The Gold Standard at the Turn of the Twentieth Century: Rising Powers, Global Money, and the Age of Empire (review)

Alan Milward lamented fifteen years ago that studies of the adoption of the gold standard in less developed countries were "almost entirely lacking" and posited that politics and diplomacy had likely been more important than economic logic in shaping their decisions to adopt the gold standard.¹ Steven Bryan's new book is a welcome addition to the work focusing on experience outside the European core to the gold standard world. Bryan examines the context and the public debates for and against the adoption of the gold standard in Japan and Argentina in the 1890s. As developing economies on the periphery, their perspective on international monetary standards and behavior provide an essential counterbalance to Eurocentric assumptions.

Argentina depended heavily on trade with Britain and was vulnerable to changing world prices for agricultural exports. Japan was more advanced industrially, emerging from the semicolonial status imposed by trade treaties since 1859. A large share of its export trade went to countries with silver standard currencies. The depreciation of silver and the rivalry between gold, silver, and bimetallism as world standards made the gold standard a better prospect to provide exchange-rate stability, but trade considerations and access to international finance played a major role in decisions regarding whether and when to adopt the gold standard and at what exchange rate. The international position of each country influenced domestic coalitions of interest in terms of exchange rate, trade partners, and capital flows. Bryan follows earlier authors who stress the accidental nature of the classical gold standard,² giving attention to the 1890s as a "third phase" in the global expansion of the gold standard. (England linked its currency to gold in 1717, key European countries and the United States adopted the gold standard in the 1870s, and developing countries followed in the 1890s.) In both countries, concern for national prestige, currency stability, trade advantage, and access to foreign loans factored into the debate on gold standard adoption. Bryan's analysis and argument are framed to challenge authors who claim that the gold standard marked a late nineteenth-century triumph of international trade and free markets, as a historical parallel and precedent for the veneration of free markets and globalization at the end of the twentieth century. Not so, Bryan cautions. Adherence to the gold standard was not the success of English theories advocating free trade and a night watchman state. Countries joined the gold standard for nationalistic reasons in an era of protectionism, industrial competition, and increasing nationalism. The ideas of Friedrich List and Alexander Hamilton dominated policy discussions, not the classical liberalism of free trade and minimal government. The gold standard needs to be understood for its national, not its international, character (p. 32).

In each country, national and sectoral interests structured the public debate on whether to adopt the gold standard. In Argentina, the gold standard advocates were industrial and agricultural exporters worried by the rising value of the Argentinean peso. Fixing the value to gold was advocated as a means to fix the peso at a low level to stimulate exports. The strongest opposition came from partisans of English theory, free trade, and laissez-faire, who saw the proposed currency stabilization as "not a true gold standard" but rather as devaluation and "robbery." The main architect of the gold standard policy, Carlos Pellegrini, sought to promote Argentinean industrial development through protectionism, government support for key industries, and monetary expansion. It was not just the gold standard but also undervaluing the peso to preserve an export advantage that motivated Pellegrini and his allies. In combination with protectionist measures the gold standard would promote exports and national industrial development.

In Japan the gold standard was less controversial. It was accepted as a fundamentally conservative measure to increase Japanese industrial and military power through export growth and access to foreign loans...