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The Norwegian debate on the gold standard and monetary integration in the 1870s

2006; Taylor & Francis; Volume: 54; Issue: 2 Linguagem: Inglês

10.1080/03585520600768505

1750-2837

Lars Fredrik Øksendal,

Global Financial Crisis and Policies

Abstract The origin of the gold standard and the desire for monetary integration shared the same root, the prevailing liberal worldview of Norwegian elites. The actual timing of the final move, however, was strongly influenced by fear of foreign exchange volatility in the wake of the German monetary unification rather than the fear of inflation highlighted in earlier studies. The diminished prospect for a single “world money” after the Franco-Prussian war made monetary integration a dividing issue. In 1873, the attempt by the government to safeguard some of the advantages of integration by joining the Scandinavian Currency Union (SCU) was defeated by the parliamentary majority. The opposition was based both on a more optimistic view of the prospect of even further monetary integration and on fears of political opposition to Scandinavianism and the government. However, eighteen months later, parliament conceded and Norway joined the SCU. Keywords: Monetary historyScandinavian Currency Unioneconomic cooperationgold standard Notes In writing this article I have benefited from valuable comments from Ola Grytten, Stig Tenold, Monica Værholm and Pål Sandvik as well as the participants in the Norwegian Economic History Association's seminar on central banking, Bergen, June 2005. 2Eichengreen, Barry and Flandreau, Marc, The geography of the gold standard, in, Macedo, Jorge Braga de et al. (eds.), Currency convertibility. The gold standard and beyond, Routledge 1996. 3Try, Hans, To kulturer - en stat, volume XI in Mykland, Knut (ed.) Norges historie, Cappelen 1979, 306–7. 4Rygg, Nikolai, Norges Banks historie, volume II, Oslo 1954, 51–8. 5Milward, Alan S., Origins of the gold standard, in Macedo, Jorge de, Eichengreen, Barry and Reis, Jaime, Currency convertibility. The gold standard and beyond, Routledge 1996, 87. 6Milward, Origins of the gold standard, 89. 7Milward, Origins of the gold standard, 90. 8Helleiner, Eric, Economic Liberalism in Currency Affairs, in Flandreau, Holtfrerich, James (eds.) International Financial History in the Twentieth Century, Cambridge UP 2003. 9Sejersted, Francis, Ideal, teori og virkelighet. Nicolai Rygg og pengepolitikken i 1920-årene, Cappelen 1973. 10Nerbøvik, Jostein, Norsk historie 1860–1914, Samlaget 1999. 11Try, To kulturer - en stat, 306–7. 12Hodne, Fritz og Grytten Ola H.; Norsk økonomisk historie i det 19. århundre, Fagbokforlaget 2000, 218–22. 13Hageman, Gro, Det moderne gjennombrudd 1870–1905, Aschehougs Norgeshistorie, vol. 9, 1997. 14Rygg, Norges Banks historie, 51–8. 15Jahn, G, Eriksen A., Munthe, P., Norges Bank gjennom 150 år, Oslo 1966, 119–20. 16Keilhau, Wilhelm, Den norske pengehistorie Aschehoug 1952, 118. 17Seip, Jens Arup, Ole Jacob Broch og hans samtid, Gyldendal 1971, 533–64. 18Talia, Krim, The Scandinavian Currency Union 1873–1924: Studies in monetary integration and disintegration, Stockholm School of Economics 2004, 60. 19Talia, The Scandinavian Currency Union 1873–1924, 87–8. 20Talia, The Scandinavian Currency Union 1873–1924, 72, 86. 21The ministry did not outline the theory explicitly, but referred to the mechanism that would drive out good money. 22Ot.prp. no. 45 (1869) Om myntvesenet samt Lovproposisjon om tillatelse for Norges Bank til å ha kassebeholdning henliggende i gull (Legal bill on the coinage and authorisation for the Norges Bank to keep gold reserves). Regjeringens innstilling av 5. April 1867 (Government recommendation of April 5, 1867), 2–4. 23Ot.prp. no. 45 (1869) Om myntvesenet. Regjeringens innstilling av 28. mai 1867 (Government recommendation of May 28 1867), 7–9. Broch formed part of a joint Swedish-Norwegian delegation. The government wanted a Norwegian representative on account of the differences between the Swedish and Norwegian coinage. 24Ot.prp. no. 45 (1869) Om myntvesenet. Innstilling 28. mai 1867. Beretning fra den i Paris avholdte internasjonale myntkonferanse, avgitt av Prof. O. J. Broch (Report by Professor Broch on the international monetary conference in Paris). 