Rising democratic power forced the gold standard into terminal crisis

Evidence

Barry Eichengreen has demonstrated how this monetary system of the gold standard grew increasingly dysfunctional with the rise of democracies, strong trade unions, and the rise to prominence of interventionist and (proto-)Keynesian theories and state practices around the world. Under these new circumstances, governments had a hard time aligning their monetary policies solely to stabilize the necessary amount of gold and defend the currency peg when demands such as full employment and economic growth were gaining in importance. The gold standard broke down during the First World War, and all efforts to reinstall a gold exchange standard during the 1920s—that is, all attempts to contain the political power of trade unions and voting people—failed due to a lack of harmonization between central banks, protectionist capital controls, and a new social balance of power. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 415

Categorization

• XREF: Eichengreen’s Golden Fetters is the canonical source here; this is the causal mechanism connecting democracy’s rise to the collapse of the classical gold standard and its interwar restoration failures. — connects to: The gold standard was a major cause of the world’s two worst economic depressions. — Mark Blyth, Austerity: The History of a Dangerous…, 485; Democracies cannot sustain a gold standard because voters will reject it — Mark Blyth, Austerity: The History of a Dangerous…, 534; The gold standard’s self-regulating automaticity became politically fatal once workers got involved. — Mark Blyth, Austerity: The History of a Dangerous…, 491 (+4 more)

Broader Connections

• The gold standard shielded monetary policy from democratic politics #contradicts (0.85) — Clara E. Mattei, The Capital Order, 998
• Gilded Age elites circumscribed democracy to protect their economic regime #complicates (0.75) — Shoshana Zuboff, The Age of Surveillance Capitalism, 343