Burns, Arthur Frank

views updated May 29 2018

BURNS, Arthur Frank

(b. 27 April 1904 in Stanislau, Austria [now Ukraine]; d. 26 June 1987 in Baltimore, Maryland), economist, and chairman of the U.S. Federal Reserve Board, who held that the government should fight inflation and unemployment by cutting taxes while maintaining the value of the dollar.

Burns was born Arthur Frank Burnseig, the only child of Nathan Burnseig and Sarah Juran, immigrants from eastern Europe who lived in Bayonne, New Jersey. His father worked as a painting contractor. An outstanding student at high school, Burns received a scholarship to Columbia University; he worked his way through school in a series of jobs that included painter, sailor, waiter, postal clerk, and shoe salesman. At Columbia he earned his B.A. in 1921, his M.A. in 1925, and his Ph.D. in economics in 1934. Meanwhile, in 1927 he began teaching economics at Rutgers University, which he continued doing until 1944.

In 1930 Burns began two associations that would last him the remainder of his life. He married Helen Bernstein on 25 January; they had two sons. Also that year he became a research associate at the National Bureau of Economic Research (NBER). In 1944 he forged yet another lifelong association when he went to work at Columbia as a professor of economics. That position lasted until 1959, whereupon he became John Bates Clark Professor of Economics (1959 to 1969), and finally an emeritus professor (1969 to 1987).

At the NBER, Burns came under the influence of economist Wesley Clair Mitchell, noted for his studies of business cycles. Later, he and Mitchell coauthored Measuring Business Cycles (1946). Burns rejected the ideas of the prominent British economist John Maynard Keynes, whose policies of large-scale government spending programs and increased money supplies were then being implemented through President Franklin D. Roosevelt's New Deal programs. By the time he replaced Mitchell as director of research at the NBER in 1945, Burns had concluded that governments should maintain high employment levels but should restrict inflation.

During the 1950s Burns had an opportunity to put his ideas to work as chairman of the Council of Economic Advisors under President Dwight D. Eisenhower from 1953 to 1956. He would not hold such a prominent position in the realm of national economic policy again until his appointment as economic counselor to Richard M. Nixon in 1969, but he did serve as a member of the President's Advisory Committee on Labor-Management Policy from 1961 to 1966 under John F. Kennedy and Lyndon B. Johnson.

Ironically, Burns, an economic conservative whose most significant work was performed under Republican presidents, was nominally a Democrat. Though he was the most conservative member of the committee, he found support from Kennedy, who in 1962 called for tax cuts as a means of stimulating the economy. Kennedy also sought to index wage increases to increases in labor productivity, a policy Burns himself later imitated as Federal Reserve ("Fed") chairman under Nixon. Additionally, Kennedy and Johnson, with Burns's support, put together a tax-cut plan, which was passed by Congress in 1964.

Burns favored making annual tax cuts, but by the time of Nixon's election in 1968 the human and economic toll of the Vietnam War had brought about a change of priorities. No longer was there the need to stimulate a good economy; rather, it was now a matter of rescuing a flagging economy from further decline. Not only had the war cost the nation heavily in terms of lives lost, but it had proved an enormous financial drain, bringing about the largest budget deficit since the end of World War II. This had in turn spawned high inflation, which, combined with the general crisis of confidence taking hold of the United States in the wake of the war, led to an erosion of faith in the government's ability to jump-start the economy.

Already by 1965 a word describing the resulting economic conditions had entered the language: stagflation. Though Burns did not coin the term, which refers to a situation of continuing inflation, relatively high unemployment, and stagnant consumer demand and economic growth, he famously warned against it in a 1970 speech. A year earlier Nixon had appointed him counselor, a position with a rank equivalent to that of a cabinet secretary, and in that capacity he held wide responsibilities in domestic affairs. An even more significant appointment followed in 1970, when Nixon chose him to chair the Fed.

To combat stagflation, Burns recommended the federal government cut back on spending and the Fed work to slow the growth of the money supply. These measures, he believed, would put the brakes on inflation without causing a recession. Nixon accepted the ideas in broad terms and incorporated them into his New Economic Policy, introduced after a meeting at Camp David on 15 August 1971. However, where the value of the dollar was concerned, Nixon rejected the advice of Burns and others, who favored stabilization of the currency, and instead brought an end to fixed exchange rates. In so doing, the president was following the advice of Undersecretary of the Treasury Paul Volcker, who in turn had been influenced by University of Chicago economist Milton Friedman—one of Burns's own students from Rutgers.

