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Political Events and Economic Ideas

Political Events and Economic Ideas

Edited by Ingo Barens, Volker Caspari and Bertram Schefold

The influence of political developments on the evolution of economic thought is the main theme behind this book. As the authors reveal throughout the book, history has shown many times that political events can trigger the formulation of new economic conceptions that in turn influence the future economic development of a country.

Chapter 4: Monetary Reform in France: The French Economists and the Stabilization of the Franc in the 1920s

Cécile Dangel-Hagnauer and Alain Raybaut

Subjects: economics and finance, economic psychology, history of economic thought, political economy, politics and public policy, political economy


Cécile Dangel-Hagnauer and Alain Raybaut* INTRODUCTION 1. The suspension of the convertibility of the European currencies and the episodes of high inflation and instability, all of which were the result of the economic disruptions caused by World War I, drove economists to reflect on the causes of these disturbances and to seek remedies for them. The conditions of Great Britain’s return to the gold standard, the critique voiced by Keynes in The Economic Consequences of Mr Churchill are well known, as is the different solution adopted by France: instead of returning to pre-war parity, the French government engaged in a two-year stabilization process that led to an 80 per cent devaluation in June 1928. Thus, rather surprisingly, it was the ‘incompetent’ French economists who succeeded in persuading policymakers and in particular the ‘French Minister of Finance (Whoever he is or may be)’ (Keynes, 1925) to take the right decision, notwithstanding the hostility of public opinion, of most politicians and even of the majority of economists, whereas Keynes failed to convince Winston Churchill that the reinstatement of the gold standard in 1925 at pre-war parity would have severe consequences.1 The contributions to economic theory of the French economists who worked to convince Joseph Caillaux and Raymond Poincaré were not at the level of those of the ‘magician of Cambridge’ (Rueff, 1975). Stranger still, the positions of the different authors in the area of monetary and exchange rate theory were rather dissimilar, ranging from Nogaro’s nominalism...

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