problem. But there is also a consensus that we can’t do anything about it. That is exactly the attitude I refuse to accept. We try to offer a solution in our report, but we don’t claim to have all the right answers. What is important is that we start a conversation. Congress, the administration, existing regulatory agencies, and financial institutions themselves all must step up to the needed debate and set out an agreed framework for reform suitable for the 21st century.
Forbes: What’s next for The Volcker Alliance?
Volcker: For starters, we will continue to urge debate and legislative action on financial regulatory reform. We have received a positive response to our report from those who have reviewed it, but it is clear the Congress will take some convincing. It’s too easy for them to sit back and say it’s too complicated. The risk, of course, is that a new financial crisis will come along, and then we will ask why we didn’t act.
Beyond the financial reform, we have a number of additional projects designed to help government work better. One major report coming up focuses on the integrity of state budgeting practices.
My highest priority for the Alliance remains the larger systemic questions of how best to attract, educate, train, and motivate talented people for public service and provide those already in service with the knowledge and skills they need to excel in policy delivery. Effective government demands a strong public service.
