ABSTRACT
Introduction This chapter focuses on the Danish experience of conducting what could be called an active exchange rate policy during the interwar years. In Denmark, as in most European countries, the exchange policy question was an important issue in economic policy throughout the whole period, along with commercial policy and a number of domestic policies designed to promote macroeconomic objectives. Certain periods stand out, however, in which exchange policy was the main instrument on the international level. Thus, while the return to the gold standard in the early 1920s was not an issue for discussion, the questions of how and when to do so, at what rate, and which additional measures to apply, certainly were. Likewise, the years after the British left gold in 1931 gave room for considerations as to how and when to adapt to a de-globalizing world order. Denmark returned to the gold standard rather late, formally only on 1 January 1927, although convertibility had been effectively restored somewhat earlier. At that time the greater part of the European currencies had been pegged to gold (the dollar) at various levels.1 Denmark preceded only a handful of countries, who, apart from Norway – and France – could all be characterized as peripheral in relation to the driving force behind exchange normalization, namely Great Britain. What was the experience from this protracted return to normalcy? Shortly after the British abandoned gold, Denmark entered into a system of state control of exchange, which was to last for almost a generation. Why this quick flight from a liberal regime? The conventional answer to both questions – the composition of Denmark’s foreign trade relations and the country’s position in the international division of labour, reflecting the structural imbalance of its economy, as well as the need to accomodate within the sphere of interest of both Germany and the UK2 – obviously cannot be denied. But the question could also be asked whether there is a connection between the attitudes in the two periods – in other words, a political learning effect – apart from the obvious constant interests of the economic actors involved. In this chapter these questions are considered through a chronological account of the history of the Danish return to the gold standard, and its subsequent abandonment.