As a result of the Volcker measures, the value of the dollar fell against that of the Japanese yen and the West German deutschmark. At the same time, Burns's Fed tightened the money supply, sending interest rates skyrocketing and helping bring about a recession even as inflation continued to climb. Stagflation thus became a full-scale reality in the aftermath of Nixon's 1972 reelection, which ultimately brought about an even more serious crisis in the form of the Watergate scandal.

Although Burns had a reputation as a conservative and a dubious attitude toward government intervention in the economy, in a number of particulars he actually supported an activist role for the federal government. This was evident during Nixon's truncated second term, when Burns seemed to reverse many of the policies he had maintained in the first term, especially expanding the money supply to boost the economy. Yet signs of this changing attitude were already apparent in 1970 and 1971.

After the economic collapse of the Penn Central Railroad in 1970, Burns announced that the Fed would provide funds necessary to prevent a panic. During this time Burns began to support wage and price guidelines, and he influenced Nixon's implementation of these measures in 1971. In this year he first expanded the supply of currency, reinforcing the economy and helping ensure Nixon's 1972 landslide victory against South Dakota Senator George McGovern.

Nixon resigned in 1974, but Burns remained as Fed chairman under the administration of Gerald R. Ford and continued the policies of government intervention introduced under the Nixon administration. After President Jimmy Carter declined to reappoint him, Burns resigned from the Fed on 31 January 1978. Eighteen months later, following the brief tenure of G. William Miller, Volcker took office as Fed chairman.

Meanwhile, Burns had become involved with the American Enterprise Institute, which would establish the Arthur F. Burns Memorial Lecture series after his death. In 1981 he was appointed ambassador to the Federal Republic of Germany by President Ronald Reagan. He resigned in 1985 at the conclusion of Reagan's first term and in April 1987 underwent triple bypass heart surgery at Johns Hopkins Hospital in Baltimore. Burns died of complications from this surgery; he was honored with a memorial service held by the American Enterprise Institute.

During his career Burns published a dozen books and pamphlets and contributed to other works. His most significant publication, inasmuch as it is an overview of his ideas during the most important phase of his career, is Reflections of an Economic Policy Maker: Speeches and Congressional Statements, 1969–1978 (1978). Notable publications during the 1960s include The Management of Prosperity (1966) and The Business Cycle in a Changing World (1969).

German chancellor Helmut Schmidt, who became a close friend during Burns's tenure as ambassador, called him "the Pope of Economics." Certainly Burns looms as large in national history as any Fed chairman, but observers are far from unanimous in their assessments of his legacy. In the view of some, Burns helped maintain economic stability during troubled times. Supporters point to his calm in the face of the Penn Central crisis, which not only served to allay fears but also advanced his personal prestige and the power of his office.

Detractors maintain that by reversing the free-market policies of his early career, Burns made a bad situation worse. Economic historians across a broad political spectrum have judged Nixon's wage and price controls a failure, and because Burns was one of the leading architects of that policy, some of the blame falls to him. Critics and admirers alike, however, agree that Burns was a strong leader in the Fed. Whereas his predecessor, William McChesney Martin, had led by consensus, Burns proposed that the chairman vote first, rather than last, so as to establish confidence in his leadership. By so doing he helped establish the national prominence of the Fed, paving the way for strong leadership by Alan Greenspan at the end of the twentieth century.

Burns's papers from his years in public service and academe are found in two collections. The larger of the two, at the Gerald R. Ford Library in Ann Arbor, Michigan, contains materials from Burns's tenure on the Federal Reserve Board, as well as documents concerning both domestic and international economic affairs. The Dwight D. Eisenhower Library in Abilene, Kansas, containsmany of Burns's unpublished works, including speeches and lectures, notes from trips, and drafts for the book Measuring Business Cycles. Wyatt C. Wells addresses a key phase of Burns's career in Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970–78 (1994). Analyses of his work and ideas appear in Edward S. Flash, Jr., Economic Advice and Presidential Leadership (1965); Herbert Stein, The Fiscal Revolution in America (1969); and William Breit and Roger Ransom, The Academic Scribblers (1971). William Safire, Before the Fall: An Inside View of the Pre-Watergate White House (1975), contains information on Burns's role in the Nixon administration. Richard D. Bartel conducted a lengthy interview with Burns, published as "An Economist's Perspective over Sixty Years," Challenge 27 (Jan.–Feb. 1985): 17–25. An obituary is in the New York Times (27 June 1987).

