Alec Ford's The Gold Standard 1880-1914: Britain and Argentina is one of a handful of classics on the gold standard written in the twentieth century. The book made three contributions. First, it elaborated a new model of the balance-of-payments adjustment mechanism. Analysing the experience of Britain, Ford argued that adjustment worked through different channels than the price-specie flow mechanism emphasized by Hume or the interest-rate-induced capital flows emphasized by Whale. 1 Ford's Keynesian model highlighted the tendency of gold outflows to raise interest rates, lower domestic demand, and restore external balance through the reduction of output, employment and import demand. 2 Relative price movements, or changes in interest rates induced by central banks playing by the rules of the game, might aid adjustment but their role was subsidiary.
The second contribution of the book was to contrast the very different nature of gold standard experience in general, and of the adjustment mechanism in particular, in less-developed primary-producing countries. Analysing the experience of Argentina, Ford argued that the record of stability under the gold standard was less satisfactory at the periphery than the centre. As at the centre, at the periphery adjustment worked through changes in income and demand. An inflow of long-term capital, for example, tended to stimulate demand, increasing imports and thereby tending to restore balance to the external accounts. But at the periphery
* S.N. Broadberry and N.F.R. Crafts (eds), Britain in the International Economy 1870-1939, Cambridge: Cambridge University Press, pp. 49-79. Copyright © 1992 Cambridge University Press. Reprinted with the permission of Cambridge University Press.