James Meade (1907-1995)
by Dr Willam Peterson
James Meade was one of the great economists of the 20th century. It was Keynes’s vision and genius which underlay the reconstruction of economics in the interwar period, and provided the basic analytical framework which economists have used since for understanding macroeconomic growth and fluctuations. But James Meade’s contribution was almost as important: he helped to make Keynes’s framework operational, by developing the first modern set of national accounts, and he extended it to incorporate the international trade and capital flows which characterise the late 20th century globalised economy. It was his work on the Theory of International Economic Policy, published in 1951-55 when he was teaching at LSE, which was cited when he was awarded a share of the 1977 Nobel Prize in Economics.
James began his academic career in traditional fashion, studying Classics at Oxford. Appalled by the intractable problem of high unemployment in interwar Britain, he switched to Economics (then a very new subject in Oxford), and graduated in 1930 with a First in PPE. He was elected immediately to a Fellowship at Hertford (his undergraduate College), and sent to Cambridge for a year ‘to learn my subject before I began to teach it’. While in Cambridge he became a member of the famous ‘Circus’ of young economists which was trying to think through and develop the ideas which Keynes had just published in the Treatise on Money. James made a fundamental contribution to this process, in the form of what was then known as ‘Mr Meade’s Relation’, which forms the basis (with due acknowledgement) of much of Richard Kahn’s original explanation of the Keynesian multiplier. With typical modesty James downplayed his ideas, described by Kahn in 1931 as ‘as yet unpublished’, and they only appeared in print in 1993.
James returned to Oxford in 1931, and spent the next six years teaching Economics, developing and publishing his ideas about what is now called macroeconomics, and writing an early and very sophisticated textbook on modern economics. He was also involved in formulating policy proposals for the Labour party (then a tiny minority in parliament) and in the League of Nations Union. It was through his work for the League of Nations that he met Margaret Wilson, and they married in 1933. In 1937 James took leave of absence from Oxford to work in Geneva writing the League’s annual World Economic Survey: this was an opportunity to use his theoretical ideas to evaluate the varied policy strategies which governments had adopted in the turmoil of the Great Depression.
James and his family returned to England with much drama in May 1940, just as the German army was conquering France, and he took up a job in what became the Economic Section of the War Cabinet. During the next six years, working closely with Keynes and others, he made three major practical contributions to the new economic thinking which would underly the post-war world. With Richard Stone he developed the first modern system of national accounts, the essential information needed for coherent economic policy-making. He played a vital role in the complicated process which led to the famous White Paper on Employment Policy: this established full employment as an objective of Government policy in the UK, a symbolic rejection of the ‘do-nothing’ approach to unemployment which had led James to become an economist fifteen years earlier. Finally, he took the leading role from the British side in the Anglo American discussions on post-war commercial policy, working for the establishment of an International Trade Organisation which would foster a return to multilateral trade in place of the damaging experiments with bilateralism and autarchy which had characterised the 1930’s. The ITO was intended to complement the two ‘Bretton Woods’ organisations (the IMF and World Bank), but political complications meant that the treaty establishing it was not ratified. However many of the key principles were incorporated in the GATT, and the original vision of an international organisation ultimately led to the establishment of the World Trade Organisation in 1995.
Although James continued as a government adviser in the immediate post-war period, he found it difficult to work with Ministers who were, for a variety of reasons, strongly attached to the continuation of wartime controls and rationing, and he resigned in 1947 to take up a Chair at the London School of Economics. The books which he published while at LSE, for which he was subsequently awarded the Nobel Prize, form the basis for much of what is now taught as International Economics: they cover the relationships between domestic and international balance in the economy, the rationale for preferential trade agreements such as those which led to the formation of the EU, and many other topics which are still relevant today.
In 1957 James moved to Cambridge to take up the Chair of Political Economy which had previously been held by Marshall, Pigou and Denis Robertson. At the same time he became a Professorial Fellow of Christ’s, and began his association of nearly 40 years with the College. The University Statutes of the time did not allow Professors to supervise undergraduates, so that for most Christ’s undergraduates he was inevitably a remote, though kindly and courteous, figure. James remained a Fellow of Christ’s until his retirement in 1974, and was then made an Honorary Fellow.
The move to Cambridge also brought James into the acrimonious politics of the Economics Faculty, a change which he did not enjoy. Looking back, it is clear that the debates reflected not only the combative personality of some of the key participants, but also deep intellectual differences about the ways in which Keynes’s original insights should be developed. For James, economics was about moderate and carefully designed reforms which would make a market economy fairer and more efficient, and which would allow growth with stable prices and full employment. But for others, who saw themselves as the guardians of the ‘Cambridge’ tradition, Keynes’s key contribution had been to show that, since financial markets could not allocate capital efficiently (either within a single country, or across international borders), most forms of investment should be the outcome of a government-led planning process.
Conflicts within the Economics Faculty, and the wish to focus on his research and writing, led James to resign his Chair in 1968, and to take up a Senior Research Fellowship at Christ’s. During his time in Cambridge he had started to write a comprehensive multi-volume Principles of Political Economy (perhaps the last book to use this traditional title), but the problems raised by the rapid expansion of the subject, together with a renewed interest in policy issues, meant that it was never completed. Instead James chaired a high-powered, but independent, committee on the reform of the UK tax system: many subsequent tax changes can be seen as (unacknowledged) moves towards implementing the reforms which the committee had suggested. And, in response to the mid-1970’s retreat from Keynesian demand management, at the age of 70 he gathered a group of young economists to work on new approaches to the formulation of macroeconomic policy, which would allow the control of inflation without generating unacceptable levels of unemployment or gross inequalities in income. The ideas which James and other members of this group developed have also had a major, though indirect, impact on the way in which policy makers in the UK operate.
Experimental studies of economists have, regrettably, suggested that they are disproportionately likely to follow the teachings of their subject and focus on individual rewards. James was always an outstanding counterexample to this tendency, seeing economics as a way of thinking about problems which should inform policy choices and foster the welfare of all. One of his last published works, Agathotopia, described his visit to ‘the island of Agathotopia . The inhabitants made no claim for perfection in their social arrangements, but they did claim the island to be a Good Place to live in. I studied their institutions closely, came to the conclusion that their social arrangements were indeed about as good as one could hope to achieve in this wicked world, and returned home to recommend Agathopian arrangements for my own country’. Sadly, it is hard to conduct this sort of social experiment in economics: so we will probably never know whether, in a wicked world where most of us lack James’s moral compass and integrity, Agathotopia is truly feasible.