The gold standard structurally blocked redistributive spending before World War I

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. … A tight fi scal budget, on the other hand, could bolster trade surpluses by lowering domestic demand. And higher rates of interest (which promised higher returns on capital while deterring imports as they slowed the domestic economy) would draw gold bullion back into the country. Hence, the imperative of fi scal and monetary rigor was normalized. — Clara E. Mattei, The Capital Order, 102

Categorization

• XREF: Direct historical antecedent of the reader’s austerity-as-class-weapon framework: the gold standard mechanistically enforced fiscal austerity, prefiguring modern neoliberal policy discipline. — connects to: The gold standard’s wage flexibility presupposed excluding democratic labor from politics — Mark Blyth, Austerity: The History of a Dangerous…, 492; 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 (+5 more)
• ADDENDUM: Relevant to ‘On Sacrifice’ territory in that both deal with systems that structurally foreclose alternatives, though the link is thematic rather than direct.

Broader Connections

• Gold standard currencies had fixed parities and central banks limited issuance to gold reserves #expands (0.85) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 64
• Austerity has failed systematically whenever governments face gold-standard-style constraints #qualifies (0.70) — Mark Blyth, Austerity, 504