Britain, France, and the Gold Standard During the Depression?

Hey all,

One reason France had trouble rearming in the 30s was that it stuck to the Gold Standard far longer than most of Europe. This kept its economy deflated, prevented them from running a deficit, etc. etc. And of course hindered rearmament.

Britain, meanwhile, went off the Gold Standard in 1931 and devalued its currency, and had a relatively mild Depression.

Suppose Britain had stayed on the gold standard til the bitter end? A worse depression, even more delayed rearmament, etc. Or suppose France goes off it earlier; say 1933. By 1939, their military is considerably better than OTL...

Thoughts?
 
Hey all,

One reason France had trouble rearming in the 30s was that it stuck to the Gold Standard far longer than most of Europe. This kept its economy deflated, prevented them from running a deficit, etc. etc. And of course hindered rearmament.

Britain, meanwhile, went off the Gold Standard in 1931 and devalued its currency, and had a relatively mild Depression.

Suppose Britain had stayed on the gold standard til the bitter end? A worse depression, even more delayed rearmament, etc. Or suppose France goes off it earlier; say 1933. By 1939, their military is considerably better than OTL...

Thoughts?

First, I don't think you can say that Britain had a relatively mild depression, as unemployment fell below 1 million only in the middle of 1940 - and that was after years of rearmament.

Second, if Britain had remained on the gold standard, then unemployment would have remained very high throughout the 1930s, and of course, a more troubled economy would mean less money for the military and, probably, more support for political extremists.

Third, one may also consider what would have happened if Britain had left the gold standard at an earlier date. Some Labour politicians admitted they were taken back by the Tories' decision to abandon it, the reason being that they hadn't known that this was an option!

As for France, well I don't know much about their economy, but an earlier departure from the gold standard would have given the French more options to get their economy going, and so more money for the army etc. But then one has to consider how beneficial earlier rearmament would have been, given the changes that were taking place in military technologies.
 
Depends if you accept Eichengreen's hypothesis that the problem was keeping with the Gold Standard.

I think the problem was international trade pretty much died. Britain, with its expansive empire not to mention the Sterling bloc, had more captive resources and more captive markets. As such Britain did better than France who lacked these things in the same scale. Italy and later Germany benefited from Keynsian government spending on infrastructure, heavy industry and armaments.

Britain leaving the gold standard was in part more acceptable because their gold reserves were so low. The undervalued Franc (compared with the overvalued sterling) had seen it all flow into French banks where more than a little was sterilized. Obviously it was more politically difficult for France to get off the Gold Standard when they had plenty of gold.
 
Depends if you accept Eichengreen's hypothesis that the problem was keeping with the Gold Standard.

I think the problem was international trade pretty much died. Britain, with its expansive empire not to mention the Sterling bloc, had more captive resources and more captive markets. As such Britain did better than France who lacked these things in the same scale. Italy and later Germany benefited from Keynsian government spending on infrastructure, heavy industry and armaments.

Britain leaving the gold standard was in part more acceptable because their gold reserves were so low. The undervalued Franc (compared with the overvalued sterling) had seen it all flow into French banks where more than a little was sterilized. Obviously it was more politically difficult for France to get off the Gold Standard when they had plenty of gold.

I think you place too much value on Britain's empire. The fact is that we (thankfully) did not exploit it the extent we could have.Yes, Britain had captive markets but the general collapse in free trade brought about by the Depression limited reduced the importance of overseas trade. Even British India placed tariffs on British textiles!

The British economy's recovery was partly due the revival of domestic demand and partly due to rearmament.
 
Depression came late to France

Actually, France held out against the Great Depression longer than most of the other powers, which may have made things worse in the longer term.

I would say that the biggest problems with French rearmament were:

1) They ended World War I with plenty of everything military - tanks, planes, artillery - and didn't buy much of anything for over 15 years. Industries don't sit around 15+ years waiting for orders. If the orders don't come workers are laid off or reassigned. Factories are converted to produce something else. It takes a while to get production going again. The French started getting serious about rearming around 1935. By late 1939/early 1940, production was going pretty well. If they had started a couple of years earlier they would have had more material. Whether they would have done more with it is another question. In the long run France might have been better off if a lot of the FT17s, etc had fallen apart in the early 20s.

2) The Hollow Years. French birth rates were tiny in 1914-1918 because the army didn't let soldiers go home and procreate enough. The age classes from those years were working their way through French industry and the army in the mid to late 30s.

3) The Popular Front. Nationalized the bulk of the aircraft industry and made big plans/poured a lot of money into new manufacturing capacity but never got much production out of it.
 
Actually, France held out against the Great Depression longer than most of the other powers, which may have made things worse in the longer term.

Meh. While the Depression wasn't serious until later than in most nations, by the second half of 1931 the economy was in decline. And as you point out, it also ended later in France.
 
Top