This book is an in-depth scientific explanation of an important body of work created by a Spanish economist who received great notoriety starting in 1922, perhaps with some precedent in 1916. This commentary is not one from a devoted follower who, due to this, does not try to do more than clarify and highlight the virtues of the great master, but rather an extensive analysis that shows admiration at times, but is also critical at times. But it is also a work that has great interest at this time. We are in the midst of an extremely serious series of financial complications at this very moment that are spawning a very serious crisis. And I have here a tool, with Bernácer’s theory of disposable funds, to clarify many of these realities from his contributions that started in 1922.

I should start by pointing out that this groundbreaking work, the article ‘The Theory of Disposable Funds as an Explanation of Crisis and Social Problems’, published in 1922 in the Revista Nacional de Economía, which ended up having international scientific dissemination thanks to Robertson’s essay ‘A Spanish Contribution to the Theory of Fluctuations’, published in Economica, had an extraordinarily small impact on Spanish economists. The ‘Why?’ has been approached many times. As Unamuno said, I turn to the person closest to me. In 1947, I was a young graduate in Economics. I had just entered the University of Madrid as an assistant to professors Olariaga and Ruiz Morales and was working in the Statistics Division of the Banking Council. My office at this institution had the full collection of Economica magazine, which I eagerly launched into. And I soon came across Robertson’s article. What he said caught my attention –indeed, it is related with extraordinary precision in this book by professor Villacís– and then I asked Olariaga if it was worth working with the contributions by this Spanish economist. At that time, I had read Bernácer’s Functional Doctrine of Money (Council of Scientific Research, 1945) and his article ‘The Budget Deficit, Inflation and Mr Kalecki’ in Anales de Economía, 1947, which seemed quite interesting to me. The answer was quick. I remember Professor Olariaga’s response almost textually – ‘Don’t waste your time on Bernácer; you already get away from me enough on your Keynesian path and you don’t need to complicate your life more.’ Olariaga completely followed Hayak and wanted his young assistant to get back to the Austrian school, to that orthodoxy that was having great difficulties at that time in handling the offensive of the ‘Cambridge circus’. But I think there was another reason he rejected Bernácer.

Starting with Flores de Lemus, the generation of economists appearing at the end of the 19^th and beginning of the 20^th centuries with their studies and opinions, they could be called members of the Spanish intellectual generation of 98. These Spanish economists were extremely devout in believing that they must receive pure and untainted preparation abroad. Flores de Lemus worked with Bortkiewicz in Tubinga and then with Schmoller and Lexis in Berlin; Bernis was with Edgeworth in Oxford and the nascent institutionalists in New York; Zumalacárregui with the Lausanne school; and then they almost single-handedly dedicated themselves to leading Spanish economic policy. They directed their energies towards applied economics, not theory. And Bernácer was self taught and, on his own, starting with Turgot and Ricardo, he dedicated his time to creating economic analysis models outside of their concrete application to our economy. I have had the feeling for some time now that he knew, or would soon know, more about Wicksell than what he claimed, even in this book. ‘But Robertson holds him in high esteem’, I insisted once to Torres. His reply silenced me: ‘And what do you have to say about Keynes’ quote, and in none less than the General Theory, of that extravagant Argentine economist, Gessel? Sometimes great economists carry out these flowery tasks, but that isn’t what’s important.’

I have to confess that I wasn’t a rebel and I accepted these points of view. I absent-mindedly half read Bernácer’s numerous articles in The Economist, which deserve to be recompiled with additional commentaries, and skipped those that appeared in Anales de Economía. Now I am sorry –and this excessively justifies this regret– that I didn’t even talk to him when I saw him attentively listening, always silent and reserved, at the tests held to select university professors at the University of Madrid; or when I saw him at a distance at the Bank of Spain Research Services, when I went to him looking for information about Spanish commercial policies during the era of the 2nd Republic (1931-1935), which coincided with the Great Depression. And on one fine day in an old bookshop, I even came across his book Freedom and Happiness: Essays on Social Medicine, published in 1916. I read it excessively quickly, but now have necessarily rectified this situation after reading Professor Villacís’ book. I drew the conclusion then that its author was a type of crusader to eliminate the interest rate, and even more, someone walking along a similar path to that of Henry George when he decided to eliminate rent on lands with taxation. I typecast Bernácer as some type of utopian socialist. Of course, the question always stayed with me of – Why Robertson? Of course, Savall’s book about Bernácer disappointed me. His biographical references left much to be desired and some of his analytical interpretations also seemed to be incomplete.

