Hegemony and the Bank of England

Abstract

Abstract That the British state did not behave hegemonically (i.e., that we cannot attribute the rise and maintenance of the gold standard to the actions of the British state) does not prima facie invalidate the thesis that the gold standard was somehow hegemonized. In fact, more scholars have attributed the stability of the gold standard to management on the part of the Bank of England than have attributed it to the British state. Clearly, if the Bank was a source of management, it was not in the service of the state. But the Bank itself may have taken it upon itself to stabilize the international system. The justification for such an act would have been quite apparent, and consistent with a variety of strands of hegemony, both of a benevolent and coercive nature. If behaving in the interest of the system (i.e., benevolently), the Bank may have taken up the moral duty of being a central bank for the world (managing the international business cycle and credit system, and providing liquidity in last resort). No other institution was situated in as favorable a position to affect world monetary conditions: being the central bank in the world’s major financial center. From a purely self-interested point of view, on the other hand, it was rational to stabilize the international monetary system because international economic transactions were preponderantly executed by British citizens (as consumers, traders, investors, and bankers). Fetter (1965, p. 255) observes how widespread has been the vision among 20th century economists that the stability of the gold standard relied on the “Bank of England action as managing director, or executive secretary.” The vision of the Bank as a manager of the international gold standard is both a common and old one. Keynes (1930, V. 11) and Scammell [1965] 1985), and more recently Eichengreen (1986b), saw the Bank as the leader of the international orchestra of central banks, and it was to the harmonization of this orchestra under the Bank’s leadership that the gold standard owed its stability. Beyen (1949, p. 14) argues that it was the Bank’s policy to be an international “shock absorber.” Cleveland (1976) concurs. Wood (1939, p. 139) avers that it was the Bank’s special position that led her to “guide the international standard.” Kindleberger (1984, p. 68) calls the Bank the “central focus of [the] management” of the classical gold standard.