Monetary Regimes of the Twentieth Century (review)

Rather than a story of the world's monetary history, this is a comparative history of the monetary/macro regimes of Europe, the United States, and Japan during the twentieth century. As such it will be useful to the audience for which it seems to have been intended: the M.B.A. students at whom the author says it was directed.

The passages of sweeping social and economic history as relating to the macroeconomic policy stances of the respective governments are the strongest feature of the book. Not surprisingly, the fullest and most enlightening of these is the discussion of the British experience. The post–World War I struggle with organized labor in the face of large-scale unemployment and the later Thatcher revolutionary return to liberalism, make attention-grabbing reading. In the discussion of the United States, there are some strange absences: in a lengthy critique of the stagnationists' failure to predict the post–World War II boom, Britton neglects the effects of the strong external shock provided by the Korean War just as the postwar retooling of civilian production was slipping into the mild recession of 1949. He refers to the U.S. authorities as employing demand management extensively, but it is not at all clear what this refers to, apart from the 1960 Kennedy tax cut and the temporary Nixon price/wage controls after suspension of gold convertibility. The Employment Act of 1946 created the Council of Economic Advisors, and there was a great deal of forecasting, but that did not lead to “demand management” in the United States. Britain was no doubt different; inter alia, the flexibility provided by the chancellor's ability to institute budget changes at frequent intervals contrasts with the cumbersome procedures of the U.S. House and Senate in the lengthy budget and appropriations measures.

Britton rejects the notion of the hegemony of sterling and the dollar before World War I and after World War II respectively. This is based on a literal interpretation of the word hegemony to mean only political domination. That the prewar gold standard was in fact a sterling standard, orchestrated by the Bank of England in its autarchic attempt to protect its slim gold stocks, is amply demonstrated in R. S. Sayers's history (1936) and William Brown's magisterial study (1940) of the gold standard. The system was far from automatic, even in the absence of the constraint on policy that appeared decades later when domestic stabilization was added to the list of policy goals. That the Bretton Woods system was a dollar standard because the United States was persistently running a balance-of-payments deficit and the rest of the world was happy to accumulate dollars (and ended when this imbalance began to appear unsustainable) is documented by numerous writers and cogently and succinctly expressed by Charles Kindleberger and others in the Economist (see Despres, Salant, and Kindleberger 1966), in what came to be a widely accepted position. This is different from Britton's suggestion that the U.S. Treasury was somehow “managing” and “leading” the world monetary system.

There are a number of small factual errors: the American-Canadian loan to Britain did take place, but the demand for convertibility later vitiated its benefit; regulation Q limited banks' payments of interest, not their charges on loans; the United States did not leave the gold standard in 1930; if the United States initiated the 1949 devaluations one should like to have heard the evidence—although it did, of course, passively acquiesce. The accompanying histories of doctrine and of international monetary organization seem to the reviewer to be somewhat idiosyncratic both in omission and in inclusion.

The last few pages on the epistemology and philosophy of science of economics are illuminating, perceptive, and refreshing; they will be of interest to readers of HOPE and no doubt a revelation to the above-mentioned M.B.A...