Judson Knight

Arthur Burns

views updated May 21 2018

Arthur Burns

Having occupied important positions in every Republican administration from the end of World War II to the mid-1980s, Arthur Burns (1904-1987) was one of the most influential economic statesmen of his times.

Born in Stanislau, Austria, Arthur Burns soon immigrated with his Austro-Hungarian Jewish parents to New Jersey. He grew up in Bayonne, where he showed particular promise in debate and languages. He attended Columbia University on a scholarship, and while a student worked as a painter, sailor, writer, and clerk. Occasionally, he published articles in New York Herald Tribune.

Burns studied under Wesley Clair Mitchell, one of the nation's leading economists who pioneered in the development of statistics. Mitchell had organized the National Bureau of Economic Research at Columbia and, after receiving his Ph.D. in economics, Burns joined him there. His first important publication, Production Trends in the United States Since 1870, was released by the National Bureau in 1934 and established him as a coming scholar in that field.

During the 1930s economic debate in America centered on the concepts of John Maynard Keynes, who held that a vigorous governmental role was needed to direct the economy. Because the United States then was mired in a deep depression, this meant large-scale government spending programs such as those sponsored by President Franklin D. Roosevelt's New Deal. While accepting some of Keynes' ideas, Burns believed the American Keynesians were far too simplistic in their approaches. Along with Mitchell, he believed economic action must be preceded by careful gatherings of facts and not based upon some abstract idea. Each industry has its own cycle, he wrote, and when several head downward at the same time, we will have a recession or depression. What is needed then is some intervention, but on a highly selective basis.

By the late 1940s, by which time he had succeeded Mitchell as director of research at the National Bureau of Economic Research, Burns had come to believe that the maintenance of employment was a prime goal of government, but that inflation was another serious problem which had to be addressed. This would be accomplished by "leaning" against the economy whenever one or the other threatened. Gentle stimulative pressures would be applied when recession threatened, and restrictive ones when inflation seemed about to rise or accelerate. This placed Burns squarely in the camp of moderate Republicans who then were supporting General Dwight D. Eisenhower for the presidency.

When Eisenhower became president in 1953 he selected Burns to head the Council of Economic Advisors. A recession developed later that year, and Eisenhower was willing to embark upon a major recovery program. Burns urged him to hold back. The economic indicators seemed to point to a milder correction than most other economists expected. He proved correct. Without major intervention the economy turned upward in 1954, leading Eisenhower to remark, "Arthur, you'd have made a fine chief of staff during the war."

Burns resigned from the administration after the 1956 election and returned to the National Bureau of Economic Research and Columbia. He advised Eisenhower from there and later took on temporary assignments from his successors, John F. Kennedy and Lyndon B. Johnson. In addition, he kept in close contact with Richard Nixon, formerly Eisenhower's vice president and then a New York attorney.

When Nixon won the 1968 election he asked Burns to return to Washington as counselor to the president, a position which would carry cabinet rank and give him wide responsibilities in domestic affairs. At the time the nation was in the midst of a crisis of confidence due to anti-Vietnam War sentiment, high inflation, and the largest budget deficit of the post-World War II period. Burns recommended a slowdown in the growth of the money supply through Federal Reserve Board policies and cutbacks in spending, which he hoped would dampen the inflation rate without causing a recession. Nixon accepted the broad outlines of the program, and at first it seemed to be working. Then the Federal Reserve tightened up sharply on the money supply, causing interest rates to rise and leading to an economic downturn while inflation was still deemed a problem. Thus was born "stagflation," a problem which would haunt the nation throughout the 1970s and cause economists to rethink many of their earlier ideas.

With the coming of stagflation Burns' position in the Nixon White House declined, and his views started to change. Now he supported wage and price "guidelines" as a means of controlling inflation and seemed to inch away from his earlier stance.

