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BIMETALLISM

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Originally appearing in Volume V03, Page 947 of the 1911 Encyclopedia Britannica.
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BIMETALLISM. The very general employment of both gold and silver for currency purposes (see MONEY) has given rise to serious practical difficulties which have in turn led to keen theoretical discussion as to the proper remedies to be employed. Though every arrangement under which two metals form the money of a region may be described as " bimetallism," the term—as often happens in economics—has received a specialized meaning. It denotes a system under which the two metals are freely received by the mint and are equally available as legal tender. The last clause implies the establishment of a definite ratio in value between the two metals (e.g. r oz. of gold= 151 oz. of silver) so that the title " rated bimetallism " may be given to it, in contradistinction to the " unrated bimetallism " which exists wherever two metals circulate together, but have their relative values determined, not by law, but by " the higgling of the market." Further, the inventor of the term—H. Cernuschi in 1869—regarded it as properly applicable to an international arrangement by which a number of states agree to adopt the same ratio, rather than to the use of the two metals by a single country, which may be described as national bimetallism. Inter-national bimetallism is at all events the form which has attracted attention in recent times, and it is certainly the most important. Regarded from the historical point of view it appears that the failure of separate countries to maintain the two metals in circulation was the cause which produced the idea of bimetallism as an international system. We find first the upholders of a national double standard, as in France and the United States, and these are followed by the advocates of bimetallism set up by a combination of countries. The theoretical considerations which underlie the controversy between the supporters and the opponents of bimetallism find their appropriate place in the article MONEY, as does also the earlier history of the double standard. The circumstances that have led to the prominence of the bimetallic question and the principal events that have marked the course of the mcvement form the subject of this article. In the earlier years of the 19th century, when the monetary disturbances that resulted from the Revolutionary wars had ceased, we find France (1803) and the United States (1792) with the double standard legally established. England, on the other hand, had in 1816 accepted by law the gold standard, which had come into use in the 18th century. Silver formed the currency of the other European countries. The great discoveries of gold in California (1848) and Australia (1851) brought about the displacement of silver by gold in France, and the continuance of gold as the principal currency metal in the United States, where by the law of 1834 it had been somewhat over-rated (I :16), as compared with the ratio adopted in France (I :152), and had therefore expelled most of the silver previously in circulation. Between 1848 and 186o over 1oo,000,000 of gold was coined in France, while an equivalent amount of silver was exported, principally to the East. At this time the weight of economic and official opinion was very decidedly in favour of the single gold standard as the best system. In 1865 the Latin Union was established, in which the French currency system was adopted and was followed by the international conference of 1867 in Paris (see MONETARY CONFERENCES), when gold was unanimously accepted as the standard for the proposed international system to be produced by co-ordinating the various currencies with that of the Latin Union. A series of political and economic events speedily changed this situation. The Franco-German War (187o-71) deposed France from her leading position, and led to the establishment of a German gold currency with a different unit from the franc, accompanied by the demonetization of the silver currencies previously in use in the German states. The United States, where an inconvertible paper currency had been introduced during the Civil War, formally established the gold dollar as the standard coin (1873) and arranged fora return to specie payments (1878). At this time, too, the great production of gold which had marked the period 1850-187o diminished, while very productive silver mines were discovered in the Pacific states of America. As a result of these combined influences the gold price of silver, which had risen a little during the height of the gold discoveries, began to fall rapidly, and the reverse process to that by which France had in the 'fifties acquired a gold currency came into operation. Silver, in accordance with Gresham's Law, was imported and offered for coinage. To obviate this the policy of limiting the coinage of silver (the Limping Standard) was adopted by the Latin Union. A further fall in the gold price of silver naturally resulted, and this made the position of Eastern trade and the finances of the Indian government in-secure. American silver producers, and the German government, as holders of a large mass of demonetized silver, were also sufferers by the depreciation. The effect on public and official opinion was shown by the English parliamentary committee on the depreciation of silver (1876), the American silver commission of the same year, and the