To Villacís, as you will see in this book, the person who led the way towards a fair assessment of Bernácer was Figueroa. Not for me. I came into contact with this teacher a lot, but whenever he referred to Bernácer in my presence, it wasn’t to cite him as an example of a researcher or to say that he was interested in his contributions. He instead normally told me about his eccentricities, which didn’t incite me to study him. Conversely and much later, Professor Prados Arrarte did stress that it was worth taking his contributions into account. When he came to my house to give me the six volumes of his Treatise on Political Economics, he told me: ‘You will see I don’t only quote you or Segura or Rojo, but many Spanish economists, but only those who are worthwhile. For example, read references to Bernácer, so absurdly overshadowed.’ This effectively occurs on page 23 of volume III of this Treatise, when pointing out that money can be considered as a flow or as a fund. I believe his exact words merit transcription: ‘An unfairly-ignored Spanish economist, Germán Bernácer, who received international accolade from no one less than Sir Dennis Robertson, has mentioned the differences between what he calls “potential flows” and “actual flows”, considering the latter as short-term data and the former as long term.’ And to clarify the matter, he transcribed these paragraphs from Bernácer’s article ‘What is the Monetary Current that is most Suitable for General Interests?’, published in Anales de Economía, 1952: ‘Thus, one must distinguish the potential flows of merchandise and money and objective flows, the latter shaped by potential flows decreased by stagnation outside of the market or increased by the decrease of these inflows. Short-term equilibrium depends on the equality of actual flows. Long-term equilibrium also depends on the normality of stocks of merchandise and of money.’ Prados Arrarte inferred the following from this: ‘Germán Bernácer’s words may show that the flow-fund dichotomy undergone by money is not theoretically insurmountable. It will be, however, if one tries to resolve the matter by connecting only the extreme opinions of the argument.’ And in volume VI, chapter LX, of his Treatise, when setting forth the monetary theories of the economic cycle, after successively mentioning the doctrines derived from Veblen; to the theories of over-indebtedness, with Irving Fisher in first place; to Hawtrey; to Hayek; to Keynes; to post-Keynesianism and to the theory on spending, he devoted his attention, very extensively, to Germán Bernácer (pages 204-208). When referring to this, he also relates the anecdote of the meeting with Robertson in Granada, since he witnessed it, which expands on the reference to this event made in this book in appendix 6.

The taboo towards Bernácer had disappeared, but his person and his studies still needed to be researched. The collaboration in Alicante for the centennial of his birth did a lot. For this occasion, I wrote an article entitled ‘Chronicle of the Spanish Homage to Germán Bernácer’ in El Trimestre Económico, July-September 1984, where Bernácer had debated so often. But all of this would have meant nothing without the irruption of Villacís, who made the importance of this economist very clear starting with his article ‘Theory on the Interest of Money in Germán Bernácer’, published in 1983 in Hacienda Pública Española. This task achieves its culmination in the present work. As readers will see, it would be impossible to improve on the presentation of the Bernácer’s life and works. Whoever works with it will also be benefited because, clear audience to the crisis we are living through now, you will understand it much better thanks to the contribution that we could already call the Bernácer-Villacís contribution. Thanks to both of them, macroeconomics has taken a giant leap forward. In the case of Professor Villacís, it is clear that he is generating the start of what is read in the great novel by Eça de Queiroz, The Mystery of the Cintra Road: ‘More than ever, one recognises that the human being can only achieve happiness in the fulfilled duty’. This also governs groups. And the group of Spanish economists has a duty that is effectively fulfilled through this work.

Madrid, 8 October 2008                
Juan Velarde Fuertes