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Published by EH.NET (January 2002)
Ted Wilson, _Battles for the Standard: Bimetallism and the Spread of the
Gold Standard in the Nineteenth Century_. Aldershot, UK: Ashgate, 2001. xi
+ 200 pp. $69.95 (cloth), ISBN: 1-85928-436-1.
Reviewed for EH.NET by Christopher M. Meissner, Faculty of Economics and
Politics, University of Cambridge. <[log in to unmask]>
In _Battles for the Standard_, Ted Wilson aims to explain why the gold
standard moved from an exclusively British institution at the beginning of
the nineteenth century to the most widely used monetary arrangement in the
world by 1910. The author offers a number of case studies each of which
emphasize that broad ranging explanations are inadequate to explain why the
world went to gold. Wilson also examines bimetallism as a brake on the
spread of the gold standard between 1870 and 1913. In his opinion,
bimetallists failed because of the inability to formulate a coherent vision
of what the candidate regime would look like and how the system would
perform if implemented. Those interested in institutional change or the
evolution of the international monetary system will feel the book presents
some interesting research.
Wilson opens with a general examination of monetary arrangements during the
nineteenth century. A series of chapters then outlines nineteenth century
monetary history in Great Britain, France, India, and the US. The
penultimate chapter considers and challenges current explanations for the
emergence of the gold standard making reference to particular country
experiences and the final chapter is about bimetallism in England during
the 1890s.
The country coverage begins with Great Britain. The goal is to explain why
it chose the gold standard in 1816 long before any other countryhad done
so, and why it clung so steadfastly to the gold standard after 1870 in the
face of considerable international maneuvering to establish bimetallism.
British currency had been de facto gold through much of the 1700s and until
1800 lacked small denomination coins. The remedy was to implement a de jure
gold standard so as to free England from the effects of Gresham's law and
to keep token silver coins in circulation. The fact that gold was the
outcome in 1816 seems to have been pure historical coincidence. The author
also gives air time to Angela Redish's explanation that technological
advances in steam pressing in the late eighteenth century allowed a token
silver coinage which people could not counterfeit and which circulated
along with full-bodied gold coins. This was an answer to bimetallism. It
provided coins of silver and gold in denominations and weights appropriate
to the value of a particular transaction without being exposed to Gresham's
Law. Wilson points out that few contemporary sources cite the steam
technology as a reason for adopting the gold standard, and so he is
skeptical that British obstinacy was based on these arguments. Furthermore
European countries with access to the same technology did not adopt gold
immediately. But arguments like Redish's also rely on the notion that a
gold standard was suited for more-developed countries because their average
transaction was of a high value and bulky silver was inconvenient. And
Germany and France did not reach the levels of 1820 British per capita GDP
until about the 1860s precisely when these countries began agitating for an
international gold standard (Maddison, 2001). The author explains how,
during the 1880s, an appreciating exchange rate vis-Ó-vis silver countries
made necessary imports cheaper while politically impotent agricultural
interests were thrashed about by import competition. Britain therefore
clung to gold.
Continuing his global overview, Wilson looks at France's deep romance with
bimetallism -- a regime it finally relinquished in 1878 as the world silver
market collapsed. It is suggested that the example of French bimetallism
and its success between 1850 and 1870 provided a success story to which
bimetallists in the 1890s could refer. In discussing France's strong
support for bimetallism up to 1878, Wilson dismisses the notion that the
Banque de France benefited from the arbitrage opportunities bimetallism
presented. Instead, Wilson argues tradition and historical esteem for the
status quo explain France's policies in the period. Although this
explanation may be correct, the evidence presented is not convincing. For
one, Wilson claims that since the gold price in terms of silver was stable
from 1850 to 1870 there were no arbitrage opportunities. But Flandreau
(1996) argues just the opposite. Arbitrage, perhaps by private agents, (who
incidentally had some say on the board of directors at the Bank) actually
worked to keep the price from straying too far from the mint ratio. And
Einaudi (2000) presents an in-depth analysis of Bank of France archival
records from the 1870s showing what the interests of the Bank were.
Wilson's work could have benefited from such archival investigation if only
to lay bare the economic motivations of relevant actors.
Indian monetary history from the early 1800s up to 1900 is next on Wilson's
list of case studies. The chapter opens with a lengthy narrative on early
nineteenth century Indian monetary history, and a conventional view of
Indian regime preference after 1870 is presented. After about 1873,
colonial powers would have preferred a gold standard in order to stop the
rise in the value of the home charges and to keep their silver denominated
pensions from depreciating in gold terms. Local export-oriented
industrialists supported silver largely because of the expansionary effect
of a continuously depreciating currency.
Americanists will find Chapter 5 on the United States to be somewhat sparse
if not highly stylized. Wilson portrays the country as a relatively
backward place where frontiersmen sought salvation in paper currencies.
This line of argument neglects, or at least avoids, discussing the economic
interests of the constituencies that shaped the debate and international
differences in political procedure and decision making. Wilson pays little
attention to the standard debtor-creditor debate or to the more
contemporary open-economy politics view of Jeffrey Frieden (1997) where
exporters and transport interests supported a depreciating standard.
