Published by EH.NET (August 2004)
John F. Chown, _A History of Monetary Unions_. London: Routledge,
2003. ix + 369 pp. $129.95 (cloth), ISBN: 0-415-27737-X.
Reviewed for EH.NET by Lawrence H. Officer, Department of Economics,
University of Illinois at Chicago.
John Chown, a partner in Chown Dewhurst LLP, has written a book that,
notwithstanding its title, is more like a general monetary history
(complementing the author's previously published _History of Money_,
London: Routledge, 1994) than a history of monetary unions. The book
contains good, summary histories of many countries' monetary
experiences, and it is readable and witty. In fact, the volume is
like a grand sweep of world monetary history. It is encyclopedic in
the number of countries covered, including little-known experiences
(such as Korea). There are some nice tidbits of information. For
example, Russia was the first country to decimalize its currency (in
1704) and the third country (after China and France under John Law)
"to make sustained use of inconvertible paper money."
While there is no original research, there is certainly original
selection of a set of monetary experiences, original organization,
and original presentation. The author offers a good descriptive
history, but the analysis is not deep. In fact, the book is
disappointing from an analytical standpoint. There is no grand
analytical theme -- or, from the vantage point of this reviewer, any
theme. The book could have benefited from a chapter devoted to
conclusions -- if only in the author's mind.
Too often, too much is left unsaid. For example, Chown makes blunt
statements such as the following: "The United Kingdom ... joined the
Snake, but was effectively driven out by market forces six weeks
later" (p. 201). One wonders: what were these market forces? Again,
"Exchange controls increase the time between bad economic decisions
and their viable consequences; this is both their attraction to a
certain type of politician, and the most serious and subtle way in
which they damage the economy" (p. 202) -- a perceptive comment, but
there is no elaboration.
Also, the book is replete with breadth but not depth. The book is
composed of 54 chapters! With so many chapters, it stands to reason
that many of them are too short. Also, the chapters can be quite
disjoint from one another. Sometimes the reader receives the
impression of rat-tat-tat from one experience to another. The volume
contains too many trees, not enough forest.
Nevertheless, the book is excellent as a chronicle of events. It is a
useful reference volume on monetary history, with the virtue of being
well readable cover to cover. The book presents in one volume what is
available elsewhere in many different sources -- and the author is
scrupulous in citing sources (except for the tables, only one of
which has the source provided). The references to specific-country
histories will prove most useful to the monetary historian. It is
clear that Chown did a thorough literature research. Perhaps he has
too heavy a reliance on "authority," but he compensates by writing
well. The British orientation and caustic comments on U.K. policy
might annoy and amuse American readers.
The volume is mainly a literary history. There are no mathematics and
no econometrics. There is some reference to quantitative studies, but
this is far from exhaustive. There are only eight tables and no
graphs -- on a subject that lends itself to quantification. In
fairness, the author does provide substantial quantitative
information within the text.
The title of the book is misleading, in suggesting that the book
deals exclusively with "monetary unions." In fact, the book covers
the following topics:
1. monetary unions (perhaps with greater concern with formation than
functioning)
2. monetary "disunions" (breaking-up of existing unions)
3. "not-really" monetary unions (and disunions)
4. "never-happened" monetary unions (proposed but did not happen)
The usual definition of a monetary union (or "monetary integration")
is perhaps best presented by W. M. Corden (_Monetary Integration_,
International Finance Section, Princeton University, 1972):
permanently fixed exchange rates and permanent currency
convertibility (that is absence of exchange controls). Corden sees
the former as inevitably involving a union central bank. (Of course,
if a smaller country enters the monetary area of a larger one, via a
currency board or "dollarization," the large country's central bank
functions as the supranational bank.) Chown accepts the first
criterion -- "a really permanent fixed rate" (p. 12) -- but not the
second, and does not require a supranational central bank. This opens
the door to a broad interpretation of what are monetary unions (that
is, inclusion of topic 3 above in the volume).
