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