Currency Convertibility: The Gold Standard and Beyond

By Jorge Braga De Macedo; Barry Eichengreen et al. | Go to book overview

COMMENT

Angela Redish

In this time of uncertainty over monetary regimes, it is natural to see what can be learned from historical experience. Correspondingly, over the last few decades the classical gold standard has been used as a case-study by those attempting to measure the impact of alternative monetary regimes for price stability, output cycles and economic growth. 1 The papers presented in Chapters 3 and 5 look for rather different lessons-what are the causes of changes in monetary regimes and how are transitions between monetary regimes effected? While it is possible that the choice of regime may have implications for (for example) price and output stability, it does not necessarily follow that it was the search for such behavior that led to the regime change. Indeed, the two papers discussed here emphasize the role of historical contingency and political symbolism in the ascendancy of the gold standard.

Let me begin with Alan Milwards' discussion of the origins of the gold standard. The central thrust of his paper is that Germany's adoption of the gold standard in the 1870s had a domino effect and led to the international spread of the gold standard. Germany's decision, in turn, he attributes to the desire by a politically powerful liberal bourgeoisie, not for deflation as is sometimes supposed, but for economic development and growth. 2 This group believed that the gold standard would 'guarantee…a liberal middle class constitutional order'.

The overall story here is internally consistent and yet I think there are gaps in the argument that need to be addressed to make the case compelling. I would like to see the link between German adoption of the gold standard and subsequent choices by other European powers expanded upon. Was the fall in the price of silver resulting from Germany's silver sales the primary channel of influence, or was it the desire for fixed exchange rate with major trading partners? This latter effect, which Milward emphasizes for example in the case of Scandinavia, needs elaboration. For example, in Chapter 6, on Portugal's adoption of the gold standard, Jaime Reis argues that the Portuguese in 1854 were rather nervous about adopting the same monetary standard as their major trading partner, for fear that the Portuguese economy would be less insulated from Britain. Similarly, there is now a debate over

-144-

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Currency Convertibility: The Gold Standard and Beyond
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables ix
  • Preface xiii
  • Part I - Overview 1
  • 1 - Introduction 3
  • 2 - The Operation of the Specie Standard 11
  • Part II - Myths and Realities of the Gold Standard 85
  • 3 - The Origins of the Gold Standard 87
  • 4 - Short-Term Capital Movements Under the Gold Standard 102
  • 5 - The Geography of the Gold Standard 113
  • Comment 144
  • Comment 151
  • Part III - Portuguese Currency Experience 157
  • 6 - First to Join the Gold Standard, 1854 159
  • 7 - Last to Join the Gold Standard, 1931 182
  • 8 - Monetary Stability, Fiscal Discipline and Economic Performance 204
  • Comment 228
  • Comment 233
  • Part IV - Implications for Europe in the 1990s 239
  • 9 - Converging Towards a European Currency Standard 241
  • Index 266
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