A Forgotten Misesian: Remembering Philip Cortney
Philip Cortney (1895–1971) was a Franco-American entrepreneur, economist and business leader. Known nowadays mostly for his short chapter in Henry Hazlitt’s edited volume The Critics of Keynesian Economics (1960) and for having translated and introduced French economist Charles Rist’s book The Triumph of Gold (1961), Cortney was a close friend of both Ludwig and Margit von Mises and a staunch defender of American values, free markets, and the international gold standard. In fact, a closer look at his nowadays largely forgotten and not easily accessible published works reveals the charisma and talent of a man who, for having written only one book and mostly conference speeches, is unduly neglected in most accounts of the Austrian intellectual movement in the United States. In the present article, and as a tribute to the fiftieth anniversary of his passing, I will provide a short overview of Philip Cortney’s life and works, and hopefully draw the interest of fellow Austrian students and scholars to this charismatic player in our tradition. I will start with an overview of his activities as a business leader and a friend of the Mises family and then proceed to an overview of his discussions of several topics related to money, inflation, and the international monetary system. I conclude with some additional notes on other interesting insights of his.
PHILIP CORTNEY: FRIEND AND MAN OF AFFAIRS
Born Philippe Cotnareanu on January 16, 1895, in Romania to the family of a banker, Philip Cortney studied engineering in France and served for two years in the French army during the First World War. In 1919, he became an engineer and laboratory chief for a Paris firm and then cofounder and partner of a Franco-Belgian exporting business, before joining Banque Transatlantique in Paris as an executive director. Married to an opera singer, Cortney moved to the United States when France was invaded by the Nazis in 1940—some months before Ludwig von Mises also fled to the US—and became a director of Coty Inc., a renowned perfume company, and president in 1946, the year he also received his American citizenship (Candee 1958, pp. 101–03).
During his first few years in the United States, due to reduced wartime activity in the perfume business, Cortney enrolled at Columbia University for studies in political science, international law and monetary economics, and became an influential man of affairs in several business organizations. In 1945, Ludwig von Mises wrote Cortney to congratulate him for an article he had published in the Commercial and Financial Chronicle under the title “The Economic and Political Consequences of Lord Keynes’ Theories.” Cortney humbly replied that there was no person in the world whose opinion he valued more than Mises’s, and thus was born a friendship that lasted until their last days (Hülsmann 2007, p. 829).
In the words of Margit von Mises, “Philip was the most hospitable and generous friend imaginable,” and he and his wife frequently invited the Mises, Hazlitt, and Fertig families to glamorous dinners at a famous New York restaurant. Albert Hahn and many other European friends were also frequently invited when they came to town. Cortney always presented the wives of these close friends with the new Coty perfumes and lipsticks (even though, according to Margit, he could not distinguish between the different perfumes), and his friendship and understanding of the Mises family went to the point of offering them a new Pontiac after the Austrian couple suffered a dramatic accident with their previous, less safe vehicle (M. Mises 1976, pp. 91–92, 100).
As mentioned above, Cortney’s activities went much beyond dealing with Coty’s affairs. He was a director of the National Association of Manufacturers, a member of the American Economic Association and of the Royal Economic Society, a commander of the French Legion of Honor, and a fellow of the New York Academy of Sciences, among other positions (Candee 1958, pp. 101–03; New York Times 1971). For our purposes, though, his most important activities were with the International Chamber of Commerce, of whose US council he was a chairman between 1957 and 1959. In 1953, at the suggestion of Ludwig von Mises, he also became a member of the Mont Pelerin Society. Indeed, in an episode familiar to Austrian students, it was to a speech Philip Cortney made at a Mont Pelerin meeting in 1965 in defense of an immediate return to the gold standard with a substantial increase in the official price of gold that Fritz Machlup infamously suggested that such arguments of the gold defenders were akin to those of trade-union leaders, who always want wages to be raised, a criticism that led Mises to refuse to talk to his former student for several years (Hülsmann 2007, pp. 1005, 1032).
This biographical sketch being made, we shall now move to an examination of Cortney’s main political and theoretical propositions, as set forward in his published writings.
