The gold standard institutionally blocked redistributive fiscal and credit policies

Evidence

By the middle of the nineteenth century, with the establishment of the gold standard and the institutionalization of fi nancial orthodoxy that emerged with it, capitalist class relations between owners and workers became more entrenched, and any scenario for redistributive demands in favor of the people was eff ectively blocked. Th e gold standard required states to secure a certain amount of gold in their coff ers so as to be able to make good on their promise to convert the currency into gold at a fi xed price. Hence, states’ priority was to avoid the outfl ow of gold, a priority that implied tight fi scal and monetary policies. Running a trade surplus was the surest way to build up a country’s gold reserves. Conversely, trade defi cits led to an outfl ow of gold, since countries used gold to pay for their imports. Any extra public expenditure, or any easing of credit— the bases for redistributive policies— would result in gold fl ights and were therefore nonstarters. — Clara E. Mattei, The Capital Order, 102

Categorization

• XREF: This mechanism — a monetary regime that disciplines fiscal policy against redistribution — is the forebear of the modern austerity/EMU logic detailed by Mattei’s later chapters and the Greek/EU debt-crisis literature. — connects to: The gold standard structurally blocked redistributive spending before World War I — Clara E. Mattei, The Capital Order: How Economists…, 102; The gold standard rigidly subordinated domestic welfare policies to fixed exchange rates — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 414; The gold standard shielded monetary policy from democratic politics — Clara E. Mattei, The Capital Order: How Economists…, 998 (+7 more)
• ADDENDUM: Directly supports a future piece: the gold standard as austerity-by-design antecedes interwar Italy/Britain austerians, the book’s core subject.
• QUESTION: Worth chasing: was the prewar gold standard genuinely effective in blocking redistribution, or did other channels (tariffs, imperial extraction) mask its binding constraint?

Broader Connections

• The gold standard structurally blocked redistributive spending before World War I #corroborates (0.95) — Clara E. Mattei, The Capital Order, 102
• The gold standard rigidly subordinated domestic welfare policies to fixed exchange rates #expands (0.88) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 414
• The gold standard naturalized austerity by removing it from political dispute #expands (0.82) — Clara E. Mattei, The Capital Order, 1302
• The gold standard shielded monetary policy from democratic politics #complicates (0.80) — Clara E. Mattei, The Capital Order, 998
• The gold standard’s wage flexibility presupposed excluding democratic labor from politics #expands (0.80) — Mark Blyth, Austerity, 492
• Gold’s fixed supply gave the gold standard a built-in contractionary bias toward deflation #expands (0.78) — Mark Blyth, Austerity, 493
• Austerity has failed systematically whenever governments face gold-standard-style constraints #complicates (0.75) — Mark Blyth, Austerity, 504
• Gold standard currencies had fixed parities and central banks limited issuance to gold reserves #expands (0.75) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 64
• State fiscal restriction functions as upward wealth redistribution #qualifies (0.75)
• Ordoliberalism institutionalized competition policy and an independent central bank against parliamentary control #complicates (0.72) — Mark Blyth, Austerity, 364