Political divisiveness at home is threatening the position of the U.S. around the world, former Federal Reserve Chairman Paul Volcker said in an interview that painted a dour picture of the nation’s future.
“It’s different now,” the head of the central bank from 1979-87 told hedge fund magnate Ray Dalio in a talk aired on the Bridgewater Associates founder’s YouTube page. “We’re still top dog, maybe, but the top dog isn’t so readily recognized by others as it was.”
Volcker became something of a legend for his time
at the Fed, helping pull the nation out of its inflationary spiral by
pushing interest rates higher and deliberately putting the economy into a
Since then, he’s been involved
in a number of endeavors. His name is part of the post-financial crisis
banking reforms, with the so-called Volcker rule aimed at stemming
risk-taking by big banks. He also helms the Volcker Alliance, an effort
to push for more efficient government where public service is prized.
In the current climate, the federal government is not efficient and working in the public sector is frowned upon, he said.
“Leadership by America is
not taken for granted anymore, and I’m afraid that’s been speeded up by
what’s happening in Washington and the country in the last four or five
years,” Volcker said. “We’ve obviously got this divisiveness in the
Congress, divisiveness in the country. It’s virtually impossible to take
very coherent, consistent approaches to domestic programs, and
particularly foreign policy.”
“Who is going to appreciate the United States as a leader, because we can’t seem to manage our own affairs at home?” he added.
Volcker was somewhat
critical of President Donald Trump’s approach but also said he
understands the frustration Trump tapped into. He spoke of global
policies that have left some behind — “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,” Volcker said. “But whether we’re handling it the right way
is in my mind pretty doubtful at the moment.”
Trump has set a major priority in reducing the trade deficit between the U.S. and China
and thus far has had limited success. The two countries have been
engaged in a now-suspended tit-for-tat trade war but are seeking to
resolve their divisions before a March 1 deadline after which the tariff
increases could kick in again.
“There’s some justice of
course in what Trump is doing,” Volcker said. “It’s true that during our
period of leadership we tended to overlook in our own country some of
the problems that the world leadership implied in terms of [willingness]
to accept a lot of imports in particular, and we began getting
overwhelmed with imports.”
He noted that the rush of
imports “didn’t bother Wall Street, doesn’t bother California, but it
bothers all those small manufacturers and not so small manufacturers
that were losing out.”
Volcker called for more work to deal with immigration on both an economic and humanitarian level, as well as climate change.
“There’s no doubt we’ve
had some unevenness and repercussions in the United States which has
presented a real political problem, and we better resolve it,” he said.