Arthur F. Burns
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Arthur Frank Burns (born April 27, 1904 in Stanyslaviv, Galicia (now Ivano-Frankivsk, Ukraine); died June 6, 1987 in Baltimore) was an American economist. He served as Chairman of the Federal Reserve from 1970 to 1978.
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[edit] Career
Burns and his family emigrated to the United States in 1914, and he earned his B.A. and Ph.D (1934) from Columbia University, studying under Wesley Clair Mitchell. His career alternated between academia and government. He taught at Columbia and studied business cycles while president of the National Bureau of Economic Research. He also was the chairman of the U.S. Council of Economic Advisors from 1953 to 1956 under Dwight D. Eisenhower's presidency. He served as the Chairman of the Federal Reserve from 1970–1978 and as ambassador to West Germany from 1981–1985.
[edit] Academia
The academic part of Burns's career focused on the measurement of business cycles, including questions such as the duration of economic expansions, and what economic variables rise during expansions and fall during recessions. He often collaborated with Wesley Clair Mitchell and set the academic tradition continued by the NBER's business cycle dating committee, which is generally considered authoritative in dating recessions. Burns's detailed macroeconomic analysis influenced Milton Friedman and Anna Schwartz's classic work A Monetary History of the United States, 1867–1960.
[edit] Federal Reserve Chairman
Burns served as Fed Chairman from 1970–1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[1] and for supporting the policy, widely accepted in political and economic circles at the time, that Fed action should try to maintain an umemployment rate of around 4 percent.[2]
When Vice President Richard Nixon was running for President in 1959-1960, the Fed was undertaking a monetary tightening policy that resulted in a recession in April 1960. In his book Six Crises, Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.[1]
Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed.[3][4] Inflation resulted, which Nixon attempted to manage through wage and price controls while the Fed under Burns maintained an expansive monetary policy. After the 1972 election, price controls began to fail and by 1974, the inflation rate was 12.3 percent.[1]
Another factor contributing to inflation under the Burns Fed was the belief among Burns and other Fed Governors that "the country" was not willing to accept rates of unemployment in the range of six percent as a means of quelling inflation. From the Board of Governors meeting minutes of November 1970, Burns believed that:
- ...prospects were dim for any easing of the cost-push inflation generated by union demands. However, the Federal Reserve could not do anything about those influences except to impose monetary restraint, and he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent. Therefore, he believed that the Federal Reserve should not take on the responsibility for attempting to accomplish by itself, under its existing powers, a reduction in the rate of inflation to, say, 2 percent... he did not believe that the Federal Reserve should be expected to cope with inflation single-handedly. The only effective answer, in his opinion, lay in some form of incomes policy.[2]
The consumer price index rose over 72% during Burns' tenure. Negative economic events included multiple oil shocks and heavy government deficits arising in part from the Vietnam War and Great Society government programs.
[edit] Sources
- Engelbourg, Saul. "The Council of Economic Advisers and the Recession of 1953-1954." Business History Review 1980 54(2): 192-214. ISSN 0007-6805 Fulltext in Jstor. Abstract: The 1953-54 recession was the first in which a Council of Economic Advisers (CEA) appointed by a Republican President, Dwight D. Eisenhower, recommended policy actions. Despite traditional Republican Party rhetoric, the CEA supported an activist contracyclical approach that helped to establish Keynesianism as a bipartisan economic policy for the nation. Especially important in formulating the CEA response to the recession - accelerating public works programs, easing credit, and reducing taxes - were Arthur F. Burns and Neil H. Jacoby.
- Leeson, Robert. "The Political Economy of the Inflation-unemployment Trade-off." History of Political Economy 1997 29(1): 117-156. ISSN 0018-2702 Fulltext in Swetswise and Ebsco. Abstract: Reviews the debate over the inflation-unemployment trade-off, which was a critical part of the 1960 presidential election campaign. At the 1959 American Economic Association Conference (AEAC), Paul Samuelson and Robert Solow, economists from the Massachusetts Institute of Technology, argued that the application of American wage and price statistical data to the Phillips curve indicated high levels of employment could be achieved with moderate levels of inflation. While this proposition supported John F. Kennedy's goal of minimizing unemployment, Richard Nixon advocated zero inflation and was supported in this policy by Arthur Burns, who delivered the 1959 AEAC presidential address. Burns was an opponent of Keynesian economics and personified the anti-Keynesian sentiment that prevailed in the United States in the 1950s. Keynesianism and communism were seen by many at the time to be one and the same.
- Robert Sobel The Worldly Economists(1980).
- Throckmorton, H. Bruce. "The Moral Suasion of Arthur F. Burns: 1970-1977." Essays in Economic and Business History 1991 9: 111-121. ISSN 0896-226X. Abstract: Reviews key words in Arthur F. Burns's testimony on various occasions before the Joint Economic Committee of Congress while he served as chairman of the Board of Governors of the Federal Reserve System, 1970-78. Correlates the key words with rates of inflation and interest rates to determine if there is a relationship between key words of testimony and selected economic variables.
- Wells, Wyatt C. Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970-78. Columbia U. Press, 1994. 334 pp.
[edit] Primary sources
- Burns, Arthur F. Reflections of an Economic Policy Maker: Speeches and Congressional Statements: 1969-1978 (AEI Studies no. 217; Washington: American Enterprise Inst., 1978); reviewed by Paul W. McCracken, "Reflections of an Economic Policy Maker: a Review Article" in Journal of Economic Literature 1980 18(2): 579-585. ISSN 0022-0515 Fulltext online at Jstor and Ebsco.
- Burns, Arthur F. "Progress Towards Economic Stability." American Economic Review 1960 50(1): 1-19. ISSN 0002-8282 Fulltext in Jstor and Ebsco. Abstract: Views economic growth, 1929-59; discusses corporate growth, government subsidies, increased consumer expenditures, rise in personal income, industrialization, and overall improvement in economic organization.
[edit] Notes
- ^ a b c Bartlett, Bruce, "(More) Politics at the Fed?," www.nationalreview.com, April 28, 2004
- ^ a b Hetzel, Robert L., "Arthur Burns and Inflation," Economic Quarterly, The Federal Reserve Bank of Richmond, Volume 84/1, Winter 1998, pages 21-44
- ^ Safire, William, Before the Fall: An Inside View of the Pre-Watergate White House, Transaction Publishers, 2005
- ^ Greider, William, Secrets of the Temple: How the Federal Reserve Runs the Country, Simon & Schuster, 1989
| Preceded by William McChesney Martin, Jr. |
Chairman of the Federal Reserve 1970–1978 |
Succeeded by G. William Miller |
| Chairmen of the Federal Reserve |  |
|---|---|
| Hamlin • Harding • Crissinger • Young • Meyer • Black • Eccles • McCabe • Martin • Burns • Miller • Volcker • Greenspan • Bernanke |
