Bimetallism
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In economics, bimetallism is a monetary standard in which the value of the monetary unit can be expressed either with a certain amount of gold or with a certain amount of silver. The ratio between the two metals is fixed by law.
This monetary system is very unstable. Due to the fluctuation of the commercial value of the metals, the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). This occurred in the United States throughout the 19th century as the official bimetallic standard became in effect a silver standard.
Political Debate—1890s USA
In the United States, toward the end of the nineteenth century, bimetallism became a center of political conflict. Newly discovered silver mines in the American West caused an effective decrease in the value of money. In 1873 the government passed the Fourth Coinage Act, at the same time as these resources were beginning to be exploited. This was later referred to by Silverites as “The Crime of ’73,” as it was judged to have inhibited inflation. Instead deflation resulted, causing problems for farmers with large mortgages but who could sell their goods for only a fraction of their post-Civil War price. In addition, improvements in transport meant an increase in international and domestic competition, driving grain prices further down. The railroads played a part in bimetallist grievances due to their monopolistic exploitation of farmers. In the early 1890s there was a depression in agriculture, and the resulting tensions created a conflict between those that favored inflationary policies caused by a bimetallic standard and those that favored sound money produced by a gold standard.
Bimetallism and "Free Silver" were demanded by William Jennings Bryan who took over leadership of the Democratic Party in 1896, as well as the Populist and Silver Republican Parties. The Republican Party nominated William McKinley on a platform supporting the gold standard which was favored by financial interests in the East Coast. A faction of Republicans from silver mining regions in the West known as the Silver Republicans endorsed Bryan.
William Jennings Bryan, the eloquent champion of the cause, gave the famous “Cross of Gold” speech at the National Democratic Convention on July 9, 1896 asserting that “The gold standard has slain tens of thousands.” He referred to “a struggle between ‘the idle holders of idle capital’ and ‘the struggling masses, who produce the wealth and pay the taxes of the country;’ and, my friends, the question we are to decide is: Upon which side will the Democratic party fight?” At the peroration, he said “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.” However, his presidential campaign was ultimately unsuccessful due to economic upturn caused in part by the failure of Russian harvests and the resultant increase in commodity prices. 1896 saw the election of William McKinley who implemented the gold standard in 1900, which lasted until the great depression. It was abandoned in 1934 in FDR’s New Deal economic recovery program.
As Friedman and Schwarz (1963) have shown, the money supply was steadily expanding in the 1890s because bank checks were becoming common.
Wizard of Oz
Since the 1960s historians and economists have explored the bimetallism symbolism in The Wizard of Oz. See Political interpretations of The Wonderful Wizard of Oz for more details. The original 1900 book centers on a yellow brick road (gold), traversed by magical silver slippers (the 1939 movie changed them to red), as Dorothy leads a political coalition of farmers (Scarecrow), workers (Tin Woodman) and politicians (Cowardly Lion) to petition the President (Wizard) in the capital city of Oz. The real enemy of the little people (Munchkins) is the giant corporation or Trust (Wicked Witch of the West), who Dorothy dissolves, just as the progressives of the era tried to dissolve the corporate trusts.Monometallism
The practical difficulties which in times past had confronted the maintenance of a joint standard, a concurrent circulation of the two metals, led one nation after another to abandon the effort, and to adopt a system of monometallism, with gold as its basis. The historical development of coinage in modern nations has been from silver monometallism through a more or less unsatisfactory experience with bimetallism, to the single gold standard. Still, in the twentieth century, both metals lost their former importance within monetary systems. Now, monometallism in the form of the gold standard has been abandoned by all nations.Primary sources
- [Campaign Text-book of the National Democratic Party (1896) by Democratic Party (U.S.) National committee] this is the Gold Democrats handbook; it strongly opposed Bryan
- Walker, International Bimetallism (New York, 1896)
- Giffen, Case against Bimetallism (London, 1896)
- Nicholson, Money and Monetary Problems (London, 1897)
- Horton, The Silver Pound (London, 1887)
- Walker, Money (New York, 1878)
- Walker, Money, Trade and Industry (New York, 1879)
- Andrews, An honest Dollar (Hartford, 1894)
- Helm, The Joint Standard (London, 1894)
- Taussig, The Silver Situation in the United States (New York, 1893)
- White, Money and Banking (Boston, 1896)
- Laughlin, History of Bimetallism in the United States (New York, 1897)
- Price, Money and its Relations to Prices (London and New york, 1896)
- Utley, Bimetallism (Los Angeles, 1899)
References
- Bordo, Michael D. "Bimetallism." In The New Palgrave Encyclopedia of Money and Finance edited by Peter K. Newman, Murray Milgate and John Eatwell. 1992.
- Dighe, Ranjit S. ed. The Historian's Wizard of Oz: Reading L. Frank Baum's Classic as a Political and Monetary Allegory (2002)
- Friedman, Milton, 1990a, "The crime of 1873," Journal of Political Economy, Vol. 98, No. 6, December, pp. 1159-1194
- Friedman, Milton, 1990b, "Bimetallism revisited," Journal of Economic Perspectives, Vol. 4, No. 4, Fall, pp. 85-104.
- Friedman, Milton, and Anna J. Schwartz, 1963, A Monetary History of the United States, 1867-1960
- Littlefield, Henry M., 1964, "The Wizard of Oz: Parable on Populism," American quarterly, Vol. 16, No. 1, Spring, pp. 47-58.
- [Angela Redish, "Bimetallism"]
- Rockoff, Hugh, 1990, "The Wizard of Oz as a monetary allegory," Journal of Political Economy, Vol. 98, No. 4, August, pp. 739-760.
- [Velde, Francois R. "Following the Yellow Brick Road: How the United States Adopted the Gold Standard" Economic Perspectives. Volume: 26. Issue: 2. 2002.]
See also
External link
- [The Bimetallic Standard], a series of pages on bimetalism from Micheloud & cie.
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