Nevertheless, the discussion of the conflict with Great Britain over
Venezuela in the 1890s and how the gold-bug Cleveland administration used
political uncertainty and hence money market uncertainty to discredit
silver agitation is intriguing. (Many readers will be irked by seeing
McKinley repeatedly referred to as "McKinlay" towards the end of the
chapter.)
The following chapter ties up loose ends by confronting previous hypotheses
about the emergence of the gold standard with historical experience. These
focus not only on the countries already treated but also Germany and
smaller peripheral countries. The seeds of what might have been an entire
chapter on Germany appear here. Wilson asserts that Germany's adoption of
the gold standard "helped secure her economic leadership of Europe after
1870" (p.124). Even if we are to believe the notion, what was the
transmission mechanism? Was it that gold provided "hegemony over France"
(p. 124) and somehow defeated this commercial rival or was it through
increased trade benefits by linking up to the gold network? On historical
grounds, we also have to suspect the digging has not been deep enough here.
Wilson clings to a notion that the French indemnity of the Franco-Prussian
war was paid in gold. Flandreau (1996) and Einaudi (2000) document that
only about 5 percent of the indemnity was paid in specie the rest being
paidin commercial paper drawable in various financial centers.
Even more confounding is the short follow up on the American adoption of
the gold standard. The argument suggests that policy in the US was made
without respect to the rest of the world. This is hardly the case. Much of
the debate, which is documented in a lengthy set of congressional hearings
held in the 1870s and published in 1879, was about ascertaining what
exactly the rest of the world would be doing in the future. There is also a
lengthy discussion on Bordo and Rockoff's "Good Housekeeping Seal of
Approval" hypothesis. The book proposes that there is no evidence that
nations consciously sought to lower their borrowing costs or receive
special treatment on international capital markets by adopting the gold
standard. But historical evidence again snags the author's momentum. It is
widely argued that one of Russia's primary motivations for moving to gold
convertibility in the 1880s and 1890s was to attract foreign capital, and
American Congressional discussions in the first decade of the 1900s on why
China should adopt the gold standard centered on the ability to attract
more foreign capital. A number of other aspects of monetary regime
transformation such as lock-in and strategic complementarities,
imperialistic preference for a non-gold periphery and precious metals
discoveries are touched on near the end of this chapter as explanations
forgold's triumph.
The book winds down with a novel discussion of the emergence of a
bimetallist movement in Great Britain near the end of the nineteenth
century. Wilson centers his discussion in Lancashire. Essentially textile
producers and laborers aligned themselves with a hope that bimetallism
would stave off increased imports of Eastern textiles. Indian cotton
manufactures benefited from the continuous depreciation of silver against
gold and hence eroded market share, jobs and profits in England.
Lancashire's bimetallist agitators faced stiff esistance from City
financiers and unsympathetic governments. But bimetallism appears to have
been its own worst enemy. Its advocates failed because of the inability to
present a coherent platform. What would the mint ratio be? Should it be the
current market value of 35 to one or perhaps the older 15.5 to one? Should
Britain insist on an international coalition to support such a move or
would it go alone? Could Britain find a coalition in any case? No simple
answers came from the movement, and gold took the day. The arguments here
are interesting and suggestive, but the author could have spent more time
on the little researched area of the viability of international bimetallism
in the late nineteenth century. The author raises interesting questions,
but there could be more discussion of the menu of alternatives and the
benefits. Too little time is spent exploring the real benefits from the
gold standard, and the author precipitously blames bimetallism's failure on
the incompetence of the movement's leaders.
Overall this work is a good narrative of institutional change in the
international monetary system. It provides a one-stop-shop for most of the
current thinking about the emergence of the classical gold standard and the
disappearance of bimetallism and silver between 1870 and 1913 while also
providing a nice range of salient case studies. The book will prove useful
for initiates to the literature. However those wishing to formulate solid
opinions about the formation of an international monetary system will not
feel the book has provided enough archival, statistical or theoretical
ammunition to take out the more entrenched explanations. Nevertheless the
book does succeed in laying the foundation for a debate about why
bimetallism failed in the late nineteenth century. This is a corner of the
literature that has seen far too little attention but it is a prime example
of institutional change and path dependence in an important sphere of the
economy It certainly deserves more along these lines.
References:
Einaudi, Luca (2001). _Money and Politics: European Monetary Unification
and the International Gold Standard (1865-1873)_. Oxford: Oxford University
Press.
Flandreau, Marc (1996). "The French Crime of 1873: An Essay in the
Emergence of the International Gold Standard, 1870-1880," _Journal of
Economic History_, 56 (4), 862-897.
Frieden, J.A. (1997) "Monetary Populism in Nineteenth Century America: An
Open Economy Interpretation," _Journal of Economic History_, 57 (2),
367-395.
Maddison, Angus (2001). _The World Economy: A Millennial Perspective_.
Paris: Development Centre of the Organisation for Economic Co-operation and
Development.
United States Monetary Commission (1879). _Report of the Silver
Commission_. Government Printing Office, Washington, D.C.
Christopher M. Meissner is a lecturer in economics at the University of
Cambridge and a fellow of King's College. He is currently working on
questions related to international finance and international monetary
arrangements in the late nineteenth century and on connected lending in
early nineteenth century New England banking.
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Published by EH.Net (January 2002). All EH.Net reviews are archived at
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