Writing in the New York Times last Sunday, Gretchen Morgenson offered an admiring send-off to Thomas M. Hoenig, who is about to retire from his post as president of the Federal Reserve Bank of Kansas City. Hoenig considers the years of low interest rates to have been counterproductive, encouraging bubbles and consumption over saving, and he has stood out among Fed presidents for calling for the break-up of mammoth banks.
“Extremely powerful institutions, both financially and politically, undermine the long-term strength of our system and make us look like a financial oligarchy,” he told Morgenson.
Peter Drucker, a persistent skeptic of the science of economics, would have sympathized with Hoenig’s criticism of Fed policy. “Monetary and fiscal measures which derive from the neat, clean, elegant model of economic analysis have results in the real economy that have nothing whatever to do with intent of the policy or the arguments behind it,”Drucker wrote in The Age of Discontinuity.
Like Hoenig, Drucker also didn’t care for entrenched power centers of any sort, although he felt it was the rule rather than the exception in most societies. “Just as a society needs social mobility to stay alive—with new men rising into the ruling groups, while the descendants of former leaders drop out—an economy needs economic mobility and a turnover of the ‘economic elite,’” Drucker counseled in The New Society.
[EXPAND More]At its best, in Drucker’s view, the United States is special for being able to foster a pluralism in which different interests keep one another in balance. The administration of Franklin Roosevelt was a good case in point. “In Roosevelt’s system government became the arbiter whose job it is to make sure that no one interest gets too powerful,” Drucker wrote inThe Ecological Vision. “When Roosevelt came in, ‘capital’ . . . appeared to be far too powerful. Farmers and workers were thus organized to offset the business power. And then, not so many years later, when the labor power seemed to become too great, farmers and business were organized to offset and balance labor power, and so on.”
Do you agree with Hoenig that the big banks have become too powerful—and, if so, how might a healthier balance be restored?