ABSTRACT
The pre-1914 gold standard may be seen as a sterling standard largely, with London as its pivot, which had gradually developed in the nineteenth century. Despite the use of a common international currency, some striking features of this standard and its operation were the differences in the economic behaviour of the countries who were members of this ‘club’,
Much of the theoretical and practical discussion of the gold standard has centred on the repercussions of gold movements and of the consequential banking measures on international capital movements, incomes, and prices in the countries concerned. Less attention has been paid to the following two questions: (a) why did the exchanges move to either of the gold points and gold move? (b) what equilibrating forces might be set in motion by the factors causing the gold movement? It will be argued that it is of crucial importance to ask these questions in order to understand the actual operation of the gold standard, for the same factors (e.g., a fall in export values or a fall in receipts from foreign borrowing) causing the export of gold or the loss of foreign balances may automatically set in motion income movements which reduce the initial discrepancy between foreign-currency receipts and payments. Two cases will be considered: (a) Great Britain, and (b) Argentina, an economy which had a chequered history of adherence (and otherwise) to the gold standard before 1914. Contrasts will emerge between the operation of the gold standard for the central country and for a ‘periphery’ country, both of which were geared together by trade and capital flows. This approach will thus follow up the suggestion of P.Barrett Whale, who, after emphasizing that the suggestions in his wellknown article1 were tentative, stated: ‘They provide a hypothetical view of the working of the gold standard…; but it is admitted that my view requires a more exhaustive testing, with regard to both the cases in which the gold standard has worked successfully and those in which it has broken down, before it can claim acceptance.2