Regarding topic 1, true monetary unions, cases of union that result
from national political unification (for example, Germany, Italy,
Switzerland) are discussed. Beyond that, the Austro-Hungarian Empire
and Latin Monetary Union are emphasized. Chown observes, as others
have, that the latter organization could have, but did not, lead to a
world monetary union; but his eloquence is telling: "Then, as now,
politics and national pride took precedence over economic common
sense" (p. 4). It is regrettable that Chown, in a rare neglect of the
literature, does not refer to the excellent work of Luca Einaudi
(_Money and Politics: European Monetary Unification and the
International Gold Standard, 1865-1873_, Oxford: Oxford University
Press, 2001) on the Latin Monetary Union. Chown too readily seems to
accept the view that Félix Esquirou de Parieu, who advocated European
and world monetary union, was a French nationalist; whereas Einaudi
provides evidence that he was an internationalist.
Chown is very good on European monetary union. He contrasts the
actual process of achieving union -- economic convergence, followed
by irrevocably fixed exchange rates, followed by replacement of
national currencies with the euro -- with alternative schemes. The
monetary union of East and West Germany is termed "badly conceived,"
and it endangered the larger and more-important European monetary
union.
Turning to topic 2, Chown emphasizes monetary "disunions" as much as
unions. The disintegration of the currency unions (following
disintegration of the political unions) of the Austro-Hungarian
Empire, Yugoslavia, Czechoslovakia, and the Soviet Union are
discussed. Also receiving attention are the break-ups of colonial
currency areas and the sterling area, and the U.S. Civil War. Chown
comments that the last "contradicts the idea that monetary union
makes for a lasting peace." This reviewer finds that statement to
rest on a simplistic straw man.
Topic 3, "non-really" monetary unions (and disunions), is not termed
so by Chown, who has an overly broad concept of what is a monetary
union. He includes metallic standards (gold, silver, bimetallic)
under this rubric. So the historic gold and bimetallic standards
receive attention, both as union and disunion (breaking-up). Much is
made of the collapse of bimetallism and its deleterious implications
for countries on a silver standard. Even the Bretton Woods system is
a topic of study. Here Chown acknowledges: "The Bretton Woods system
was not a monetary union but was, in its day, the nearest approach we
had" (p. 193).
Treatment of metallic standards (to say nothing of Bretton Woods) as
monetary unions is unusual, to say the least. Chown can also be
criticized for not explaining why the U.K. made the mistake of
returning to gold at the prewar mint price in 1925 and for saying
very little about why the gold standard collapsed in 1931. He
mentions "declining confidence in banks," but why this decline? The
entire discussion of the gold standard suffers from neglect of the
issue of credibility.
Topic four, "never-happened" monetary unions, treats proposed
U.S./Canada (possibly including Mexico) and Australian/New Zealand
unions. Chown observes that, for political reasons, Canada objects to
monetary union with the United States. However, it is also true that
Canada historically has, from time to time, revealed a preference for
monetary policy independent of (or at least not wholly dependent on)
that of the United States -- the proof being Canada's occasional
predilection for a floating exchange rate even when most of the world
was on a fixed rate. Here, as usual, Chown mainly presents the views
of others ("authorities," one might say). Interestingly, while Chown
comments negatively on a proposed Argentina/Brazil monetary union --
"This might well have been disastrous for both countries" (p. 312) --
he does not make the obvious point that inclusion of Mexico as a
third party in a North American monetary union is also not sensible.
An omission from a book that takes so broad a view of monetary unions
is monetary disunions that never happened, for example, monetary
implications of a secession of Quebec from Canada.
All in all, Chown has produced a useful work for the monetary
historian and an interesting book for non-specialists.
Lawrence H. Officer is Professor of Economics at the University of
Illinois at Chicago. He is also Editor, Special Projects, at EH.Net.
His recent research concentrates on historical-data development, both
for printed journals and for the "How Much Is That?" section of
EH.Net. An example of the former is his article "The U.S. Specie
Standard, 1792-1932: Some Monetarist Arithmetic," _Explorations in
Economic History_, Vol. 39, No. 2 (April 2002), pp. 113-153.
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