School of Public Affairs/Kogod School of Business
Paul Volcker, Former Chairman of the Board of Governors of the Federal Reserve System
May 14, 2006
Provost Broder, President Kerwin, Trustees, faculty, family, guests, and of course, most particularly graduates.
Commencement is the most important day in the life of a university. It is a time for celebrating amid family and friends. And, I think after 120 years American University has learned how to do it right. It provides tangible recognition of what you graduates have achieved and as many of my predecessors at the podium have said recognition of the faculty as well - the men and women who have set high standards and pushed you to reach and exceed them.
I have a further reason for personal pleasure. When inviting me to speak, President Kerwin reminded me I had been similarly honored 22 years ago. So now, I look forward to two American University degrees. That is a matter in which I take enormous pride even though I fully recognize two honoraries don't add up to one real degree…one earned degree. As the saying goes, no pain, no gain.
It is you graduates that have had the struggle, and now the exhilaration, of actually earning important new credentials. Congratulations to you all!
Let me say that it was easy to resist any temptation to re-read my remarks of 22 years ago [laugh]… too much has happened in the world of business and public affairs since the 1980's to make that relevant. You know that was long ago, before some of you were born. Interest rates were actually 15 – 20 percent. Those were the old days, but I’m not sure the good old days.
I am also conscious that American University has itself changed a great deal, since that time. There has been a certain amount of turmoil, here that I am told, but more significantly growing respect for for the programs and standards maintained by the professional Schools of Public Affairs and Business.
There is a certain irony it seems to me in all this change. Here we are, the commitment of the University to provide the best in professional education for business and government has been bearing fruit. But all around us - certainly here in Washington, in the world of business, and in international institutions - another kind of evidence, and its disturbing evidence, has mounted of something wrong. There have been too many failures in planning and administration, too many lapses in ethical standards, too much outright corruption in some of our most important public institutions.
Almost every day we read about laws, regulations, and the appropriations process being twisted and distorted in the pursuit of particular policy objectives or special interests; sometimes, it seems as if the locus of decision-making lies more on K-Street than on Capitol Hill or within administrative agencies. And I don’t thing its entirely a coincidence that too many of our best are leaving public service or refusing to join.
Let me be clear that egregious examples of self-serving behavior are not confined to government. Consider the really grotesque patterns of executive compensation; the mantra of "pay for performance" a mask for what Alan Greenspan once termed infectious greed. At least as disturbing is the apparent difficulty members of our honored professions - law, accounting, banking and others - have in adhering to reasonable interpretations of their own ethical standards.
In that light, all those polls indicating pervasive uncertainty and uneasiness about our leadership and where the country is headed; even in the midst of high employment and sustained growth are understandable.
That sense of disaffection, of passive disengagement, seems to me inconsistent with the confident and optimistic vision that we Americans have always claimed as part of our birthright and part of our citizenship. We have taken special pride in effective democratic government at home, and in maintaining international leadership more by force of our ideas and force of our example than by military strength.
Fundamental to those ideas has been our belief in our system of private enterprise. That system, by the magic of Adam Smith's "hidden hand" and with sensible public policies, can fairly and broadly distribute the fruits of a flourishing, innovative economy not just within our borders but, by trade and investment, right around the world. But, now, doubts are being raised.
Yogi Berra in one of his famous aphorisms once said you can observe quite a lot just by watching. Over the years since I was last here I've had the opportunity to do quite a lot of watching.
Most recently, with the help of a truly dedicated and able international professional staff, I chaired a committee to investigate the United Nations' management of its $110 billion dollar Oil-for-Food Programme in Iraq. Our findings are not pretty. We took about 2,000 pages to report a story of pervasive failures to accept administrative responsibility within the UN organization. The Secretariat claimed it lacked direction from the Security Council. The Security Council failed to reconcile its differences. Those in the field in Iraq resisted and didn't get needed guidance and control. Unhappily, outright corruption seeped into the UN organization itself. I’d like to think our investigation provides a kind of textbook for the School of Business and School of Public Affairs in looking towards the future.
The investigation uncovered at least as disturbing a picture among private companies participating in the Oil-for-Food Programme. They were the ones that actually purchased the Iraqi oil…they were the ones selling the humanitarian goods at a total of about $110 billion dollars. In the process illicit transaction - bribes and kickbacks - came to be routine among more than half of the four and a half thousand private contactors involved.
Before we simply assail the UN and its leadership, let's consider the responsibilities of its member states. The United States and a few other countries have pursued corrupt behavior with vigor. But too often, nations have remained speechless and passive in the face of clear evidence of smuggling and irregularities.
Of course, we don't have to look to New York or abroad, or to private companies to find problems There has been more than enough to occupy our attention right here in this city.
