BIMETALLISM.*
WHATEVER may be thought of the merits of their cause, —and on those merits we desire on the present occasion to express no final opinion—bimetallists have certainly bad more than their share of sheer bad luck. Few -abstract economists, in this country at all events, can be found to controvert the soundness of their theory ; and few practical men would, we fancy, be disposed to deny that the adoption of international bimetallism twenty, or even ten, years ago would have saved the world from incalculable anxiety and loss ; yet the trend of events has been steadily in favour of universal gold monometallism, and the event of last year's negotiations, in which not more than one -of the four Governments concerned seems to have been acting in entire good faith, was thought by many at the time to have defi- nitely relegated bimetallism to the limbo of the lost causes of history. Already, however, there are signs that the last word on the subject has not yet been spoken, and the possi- bility of a political or economic convulsion which may deprive monometallism of the fruits of her late victory seems to be less remote than was at first believed. While it is still uncertain whether Russia with all her potentialities of wealth, or India with her silver-using population of hundreds of millions, can establish a currency on a gold basis ; while China and Mexico will certainly not desire to do so ; while France is deeply interested in the retention of silver in the currencies of the world ; above all, while America has definitely missed her chance of an effective adherence to the gold standard, and is hourly drawing nearer to a final effort in favour of silver, no one can maintain that the future belongs so certainly to gold as the theorists in this country who have discovered that currency is only a simple • Binstalism. Br Major Leonard Darwin. London: John Murray. [73. 6d.1
matter of manipulation would have us believe. Therefore an examination and restatement of the arguments for and against bimetallism so moderate, so clear, and so candid as Major Darwin has given us will be of the highest value to those who wish to form an opinion or take a part on either side in the final controversy which apparently still lies before us.
In form Major Darwin's book reminds us of a Report of a Royal Commissioner, with its careful analysis and discussion of arguments, its judicial conclusions, and its freedom from the irritating references which enliven or disfigure so many treatises on this subject. Like several unprejudiced inquirers who have tried to work out the subject for themselves, Major Darwin sums up in favour of the bimetallic solution, with reservations, however, which will certainly be satisfactory to the opposite party. In his eyes the question of the ratio is of vital importance, and he argues it mainly as a choice between the two extremes of the old or " low " ratio of 151 to 1, and what he calls the " market " ratio, which would now be about 35 to 1; deciding so strongly in ravour of the latter as to hold that monometallism is to be preferred to "almost any" compromise with those "who desire to use bimetallism as an engine for raising prices." The effect of the first-named ratio would, no doubt, be an inflation of prices in gold-using countries, and we are at one with the author in his opinion of the injustice and impolicy of its adoption by a bimetallic union, whether such a union included Great Britain or not. There is, however, all the difference in the world between that ratio and a higher ratio (though not one as high as the actual market ratio) ; and Major Darwin's arguments against the" low "ratio will seem to most bimetallists to be inapplicable to a ratio of, say, 25 to 1. The " low " ratio, if it did not produce a cataclysmic disturbance in trade and commerce, would be likely to bring about a con- siderable, if temporary, rise of prices in gold-standard countries, an object as little justifiable as that of preventing a further decline is desirable, and one which if it benefited producers in these countries would necessarily, if not in a corresponding degree, injure those carrying on business in silver-using countries. As regards the effect upon the relation of creditor to debtor of a low ratio, Major Darwin pertinently asks why "one party to a contract made in England between Englishmen has equitable grounds for demanding that his contract shall be modified to the disadvantage of the other party because of the effects of foreign legislation ? " The mere fact that to re-establish the old ratio would involve interference with debts which have either recently changed hands or been recently contracted — perhaps the great majority of all debts—shows how unjust such a course would be. The recent debtor "would gain just as much as the debtor of twenty years' standing by the introduction of low-ratio bimetallism, though he would not have been in the slightest degree injured by English or foreign legisla- tion." But while applauding Major Darwin's protest against the exaggerated and misleading, if not positively dishonest, appeals of the electioneering bimetallist, appeals which, as he well points out, the monometallist might easily retort upon him by working on the fears of the wage-earning classes