By Richard S. Grossman
Britain operated under the gold standard for nearly 100 years before World War I forced Britain — and many other countries — to abandon it. During that century, Britain was the world’s military, financial, and industrial superpower. When Britain decided to return to gold in 1925, in hopes of reestablishing its pre-war dominance, it set of a rush among other countries to follow its example. But the interwar gold standard was doomed from the start: exchange rates were misaligned, gold holdings were inadequate and poorly distributed, and countries were powerless to use monetary policy to improve economic performance. When the Great Depression emerged in 1929-30, the gold standard played a crucial role in transmitting the shock internationally, amplifying its effects, and making it harder for policy makers to find a way out. The following infographic illustrates one way in which the gold standard had a disastrous effect on the British economy.
Download a jpg or pdf of the infographic.
Richard S. Grossman is Professor of Economics at Wesleyan University and a Visiting Scholar at the Institute for Quantitative Social Science at Harvard University. He is the author of WRONG: Nine Economic Policy Disasters and What We Can Learn from Them and Unsettled Account: The Evolution of Banking in the Industrialized World since 1800. Read his previous blog posts about economics.
Subscribe to the OUPblog via email or RSS.
Subscribe to only business and economics articles on the OUPblog via email or RSS.
There are currently no comments.