The gold standard rigidly subordinated domestic welfare policies to fixed exchange rates

Evidence

The gold standard—the liberal economic order that shaped the first phase of globalization between 1871 and 1914, lasted until the outbreak of the First World War, and was resuscitated in the interwar period—was fundamentally anti-democratic. To enable free international capital flows at an astonishingly high level—around 1900 at a similar level to the year 1990 in proportional terms—this system of fixed exchange rates and gold backing posed strict limits to domestic economic policies. Karl Polanyi has given a moving description of what this meant for working people and the poor: if the balance of payments, volatile international capital markets, and the stabilization of exchange rates demanded domestic restraint, then high unemployment and falling wages were condoned. As stated in a standard textbook, the “stability of exchange rates relied on the submission of national economic policies under the diktat of balance of payments adjustment.” — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 414

Categorization

• XREF: Directly engages Polanyi’s Great Transformation, likely already in the reader’s library — and reverses the usual caricature that sees ‘free markets’ as democratic by tying the gold standard’s anti-democratic discipline to the balance-of-payments submission it demanded. — connects to: The gold standard’s wage flexibility presupposed excluding democratic labor from politics — Mark Blyth, Austerity: The History of a Dangerous…, 492; The euro institutionalized a gold standard, removing devaluation as a national adjustment tool. — Mark Blyth, Austerity: The History of a Dangerous…, 216; Fixed exchange rates eliminate both hedging demand and speculation rationale for currency futures — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 645 (+10 more)
• ADDENDUM: Would pair well with the sacrifice article’s theme of stratified societies imposing costs on the poor — here the gold standard imposed unemployment and falling wages on working people as a routine cost of monetary discipline.

Broader Connections

• The gold standard naturalized austerity by removing it from political dispute #expands (0.92) — Clara E. Mattei, The Capital Order, 1302
• The gold standard structurally blocked redistributive spending before World War I #expands (0.90) — Clara E. Mattei, The Capital Order, 102
• Gold standard currencies had fixed parities and central banks limited issuance to gold reserves #expands (0.88) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 64
• The gold standard shielded monetary policy from democratic politics #expands (0.88) — Clara E. Mattei, The Capital Order, 998
• Fixed exchange rates trade employment stability for external balance #expands (0.85) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 295
• Fixed exchange rates force austerity when competitiveness declines #expands (0.82)
• A fixed exchange rate regime forces member countries to resort to internal devaluation #expands (0.80) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 125
• Early neoliberals favored the gold standard and opposed floating rates #complicates (0.75) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 428