Who is the most important Western economist of the 20th century?

by Ralph Benko

Who is Jacques Rueff?

With Bastille Day just past, let us pause, briefly, to salute the greatest economist of the 20th century: French monetary statesman Jacques Rueff. The little-publicized Rueffian school (to which this writer belongs) quietly is working to gain influence in the corridors of power to revitalize Rueff's great legacy, the classical gold standard.

Rueff's leading intellectual protégé, at least in the United States, was American financier and philanthropist Lewis E. Lehrman (whose institute this writer professional serves). Rueff dedicated his autobiography to Lehrman. In the current issue of The Weekly Standard editor William Kristol knowingly observes that "[T]he wisdom of thinkers from Adam Smith to Joseph Schumpeter to Friedrich Hayek, and of statesmen from Alexander Hamilton to Ludwig Erhard to Jacques Rueff, remains available to us. And there are those who draw on those traditions and try to think anew (see, for instance, the articles by Irwin Stelzer and Lewis Lehrman in this issue).

Lehrman's article, Romneyconomics, provides a comprehensive prescription for what ails America and the world. In its scope and ambition this new publication resembles Jude Wanniski's The Mundell-Laffer Hypothesis, published by Kristol's father, Irving, in the Spring 1975 issue of The Public Interest. The Mundell-Laffer Hypothesis dramatically shifted the discourse. And changed the world.

The big brand names in center right economics, of course, are Smith and Friedman, Schumpeter and Mises, and, of course, the great Hayek. There are other greats, of course; these are the most iconic. Who is Jacques Rueff? Who has the temerity to claim that he belongs in the pantheon with Adam Smith?

On the occasion of the centenary of Rueff's birth, in 1996, Lehrman was invited to address the Assemblée Nationale - the French Parliament.

"In what I now say to you, I draw from the speeches, the writings, and the letters of the greatest economist of the twentieth century. ... The ideas I set before you originate in the proven genius of an extraordinary teacher, a selfless servant of the French people, and a peerless citizen of the world - in the words of General de Gaulle - "une poète de finance."

"I speak of Jacques Rueff."

Kristol, Lehrman... and Forbes.com's own John Tamny. Tamny wrote an important review of Christopher S. Chivis's 2010 biography The Monetary Conservative : Jacques Rueff and Twentieth-century Free Market Thought :

"For ... somewhat lonely advocates of a dollar defined in gold in modern times, the name Jacques Rueff is one that regularly comes up. One of the leading policy intellectuals in favor of a pure gold standard in the 20th century, Rueff's name looms large to this day among those who follow currency matters. ..."

As far as the ongoing Rueffian Renaissance goes, in India just last week the internationally regarded former deputy governor of India's equivalent of the Federal Reserve System, S.S. Tarapore, wrote in a column entitled The Resurrection of the Gold Standard , "As Jaques Rueff says in his Monetary Sins of the West(1972), there was catastrophic suffering till 1934, when President Franklin Delano Roosevelt raised the price of gold from $20 to $35 per ounce; this was in effect a devaluation of the US dollar! Critics of Roosevelt warned about unbridled inflation and total chaos but, to the contrary, the economy recovered." (Rueff's championship for this devaluation had to do with the rectification of the distortions created by that "grotesque caricature" of the gold standard, the gold-exchange standard, which precipitated the Great Depression.)

John Mueller, now of Ethics and Public Policy Center, served as the chief economist to Rep. Jack Kemp while Kemp was the world's great paladin of economic growth through lower marginal tax rates and the gold standard. Mueller wrote a tribute to Rueff as the millennium dawned, in 2000, Jacques Rueff: Political Economist for the 21st Century?

Jacques Rueff wasn't the most famous or the most influential economist of his time; John Maynard Keynes walks away with both those awards. But Rueff's ideas about economic policy will easily make the transition to the 21st century, whereas Keynes's will not.

Rueff was both a theorist and a successful practitioner of economic policy, who gave the earliest accurate diagnosis of the two biggest economic policy problems of the 20th Century: unemployment and inflation. He used that diagnosis to engineer several successful reforms of national economic policy, and his analysis is just as valid today as when developed in the 1920s. Rueff also contributed to the philosophy of the "social market economy" and of the European Union.

From 1930 to 1933, Rueff served as French financial attache in London, where he was in charge of the Bank of France's sterling reserves, and was able to analyze and correctly warn about the deflationary collapse of the gold-exchange standard. ...

The collapse against which Rueff had warned began when, after Nazi political gains caused a capital flight from Germany, an international panel of experts led by the United States effectively imposed exchange controls on capital invested in Germany. The immobilization of investments in Germany triggered the liquidation of assets elsewhere by creditors who needed to service their own debts. In the process, numerous banks failed, and almost all the world's dollar and sterling exchange reserves were liquidated.

Students of the history of the American Revolution are fully aware of how critical was France's diplomatic, financial, and through the great Lafayette, tactical help in the birthing of the American republic. If America has a "special relationship" with a European nation surely it is with France at least as much as with England.

A great number of pixels have been generated in an ongoing policy debate as to whether to be guided by the work of the great English lord, Keynes, by the great Austrians Mises and Hayek, or by that great Canadian, Mundell. Yet do not be surprised to wake up one morning and discover that American policy makers are turning their attention neither to London nor Vienna nor Ottawa (via Mundell's New York City and Siena, Italy bases), but to Paris. Rueff's thoughts are alive and well and very much afoot in Washington, DC.

Lehrman, concluding his remarks before the Assemblée Nationale:

By pinning down the future price level by gold convertibility, the immediate effect of international monetary reform will be to end currency speculation in floating currencies, and terminate the immense costs of inflation hedging, thus channeling immense new savings out of financial arbitrage and speculation, into long-term financial markets (and, incidentally, ending the predatory reign of speculators, and Federal Reserve dealers, with inside knowledge of Treasury and central bank operations.)

Increased long-term investment, improvements in world productivity will surely follow, as investment capital moves out of unproductive hedges and speculation, seeking new and productive outlets. Naturally, the investment capital available at long term will mushroom, inspired by restored confidence in convertibility because the long run stability of the price level will be pinned down by gold convertibility - as history shows to be the case in certain, previous, well-executed monetary reforms of the past two hundred years. Along with increased capital investment will come sustained demand for unemployed labor to work the new plant and equipment.

Indeed, domestic and international monetary reform, i.e. the gold standard - a common, neutral, non-national currency, is the only true and lasting road to full employment. This is the reform plan set out for us by Jacques Rueff two generations ago.

Who is Jacques Rueff?  Merely "the greatest economist of the twentieth century."  Perhaps he will prove the guiding star for the 21^st.

Ralph Benko