The Floating Pound and the Sterling Area: 1931–1939

by Ian M. Drummond

Britain's abandonment of the Gold Standard in 1931 raised new economic policy problems both for Britain and for the countries of the Empire, who had to decide whether to follow sterling off gold and, if so, whether to peg their currencies to sterling. By exploiting archival material, the author casts fresh light on the debates and financial diplomacy of the period, and provides a fuller understanding of several key issues: the formation of the sterling area, the World Economic Conference of 1933, and American concerns about the price and course of sterling.

320 pages, Hardcover

First published February 27, 1981

About the author

Ian M. Drummond (1933-1994) was a professor emeritus of economics and a former vice-dean, Faculty of Arts and Science, University of Toronto.

Reviews

[Francis Kennedy · Rating 3 out of 5]

This is quite a strange book. Ostensibly it is about the Sterling area (countries pegging their currencies to sterling) during the period of floating exchange rates in the 1930s. Its principal thesis is that this was a voluntary association not controlled or constructed by British authorities, and not some imperialist web of control created by Montagu Norman, the Bank of England Governor - though certainly the author argues it was congenial to the UK and of wider benefit to the world. Around half of the 9 chapters (excluding introduction and conclusion) are broadly about this topic, mainly case studies of financial diplomacy with India, Canada, South Africa, Australia and New Zealand, focused mostly on 1930-33. But then the other half are mainly about financial diplomacy between the UK, USA and France with regard to exchange rate management during 1933-39.

There is evidence of a truly impressive amount of archival study in this book, and it is very helpful in piecing together British external financial policy during this period, particularly the exchange rate policy of the Chancellor and UK Treasury officers and also, where relevant, the views of the Foreign Office. But the references to Norman are few and presumably Drummond in 1980 did not have access to Bank of England archives, so the Bank is also largely hidden from view. The references to other adherents to sterling, eg Scandinavia, are also brief. So in the end we are left musing that a policy that Norman had been promoting since the Imperial Economic Conference of 1923, that British Empire countries should fix their currencies to sterling and hold their international reserves in sterling was, where they had freedom to act, ‘entirely their own affair’. This statement is of course tautologically true. But it remains unknown the extent to which the UK and particularly the Bank in a more subtle way promoted this ‘voluntary association’ through measures which are not as obvious as coercion. International monetary systems based on commercial institutions and practices are very much like a web with sticky patches to which money adheres.