PHILIP CORTNEY: CHAMPION OF LIBERTY AND SOUND MONEY
Philip Cortney is remembered nowadays mostly for his work and positions regarding international monetary systems. Throughout his career, he was an intransigent supporter of the classical gold standard and a critic of the various monetary arrangements arrived at after World War I. In his charismatic style, Cortney explained that
[i]t is the gold standard which has made possible the expansion of international commerce and the distribution throughout the world of the benefits that are derived from the international division of labor. It is gold and its general acceptance which permits each individual to buy what he wants and to sell the fruit of his labor any place in the world, thereby spreading the benefits of competition. It is gold which assures the individual his independence and which is the best shield of the small states against the arbitrariness of the large ones…. It is gold, to sum up, which has been the best weapon against economic nationalism and its dangers. (Cortney 1949, pp. 198–99; 1961, pp. 5–6)
In his 1957 speech as chairman-elect of the US council of the International Chamber of Commerce, Cortney stated that the maintenance of stable exchange rates without free convertibility of currencies would only create serious maladjustments, and denied that reserves in the form of dollar balances or sterling balances would serve as a sound substitute for gold reserves. To Cortney, it was “a dangerous fallacy [to think] that the separate countries can cover their lack of liquidity with debts from some countries or by borrowing from each other.” This, he said, would amount to the famous gold-exchange standard, “an essentially inflationary device which has played much havoc with the domestic and international economic situation of many countries at the time of the Great Depression” (Commercial and Financial Chronicle 1957).
Cortney constantly emphasized that a correct account and explanation of the 1929 crisis would be a prerequisite for a return to sound economic discourse in the United States, and maintained, in a very pragmatic fashion, that “if we are unable to analyze a situation like that of 1929 on the basis of all known facts, it is simply a mockery to teach or to profess the belief that we can put our economic destiny in the hands of government interventionists and money managers” (Cortney 1961, p. 39). He exchanged correspondence on this topic with Murray Rothbard, when the latter was writing his America’s Great Depression.
Indeed, Cortney himself held a very “Austrian” theory of the Great Depression. His focus was on the relative price-cost relationships prevalent in the various sectors of the economy, which were thrown into disarray by the inflationary methods of World War I and the subsequent attempt to stabilize prices during the 1920s. According to Cortney, during World War I, inflation and immigration laws led to a rise of 120 percent in wages, without any rise in productivity. This, he said, “promoted a basic maladjustment between the industrial workers and the farmers, as soon as agricultural prices began to slip after the end of World War I.” Cortney was convinced that it was a great mistake to try to maintain simultaneously the prewar price of gold in terms of dollars and sterling and the postwar inflated price level. Such disequilibrium between the general price level and the gold valuation of the world’s key currencies also led to a relatively reduced incentive for gold production, a fact many neglected. And although the Federal Reserve was able to hold up the price level for almost a decade by “an abnormal expansion of inflationary credit,” in so doing it simply fueled the speculative boom, which according to Cortney had to collapse “when excessive private debt creation could no longer be expanded” (Cortney 1954, 1960). In a markedly Austrian passage, he brilliantly pointed to the causes of the prolonged depression in the American drift toward interventionism:
The unemployment of the 1930’s is to be ascribed to a great extent to the rigidities in wages, the wholesale destruction of bank-deposits (plus, of course, the anti-capitalistic climate created by the New Deal destructive of confidence and enterprise). The more we prevent (by wrong wage, farm and fiscal policies) a normal relationship between costs and prices, between the various segments of our economy and within the wage-structure, the greater will be the artificial purchasing-power needed to maintain the unbalanced economy … until we find ourselves in chains. (Cortney 1949, pp. 184–85)
Cortney believed that the United States had to assume a leading role in international affairs and do all it could to bring the world back into a healthier monetary framework. The reason for this was that, due to the substantial American influence on world trade, an artificial boom in the United States would push world commodity prices upward and bring instability to the rest of the world. The world needed monetary stability and balanced budgets. The first step was to stop inflating the dollar: “no sound international cooperation is possible without monetary solidarity, and no monetary solidarity is realizable as long as we indulge in inflation” (Cortney 1952a).
It is important to clarify that Cortney explicitly “opposed an increase in the price of gold for any other purpose than a restoration of the international gold standard.” For this, he gave three reasons: “(1) Most European countries need stable currencies as much as they need their free exchange-ability. (2) A rise in the price of gold without a return to the gold standard would only provide the politicians with additional inflationary tinder and prevent the reestablishment of the quasi-automatic correctives of the price system in international trade, and (3) A policy of flexible exchange rates will not discourage domestic inflation and the value of many currencies will constantly depreciate” (Cortney 1953).
