Jewish World Review Nov. 12, 2002 / 7 Kislev, 5763
Political Correctness at the Fed (No joke!)
We all acknowledge that political correctness is a problem - that it can
chill free speech and that it can reduce the quality of public discourse.
But political correctness can do more than that. It can hurt economic
Anyone who wants to challenge this last assertion as a polemicist's stretch
may want to consider a controversy involving an author, Harry Stein, and
the Federal Reserve Bank of Dallas and its president, Robert McTeer.
As Dallas Fed president, Mr. McTeer is one of the most influential monetary
policymakers in America. Along with the other regionally based Fed
presidents, he rotates on and off the Federal Reserve's Open Market
Committee, where regional presidents set policy with the Washington-based
Board of Governors.
Overall, US monetary policy has had its critics, but certain things about
it are incontrovertible. One is that over years it has succeeded in
bringing US interest rates down - by a full three percentage points, in the
1990s-and that that reduction has been a social good. The lower rates
fuelled overall growth. But they especially benefited homebuyers, and very
especially lower-earning home buyers, a group that includes many
Mr. McTeer's role was central here; as a "new economy" advocate on the FOMC,
he championed the argument that productivity increases from new technology
were reducing the threat of inflation and so permitted lower interest
rates. This, especially in the late 1990s, amounted to economic heterodoxy.
In recent months, Mr. McTeer has been in the news again. In September, he
joined Governor Ned Gramlich in a dissent against FOMC policy that called
for loosening money. Come this week, that dissent became the majority
opinion and brought about a 50 basis point rate cut.
Like most original characters, Mr. McTeer demonstrated his originality in a
number of areas; he fashioned the staid Dallas Fed into something of a
splashy think tank, inviting speakers with a range of expertise.
Such work means that Mr. McTeer is sometimes mentioned as one of the
possible successors to Fed Chairman Alan Greenspan. But candidates for Fed
jobs must be able to sail through confirmation hearings in the US Senate.
Political baggage, especially baggage in sensitive areas, is a potential
disqualifier. And recently Mr. McTeer acquired just such baggage.
This reversal stems from a speech Mr. Stein, the author, delivered in Dallas
upon the invitation of Mr. McTeer last spring. Mr. Stein's topic was his
recent book, ""How I Became Part of the Vast Right Wing Conspiracy (And Found
Inner Peace)." In the book, Mr. Stein humorously chronicles his story as the
child of communists and his conversion from leftwing youth to conservatism.
Then he attacks the political intolerance of modern feminism, modern
multiculturalism, and so on.
At one point in his speech, Mr. Stein spoke about an incident that occurred
at his son's school. The class was reading Mark Twain's Huckleberry Finn.
Huckleberry Finn contains racist language, to which Mr. Stein referred. But
its central plot line is about Huck choosing - in the face of high
penalties - to save Jim, his runaway slave buddy, from recapture by his
The son's teacher expressed disapproval of the book, Mr. Stein reported,
"because it is racist". Mr. Stein's son argued the book was anti-racist. The
teacher asked how the boy would like it if they read an anti-Semitic text
(Mr. Stein is Jewish). The son replied that the class had read such a book -
Mein Kampf - in an earlier class. The general point of Mr. Stein's story was
that (the teacher's) political correctness discouraged debate, rather than
Apparently some people in the audience at the Dallas Fed thought that such
discouragement was a good idea. In question time, one guest rose to say
that "I was personally offended by your jokes" and warned that Mr. Stein's
true point "may be lost on many" who hear of his story. The suggestion was
that Mr. Stein's anti-racist anecdote might be interpreted as a racial slur.
Next thing you know, Mr. Stein's little Huck Finn account (worth about two
per cent of his entire speech) was being covered by the local press.
"Political Talk Irks Fed Members" ran one headline. The story reported,
among other things, a statement from the San Francisco Fed saying "Our
president found the speaker's choice of words to be offensive and
inappropriate for a gathering held at a Federal Reserve Bank". Other news
stories willfully misinterpreted what had happened at the speech; the topic
became racial insensitivity, not free speech.
Mr. McTeer apologized several times, saying, among other things that
"Certain derogatory terms for racial and religious minorities are so
inflammatory and offensive that they have no place in a serious policy
Readers may be able to guess the rest of the story. The press reports put
Mr. McTeer under a cloud. Both the administration and the House and Senate
Banking Committees have publicly pressured the Fed, an institution where
the proportion of white males in high positions is rather higher than that
of white males in the general population, into attuning itself to issues of
diversity and background. Hiring more women, blacks or Hispanics is not the
only issue. Even the autonomous Fed, the message is, must also create an
environment that is hospitable to diversity.
One can of course at this point note that some of this may have been Mr.
McTeer's fault. Perhaps he should not have hosted an event that was not
explicitly economic. Or perhaps he should not have apologized. And, as
Harry Stein later noted in a thoughtful article recalling his Texas visit
in the Manhattan Institute's City Journal, Mr. McTeer has apologized
Which brings us back to this week's rate cut and Mr. McTeer's monetary
policy victory. For those who advocate lower rates for the US, it was good
economic news. But it might also have been good news in another sense: it
might have shown that the little Fed controversy over the Stein speech is
over. That would be a good thing. It must be possible, after all, for
America to make racial and social progress without bringing political
correctness into arenas where it has no place.
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JWR contributor Amity Shlaes is a columnist for Financial Times
. Her latest book is
The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.
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