Before I begin, full disclosure is in order here.

1. I am, in the words of James Tobin, an unreconstructed Keynesian.

2. I have been an advocate of flexible exchange rates since 1960.

3. Until I read this book, I thought, along with most anglophone academic economists, that Jacques Rueff was a somewhat “antediluvian” (to use Chivvis’ term) figure, who, having decided in 1923 that the gold standard was the only sensible way to organize international payments, never saw any cause after that to change his mind, and talked de Gaulle into adopting the same position.

1. and 2. above still hold. Chivvis has convinced me that 3., while true, is an oversimplification.

The author is a political scientist who specializes in European politics and history; this book is an extension of his doctoral dissertation at Johns Hopkins. Its subject is a man better known in public and political circles than among academics, at any rate in North America and Britain. He lived through both world wars (1896–1978), and served the French state in numerous capacities both at home and abroad. He held an academic post but was never far removed from public service. This included a three-year term on the Economic and Financial Committee of the League of Nations (1927–1930), financial attaché to the French Embassy in London (1930–1933), a judge in the European Court of Justice, a representative to the European Coal and Steel Community (the embryo of the European Union), Deputy Governor of the Bank of France, and chair of a number of influential committees. This is a partial list.

Concurrently, though intermittently, he taught at the University of Paris, and found time to write a number of books and papers on economics, political economy, and philosophy of economic systems. However, most of his writings appeared in non-strictly academic publications, and rarely in English, so he is less well known in academic circles than he perhaps deserves to be. By the post-WWII period, he was viewed as somewhat of a relic, serving primarily as de Gaulle’s Court Economist. Nevertheless, it appears that his was a richer and more nuanced intellect than is frequently described.

An example of the relevance of this last sentence is that, during and after WWII, while unwaveringly supporting a completely free-market economy to the point of his conviction that interference (even of a ‘Keynesian’ nature) would probably lead to something like Soviet or Nazi regulation, he nevertheless favored a social policy that was relatively ‘gentle’ and supportive of the unfortunate and disadvantaged. He was passionately in favor of totally free markets and competition as regulatory tools, to be distinguished from, and compatible with, social measures to ameliorate some of their unjust effects on distribution (p. 15). In this, he differed from his fellow liberals, including von Mises, and, after the war, colleagues in the Mount Pelerin society. This theme appears and reappears throughout the book. It represents Rueff as more independent in thought and sympathetic in soul than is generally thought. Chapter Four on “The Crisis of Liberalism and the Future of Liberal Capitalism in the 1930s” is informative in this regard. Intense discussions of how to deal with the deep depression of the 1930s, and the apparent failure of the liberal market economies, involved various thoughts on how much interference with the market was compatible with liberalism. This was naturally intensified by developments in the Soviet Union, Italy, and Germany. Liberals questioned how much economic planning was compatible with social and political liberalism. Rueff remained faithful to his anti-planning principles. He agreed with von Mises that detailed planning would be virtually unattainable and that, furthermore, it would almost inevitably lead to totalitarianism. At a colloquium in 1938 (the Colloque Lippmann), liberals debated the necessity of remaining firm in advocacy of free markets. It was here that Rueff began to develop his stance of favoring totally free markets, especially with respect to monetary policy, coupled with modifications in the direction of ‘social spending.’ He continued in this position for the rest of his life.

The facts of Rueff’s personal biography are presented sparsely. Chivvis explicitly states at the outset that this is an intellectual, not a personal, biography (p. 5). His higher education, after his wartime army service, was at the École Polytechnique. From there, he went on to teach at the Institut de Statistique at the University of Paris, and simultaneously to work in the government, first in the Inspection Générale des Finances, a much more sophisticated and exclusive institution than it sounds. He remained in one or another form of government service for the rest of his working life, except for the period during World War II when he was not allowed to have an official position. We learn that he was Jewish, that he converted to Catholicism, that he married into respectable wealth and prestige, which gave him the means, and the country home, in which to think, study, and write—and to stay alive, in Vichy France, though forced to resign from all government positions. The wartime writing took mainly the form of L’Order Sociale, which Chivvis describes as “Rueff’s main effort to link social and political stability with monetary institutions.” The main thrust here is the alleged relationship between inflation, social (dis)order, totalitarianism, and war. He did not deviate from this view, and, twenty years later, was characterizing inflation as “the work of the devil” (p. 105). (Chivvis, by the way, views this as having gone somewhat too far in his aversion to inflation.)

During this period, he wrote also on monetary issues. Here he was unwavering in his conviction that a full gold standard was the best (the only?) way to organize world trade and payments, so that he was highly skeptical of Bretton Woods through most of his career, but even more strongly opposed to flexible exchange rates. Perhaps more important to him than international monetary arrangements (though this is not explicitly stated) was the firm belief in the primary importance of domestic monetary stability, best maintained by adherence to a gold standard.Footnote ¹