Thus, even though Cortney echoed Milton Friedman in noting that “we would do well to remember that inflation is essentially a monetary phenomenon, and that the rise in the price level is only a consequence of monetary and credit inflation” (May 1959), and anticipated Robert Mundell and Marcus Fleming in warning that “we cannot have free convertibility of currencies, fixed exchange rates and unrestricted multilateral trade, while each country is pursuing autonomous nationalistic monetary policies” (Cortney 1952a), he was above all a champion of the classical gold standard tradition.
Not afraid to delve into moral considerations, he maintained that sound currency was a matter of morality, “because inflation is robbing some for the benefit of others, and ending with the destruction of all”—and, he concluded, “we can’t have an enduring free society based on immorality” (Cortney 1959). Furthermore, echoing Mises, Cortney criticized American colleges for their “excessive specialization” in different branches of economics (i.e., labor economics, international trade, etc.), a tendency which in his opinion “prevents the formation of economists able to embrace all aspects of an economic problem,” and maintained that “[i]t is also absurd that our colleges should teach economics principles separate from political doctrines. There is a necessary and intimate relationship between some political forms of governments and some economic systems. In particular, economic liberalism is a necessary condition of our political freedom” (Cortney 1949, pp. xviii–xix).
Cortney’s favorite reference in monetary economics was the French economist and diplomat Charles Rist. In the introduction he wrote to his own translation of Rist’s book The Triumph of Gold, Cortney dispels any illusions that his monetary framework could be described as simply monetarist or quantitative. Instead, he should probably be considered a follower of the classical banking tradition, as is evident from the following passage: “Monetary stability cannot be obtained if the banks monetize government debt or if they finance inflationary credits to private industry and commerce. In other words, the commercial banks should limit themselves to the financing of self-liquidating commercial or industrial credits and buy bonds or grant long-term loans only to the extent of savings deposited with them” (Cortney 1961, p. 30).
Cortney achieved the height of his international influence when during the late 1940s he and his friend Michael Heilperin (another defender of the gold standard who also died fifty years ago, on April 6) led the International Chamber of Commerce to surprisingly oppose the ratification by the United States of the Havana Charter of 1948, ultimately achieving its inefficacy (Slobodian 2018, pp. 124–25, 133–38). The charter, proposed by John Maynard Keynes, would establish an International Trade Organization, a financial institution called the International Clearing Union, and an international currency, the bancor. Cortney did not oppose (and in fact supported) an international trade organization, but he felt that the specific details of this charter were too sympathetic to the “full employment doctrine,” subordinating healthy trade practices to matters of national economic sentiment and creating a back door for a sort of international Keynesian nationalism. This led Cortney to draw a comparison between the Havana Charter and the 1938 Munich Agreement, in which the United Kingdom, France, and Italy agreed to the annexation of the Sudetenland by Nazi Germany, in what was later criticized as an “appeasement” policy. With that in mind, Cortney baptized the Havana Charter as an “economic Munich,” which phrase served as the title of his 1949 book, which Mises considered “a classic of economic freedom” (L. Mises 1955).1
The most controversial proposition of the book was Cortney’s contention that currency convertibility is a fundamental human right. Perhaps drawing upon his experience as an emigrant from a war-torn country, in the preface to his book Cortney asserts that “nationalism is a curse and mental disease” and describes exchange controls, i.e., the prohibition to convert one’s wealth into the currency one wishes to, as “a diabolic instrument of nationalism” and “the archfiend of human liberty.” This led him to the proposal that “exchange control in time of peace should be considered an act of aggression and a violation of human rights in international law” (Cortney, 1949, p. xviii).
To Cortney, the right to leave one’s country is literally “the basis of all other human rights.” Giving the example of a German during the Nazi regime, Cortney considered that “if he is ashamed to be part of the community in which he happens to be born, or if he simply chooses to go and live in a community more congenial to his sense of human dignity,” it must be his right to do so. Therefore, “if the right to leave a country is denied to us, all other human rights become insecure.” Furthermore, Cortney argued, if such a right could only be exercised by leaving all of one’s wealth behind, the practical result tends to be the same—i.e., a serious impediment of one’s ability to move to a different country. And since currency convertibility is the means through which one can most effectively move one’s wealth abroad, Cortney asserted that “for a currency not to be an instrument against human liberty it must be convertible into other currencies,” thus providing a moral reason for the conclusion that “the gold standard, which implies free convertibility, is essential to human liberty” (Cortney 1949, pp. 132–34).
