Is the Fed more than a cheerleader?

Fed officials are falling all over themselves to call for diversity and inclusion in their ranks, the economics profession and their economic policies. But can they deliver?

Photo source: Japan Times.

The latest installment in the Fed getting ‘woke’ came this week at an event, “Racism in the Economy: Focus on the Economics Profession” hosted by the Federal Reserve Banks. It the fifth event in a series, Rah, rah, rah. My main reaction is: ‘bout time and don’t break your arm patting yourself on the back. (Note, I am in a bad mood this week otherwise I would be cheering them on.) Do watch the events. They feature many Black scholars from whom we all should be learning.

Why am I not ready to do the ‘Wave’ and some cartwheels? The Federal Reserve—both officials and staff—have never done much for racial and Ethnic minorities. In fact, they have steadfastly ignored their maximum employment mandate since day one—a mandate straight out of the Civil Rights movement. Black and Brown people have fallen victim to the boogeyman of inflation over and over again. Nice of you to finally show up and cheer. But I don’t trust you. Can you really turn words into actions?

I have my reasons to be skeptical. I started at the Fed in 2007 and watched the horror of the Great Recession and its painfully slow recovery. I cannot think of one time we talked about the economic conditions among Black people in the Board room. I am as guilty. The never appeared in any forecast memo I wrote about consumer spending or GDP from 2008 to 2017. It was not until I moved to the Consumer and Community Affairs and managed the Survey of Household Economics and Decisionmaking that I grappled with the economic inequities. But even then we did not write the words “systemic racism.” I did in my latest piece at Bloomberg Opinion. Of course, I got push back from some economists. Economists prefer euphemisms for racism. No surprise we are mostly White.

The Board is a sea of Whiteness. Currently, there are no Black economist working in the four economics divisions—the ones that inform the staff forecast and advise on monetary policy. The one Black woman who I worked with for years retired at the end of last year. Another Black economist works outside the economics divisions. None of the economists in my former section in Consumer Affairs are people of color. One Hispanic woman economist retired the same year I left.

My frustration with the lack of racial and Ethnic diversity at the Board and in the profession is frustration with myself too. I am working on doing better which mainly involves listening and learning from the many scholars of color in the profession. And a lot of saying I am sorry. Lisa Cook, Bill Spriggs, Gbenga Ajilore, and many others have been patient teachers. Listening and apologies not enough. We *do* better.

The Board like much of the economics profession explains away its Whiteness as a lack of economists of color. Bullshit. Yes, frighteningly few people of color earn a PhDs in economics each year, but THERE ARE MANY WITH PHDs AMONG US. No excuses. No Black or Brown economist supporting monetary policy at the Board is inexcusable and it’s offensive to the current scholars of color to keep saying they don’t exist or aren’t good enough to hire.

Maybe even worse these White institutions—the Fed, academic departments, government agencies, and think tanks—have started sundry ‘pipeline programs’ with more diversity and inclusion as their mission. Most commonly these take the form of hiring research assistant and pre-docs from diverse backgrounds. They believe our cheerleading. Could be all fine and good, but we bring many into the institutions and then smash them. Many flee from economics to other professions that offer more respect, MBA programs offer more to them than economics. Think about that!

Last summer I wrote a fiery blog post, “economics is a disgrace.” I had only intended it for Ben Bernanke and Janet Yellen, then-former and current president of the American Economics Association. It was written with the intention to make Ben cry. I worked for him and Janet at the Board. I know they both care and I hit them with the full force of the pain I and many others who came to me have endured. We all cried and you should to. I do not know a single woman economist at the Fed who has not had sexist or demeaning remarks said to them. I have sat in training meetings at the Fed where men economists have shared their ‘approach’ to hiring. Let’s just say someone from legal almost passed out after one comment and the man was lucky the women economists sitting around him did not pummel him. He deserved it.

I published my musings on economics to the world after one heavy week of mentoring this summer. Three students, both undergrad and grad, came to me with horrible treatment. They were hurt. One to the point that I was worried for his health. We talked about how to get him help. I checked on him later too. Then a prominent economist killed himself, one in a string over the past few years. Enough was enough the toxicity must stop. So I posted a more redacted version my letter to Ben and Janet on my blog. (Note, no version had the name of the student victims. Retaliation is real. I don’t trust even Ben and Janet with their names.)

The MOST important words in my post were, “diversity without inclusion is cruel.” I am horrified by the treatment of some research assistants and predocs in economics. Many victims are people of color and White women, but White men are not safe either. I have talked with now well over a hundred who have been demeaned, disrespected, faced bias due to their identity, verbally abused, sexually harassed, discriminated against in pay, retaliated against in grad school recommendations and performance reviews, and many more who fear retaliation. Good lord. That’s how we welcome people to economics? Exclusion hurts people deeply. It makes me angry.

Then comes the insult. I listen to Jay Powell and Fed officials lift up diversity and inclusion, right after I have spent two hours with a Board research assistant in a hostile situation. She had spoken to her supervisors and nothing happened. I told her about Employee Relations—trained mediators at the Board—who would help her. NO ONE TOLD HER ABOUT IT!!! So much for manager training. So much for inclusion.

The Fed is not alone. I sat in hours and hours of diversity and inclusion staff training in less than a year at Equitable Growth, a progressive think tank that made Heather Boushey’s career in economic policy. The center has “equity” in its name. I have NEVER worked at a more toxic, badly managed place. I left. I spoke out after months of conversations in private went nowhere. I gave them the benefit of the doubt. Countless people have asked me since if they should apply for jobs at Equitable Growth. My answer ALWAYS, yes! It has a great mission, the staff are wonderful, and I think management will improve after me calling them out. Why am I so stupid?

