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Published by EH.NET (January 2004)
Luca Einaudi, _Money and Politics: European Monetary Unification and the
International Gold Standard (1865-1873)_. Oxford: Oxford University Press,
2001. xiii + 241 pp. $100 (cloth), ISBN: 0-19-924366-2.
Reviewed for EH.NET by Benjamin J. Cohen, Department of Political Science,
University of California at Santa Barbara.
Research in recent years has greatly revised our understanding of the
origins of the classical gold standard. Once, the monetary regime that
dominated the pre-World War I era was perceived as largely apolitical -- a
system that came to prevail over available alternatives mainly because of
its inherent superiority in preserving currency values and financial
stability. Today, however, we know better, thanks to the work of such able
scholars as Barry Eichengreen, Michael Bordo, Marc Flandreau, and Marcello
de Cecco. The political roots of the gold standard lie exposed, going back
to the Great Power politics of the 1860s. Now comes Luca Einaudi, currently
a research associate at Cambridge University, to add more detail to the
story. It is a fascinating tale.
Einaudi's focus is on the failed attempt in the 1860s to achieve a broad
monetary union in Europe, despite the best efforts of the government of
France under Napoleon III. In contrast to most previous studies of the era,
which concentrate on the protracted contest between the rival systems of
gold monometallism and bimetallism, _Money and Politics_ stresses the
pivotal role of the debate on European monetary unification that followed
creation of the Latin Monetary Union (LMU) in 1865. In 1867 Paris convened
an international monetary conference that voted unanimously in favor of a
universal coinage building on the LMU-franc system. But even though a
number of governments subsequently passed laws to adopt the LMU system,
seemingly placing Europe on the road to full monetary unification, the
effort ultimately failed, owing in good part to resistance from both
Britain and the new German Empire. For Einaudi, the clash of national
interests provoked by France's ambitious project was decisive in accounting
for the final triumph of gold. A seemingly neutral standard based on gold
proved politically more acceptable than a monetary union under French
leadership.
Based on extensive new archival research, the book is organized into five
chapters. Following a general overview in the first chapter of Europe's
monetary arrangements and politics in 1865, Einaudi examines the birth of
the LMU in chapter 2, the intellectual debate provoked by the 1867 monetary
conference in chapter 3, the subsequent history of the LMU in chapter 4,
and the responses of Britain and Prussia, later Germany, in chapter 5. In
an epilogue, Einaudi summarizes the analysis and laments the failure of
France's initiative which, he suggests, might well have been more effective
than was the gold standard in promoting peace and cooperation in Europe.
Central to Einaudi's narrative is Felix Esquirou de Parieu, vice president
of the French Council of State (1855-1870) and chief architect of France's
monetary project. Originally trained as a lawyer, Parieu in time became one
of France's leading financial specialists and, from 1858 onward, a
determined advocate of European monetary unification. In 1865, declares
Einaudi, Parieu was "the right man in the right place for monetary
diplomacy. ... a curious mixture of political realism and utopian
aspirations" (pp. 49, 54). Parieu presided over both the Convention of 1865
and the 1867 monetary conference, and the LMU and the universal-coinage
proposal were each largely his creation. The project's ultimate failure
left him personally embittered and politically marginalized.
The villain of the piece, according to Einaudi, was the "growing wave of
nationalism" (p. 189) at the time -- specifically, the Great Power
aspirations of Britain and Prussia-Germany. The British, with their
superiority in manufacturing and with London's role at the apex of global
finance, were reluctant to subscribe to any arrangement that would leave
them subordinate to their historical enemy, France. For Britain, the fabled
pound was "the symbol of its economic success. [Britain] had no wish to see
it overshadowed" (p. 193). London sent no official delegation to the
conference in 1867 and flatly refused to accept the conference's
recommendations. From Prussia the initial response was more ambiguous, but
after the fierce Franco-Prussian War (1870-1871) and the emergence of the
new German Empire under Prussian leadership, it was clear that the Germans
too would be unwilling to follow France's lead. In Einaudi's words: "The
Franco-Prussian War crushed the political equilibrium on which the Union
was based. ... unification and coordination could not survive the poisoned
atmosphere between France and Germany" (pp. 89, 189).
Overall, Einaudi's analysis is difficult to fault and adds substantially to
our knowledge of the origins of the gold standard. Some might question the
central role assigned to France in his narrative, but in fact such an
emphasis seems a welcome corrective to the priority traditionally accorded
Britain in the bulk of the English-language literature. However dominant
the City of London may have been in global finance at the time, Paris
remained a powerful monetary force for much of the European continent.
Likewise, some might question the lack of attention paid to the underlying
economics of the period -- in particular, the shifting price relationship
between gold and silver, which undoubtedly doomed the bimetallic standard
favored by France's Ministry of Finance -- but this too may be justified by
the paucity of political analysis characteristic of many other scholarly
contributions. Meticulously researched and clearly written, _Money and
Politics_ belongs on the bookshelf of anyone with a professional interest
in international monetary history.
Benjamin J. Cohen is the Louis G. Lancaster Professor of International Political Economy
at the University of California, Santa Barbara, and is the author of _The Future of Money_
(Princeton University Press, 2003).
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