Gold dust

Issue: 123

Chris Harman

Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (second edition) (Princeton, 2008), £19.95

Occasionally mainstream economists manage to produce works of genuine use. This is one of them. The eruption of the credit crunch and then the deepest recession since the 1930s has led to many people developing a new interest in economic discussions, only then to be mystified by references to things like the gold standard, the Bretton Woods system, and the Plaza Accord. Eichengreen explains such things in easily understandable terms. In doing so, he makes it clear that insofar as there has been an international monetary system it has always depended on negotiated deals between the major powers according to their economic interests rather than pure market relations.

So, for instance, he shows how the use of gold as a common measure for all national currencies through the gold standard only emerged quite late in the 19th century and its maintenance depended on different national banks being prepared to do a favour to each other by turning a blind eye to infractions of its rules. He ends by pointing to the problems posed today for global economic transactions being based upon one no longer all-powerful national currency, the dollar. A book well worth reading if you want to know some of the background to the world economy today.