Drawing Gold From the Moon
The title of this blog is a quote from a famous historian of international finance, Barry Eichengreen, about how Britain used its power to maintain the classical gold standard monetary regime from 1870 – 1914. Essentially, what he is talking about is the fact that Britain maintained a gold standard (where all currencies are tied to a certain quantity of gold) without actually having very much gold. Somehow, someway, it was able to avoid a massive financial crisis simply by making people believe it knew what it was doing, or if they didn’t believe that, it made sure they acted like they did anyway.
Nowadays people like Ron Paul talk about a return to a gold standard as the be all and end all of the world’s problems. A gold standard system is seen as one where there was stability; not like the turbulent financial environment we find ourselves in today. But there’s a few things that get overlooked when you hear these calls for such a return, and one of those is POWER.
According to its proponents, the Classical Gold Standard, and the Gold Exchange Standard that came between World War Two and ended in the 1970s were periods where States played by the “rules” of the international system and as such, prosperity and joy reigned.
In actual fact, in the Classical Gold Standard, the British used their imperial power over their downtrodden colonies to maintain the system (pretty sure India doesn’t want a return to the Classical Gold Standard for this reason). Meanwhile, in the Bretton Woods period, the US as the hegemonic power essentially ran the show. It did so somewhat benevolently at first (if by benevolent you mean that in pursuing its own self interest it let some other countries do what was in their interest too for a while) but ultimately it went a little power mad and started aggressively pursuing global financial liberalisation simply because it realised that having inadvertently opened the Pandora’s Box of financial globalisation as it pursued other objectives, it was gaining a new structural power vis a vis other states within this financially liberalised international system. Most importantly, it could exploit that power even as it (like all other States) lost sovereignty to the whims of the financial markets and its merry band of speculators. This, very basically, is what the US has been up to in the international financial system from the 1970s until today.
Anyway…to cut a long story short, I wrote an essay about all of this for my International Monetary Relations class, and here it is, in Wordle form, because I thought it looked pretty cool:
Posted on October 8, 2012, in Uncategorized and tagged barry eichengreen, Britain, classical gold standard, colonies, gftei, global finance, gold exchange standard, IMR, India, joy, power, ron paul, US, wordle. Bookmark the permalink. Leave a comment.