Vol. 6 · pages 476–480

461 TOWARDS A GOLD STANDARD TABLE XXIII DISTRIBUTION OF THE STOCK OF MONEY IN DIFFERENT COUNTRIES * Countries. Monetary Circulation at the Beginning of 1892. Gold. Silver. Uncovered Notes Fractional Cur-rency. BillonMoney. Austria . . fl. 65,000,000 197,000,00 601,000,000 40,000,000 14,000,000 England . . .£ 118,000,000 — 10,000,000 26,000,000 1,900,000 France . . . fr. 3,900,000,000 3,200,000,000 572,000,000 280,000,000 280,000,000 Germany . . m. 2,500,000,000 430,000,000 450,000,000 457,000,000 57,000,000 Holland . . fl. 64,000,000 135,000,000 98,000,000 7,600,000 1,800,000 Italy . . . li. 485,000,000 81,000,000 847,000,000 150,000,000 75,000,000 Russia . . . .£ 59,500,000 — 51,200,000 8,200,000 1,000,000 Spain . . . pes. 160,000,000 646,000,000 548,000,000 190,000,000 157,000,000 U.S.A. . . doll. 671,000,00.0 458,000,000 419,000,000 77,000,000 18,000,000 *The figures are as given by Ottomar Haupt (London: Effingham, Wilson & Co., 1892, p. 160.)

462 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES The reasons for the failure of these Conferences to reach a bimetallic agreement have not been properly understood. One cannot read the debates on bimetallism at these Conferences without observing that the opposing parties approached the subject with different objectives. To one the principal objective was the maintenance of a stable ratio of exchange between gold and silver irrespective of the question whether one or both remained in circulation; to the other it was the maintenance of the two metals in concurrent circulation. As a consequence of this difference in the lines of their approach an agreement on a bimetallic project became well-nigh impossible. The workability of bimetallism in the sense of maintaining a stable ratio between gold and silver is necessarily an indefinite proposition. Nonetheless, it cannot be said, if the debates at these Conferences are taken as a guide, that the possibility of a successful bimetallic system in the stable-ratio sense of the term had been denied by the majority of economic theorists, or by the Governments who met at these Conferences. On the other hand, the Conference of 1881, the most important of the three, was remarkable for its confession regarding the workability of the system. All Governments, barring a few minor ones, were in favour of it. Even the British Government, in consenting to bring into operation the silver clause of the Bank Charter Act, must be said to have given its word of approval. But what did bimetallism promise, as a piece of mechanism, to maintain the two metals in concurrent circulation ? The bimetallists used to cite the example of France in support of the stability of the double standard. But was there a concurrent circulation of two metals in France under the bimetallic system ? Far from it. For, although it was a virtue of the system that changes in the production of the two metals made no appreciable variations in the fixed ratio of exchange, yet the slightest of such as did occur were sufficient to effect the greatest revolution in the relative circulation of the two metals, as the following table clearly brings out:— TABLE XXIV MINTAGE OF GOLD AND SILVER IN FRANCE* Period GoldMillion Francs SilverMillion Francs Ratio ofValue 1803 to 1820 … 868 1,091 1 : 15.58 1821 to 1847 … 301 2,778 1 : 15.80 1848 to 1852 … 448 543 1 : 15.67 1853 to 1856 … 1,795 102 1 : 15.35 1857 to 1866 … 3,516 55 1 : 15.33 1867 to 1873 … 876 587 1 : 15.62 * Table submitted to the Paris International Monetary Conference of 1881 by M. Pierson, Delegate for the Netherlands.

463 TOWARDS A GOLD STANDARD In mitigation of this, the bimetallists had nothing to offer. There were, no doubt, such schemes as the one proposed by Prof. Marshall, consisting of paper based on a linked bar of gold and silver in certain fixed proportions,* having the object of converting this “either-metallism” into double-metallism. But such schemes apart, the free-mintage-cum-fixed-ratio plan of bimetallism gave no guarrantee against alternation in the circulation. Indeed, under that plan the alternation is the very soul of the mechanism which keeps the ratio from being disturbed. The only thing the bimetallists could say in mitigation of this was that† the alternation in currency would confine itself to bank reserves and would not be extended to the pockets of the people. This was only an eyewash,‡ for how could the banks arrange their reserves except in conformity with the prejudices of the people ? Even international agreement to use gold and silver at a fixed ratio was no guarantee that this concurrent circulation would be maintained. Stability of ratio did depend to a large extent upon an international agreement, for, although it could be maintained by the action of one nation, the deviations of the ratio in that case would probably be greater. But mere international agreement has no virtue of itself to prevent one metal driving out the other. To suppose that Gresham’s Law is powerless under international agreement is a gross mistake. Gresham’s Law is governed by the relative production of the two metals to the total currency needs of the movement. Supposing the production of one metal relatively to the other was so enormous as to more than suffice for the currency needs, how could international agreement prevent the former from driving the latter entirely out of circulation ? On the other hand, international agreement, far from discouraging, would encourage the process. In adopting bimetallism, therefore, the nations had to make a choice between a stable ratio and a concurrent circulation, for there might arise a situation in which there was a stable ratio * Cf. Contemporary Review for March, 1887. it is interesting to note that essentially the same plan was suggested 115 years before Prof, marshall by James Stewart when his advice was sought by the East India Company as to the method of reforming the then chaotic currency of Bengal. He refrained from pressing it upon the Company because he thought “mankind were not all philosophers.” Cf. his Principles of Money as applied to the Present State of the Coin of Bengal (2nd Edition, 1772), pp. 8-11; cf. also William Ward, On Monetary Derangements, in a Letter addressed to the Proprietors of Bank Stock, London, 1840, p. 8. † Cf. Prof. Foxwell, Oxford Economic Review, 1893, Vol. III, p. 297. ‡ Cf. the reply by Prof. Cannan, ibid., p. 457.

