When I was googling something on the classical gold standard, I came across Brad DeLong’s book (?) on the economic history of the 20th century. In his discussion of the gold standard before World War I, he writes:
It is important to recognize that the gold standard was a historically-specific institution. The cornerstone of the gold standard was the commitment by all industrial-economy governments and central banks to maintaining convertibility of their currency. The pressure that twentieth-century–democratic–governments would feel to abandon currency convertibility and the stable exchange rate peg in order to boo[s]t employment or attain other economic objectives was simply absent. The credibility of the government’s commitment to the gold standard rested on the denial of the franchise to the working class. As long as the right to vote was still limited to middle and upper-class males, those rendered unemployed when the central bank raised [its] discount rate and tightened monetary policy had little voice in politics. As long as union movements remained relatively weak, the flexibility of wages and prices that would allow the gold-standard system to quickly readjust to equilibrium was present.
Later on these two preconditions for the functioning of the gold standard would erode, and the gold standard would cease to be a politically and economically-feasible institution.
Although DeLong writes in a neutral tone, as if he is simply reporting facts, there is clearly a dig at the gold standard here. He isn’t simply saying that it failed because of XYZ, DeLong is also saying that the only way the gold standard “works” is to screw over the powerless.
In any event, I think his history is simply wrong, at least with respect to the United States. FDR didn’t campaign on ending the gold standard. Here was the Democratic platform for the 1932 election, as reported by Scott Sumner:
The Democratic Party solemnly promises by appropriate action to put into effect the principles, policies, and reforms herein advocated, and to eradicate the policies, methods, and practices herein condemned. We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government. And we call upon the Democratic Party in the states to make a zealous effort to achieve a proportionate result.
We favor maintenance of the national credit by a federal budget annually balanced on the basis of accurate executive estimates within revenues, raised by a system of taxation levied on the principle of ability to pay.
We advocate a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our government to consider the rehabilitation of silver and related questions.
And Scott’s post itself is a discussion of the (famous) problem that nobody knew what was going to happen to the gold standard after the election in November but before FDR’s inauguration (which was in March in those days). So at best FDR was being coy about the gold standard. He certainly didn’t get elected on a promise to end it. (Even this site, which is definitely coming from a different political angle compared to Sumner, at most can say that although FDR campaigned on a sound currency, he never promised to stay on the gold standard.)
Furthermore, when the US did “go off gold,” people were forced to turn their gold over under threat of a 10-year prison sentence and a huge fine. Sure, a lot of fat cats were inconvenienced, but I imagine a lot of regular Joes had to turn in their gold too. So this wasn’t the analog of a South American land redistribution.
These tendencies carry through to our times, as well. If you ask the man on the street, “Do you favor a strong or a weak dollar policy?” what is he going to say? Furthermore, if you ask, “Most economists agree that TARP and the Federal Reserve’s injection of more than $1 trillion into big banks saved the financial system and averted a second Great Depression. What do you think?” I suspect a lot of the “working class” would say, “Screw the bankers!”
So my point is, I think the general public, even the working class, is OK with a strong currency as epitomized by the gold standard. They might be wrong in that view (I don’t think so), but DeLong’s narrative doesn’t really work for the U.S.