Silver and Gold: The Political Economy of International Monetary Conferences, 1867-1892 (review)

Silver and Gold: The Political Economy of International Monetary Conferences, 1867-1892. By Steven P. Reti. Westport, Conn.: Greenwood Press, 1998. x; 214 pp. $59.95.

In the minds of many people, economists included, the classical gold standard represents a period of international monetary cooperation and tranquillity unmatched before or since. Even those who recognize that the "classical era" lasted only a few decades, often view it as a special time. And in many ways, it was special, as it helped to undergird world trade at a level not experienced before the system's emergence or for many decades, after its demise. Special, yes, but tranquil, no.

In Silver and Gold, Steven Reti documents the political battles occurring throughout the first half of the gold era. By focusing on the events surrounding the international monetary conferences of 1867, 1878, 1881, and 1892, Reti demonstrates that adherence to the gold standard, far from being a widely accepted policy stance, was highly contentious in many countries. But Reti is after bigger game than merely noting the political squabbles of the period; he is more interested in appraising different theoretical hypotheses purporting to explain the origination and continuation of the gold standard.

The three main hypotheses with which Reti is concerned are the "spontaneous explanation," which maintains that the gold standard emerged spontaneously as various states adhered to a common set of "rules" for central-bank behavior; the "theory of hegemonic stability" set forth by Charles Kindleberger, which maintains that "a single dominant country, acting as a 'stabilizer' by providing several monetary functions, is a necessary condition to explain stable exchange-rate regimes" (10); and the "coordination-game theory," which maintains that, given a common interest in coordination, particular countries will seek to establish "focal points" that best serve their individual interests. The first explanation suggests that no international coordination of policies occurred; the system simply evolved without direction. The second suggests that a dominant economy (Britain) stabilized a system that would otherwise have been well described as a prisoner's dilemma game. The third hypothesis suggests that a better description of the process is a coordination game, in which countries recognize the losses that would follow from opting out of the system and thus remain in the system while attempting to shape it to their advantage.

By documenting the political forces shaping the positions adopted by individual governments, the arguments put forth by national representatives during the conferences, and the domestic political fallout resulting from the conferences, Reti sheds a great deal of light on the nature of the process that generated and sustained the gold standard. His detailed presentation of the political economy of the era leaves little doubt that the coordination-game theory provides the most reasonable explanation of the rise and survival of the regime.

Extensive documentation is both the book's greatest strength and its greatest weakness. At times the book is repetitive, and Reti's writing style is merely workmanlike. But lack of style detracts little from the important contribution to our understanding of the political economy of the gold standard made by the book.

Neil T. Skaggs
Illinois State University

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