Published by EH.NET (April 2011)

Robert H. Ferrell, editor, Inside the Nixon Administration: The Secret Diary of Arthur Burns, 1969-1974. Lawrence, KS: University Press of Kansas, 2010. xiv + 133 pp. $25 (hardcover), ISBN: 978-0-7006-1730-2.

Reviewed for EH.Net by Henry Chappell, Department of Economics, University of South Carolina.

Arthur Burns served as Chairman of the Federal Reserve Board (the Fed) from 1970 to 1978. Prior to serving at the Fed, he had distinguished himself in academia at Columbia University, had served as the Chairman of President Eisenhower?s Council of Economic Advisors, and had been president of both the National Bureau of Economic Research and the American Economic Association. He had also served President Nixon as an advisor prior to his years at the Fed.

As Fed Chairman, Burns inherited an incipient inflation, an inflation that accelerated under his tenure. His reign at the Fed is also known for an unhealthy mixing of politics and economics; it has been alleged that Burns? expansionary policies prior to the 1972 election were motivated by an effort to secure a Nixon win. There is little doubt that Nixon was a political schemer, but Burns? motivations have always been more difficult to assess.

As the title suggests, this book is a diary kept by Burns during the Nixon years, beginning with inauguration day in 1969 and concluding shortly before Nixon?s resignation in July 1974. The volume has been edited by Robert H. Ferrell, emeritus professor of history at Indiana University. Ferrell has left Burns? original wording intact, but has annotated the entries to provide helpful context for the reader. After Burns assumed the Fed Chairmanship, he continued to play a role as a key Nixon advisor and he observed and interacted with all of the major Nixon administration appointees. Because of his proximity to the administration, Burns? diary is able to describe the political machinations that preceded important events like the abandonment of the gold standard, the imposition of price controls, and the expansion of the money supply in advance of the 1972 election.

Ferrell tells us that Burns ?wrote this diary to hold in his mind the strengths and foibles of the leading figures of the Nixon administration, not least the president himself? (p. vii).? Burns clearly succeeded in chronicling the foibles of others; his assessments are rarely flattering. Burns says that former Treasury Secretary George Schultz was a ?woefully ignorant ideologist? (p. 66). Of William Martin, his predecessor as Fed Chairman, Burns says, ?Poor fellow, he thinks he owns the Fed and has suddenly discovered that he is so indispensable that the job must not go … to anyone else. Pathetic slob!? (p. 14).? Burns dismisses Sargent Shriver, saying, ?What a damned fool that lacquered fellow is! More stupid than I had realized.? Similarly, IMF head Pierre-Paul Schweitzer ?… is a pathetic man, always on the defensive one way or another? (p. 58).

Burns was equally harsh in his assessment of Paul Volcker, who, at that time, was serving as an undersecretary of the Treasury: ?Volcker troubled me, gave a stupid reply to President?s question why the British are interested in raising the price of gold, and I had to clarify the matter? (p. 13). He added that ?he is an indecisive man, full of flaws, and anxieties? (p. 62), and laments that ?… somehow, poor and wretched Volker — never knowing where he stood on any issue — had succeeded in instilling an irrational fear of gold in his tyrannical master [Treasury Secretary John Connally]? (p. 65). Ironically, history will portray Volcker as the heroic figure who, as Fed Chairman, finally put an end to the Great Inflation that began under Martin and accelerated under Burns.

Burns does offer at least one positive evaluation of an administration colleague, one that is comically inappropriate: ?Ted Agnew is an honest man. He has plenty of guts and good sense? (p. 76).? Agnew later resigned as Vice President and was convicted of tax evasion in connection with charges of bribery.

Given the profound inadequacies of other Nixon appointees, it was natural for Burns to seek to influence the President.? Ferrell seems to accept this as an appropriate and virtuous role for Burns. He notes that ?the solidity of his [Burns?] self-knowledge made him impervious to the mistakes of politics … when the public interest intervened he could be counted on? (p. ix).

Even if we accept Burns? good intentions, he was neither without ambition nor immune to manipulation. Like many others, Burns craved both the president?s ear and his approval. He wanted to be a part of Nixon?s administration, with influence over all economic issues, not just monetary policy. Nixon was happy to oblige him. Burns met with the ?Quadriad? (Nixon?s key economic appointees), had private meetings with Nixon and administration officials, frequently attended Cabinet meetings, and was even included in Nixon family social events.

What price did Burns pay for this elevated status? He was expected to be a team player. Burns records this expectation explicitly, quoting Nixon as saying ?while my [Burns?] status was a special one, I too will be expected to conform to publicly announced Administration policies? (p. 45).? In August 1971, Nixon announced the adoption of wage and price controls, the closing of the gold window, and the abandonment of the Bretton Woods regime of fixed exchange rates.? When Burns told Nixon that he could fully support the new program, he was rewarded with both praise and trinkets: ?That evening, Saturday, [William] Safire came to see me and told me how pleased the President was with my entire attitude and that he had said that he did not think that one could find another half dozen men like me in the entire country — that, indeed, I was a rare jewel … The next day, Sunday, the President presented everyone at the meeting with a Camp David Jacket, but he singled me and [David] Kennedy out — we were also to receive some Camp David glasses.?

Excuse me, Arthur, did you just sacrifice central bank independence for souvenir glasses?

Later, Nixon chose to ask Burns to chair the Committee on Interest and Dividends, a board with oversight over those income categories under the wage and price guidelines. It would be difficult for any Fed Chairman to raise interest rates during a period of price controls, but for a Fed Chairman to raise interest rates while simultaneously chairing a committee overseeing interest rate pricing guidelines was unthinkable. Nixon had cleverly boxed Burns in with this double appointment. Unfortunately, Burns was easy prey:? ?[Nixon] expressed gratification over my taking chairmanship of Committee on Interest and Dividends, hoped that this would not be embarrassing to Fed, [said] that my hand in this was needed, for a Stans or a Romney would not command the authority or respect required for success. I kept quiet for the most part. How could I disagree?? (p. 58-59).

As Burns was manipulated through attention and flattery, the Fed?s independence was a casualty and the political pressure for monetary ease was irresistible. Burns could not advocate resistance. Had he done so, he would have become a pariah in the administration and — for one who craved a central role — that would have been an intolerable outcome. Burns was quick to note shortcomings of others but he was unable to see how his own imperfections were so tragically exploited.

The Burns diary provides an extraordinary account. Readers will find that Ferrell?s annotations providing historical context are convenient and useful supplements. Ferrell also offers interpretive commentary that is sometimes helpful but, at other times, less so. He presents Burns as a defender of virtue, the public interest, and the gold standard, but fails to comment on the personal frailties that led Burns to sacrifice Federal Reserve independence. Ferrell?s comments on economics are sometimes confused or misleading. For example, his explanation for the crisis leading to the abandonment of gold is that ?The increasing wealth of the European nations and Japan and other factors had sent dollars out of control? (p. 49). Commentary aside, the diary itself is a treasure. It is essential reading for anyone with an interest in the history of the Nixon presidency or the political decisions that sustained the Great Inflation of the 1970s.

Henry Chappell is the Dewey H. Johnson Professor of Economics at the University of South Carolina. He is the author, with Rob Roy McGregor and Todd A. Vermilyea, of Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee, MIT Press, 2005.

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (April 2011). All EH.Net reviews are archived at