464 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES but no concurrent circulation of both the metals. If the Conferences broke down, it was not because they did not recognize the possibility, which was unanimously upheld by such an impartial tribunal as the Gold and Silver Commission of 1886, of a stable ratio being maintained under a bimetallic regime. They broke down because the bimetallic system did not guarantee the concurrent circulation of the two metals. However, it is certain the impossibility of concurrent circulation could not have been such a drawback if the immediate effect of bimetallism would have been a flow of gold into circulation. But as matters then stood the immediate effect would have been to bring silver into circulation. It was this more than anything else which scared away most of the nations from the adoption of the bimetallic system. Now, it is a curious thing that nations which had assembled together to bring about a stable ratio between gold and silver should have rejected a system which gave a promise of such a stability on the comparatively less significant ground that it had the effect of altering the composition of the circulation from gold to silver. But the fact must be recognized that at the time the question of reconstituting the bimetallic system was agitating the public mind, in most of the European countries gold and silver had ceased to be regarded as equally good for currency purposes. The superiority of gold to silver as a carrier of large value in small bulk was coming more and more to be appreciated in the latter part of the nineteenth century, and no plan of stabilization which did not provide for the unhindered circulation of gold was likely to meet with common approval. This prejudice was in no way confined to a gold-standard country like England. The closing of the Mints by the Latin Union is a proof positive of the change in the attitude of the bimetallic countries. As Jevons argued*:— “So long …… as its operation resulted in substituting a beautiful coinage of napoleons, half-napoleons, and fivefranc pieces in gold for the old heavy silver ecus, there was no complaint, and the French people admired the action of their compensatory system. But when [after 1873] it became evident that the heavy silver currency was coming back again …… the matter assumed a different form.” * Money and Mechanism of Exchange, 1890, p. 143.

465 TOWARDS A GOLD STANDARD So great was the prejudice in favour of gold that the interests of the chief Powers in the various Conferences, it may be truly said, waxed and waned with the changes in the volume of their gold reserves.* In 1878, the United States took the lead in calling the Conference because the working of the Bland Allison Act checked the inflow of gold necessary for its cash payments. Germany was indifferent because she had enough gold and was confident of selling off her demonetized silver without loss. In 1881 France and Germany showed more anxiety for reform because the former had lost all her gold and the latter was unable to palm off her silver. By 1892 none was so poorly supplied with gold as was the United States, largely as a result of a reckless policy which did her harm without doing good to anyone else, and she was therefore left alone to support the cause of silver. Possessed as almost every Government was by this prejudice for gold, it was not an ineradicable prejudice. What the countries wanted was a lead from an influential nation. Throughout the debates at these Conferences one thing stood out very clearly. If England could have brought herself to adopt a bimetallic system, others, like sheep, would have followed suit. But she was too much wedded to her system to make a change, with the result that bimetallism, as a way out of the currency difficulties, became a dead project. The vanishing of the prospect of re-establishing the bimetallic system as a result of her obstinacy was a small matter to the European countries. They had virtually made gold, the international form of money, as the basis of their currency, and were therefore quite indifferent as to the issue ; but it was a terrible blow to the hopes of India. After the proposal of 1878 had been turned down, bimetallism was considered by the Government of India as the remedy, and its advent looked forward to for salvation. It is true that in the beginning of bimetallic discussions the attitude of the Indian Government was rather lukewarm. In a despatch dated June 10, 1881,† to the Secretary of State, it was revealed that the Government of the time was divided in its opinion regarding the merits of bimetallism. The Viceroy and another member of Council refused their support on the ground that bimetallism was unsound in principle,‡ and even the majority who thought * Cf. The Report of the Indian Delegation to the International Monetary Conference of 1881, C 3229 of 1882, p. 7 ; also Russell, op. cit., pp. 374-5. † P.P.C 3229 of 1882, p. 33 et seq. ‡ Ibid, p. 37.