Working for the People

Donald Kohn: Vice chairman, Federal Reserve Board of Governors

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Kohn’s reference points have changed mightily. For one thing, world exchange rates are now flexible and not pegged to gold (a strategy he recommended in his I.S. in 1964, seven years before the link was actually severed.)

“I don’t consider myself a prophet,” he says now. “I picked the topic because a lot of economists were making that argument. I went into the thesis without having made up my mind and instead read the arguments. That’s the way it’s supposed to work.”

Flexible exchange rates, increased transportation and communication capabilities, and exploding technology helped ignite a global economy. The size of the U.S. economy has grown from $1 trillion in 1970 to $14 trillion today. The workforce has nearly doubled, federal spending is 13 times higher, and public debt has exploded from $380 billion to over $9 trillion. United States trade with the rest of the world has increased 24 times, to over $2 trillion a year.

Globalization has complicated the work of Kohn and his colleagues, as they simultaneously evaluate international developments and the increasingly intricate details of the U.S. economy.

How does he track this expanding spreadsheet? “With difficulty,” he laughs. “You have to be aware of the broad trends like globalization. But cyclical developments are also very important.”

And how does he stay in touch with the consequences for individuals? “I try to force myself to think, practicing patterns of thought that were developed and encouraged at Wooster. The statistics we look at depend on the circumstances. I take a topic and examine it from various angles. I try to spread the net very widely. Right now, the big issue in the economy is housing. In a month or two it might be something else.”

Kohn began tracking these cycles in earnest when he joined the Kansas City Federal Reserve Bank in 1971, finishing his doctorate at the University of Michigan. He moved to Washington five years later. His expanding role in the decision-making of the Federal Reserve Board has kept the job attractive. Has he ever thought of leaving? Not for long, he replies. “I would rather be on the inside working on things than on the outside trying to guess what some other Don Kohn was telling Alan Greenspan.”

He was drawn to public service in part by his experience at Wooster, but especially by his parents. His father was chief financial officer for the Young Men’s Hebrew Association in Philadelphia; his mother was an elementary school teacher. “The notion of working for a place that is trying to make the world a little bit better is part of what I grew up with,” Kohn says.

That has meant a public service career, which he summed up in one sentence for a Wooster audience a year ago. “I can tell you from personal experience that going to work each morning knowing that how well you do your job could affect the welfare of your fellow citizens can be a little scary, but it is also tremendously challenging and rewarding.”

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