I have learned recently about an discriminatory treatment at both Equitable Growth and the Council of Economic Advisers where Heather is now a Member. I am done recommending people work at either place, especially people of color or people who are not politically convenient to Heather career path. Nice work. I have heard from people current and former at other progressive and left-of-center think tanks. It’s sad and inexcusable. I know we can do better, but I am not holding my breath.

Ok, back to the Fed and monetary policy. Yes, we can bring racial disparities into policy making and there is progress. I wrote about it in the New York Times recently. (I was in a better mood then.

The analysis is coming along too. The chart packs going to the FOMC show the Black unemployment rate now. Jay and many other Fed officials are speaking about and deliberating on these inequities. The new “average inflation targeting,” as lame as it sounds, IS a big step toward elevating the maximum employment mandate, making it on par with stable prices mandate. Took over 40 years but better late than never.

But do the cheerleaders at the Fed mean it? I am pessimistic. See above. If you keep destroying marginalized people IN THE BUILDING, how are you possibly going to serve the ones out in the world? They refuse to define maximum employment. It’s not that hard. You pulled 2% inflation at of your woo-hoo value. Pick a number and tell us why. In addition, despite all the talk they refuse to define how higher racial/Ethnic unemployment rates fit in that thinking. Note, they should. Getting to full employment is about bringing those are the margins into work, bringing them in with jobs that pay living wages and have career paths. Guess who’s at the margins? MARGINALIZED GROUPS.

The tools of mainstream macro are as entrenched as they are broken and the commitment to fighting for economic justice are in its infancy. I wrote how potential output a key metric of how much our economy can grow is has systemic racism baked in it. Sounds boring but it’s being weaponized to undercut more supportive economic policy. I have written non-stop on how inflation hawks are standing in the way of economic policy serving all the people. I am tired and I am discouraged. Yes, we are making progress. Thank god, Jay and Janet are leading the Fed and Treasury now and not Larry and Gene. Jay and Janet are the real deal, but they ain’t got much backup. You can’t make a pyramid with only one cheerleader at the top and you better have someone to catch you.

Change is happening, even if it’s messy and painful. As one example, in our tools, distributional macro models—that allow us to study how economic conditions affect different groups of people, including by race—are the cutting edge. These models have been around for decades, even economists know that inequality has been with us for a long time, but now they are sexy and published in the best journals. Empirical macro is pushing hard against macro theory some of which is useless. Let the data speak. And then listen to them. They say kill the zombie models.

Importantly, economists and policy experts considered by the mainstream not to be mainstream—another insult—are getting a lot more attention. ‘Bout time. Even five years ago it was inconceivable that Modern Monetary Theory, a wealth tax, and guaranteed income would be seriously discussed. They are and more. Now the old guard is NOT going down without a fight. See the implosion of Larry Summers and team. What’s sad is that the gatekeepers of the mainstream will never welcome the leaders on the outside into the fold. Part of MMT will almost certainly make into the mainstream canon. But today’s leaders of MMT will not get the credit. I expect Stephanie Kelton to be the MMT Moses leading us to new ‘Promise Land’ of economics but not allowed to enter herself. I could be wrong, but that’s a well worn path in the history of economic thought. (Economists really should study our history more. It’s fascinating and it often rhymes with today.)

The only way the Fed and other economic policy makers make progress toward economic justice for all is to have economists who can give them the tools, the analysis, the research to guide them. The gatekeepers, are largely a lost cause. Hope springs eternal. If I ever woke to Larry Summers going to bat for Main Street I would offer to rename the Sahm rule in his honor. But yeah, he ain’t changing. And it’s not just the old farts. The people they have trained and helped up the ladder are selected to be like them. Bad behavior and bad economics are learned. Their offspring have learned to silence divergent views. Don’t expect them to reshape orthodoxy.

All is not lost. Those like me slammed by the Great Recession, the financial crisis, and its painful recovery became suspicious of what we were taught in grad school and what we still hear from the elders. But we are a bit of a lost cause too. I succeeded at the Fed because I learned to come up swinging. You can see it in my Twitter feed. Do you really think I am that different in private among the macro tribe (when I need to be). I am not a nice person anymore. I walked into the Fed a nice person. My experiences as a student were amazing. Others are not as lucky and did not have the start I did. Some assholes of the Fed made up for lost time. But I learned a lot from them. I am part of the selection problem today.

One of the reasons that I spend so much time with with young adults is that they get it. They know that racism, sexism, homophobia, elitism, moneyed interests, etc. cause immense pain and suffering. Now don’t get me wrong some of them are shit heads too. Selection on toxicity starts young. But many more of them are committed to a better economics. I and others are trying frantically to create enough space in the profession for them to flourish. I am also trying to create space for current experts in marginalized groups, including those outside the orthodox thinking. I can see slow progress. It’s heartening to meet them and see their passion. That’s why the abuse that some endure breaks my heart. Economics needs them but we do not deserve them.

But anyone in an under-represented group—as a woman I am one in macro—knows that heart break is part of the deal. Those who stay love economics, and have not been beaten to a pulp have to love it more than the others That’s not fair. We also have to hit a higher bar with our work. Also not fair. New ideas have to hit really really high bar which is absurd given how shit some of our 'orthodox’ views are.

Wrapping it up. Yeah, Fed. Yeah economics. You are trying. I am shaking my pompoms for you. Now try harder. Or I will throw them at you. Listen to new people, bring into the room, and give them a goddamn seat at the table. Sit in the back row, I promise you will learn something and economics and the world will be better for it.