A central bank veto on all policy save austerity turned devaluation into economic harm.
Evidence
Even when France eventually abandoned gold in September 1936, little improved. To mix metaphors, while devaluation can create room to move, spending must pick up the slack. So when the monetary authority acts as a de facto veto on all policies except austerity, devaluation simply increases the import bill and deepens the slump. Most states in this period that left gold behind rebounded through devaluation plus spending, even if it was through rearmament. Yet the Bank of France continually vetoed budget increases that would have allowed the French military to modernize, and even mobilize, to meet the German threat. As a result, French defense spending between 1934 and 1938 was one-tenth that of Germany. — Mark Blyth, Austerity, 554
Categorization
- XREF: Connects to Blyth’s broader austerity thesis and, via Mattei, to the role of central bank politics in imposing deflationary orthodoxy. — connects to: Financial markets punish governments through currency devaluation and downgrades (financialization’s disciplinary power). — Max Haiven, Cultures of Financialization, 548; Currency devaluation causes import inflation and cuts real wages — Mark Blyth, Austerity: The History of a Dangerous…, 210
- QUESTION: The causal claim that devaluation without spending backfires only where monetary authority vetoes spending — worth testing against other gold-bloc cases like Belgium or Poland.
Broader Connections
- Currency devaluation causes import inflation and cuts real wages
#exemplifies(0.82) — Mark Blyth, Austerity, 210 - Financial markets punish governments through currency devaluation and downgrades (financialization’s disciplinary power).
#qualifies(0.80) — Max Haiven, Cultures of Financialization, 548