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POLI 354 (26)

Beth Simmons, Who Adjusts?, Princeton University Press, 1994

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McGill University
Political Science
POLI 354
Mark Brawley

Beth Simmons Who Adjusts Princeton University Press 1994 Chapters 12 WebCTChapter 2This reading deals with the gold standard system during the interwar period The thesis of this reading can be summed up by The interwar gold exchange standard never worked as smoothly as had the international monetary system before the First World War This reading gives the reasons for this fact This chapter argues that the gold standard system relied on a commitment by states to deflate if necessary in order to defend their currency The context of postWorld War I and the change from prewar conditions to postwar conditions led states to deviate from this commitment by undermining the credibility of that commitment in many states The prewar classical gold standard was very stable whereas the interwar standard was very unstable the United States and almost every European country devaluated their currency several times The reason for this contrast provided by Barry Eichengreen is the difference in credibility of the two systemsThe prewar system was credible states believed that the authorities at the centre of the system would with no doubt defend the gold convertibility for two reasons because of minimal domestic opposition to the gold standard and prompt and significant international central bank collaboration in times of crisis However in the postWWI period there was uncertainty about the states willingness and ability to maintain the gold standard Moreover strong states were unwilling to collaborate because they expected weaker states to be unable to maintain their currency if strong states maintained the
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