Questions of both competence and ethics are simply too wide-spread to be tolerated or ignored. Those questions relate to some of the principal agencies of government, agencies upon which not just our well being but ever, our survival are dependent. Abuses of the appropriation process have reached the point that favorite "earmarks" significantly distort the budgetary process and undercut any sense of spending limits. Yet, the Congress itself seems unable to act, neutered by partisan divisions and the miasma of lobbying excesses and polarized by a deep partisan divide.
There have been symptoms of trouble for a long time. Trust in government has been chronically low for years. There’s a healthy skepticism inherited from the Founding Fathers seems to be descending into a corrosive cynicism. I noticed in scanning ‘The Washington Post’ this morning that that word cynicism about government was repeated in three columns on the op-ed page. It’s no wonder that many of our best have been discouraged to either enter elective or administrative office, and that has been true at entry and it’s true at senior levels. The challenge is sharpened by the fact that competent and experienced civil servants whom we have counted on for effective administration are retiring or sometimes leaving early.
There isn't any secret about these problems - and there have been many calls for reform. I participated in several myself and they have important points in common among. Moreover, here and there has been encouraging action, and some a special relevance to those of you thinking of entering the public service. Progress with respect to more flexible personnel practices within the Federal Government, in particular, more rational recruitment efforts are being rationalized. The Presidential Fellows Program seems to be working in attracting particularly able young people, including a number from your campus. The need to reward exceptional performance for those already in government who are doing better is now being recognized.
But by and large, the resistance to change has been strong. That has been true - dramatically true - within the UN where useful proposals by the Secretary General himself have been for the time being rejected by the General Assembly. The scandals in the world of business and accounting have provoked sweeping legislation in the form of the Sarbanes Oxley Act. The enforcement of the SEC has certainly been bolstered. But both of those initiatives have and are encountering stiff resistance, and it is too early to claim success.
Now it may strike you as odd – I suspect you would use a stronger word - for me to regale you, on this of all days, with a litany of woe. But let me put it to you differently, and more positively.
What I'm describing is a time of challenge; a time of enormous challenge, a challenge that should absorb our best efforts, and our full energy. We need, this world needs, a strong United States, a United States confident in its convictions and in its capacities, a nation willing and able to deal with its problems at home while seeking to work with others for a peaceful and prosperous world.
That is, and should remain, this country's destiny. Those of you graduating today are inextricably a part of that destiny. You can’t escape that challenge. You and your counterparts at hundreds of colleges and universities have a key role to play - a far more important role than for those of us long enmeshed in present affairs.
To put it bluntly, we need you. We need your energy. We need fresh ideas, we need open minds. Most of all, we need a strong and renewed sense of values; able to distinguish between what's really important and what is not.
That may, and I'm sure it does sound awfully abstract and high blown, pretty far removed from all those immediate questions of where to work, where to live, and how to pay.
Let me tell you about the only lessons I've learned in the way of career advice.
The first is that change is indeed hard - that almost always big change, important change, requires a strong catalyst. There has to be a sense that the existing ways of doing things no longer seem to work, a sense of foreboding or impending crisis.
Well, it’s precisely that what I have tried to convey today in these tales of woe.
The second lesson is much happier. There is no greater sense of excitement, no greater sense of satisfaction, than in participating in a process of reform and renewal.
That sense of excitement and satisfaction can come in all sorts of packages. It could be found in public life -from activity in local communities to the highest levels in Federal Government. It occurred to me this morning that people often ask me about the new Chairman of the Federal Reserve. That’s a pretty responsible job. He’s a distinguished academic. He has a PhD. With all respect to your economic professors, I tell people, I am more reassured by the fact that he spent some years on the local school board in terms of his ability to deal affectively in his interest in public service. The sense of excitement and satisfaction can come in private enterprises, from start-ups to the biggest corporation. It certainly can come and is increasingly coming in the non-profit world.
Let just take a minute to illustrate with a couple of examples from the proud world of elite universities. If there is any world known to be particularly resistant to change, it is those universities. The two institutions I have been associated with most closely, Harvard and Princeton, have in different ways found their own moment of crisis. Harvard has been forced to reconsider its own governance structures as it searches for a new president. At Princeton, something relevant to the School of Public Affairs here, the Woodrow Wilson School of Public and International Affairs has been sharply attacked by important donors for lack of focus on its mission, but that school is now moving forcibly and constructively to meet its commitment to prepare students for careers in public service alongside what is being done by this university and elsewhere. I know that this university has been looking at its own system of governance and I wish it well. All this is good. Reflection, reform and renewal will strengthen our institutions, those who lead them, and our society at large.
It is that spirit that I trust will be a part of your lives.
Large or small, public or private, you can’t escape that fact that your work and your life will be inextricably bound up in something bigger than any of us individually. That something is the success of the greatest country in the world, the nation in which we all live, the United States of America.
For most of you, it's your country now. It always will be. Make the most of it! And, thank you for having me.