Money Mischief_ Episodes in Monetary History - Milton Friedman [52]
Proponents and Opponents of Bimetallism
Writing in 1896, at the height of the agitation for free silver, Francis A. Walker (1896b, [>]) gives an excellent description of the
three classes of persons in the United States who have been wont to call themselves bimetallists. We have, first, the inhabitants of the silver-producing states. These citizens have what is called a particular interest, as distinct from a participation in the general interest.... Their interest in the maintenance of silver as a money metal has been of the same nature as the interest of Pennsylvanians in the duties on pig iron.... Although the silver-mining industry of the country is not large ... it has yet been able to exert a high degree of power in our politics, partly because of our system of equal representation in the Senate, partly because of the eagerness and intensity with which the object has been pursued. The second of the three classes ... consists of those who, without any particular interest in the production of silver, are yet, in their general economic views, in favor of superabundant and cheap money. Among the leaders of this element have been found the very men who, between 1868 and 1876, were foremost in advocating the greenback heresy [which, it is worth noting, is today's orthodoxy]. Beaten on the issue of greenback inflation, they have taken up the issue of silver inflation.... They are for depreciated silver, because, in their view, it is the next best thing (by which they mean what we would call the next worst thing) to greenbacks. Those who constitute the element now under consideration are not true bimetallists. What they really want is silver inflation [they are Schumpeter's "monetary monomaniacs"].
The third element ... comprises the convinced bimetallists of the country; men who believe, with Alexander Hamilton and the founders of the republic, that it is best to base the circulation upon both the precious metals. They are not inflationists, although ... they strongly deprecate contraction.*
The persons who called themselves monometallists or hard-money men and favored a gold standard consisted of three parallel groups: those with interests in gold mining; deflationists, castigated by the free-silver forces, with some justice, as "Wall Street"; convinced monometallists, who interpreted the economic preeminence of Britain as testimony to the virtues of a gold standard and the move by many European countries in the 1870s from bimetallism to gold as testimony to the fragility of bimetallism.
The controversy was not restricted to the United States. It raged in Britain, France, and, indeed, throughout the world, producing, as Massimo Roccas remarks, "the liveliest theoretical disputes among economists and the sharpest economic policy debates in the 'civilized world'" (1987, p. 1). Elsewhere, also, the participants were divided into the same groups as in the United States, with one difference: among advocates of bimetallism, the first group included not only silver-mining interests but, especially in Britain, persons involved in trade with India, which was on a silver standard with free coinage until 1893, and, everywhere, persons involved in trade with China, which was on a silver standard until the late 1930s. Traders with India and China favored bimetallism for the same reasons that exporters today favor fixed exchange rates—to reduce the inconvenience and risks accompanying a fluctuating exchange rate.
The distinctions between the groups are not ironclad. A clear example for the United States is the first and long-time chairman of the department of economics of the University of Chicago, James Laurence Laughlin. His 1886 book, The History of Bimetallism in the United