The Gold Standard Illusion: France, the Bank of France, and the International Gold Standard, 1914-1939

Abstract

PROFESSOR Kenneth Mouré, of the University of California at Santa Barbara, published in 1991 an excellent book on Managing the Franc Poincaré (rev. ante, cix (1994), 1334–6). It dealt with French monetary policy from 1928 to 1936, the rather short period during which the French franc was on the Gold Standard, at the parity which Prime Minister Poincaré had fixed. In this new book, he returns to French monetary policy, but for a longer period and within a wider, international framework. The focus is upon discussing an orthodoxy which prevailed during the Great Depression (J.M. Keynes, to whom gold was ‘a barbarous relic’, was one of its proponents), and which has been revived in our days by several scholars. To put it crudely, they make France the principal culprit for the Great Depression. In the late 1920s and early 1930s, the Bank of France and the French government followed a narrow-minded and selfish policy which attracted mountains of gold to Paris and exerted strong contractionary pressures on monetary policy in other countries, especially Britain, which was forced off the Gold Standard by the 1931 crisis. So, France was responsible for the Great Depression, but her policy backfired: she was eventually hit by the Depression, did not benefit from the global recovery which started after 1932 and remained depressed economically until 1938. Moreover, the development of the Bank of France as a modern central bank had been much delayed.