Nationalization of the Bank of England and the Bank of France

Abstract

I take it for granted that neither economists nor political scientists can assume without qualification that the first election returns in two countries after they have been ravaged by war really reflect a considered judgment of the role that central banks can or will play in the future. The mere decision to nationalize, in itself, settles little save, perhaps, a real or fancied grievance. The acts nationalizing the Bank of England and the Bank of France can be analyzed most fruitfully not as isolated fragments of history nor even as harbingers of immediate changes in monetary policies but as reflections of changes in the basic attitudes of the British and French people toward the role that the government should play in economic affairs.' For more than a century before the Great Depression a state bank would have been as incongruous in France or the United Kingdom as a private independent central bank would be in the Soviet Union. The predominant view in both countries had long been that the government should keep its activity in economic and business affairs at a minimum. One facet of this liberal tradition was that the government should not interfere in the management of the central bank. A wholly consistent advocate of laissez-faire, of course, would have opposed establishment of a central bank with unique monetary powers and privileges. Instead he would have urged that people be free to establish banks and would have relied on competition among many banks to regulate money and credit. The most ardent and consistent advocates of the doctrine held this view, and the relative merits of central banking and free competitive banking were discussed at