Cortney went even further in his polemic against the tyranny of the state over the individual. In a courageous stand for individual liberty, he criticized the United States government for, under the Foreign Assistance Act of 1948 (the Marshall Plan legislation), “assuming the role of a Gestapo” by agreeing to provide the names of foreign individuals with American bank accounts and helping to “locate, identify and put to appropriate use assets which belong to the citizens of such country and which are situated in the United States” (Cortney 1949, pp. 133, 135).
This opinion, of course, goes against current international practices as determined by the US Foreign Account Tax Compliance Act regime and the Organisation for Economic Co-operation and Development Common Reporting Standard, and is a shock to modern progressive historians such as Quinn Slobodian, who derisively called this “the human right of capital flight” and insinuated that Cortney was being insensible to “the horrors of the war” for considering it a “scandal” that citizens of the aggressor nation would lose their foreign property and proposing that, in the words of Slobodian, “one must under all circumstances be allowed to exchange and export capital” (Slobodian 2018, pp. 133–38).
Unfortunately, in such vicious insinuations, Slobodian seems to forget that: i) Cortney was himself a World War I veteran (a fact Slobodian does not mention in his book) and a World War II emigrant and that ii) Cortney explicitly qualified his proposal for the absolute interconvertibility of currencies with “in time of peace,” thus invalidating Slobodian’s claim that Cortney held such a proposal to be effective “under all circumstances.”
Indeed, Cortney shows that he had a very nuanced view of wartime exchange problems, as demonstrated in the following passage: “In the case of Great Britain a gradual retreat from controls is a preferable method of getting rid of them. Those who advocate immediate cessation of all controls seem to forget that we are not yet in a peace economy, and furthermore that Great Britain has to recover from a severe shock suffered during the war” (Cortney 1949, p. 190).
Also in the same book, in an essay entitled “Full Employment—Wages and Democracy,” originally written in 1945, Cortney reveals a very reasoned approach to the problem of accepting a “full employment bill” (that was later to become the Employment Act of 1946), stating that “to those who adopt towards the full employment issue an attitude of ‘black or white,’ and are inclined to reason that because it entails dangers, the only proper thing to do is not to adopt such legislation, I submit that their position disregards practical politics and social trends, and besides, is dangerous.”
It was Cortney’s view that, on the one hand, the public would no longer tolerate mass unemployment, even if a bill were not adopted, and that, on the other hand, the causes of such unemployment were already active in wrong wage policies and misguided monetary and fiscal practices. So, Cortney reasoned, “the only politically practicable and sound approach to the full employment issue is to provide safeguards against its ill-effects” (Cortney 1949, p. 106).
Moreover, Cortney made the same type of reproach to Henry Hazlitt’s opposition to the Schuman Plan for European integration. While embracing Hazlitt’s concerns as an economist, he noted that one must also take into account “many psychological and political facts and problems,” so that “the critics of the Schuman Plan must keep in mind that the alternative to the Schuman Plan is not a high degree of competition and the most efficient allocation of resources, but national cartels interwoven or not into a private international cartel” (Cortney 1951).
Thus, in contrast to his position in relation to the Havana Charter, Cortney believed that “we should give our wholehearted support to the Schuman Plan,” while being prepared with a more rational plan in case the present one broke down. Although he remained apprehensive of whether a gradual European integration would create a “European patriotism” or whether it would instead “exasperate nationalistic feelings and suspicions by the politicizing of national economic conflicts of interest,” Cortney was certain that “the very survival of Western Europe, and maybe of the western civilization, depends on the realization of an economically and politically United Europe,” wherein economic liberalism would be allowed to prevail.2
Although space limitations do not allow me to review Cortney’s intellectual concerns and valid discussions much further, special mention is due to how, even before meeting Mises, this unique businessman discerned that “the spreading of well-being in the increase of the standard of living of the whole nation can be brought about only if prices slowly but persistently show a trend to decrease” (Cortney 1944); how he saw that “the efficiency of the individual competitive system is at its greatest when the consumer is King” (Cortney 1949, p. 188); how he described Keynes as “a mixture of statesman and economist for whom monetary and economic doctrines must be political instruments of the art of governing men” (Cortney 1949, p. 237); and how he thoroughly described “what makes America great” in his article entitled “Secrets of American Capitalism” (Cortney 1952b).