appearance of many works on the subject, most of them advocating the double standard. On the initiative of the United States an international monetary conference met in Paris in 1878, but though the necessity of keeping a place for silver in the money of the world was recognized, the proposal to adopt the double standard for general use was rejected by the European states. By the Bland-Allison Act (Feb. 1878) the United States had provided for the coinage of a certain amount of silver per month as a mode of keeping up the price of the metal, which notwithstanding fell to 48 pence per oz. in 1879. The prolonged depression of trade in America and Germany was attributed to the scarcity of money, due to what was described as " the outlawry of silver." By the joint action of France and the United States a fresh monetary conference was held in Paris in 1881, where the advocates of bimetallism were very strongly represented. After prolonged discussion no conclusion was reached, in consequence of the refusal of England and Germany to abandon the gold standard. Though an adjournment to the following year was resolved on, the conference did not reassemble, and the bimetallic movement took the form of agitation, carried on in each country. The English inquiry into the depression of trade (1885-1886) drew from the commission a recommendation for a fresh commission to investigate the relation of gold and silver. This latter body, appointed in 1886, obtained a great body of important evidence, and in 1888 closed its work by a report in which the views of the two sections of the commission were separately presented. Six members supported the existing gold standard and six were in favour of the bimetallic system. This inconclusive result was soon followed in the United States by the Sherman Act (189o), providing for a larger monthly coinage of silver. A temporary rise in the price of the metal was followed by a further fall, making the situation still more critical. A new monetary conference was summoned by the United States and met in Brussels in November 1892. To modify opposition the " desirability of increasing the use of silver " was the resolution proposed; the actual method being left open. This conference also proved abortive and adjourned to 1893, but like that of 1881 did not meet again. International action having failed to secure any system of bimetallism, the United States and India sought to relieve their position by local legislation. The former repealed the Sherman94? Act, and the latter closed its mints to the free coinage of silver (1893). As these measures were opposed to bimetallism in that they restricted the use of silver, and were followed by a lower price for that metal than had ever been known, the agitation in the United States and Europe continued. In America it took the form of advocating the free coinage of silver by the United States without waiting for other countries; and in this shape made the principal issue at the presidential elections of 1896 and 'goo, in each of which it was emphatically rejected. A further attempt at securing international bimetallism was made by Senator Wolcott's commission in 1897. The American envoys, in concert with the French government, proposed to England (1) the reopening of the Indian mints, and (2) the annual purchase by England of £Io,000,000 of silver. The French minister claimed further concessions which were regarded as inadmissible by the English government; but the fate of the mission was settled by the refusal of the Indian government to reopen its mints. After the American election of 1900, bimetallism as a popular cause disappeared from view. The silver issue was withdrawn from the democratic platform in 1904, and the bimetallic movement died out in England. Amongst the causes of this collapse the most important are: (1) the adoption of the gold standard by so many countries—Austria-Hungary (1892), Russia and Japan (1897), India (1899), Mexico (1904)—a movement which pointed to the complete triumph of gold in the future; (2) the great increase in the output of gold. Australia and South Africa so developed their gold mines as to bring the yield for 1906 to £81,000,000 as contrasted with the less than 20,000,000 of 1883. This growing supply removed all that dread of a " gold famine " which served as a popular argument with bimetallists. To these may be added (3) the knowledge that experience had brought of the difficulties surrounding any attempt to establish a common ratio where the interests of different countries are so opposed; and (4) the great expansion of trade and industry, concomitantly with the wider adoption of the gold standard. Therefore, to quote the words of perhaps the ablest advocate of bimetallism, " The outcome of the prolonged controversy . . . appears to be that the commercial world will carry on its business principally and more and more on a gold basis, and that particular countries will endeavour in different ways to adjust their actual medium . . . to the gold standard " (Nicholson, Money and Monetary Problems, 6th ed.). Perhaps the principal service rendered by the many able minds engaged in the movement will prove to be the fuller development of the more difficult parts of monetary theory and the additional light thrown on the course of monetary history. A proposal, sometimes confounded with bimetallism, is that for a standard composed of both gold and silver, which is better described as the Joint-standard or as Symmetallism.
End of Article: BIMETALLISM
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