With a few exceptions, the biographer is sympathetic to his subject’s intellectual and social attitudes. Rueff’s post-WWII advocacy of a return to the gold standard is described as ‘utopian,’ but mainly because it ran counter to the prevailing geopolitical mood. At the time, there was much discussion of the perception that any rise in the price of gold (not to speak of a full-fledged gold standard) would benefit primarily South Africa and the Soviet Union. But Chivvis doesn’t tell us whether he agrees with the desirability of such a solution in principle. He notes that “de Gaulle’s intransigence ended any hope of compromise between the gold standard and a dollar system” (p. 177). I cannot imagine what is meant by such a compromise, especially since, to repeat, what Rueff really wanted was a full-fledged gold standard. Evidently, what is suggested here is a more important role for the IMF (and a widespread use of the SDR). But Chivvis continues that, looking at the world in the twenty-first century, “it is difficult not to conclude that these debates of the early 1960s were a missed opportunity to set the international monetary system on a firmer footing.… The expanding monetary base on which Rueff focused … was what permitted the accommodation of labor’s demands through inflation.… although the dire consequences Rueff predicted did not come to pass, the inflations of the 1970s suggested that he was not too far off the mark” (p. 177).Footnote ² To compare these with the hyperinflations of the post-war (I and II) periods in several European countries strikes me as an exaggeration, at best.

In his debate with Fred Hirsch, in 1965, Rueff favored a full-fledged gold standard as opposed to the gold exchange standard, referring to the offsetting practices, especially of the Federal Reserve System, in the 1960s, sterilizing gold flows. This, he argued, was a ‘bad thing.’ The criterion was that it was absolutely essential that the loss to the debtor must equal the gain to the creditor. Hayek, by the way, thought, as Rueff did, that a full-fledged system of fixed exchange rates in which domestic money supplies varied pari passu with the stock of gold (or foreign exchange) was the ultimate desideratum for an international monetary system.Footnote ³ Rueff, as we have noted, remained faithful and unyielding in his insistence on a system that never, in fact, existed. The full-fledged gold standard that he apparently visualized never existed in modern times. The late nineteenth and early twentieth centuries were characterized by a system operated by the Bank of England.Footnote ⁴ The particular constellation of world trade and long-term private investment made for the smooth functioning of a system orchestrated primarily by the Bank on the basis of an amazingly small stock of gold and a great facility for managing short-term capital and money markets centered in London.

There are two notable instances of Rueff’s publishing in mainstream English-language economic journals. The first was a contribution in 1929 to the famous Keynes–Ohlin debate on German reparations in the Economic Journal. Keynes had argued that Germany would have great difficulty in paying the required reparations, as adjusted by the Dawes Plan, because, in addition to the budgetary problem of taxing the German population, there was the balance-of-payments problem of effecting the transfer. Ohlin argued that Keynes was ignoring the income effect on exports and imports in the paying and receiving countries.Footnote ⁵ On the third round, Rueff entered the discussionFootnote ⁶ and came down on the side of Ohlin, though with practical, rather than theoretical, arguments. The current account balance of France had adjusted quickly, he said, to the reparations to Germany in 1873, to the inflow of loans from the United States in 1912 and 1913, and later to the cessation of those loans. He argued that the current account could adjust to imbalances in the capital account—as witnessed by the fact that it had done so. At times, Rueff seems to be arguing that the balance of payments will always reach an equilibrium because it did in the past, inter alia, both before and after WWI, despite the wartime loss of productive capacity, and after the Franco-Prussian War, when France paid large reparations to Prussia with surprising speed and apparent ease. Here, Chivvis does not comment on the fact, familiar to most economists, that the balance of payments always balances, but is not necessarily always in equilibrium.

The second major contribution of Rueff to anglophone academic discussion, which Chivvis discusses in some detail, is a paper (commented on by Tobin, with a reply by Rueff) in the Quarterly Journal of Economics. Rueff’s opening is an attack on Keynes, specifically on the notion of the possibility of an equilibrium with unemployment. Chivvis is understandably somewhat vague in his presentation here; the Rueff paper is, to say the least, opaque. It is a long, fairly convoluted argument that if additional income is not consumed or invested, it will be expressed in a demand for money, which will necessarily resolve itself into new investment. “To demand money is not, as Lord Keynes believes, to demand nothing. It is to demand wealth capable of being monetized within the framework of the existing monetary system. Hence, the preference for liquidity offers, like any other demand, an outlet for the labor forces offered on the market (1947, p. 354; italics mine).

Tobin replied to this in detail, but I will cite only what I think is his major statement of the error in Rueff’s position:

Rueff replied at length but said he would present his case fully to Tobin in some lengthy future paper of which I find no evidence (Rueff Reference Rueff1948). In my view, Rueff here is going even further than most of the Austrians, especially Hayek, who argued that additional saving created the possibility for new investment; but Rueff is apparently arguing that this possibility will necessarily be realized.

There are frequent references throughout the book to Keynesianism in a form which I find unrealistic. In the first place, it interprets Keynesianism as the view that the problem with modern economies is price rigidity—a drastic oversimplification. Secondly, it associates Keynesian policy recommendations with a degree of regulation, interference with markets, and draconian control over the economy, which I can only interpret as greatly exaggerated, though I know little about the French debate of the time.

In sum, Chivvis has done an excellent and useful job in laying out the thoughts and development of an economist little known in academic circles outside of France. He has understandable difficulty with the purely economic aspects of Rueff’s work, but presents a fine discussion of the relationship between his economic thought and his social and political ideas, and of his contribution to the French economic and political establishment. Since the book is organized, as it should be, by concepts rather than by chronology, a bibliographic summary would have been a helpful prop.