Philip Cortney died in Geneva fifty years ago, on June 11, 1971, two months before the infamous “Nixon shock” of August 13, 1971, which threw the world monetary system into the sort of international fluctuations that this last chevalier of the gold standard had fought against during most of his career. It is my hope that the present article serves both as an invitation to further study and dissemination of the published writings of this champion of the free market tradition, and as a worthy tribute to the memory of this valiant friend of liberty.
Candee, Marjorie Dent, ed. 1958. Current Biography Yearbook. New York: H.W. Wilson. https://archive.org/details/in.ernet.dli.2015.124053.
Cortney, Philip. 1944. “The Full Employment Issue.” Commercial and Financial Chronicle, Aug. 24, 1944, sec. 1. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/august-24-1944-554307.
———. 1949. The Economic Munich: The I.T.O Charter, Inflation or Liberty, the 1929 Lesson. New York: Philosophical Library.
———. 1951. “The Schuman Plan—Its Hopes, Risks and Danger.” Commercial and Financial Chronicle, May 24, 1951. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/may-24-1951-555599.
———. 1952a. “Worldwide Inflation and Monetary Disorder.” Commercial and Financial Chronicle, Apr. 3, 1952. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/april-3-1952-555696.
———. 1952b, “Secrets of American Capitalism.” Commercial and Financial Chronicle, July 31, 1952. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/july-31-1952-555733.
———. 1953. “American Monetary Policies and their Impact on the World.” Commercial and Financial Chronicle, Nov. 5, 1953. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/november-5-1953-555873.
———. 1954. “Are Labor Unions Destroying Free Enterprise?” Commercial and Financial Chronicle, Oct. 28, 1954. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/october-28-1954-555982.
———. 1959. “Role of Businessmen in the Defense of the Free Society.” Commercial and Financial Chronicle, Apr. 30, 1959. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/october-28-1954-555982.
———. 1960. “How to Get a Sound International Monetary System.” Commercial and Financial Chronicle, May 19, 1960. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/may-19-1960-556613.
———. 1961. Introduction to The Triumph of Gold, by Charles Rist. New York: Philosophical Library. https://mises.org/library/triumph-gold.
Hazlitt, Henry, ed. 1960. The Critics of Keynesian Economics. Princeton, NJ: D. Van Nostrand. https://mises.org/library/critics-keynesian-economics.
Hülsmann, Jörg Guido. 2007. Mises: The Last Knight of Liberalism. Auburn, AL: Ludwig von Mises Institute. https://mises.org/library/mises-last-knight-liberalism-0.
May, A. Wilfred. 1959. “Observations … ” Commercial and Financial Chronicle, Dec. 31, 1959. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/december-31-1959-556569.
Mises, Ludwig von. 1955. “Government vs. Liberty.” The Freeman, March 1955. https://mises-media.s3.amazonaws.com/Freeman55-3_4.pdf.
Mises, Margit von. 1976. My Years with Ludwig von Mises. New Rochelle, NY: Arlington House. https://mises.org/library/my-years-ludwig-von-mises.
New York Times. 1971. “Philip Cortney, Ex-Head of Coty.” June 16, 1971. https://www.nytimes.com/1971/06/16/archives/philip-ortneyi-exhead-of-coty-1-leader-in-world-chamber-ofcommerce.html.
Slobodian, Quinn. 2018. Globalists: The End of Empire and the Birth of Neoliberalism. Cambridge, MA: Harvard University Press.
Commercial and Financial Chronicle. 1957. “Restoration of Monetary Order Called for by Philip Cortney.” May 23, 1957. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/may-23-1957-556270.
———. 1959. “Philip Cortney Given Honorary Degree.” June 11, 1959. https://fraser.stlouisfed.org/title/commercial-financial-chronicle-1339/june-11-1959-556506.
- 1. Besides some new writings, the book also included many of Cortney’s previously published articles.
- 2. European readers will also find it interesting that, in the same article, Cortney expresses his conviction that “either Europe will get a single currency or there will be no Europe,” even though he believed that “the free inter-convertibility of European currencies and the slashing of quotas and tariffs would have provided a more rational way of attaining the goal of a United Europe, but apparently our world refuses to be rational” (Cortney 1951).