BackOpinion | In memory of James Woodburn Dean: a rebel with a cause
An expert on sovereign debt crises, James had foreseen the dangers that an over-leveraged US financial sector posed
PremiumBack in 2006, a macroeconomist warned of the dangers to the US and the world economy from an over-leveraged and bloated financial sector and widening wealth and income inequalities in the US and other advanced economies. Further, he predicted—or should I say prophesied—that, should these not be attended to urgently, the US could slip into a recession, or worse. He added that this would eventually lead to a protectionist backlash from those left behind and potentially threaten the entire globalization enterprise.
No, I am not writing of Raghuram Rajan, nor of Nouriel Roubini, but of my dear friend and co-author of many years, James Woodburn Dean. James passed away tragically a few weeks ago, in Addis Ababa, en route from Goa and Mumbai to Cape Town. Before that, he had been in Beijing and Shanghai, having left his home in Vancouver on a round-the-world trip.
In a sense, James’ final journey was emblematic of his career, which spanned the globe, but was anchored by his professorship at Simon Fraser University. Although a university professor, James was the opposite of the ivory tower stereotype, preferring to travel widely and learn from observation, inquiry and conversation, rather than theorize about the world from an armchair.
Indeed, a regular stop for both of us has been the annual Santa Colomba Conference, near Siena, Italy, convened and chaired by Nobel-winning economist Robert Mundell, which brings together not just academics but policymakers, bankers, entrepreneurs and others.
One often learns more at Mundell’s retreat about the practical problems of monetary policy in an hour-long chat over a glass of Chianti with a former central banker than weeks spent poring over arcane academic articles.
James cut a glamorous figure, standing apart from the bedraggled, dishevelled academic typecast. Blessed with dashing good looks and charisma to burn, for many years James drove a vintage Jaguar XJR and preferred Italian suits and starched shirts to the corduroy trousers and moth-eaten jumpers more common in academia. He was also an unfussy connoisseur of fine food and wine and was a fine chef himself .
Rounding out a humanistic personality, James was a gifted jazz musician, whether on piano, clarinet or saxophone. After an academic conference or seminar, James could often be found at the local jazz club, jamming late into the night with local musicians.
Born in 1941 in Canada, and with an undergraduate degree in mathematics from Carleton University, James completed a doctorate in economics in 1973 at Harvard University, writing a dissertation on macroeconomics under the supervision of the legendary James Duesenberry. James was always a classical Keynesian in the best sense, even when it was deeply unfashionable, and his views found vindication after the global financial crisis.
The primary focus of James’ work, spanning a long career, was international macroeconomics and finance, and his most important and influential research being that on the economics of sovereign debt crises (Michael Bowe and James W. Dean’s “Has The Market Solved The Sovereign-debt Crisis?".
Much before it became popularized and codified as the “debt Laffer curve", James argued that debt forgiveness sometimes, perhaps often, made better economic sense than creditors extracting every last penny that was owed them. He came to this conclusion not from abstract theorizing, but from studying and understanding in real time the Latin American debt crises of the 1980s, which were successfully resolved through sovereign debt relief of a type that James advocated.
Later, during the Greek sovereign debt crisis of a few years ago, James argued, similarly, that the German, French and other large creditors would do better to write off a portion of Greek debt than to insist on full repayment and impose punishing austerity on an already suffering populace.
His reasoning was that a partial write-off would lead to greater repayment as the Greek economy recovered and economic activity increased, rather than driving the economy further into recession by imposing Teutonic-style belt-tightening.
Such views were not always popular, especially when speaking to audiences replete with bankers, as I discovered during a talk by James at IDFC Institute on this very subject that I organized a few years ago.
The usual refrain of critics is to cry “moral hazard" and James always replied that, while valid in theory, there is little empirical evidence that sovereigns will wilfully behave more rashly when they have received partial debt relief.
James’ more recent work, some of it co-written with me, focused on the puzzles and paradoxes of globalization. Writing in Canada’s The Globe And Mail in August 2016, some months before the election of Donald Trump to the US presidency, James and I argued that, as a profession, we economists have often glossed over the losers from globalization, and that this has been detrimental to making an intellectually honest, rather than ideologically driven, case for freer trade in goods, services and capital—one which acknowledges that there will be losers, though society as a whole will likely gain.
We wrote then: “Rather than the doctrinaire certainty that feeds extreme solutions—sovereignty and democracy over globalization, or the reverse—we economists need to reclaim the nuanced world that lives at the margins."
R.I.P., old friend.
Vivek Dehejia is resident senior fellow at the IDFC Institute, Mumbai. Read Vivek’s Mint columns
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