In late 1969 President Nixon named Burns to become chairman of the Federal Reserve, where he would be able to act independently. Burns expanded the currency supply, which gave the economy a boost. When the Penn Central Railroad collapsed in 1970, Burns proclaimed that the Federal Reserve would provide sufficient funds to prevent a panic, and his calm behavior in this crisis not only enhanced his reputation but made him one of the most powerful men in the country insofar as economic matters were concerned. Burns continued to support wage and price guidelines and was credited with having helped prompt President Nixon to impose them in 1971. That same year he expanded the money supply considerably, so that by Election Day 1972 the economy was growing while prices were being contained, making the economy appear quite healthy and helping Nixon win a second term. Burns was accused of having used the Federal Reserve for political purposes, which he vehemently denied.

Burns served as chairman of the Federal Reserve until the conclusion of his term in 1978, at which time he was not reappointed by Democratic President Jimmy Carter. This caused the dollar to plummet and shook the new administration. Burns left government to take a post at the American Enterprise Institute and also lectured and wrote, becoming an elder statesman of moderate economics. During that time he published Reflections of an Economic Policy Maker (1978).

In 1981 President Ronald Reagan named Burns ambassador to the Federal Republic of Germany. He took the post during a time of strong anti-American sentiment in Europe, because of U.S. deployment of cruise and Pershing missiles. Reagan proved wise in his decision to appoint Burns, who was well-respected throughout Europe for his past performance in economic matters. He was able to quell European concerns, arriving at an agreement with the West German foreign minister that significantly eased tensions within NATO. Burns served as Ambassador to Germany for four years, then returned to the American Economic Institute to pursue writing and teaching.

Arthur Burns died in Baltimore, Maryland on June 26, 1987, leaving a tremendous legacy. Not only did his economic policies dramatically influence the American and world economies, he also inspired people, such as his famous pupil, Milton Friedman. He was clearly an approachable man, being described by one reporter as "a small-town druggist circa 1910."

Further Reading

There is no biography of Arthur Burns. A discussion and analysis of his life and ideas may be found in Robert Sobel, The Worldly Economists (1980); William Breit and Roger Ransom, The Academic Scribblers (1971); Edward Flash, Jr., Economic Advice and Presidential Leadership (1965); and Herbert Stein, The Fiscal Revolution in America (1969). For his work during the Eisenhower administration see Sherman Adams, Firsthand Report: The Story of the Eisenhower Administration (1961), while William Safire, Before the Fall contains material on his work during the Nixon administration. Among the more accessible works by Burns himself is Reflections on an Economic Policy Maker (1978), which is a collection of his papers and speeches through the years. Also see Wyatt C. Wells, Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970-78, Columbia University Press, 1994. □

Burns, Arthur Frank

views updated May 29 2018


BURNS, ARTHUR FRANK (1904–1987), U.S. economist. Born in Stanislau, Austria, Burns studied at Columbia University, New York, and then taught at Rutgers and Columbia. In 1930 he began a long association with the National Bureau of Economic Research, whose president he became in 1957. Burns served as a presidential adviser and was a member of numerous government bodies concerned with economic matters. From 1953 to 1956 (during the Eisenhower administration) he was chairman of the President's Council of Economic Advisers. In October 1969 Burns was named chairman of the Board of Governors of the U.S. Federal Reserve System by President Nixon, a position he held until 1978.

Later on, he took a position at the American Enterprise Institute. He then served as an adviser to Ronald *Reagan. From 1981 to 1985 Burns was the U.S. ambassador to the Federal Republic of Germany.

His publications include Economic Research and the Keynesian Thinking of Our Times (1946), Measuring Business Cycles (with W.C. Mitchell; 1946), Stepping Stones Towards the Future (1947), The Cumulation of Economic Knowledge (1948), Production Trends in the United States since 1870 (1950), New Facts on Business Cycles (1950), Looking Forward (1951), Business Cycle Research and the Needs of Our Times (1953), Frontiers of Economic Knowledge (1954), Prosperity without Inflation (1957), The Business Cycle in a Changing World (1969), Reflections of an Economic Policy Maker (1978), The Anguish of Central Banking (1979), The Condition of the American Economy (1979), The Ongoing Revolution in American Banking (1988), Arthur Burns and the Successor Generation: Selected Writings of and about Arthur Burns (with Hans N. Tuch; 1988).

[Joachim O. Ronall /

Ruth Beloff (2nd ed.)]