212 The Domestic Politics of International Monetary Order: The Gold Standard
discount rate to higher levels. Because a crisis in London necessarily produced a
backlash in France in the form of gold outflows, coming to the assistance of the
Bank of England allowed the Bank of France to maintain a more stable structure
of domestic interest rates.
France’s role as lender of last resort to England can be credited with relieving
the most severe crises of the era (the Barings Crisis of 1890; the American crises
of 1906 and 1907). The picture of the classical gold standard as managed by the
Bank of England alone is thus far from complete. In fact, it was Bank of France
officials who thought of themselves as the “monetary physicians of the world,”
and allocating a portion of the Bank’s immense gold holdings anywhere it was
needed became an explicit component of French monetary policy. It is important
to stress that there was nothing cosmopolitan about this policy. The goal was
always to prevent foreign crises from destabilizing the French economy and forcing
an upward adjustment in interest rates....
The Bank of England, often regaled as the “manager” of the classical gold
standard, never made such bold statements of its international role nor consciously
acted in ways consistent with the role. In fact, the Bank of England was so dependent
on the French bank in times of crisis that the latter became known as the Bank of
England’s “second gold reserve.” It is therefore difficult to substantiate the view
that attributes the durability of the classical gold standard to management by a
single financial center. If the Bank of England served to protect the value of
sterling so essential to its role as international money, in periods of extraordinary
stress, France was the international lender of last resort.
The French commitment to protect the domestic market from foreign influences
was also reflected in its longer and more avid use of “gold devices.” Before 1900,
the Bank of France frequently charged more for gold bars or foreign gold coins
to discourage the export of gold in these forms. It was also quite common for the
bank to induce gold imports by raising its purchase price for gold bullion above
the mint rate. In later years the same policy of buying gold at a loss was pursued
from time to time with the essential purpose of imposing upon the Bank the costs
of protecting convertibility instead of imposing them upon the business community
by an advance in the rate of discount. Lastly, the Bank also regularly granted
interest-free advances to gold importers and on occasion bought gold at its border
branches to reduce shipping and insurance fees.
Taken as a whole, French monetary institutions and policies were far less
consistent with the principles and operational rules of the gold standard than
England’s. Indeed, even considering France a gold-standard country stretches the
definition of the concept because the central bank’s commitment to redeem its
notes in gold was always conditional and discretionary, and the market for gold
was in no sense free. Moreover, since the Bank used an array of methods to avoid
adjusting domestic macroeconomic conditions in line with gold flows—which, of
course, eliminated any positive equilibrating role for monetary policy—it avoided
playing by the rules of the game. In contrast to England, the French monetary
system was designed and operated to insulate the domestic economy as much as
possible from external pressures. Domestic targets took precedence over international
ones, and one important consequence of this was that Paris could not develop as