of a rise of prices, we do not see that his arguments can be used with anything like the same force against a ratio considerably lower than the market ratio he advocates,—a, ratio, for instance, of 25 to 1. Even granting the bimetallist assumptions of the continued validity of the quantitative theory of money, and of the effect on prices of recent currency legislation, it would be difficult to argue that the adoption of such a ratio would have a disturbing influence on existing prices, or do more—if it dia that—than arrest what all admit to be the depressing, if not disastrous, downward tendency of prices ; or that what England, as a creditor nation, would lose in the value of her gold receipts, she would not more than recover in the renewed confidence of her manufacturers and the stability of exchange in her Eastern trade. To seriously propose a ratio of 35 to 1 as the only alternative to universal gold monometallism, or rather, if that be admitted to be unattainable, to the present condition of anarchy, is to throw up the game of bimetallism. It is absurd to imagine that France or America would be willing to write off their whole loss and deprive themselves of the possibility of separate action, and of the ()bailee of recovery from causes inde- pendent of legislation. It is equally out of the question that the
Indian Government, after having for the most pressing financial reasons more or less successfully given a monopoly value to the rupee, could agree to any bimetallic system which did not raise the gold price of silver to the level to which they have succeeded in raising the rupee. This, indeed, Major Darwin himself points out; and adds, what is perfectly true, that Indian traders could hardly begin to suffer from falling prices until a ratio lower than one represented by 25 to 1 were chosen. So far, therefore, from agreeing with Major Darwin's somewhat unpractical conclusion, we should imagine that a bimetallist, if convinced either of the evil or of the impossibility of universal gold monometallism, would consider the question eminently one for a compromise and discussion. We do not indeed, understand Major Darwin to be so con- vinced of the necessity of a bimetallic agreement as to feel able to take any decided action to bring it about. He admits that the choice between bimetallism, even at the " market " ratio, and monometallism is "not free from doubt," though he holds that, of the alternatives to an effective bimetallic arrange-
ment, a division of the world into a silver camp and a gold camp would be the worst, and that universal gold mono- metallism, even if a practical possibility, would lead to such further appreciation of the metal as to intensify the revolt against existing currency arrangements. " Market-ratio " bimetallism would, he thinks, give stability to the standard without inflicting injustice on any class ; would, at all events
check the too rapid fall of prices ; and would have a good chance of long duration. A bimetallist might, as we have said, draw arguments from Major Darwin's own armoury to prove that the same excellent objects would be attained by the adoption of a ratio of 25 to 1, with the added advan- tage that there would at least be some remote possibility of such a ratio being accepted by the parties concerned.
We have drawn attention to this portion of Major Darwin's work because he himself seems to consider it the most im- portant contribution he has to make to the discussion of the subject. Whatever bimetalliats may think of its practical value, the writer deserves the credit of having faced a ques- tion which they have too often shirked, but which lies at the root of the controversy at its present stage. But he has in other chapters of the book elucidated and restated with remarkable comprehensiveness and power of exposition the
various points affecting the problem, most of them, of course, familiar to currency students We may, for instance, men- tion his demonstration that the legal ratio fixed must govern the bullion market as long as neither metal is driven out of circulation, an almost inconceivable event; and his discussion of the effect of credit on prices. His treatment of this obscure and difficult question is full of sound sense, and he seems to us to establish the proposition that there must exist a definite quantitative relationship between the amount of coin in circulation and the total money value of the business being transacted by the aid of the currency in question. He well says, for instance :— " To deny that there is a relationship (between the coin avail- able and the total credit transactions) is equivalent to saying that bankers and others in gold-using countries are just as ready to advance money when they have little gold at their command, as when large reserves of specie are available, either in their own hands, or held for them by others The eagerness with which the Bank of England reserves are watched at all times, and the serious consequences which follow an exceptional rise in the rate of discount consequent on any exceptional variation in the quantity of gold held in reserve, prove that the amount of gold in the country is a factor of the utmost importance in regulating credit."
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