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The Gold Standard and the International Monetary System, 1900-1939
In this study Professor Drummond surveys the workings of the international financial system from America's adherence to the gold standard until World War II, drawing on recent scholarly work in several languages.
Professor Drummond begins by defining the gold standard and then proceeds to analyse the operation of the system itself. Although economic historians have referred to it as a 'system,' in that individual countries' arrangements fitted together coherently, it was neither consciously designed nor internationally administered. Each country's gold standard arrangements derived from the law or custom peculiar to that country, but they shared common elements which Professor Drummond isolates.
The history of the gold standard's operation is then considered, through the disturbances during and after World War I, the unsatisfactory reconstruction of the 1920's and the final collapse in the 1930's, together with subsequent efforts at a new kind of reconstruction. Professor Drummond concludes that the factors militating against the successful operation of the gold standard were too great to be overcome by the individual efforts of financiers, central bankers and politicians.
Professor Drummond begins by defining the gold standard and then proceeds to analyse the operation of the system itself. Although economic historians have referred to it as a 'system,' in that individual countries' arrangements fitted together coherently, it was neither consciously designed nor internationally administered. Each country's gold standard arrangements derived from the law or custom peculiar to that country, but they shared common elements which Professor Drummond isolates.
The history of the gold standard's operation is then considered, through the disturbances during and after World War I, the unsatisfactory reconstruction of the 1920's and the final collapse in the 1930's, together with subsequent efforts at a new kind of reconstruction. Professor Drummond concludes that the factors militating against the successful operation of the gold standard were too great to be overcome by the individual efforts of financiers, central bankers and politicians.
- GenresEconomics
71 pages, Paperback
First published January 1, 1987
About the author
Ian M. Drummond
10 books2 followersIan M. Drummond (1933-1994) was a professor emeritus of economics and a former vice-dean, Faculty of Arts and Science, University of Toronto.
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March 21, 2025
This is a little book about a big subject. What Ian Drummond offers in it is a succinct overview of the international financial system in the first four decades of the 20th century, and the role the gold standard played in it. It’s a formidable task made all the more challenging by the limited amount of space available to do so, which requires him to maintain a consistent focus on his subject.
Drummond divides his examination into three parts. The first of these summarizes what might be regarded as the “golden age” of the gold standard, the years leading up to the First World War. While it was an era which many people today look back upon wistfully, he demonstrates that it was nothing like the smoothly running system of stable monetary values as is popularly believed. Much of the misconception for this, he argues, comes from the broader economic growth that characterized the period rather than the convertibility of gold, which was itself irregular, determined by governmental institutions rather than the marketplace, and dependent upon new gold strikes for monetary expansion. This system quickly collapsed with the outbreak of the war, as belligerent nations freed themselves from its constraints in order to wage war more effectively.
With the end of the war, the desire for a restoration of a system of fixed exchange rates after the First World War led most Western nations to attempt a return to the gold standard. Again, this was not a matter of international coordination, but of national whim, and led to the resumption of convertibility at different times and rates. This system was further complicated by the complex system of debts and reparations which warped international finance during this period, and which maldistributed gold within it. The protectionist response to the Great Depression made the it inevitable that countries would abandon the standard in order to grant themselves more flexibility to deal with the crisis, though gold remained an important element of international finance for the remainder of the decade.
As one might expect, Drummond is dismissive of the modern-day calls for a revival of the gold standard, noting that “[w]hen the cry for ‘a return to gold’ goes up . . . it usually comes from folk who know little about the history of the subject.” (27) For anyone seeking to learn about it, they could do worse than turn to this book. Though its age means that a growing body of scholarship about the gold standard is excluded from his analysis (the absence of Barry Eichengreen’s Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 from the bibliography is particularly regrettable) and while he makes greater assumptions about his reader’s knowledge of international finance than might be justified, his book still offers a useful summary of the topic for anyone wanting to understand its operations and why it ended. For those seeking an introduction to the subject, this is a good place to begin.
Drummond divides his examination into three parts. The first of these summarizes what might be regarded as the “golden age” of the gold standard, the years leading up to the First World War. While it was an era which many people today look back upon wistfully, he demonstrates that it was nothing like the smoothly running system of stable monetary values as is popularly believed. Much of the misconception for this, he argues, comes from the broader economic growth that characterized the period rather than the convertibility of gold, which was itself irregular, determined by governmental institutions rather than the marketplace, and dependent upon new gold strikes for monetary expansion. This system quickly collapsed with the outbreak of the war, as belligerent nations freed themselves from its constraints in order to wage war more effectively.
With the end of the war, the desire for a restoration of a system of fixed exchange rates after the First World War led most Western nations to attempt a return to the gold standard. Again, this was not a matter of international coordination, but of national whim, and led to the resumption of convertibility at different times and rates. This system was further complicated by the complex system of debts and reparations which warped international finance during this period, and which maldistributed gold within it. The protectionist response to the Great Depression made the it inevitable that countries would abandon the standard in order to grant themselves more flexibility to deal with the crisis, though gold remained an important element of international finance for the remainder of the decade.
As one might expect, Drummond is dismissive of the modern-day calls for a revival of the gold standard, noting that “[w]hen the cry for ‘a return to gold’ goes up . . . it usually comes from folk who know little about the history of the subject.” (27) For anyone seeking to learn about it, they could do worse than turn to this book. Though its age means that a growing body of scholarship about the gold standard is excluded from his analysis (the absence of Barry Eichengreen’s Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 from the bibliography is particularly regrettable) and while he makes greater assumptions about his reader’s knowledge of international finance than might be justified, his book still offers a useful summary of the topic for anyone wanting to understand its operations and why it ended. For those seeking an introduction to the subject, this is a good place to begin.
Displaying 1 of 1 review