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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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