Conversión alimenticia en relación a kg de huevo producido.

In contrast to conventional interpretations of Britain’s return to the gold standard at $4.86, an analysis based on the alternative theoretical view of exchange rate policy-making developed in the previous chapter offers a markedly different way of understanding and assessing the policy. From this perspective, the return to gold is not seen as having been driven by ideational factors or a desire to restore prewar conditions, and nor is it seen as an attempt to maximise Britain’s trade and employment or as having been designed primarily to serve the financial interests of the City. Instead, the policy is seen as the central component of a wider governing strategy designed to provide favourable conditions for capital accumulation, to regulate class struggle, and to secure greater freedom of high political manoeuvre for the core executive. More specifically, the policy was designed to address long term political and economic difficulties within the British state by putting pressure on capital and labour to become more competitive and to shift to more advanced industrial sectors, to reduce and confine class unrest, and to ease the pressure on the state authorities through the depoliticisation of monetary and economic policy-making.

The political and economic difficulties facing Britain in the 1920s had their origins in developments during the last third of the nineteenth century. At this time Britain’s position as the world’s most powerful economy was under threat from increasing international competition, a relative decline in productivity, and a growing over- dependency on export industries of diminishing global importance. From 1910 the political

stability of the British state itself was also under threat from an increasingly organised and disaffected labour movement infused with the idea of using radical means to further its position. The seriousness of this situation was augmented by the effects of the First World War. The material demands of the conflict put Britain’s economy under enormous pressure, depleting its reserves and further distorting its pattern of productive activity towards outdated and declining industries, while high levels of inflation further undermined Britain’s economic competitiveness and helped to sustain labour unrest. These effects were further enhanced by a huge expansion of the state into almost all areas of economic life, which helped to strengthen the organisation of both capital and labour, and which transformed economic conditions and policy-making into overtly political issues. At the same time as this expansion now made state officials themselves directly responsible for domestic economic conditions, it also raised the expectations of capital and labour as to what could be achieved through the use of state power after the war, thereby making the resolution of these problems more difficult, and constraining the high political freedom of the authorities.

By the end of the war the key aims of the core executive were to return control and responsibility for economic conditions to the market, to contain and reduce inflation and labour unrest, and to encourage an economic recovery and an adjustment in Britain’s economic structure in order to meet the changed conditions of the postwar world. The central means of achieving these aims was a governing strategy based upon a return to the gold standard at the prewar par. This, it was thought, would aid the postwar recovery of the global economy by encouraging other nations to return to gold, would provide stability for Britain’s international economic activities, and would firmly re-integrate Britain’s

economy within the competitive discipline of the global circuit of capital, thereby forcing domestic prices and economic conditions to conform to those prevailing elsewhere. In addition it was also felt that returning to gold at the specific rate of $4.86 would ensure credibility in the policy, and that the relatively high value of the exchange rate would put pressure on the domestic economy as a whole, forcing down prices and wages and encouraging producers to move into internationally expanding branches of economic activity. The financial discipline of the regime would also be reinforced by the necessity of maintaining an all-round tight economic policy stance, including high levels of interest rates and taxation, in order to defend the parity until the economy adjusted.

A credible return to the gold standard was also seen to possess definite political advantages. By placing control of monetary policy in the hands of the politically ‘independent’ Bank of England, and by locating this within the wider framework of an automatic and globally constituted system, membership of the regime would serve to lock- in the future economic policy direction of the state as a whole (since this would now be subordinated to the needs of maintaining the parity), and would enable state officials to depoliticise the issues of economic conditions and policy-making. This would help to ease the pressure on the authorities and to increase their freedom of high political manoeuvre in several ways. Firstly, this would serve to reduce and contain the expectations of capital and labour as to the future economic policy behaviour of the state; secondly it would redraw the boundaries between the ‘political’ and the ‘economic’, thereby disarming and redirecting class struggles over economic issues away from the state. Thirdly, the regime would effectively blur the borders of political responsibility (and hence accountability) for economic conditions between the government and the Bank of England; and fourthly,

adherence to a gold standard would simplify the management of economic policy through the provision of a clear signal in the form of gold movements as to whenever domestic economic conditions began to diverge from those pertaining internationally.

From this alternative viewpoint Britain’s interwar gold standard policy is not seen to have been a mistake or a failure, but is best described as having been a relative success. On the one hand, the policy largely failed to force any substantial adjustment or competitive breakthrough in the British economy, and though prices fell, wages remained rigid. This created growing difficulties for the state authorities, who became unable to exert their full freedom of manoeuvre in interest rate policy due to rising political concerns over unemployment, and eventually led to the collapse of the gold standard regime itself as the lack of any significant domestic adjustment combined with the emergence of an international economic crisis during the late 1920s to produce a speculative attack on the pound during 1931.

In terms of its political effects however, the return to gold can be viewed as having been a success. The regime established a credible and depoliticised framework for economic policy-making, effectively removing monetary policy from the political agenda, and with the exception of unemployment (which remained a key political issue throughout this period), the authorities generally were no longer seen to be responsible by representatives of capital or labour for domestic economic conditions. Moreover, the renewed gold standard also enabled state officials to displace whatever pressure did arise over economic conditions, while the threat posed by labour unrest and militancy was also reduced. As such, despite the constraints over interest rates, the gold standard can therefore

be seen to have eased the political difficulties of the British state and to have provided the core executive with a greater degree of high political freedom.

Concluding Remarks

This chapter has examined the key themes and issues surrounding Britain’s return to the gold standard in 1925 and has outlined an alternative means of understanding the policy based on the alternative theoretical approach towards exchange rate policy-making developed earlier. From this perspective, Britain’s return to gold is seen as a component part of a wider governing strategy designed to regulate the domestic circuit of capital, contain labour unrest, and improve core executive freedom for the pursuit of high political goals. More specifically, it is argued that Britain’s return to gold was designed to address long-term political and economic difficulties within the British state by encouraging an economic adjustment and improved competitiveness, and by displacing responsibility for economic conditions and policy-making away from the state through the depoliticisation of monetary and economy policy-making. The following chapters develop this argument in more detail.

Chapter 3 : The Crisis of the British State

Britain’s interwar gold standard policy was the key component in a wider governing strategy designed to address a growing economic and political crisis in the British state. This crisis began to develop during the latter part of the nineteenth century with the onset of relative economic decline and an increasingly outmoded pattern of economic activity, and grew in intensity in the years immediately preceding the First World War with an upsurge of labour unrest and militancy posing a serious threat to political stability. The crisis was further exacerbated by the effects of the war itself, which not only added to Britain’s economic weakness and to the growing strength of labour, but also transformed economic conditions and policy-making into an overtly political issue, thus leading to growing pressure on the state authorities and greatly curtailing their high political freedom of manoeuvre. The purpose of this chapter is to outline and explore these issues.