25Ot.prp. no. 45 (1869) Om myntvesenet. Innstilling 28. mai 1867. Brochs beretning fra Paris. 26Ot.prp. no. 45 (1869) Om myntvesenet, 56–60. 27Innstilling O. no 223 (1869) Innstilling fra Bankkomiteen angående Kongelig Proposisjon til Lov om tillatelse for Norges Bank å ha Kassebeholdning henliggende i gull ( Parliamentary committee recommendation on the legal bill giving authorisation for the Norges Bank to keep gold reserves). 28Odeltingsforhandlinger (Debates in the Lower legislative chamber) (1869), 1106, Lagtingsforhandlinger (Debates in the Upper legislative chamber ) (1869), 693. 29Hodne og Grytten, Norsk økonomisk historie, 217–8. 30Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Regjeringens innstilling av 1.februar 1872 (Legal bill on the introduction of the gold standard. Government recommendation of February 1, 1872). 31One pound sterling was divided into twenty shillings, and a shilling was divided into twelve pence. 32Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Innstilling av 1.februar 1872. 33The Norwegians preferred to subject the case to intergovernmental negotiations, but were willing to participate as the prospective partners had already agreed to proceed in accordance with this framework. Professor Aschehough, bank director Getz and merchant Andresen were appointed as delegates. Professor Broch had been asked to participate, but had excused himself on account of health concerns. Seip gives a somewhat different account of why Broch was omitted, pointing to an effective outmanoeuvring of the foremost Norwegian expert. 34Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning avgitt av de nordiske kongerikers anordnede myntkommisjon (Report by the Scandinavian coinage commission). 35Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Innstilling av 20. november 1872 bifalt i kongelig resolusjon samme i samme dag i sammensatt norsk-svensk statsråd (Recommendation of November 20 1872, approved by Royal Resolution the same day in joint Norwegian-Swedish cabinet). 36Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Innstilling av 20. november 1872. 37Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Innstilling av 20. november 1872. 38Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet nedsatt 9. desember 1872 (Report by the Royal Commission on coinage appointed December 9 1872). 39Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Særlig votum fra Professor O. J. Broch (Minority report of Professor Broch). 40See footnote 21. 41Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 42Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 43Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 44Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 47Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 45Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 46The commission assessed the Norwegian annual balance of trade with her major trading partners based on the average for the years 1866–1870. The trade with Sweden balanced at around 1.5 million speciedaler. In addition, Norway enjoyed a considerable freight income from Sweden. The imports from Denmark constituted some 4.4 million speciedaler while Norway's income from Denmark, exports and freight rates, totalled less than 1.3 million. Thus Norway ran a deficit on current account with Denmark of more than 3 million speciedaler. Great Britain was Norway's most important trading partner with an average import volume of 6.2 million speciedaler and a trade deficit of 500,000 speciedaler. On the whole, Norway ran a deficit on foreign trade. However, the net freight rates of the merchant navy had increased from 7.4 to 10.3 million speciedaler in the course of this period. Most of the invisible earnings were in pound sterling. 48Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Betenkning fra den kongelige kommisjon om myntvesenet. 49Stortingsdokument no.. 62 (1873). Forestilling fra Bestyrelsen for Christiania Handelsstands Forening i anledning det foreliggende forslag om overgang til gullmyntfot (Address from the Christiania Chamber of Commerce on the proposed introduction of the gold standard). 50Innstilling S. no. II (1873) Innstilling fra den forsterkede bankkomité angående den kongelige proposisjon om samtykke til ratifikasjon til den mellom de forente riker og Danmark under 18. desember 1872 avsluttede konvensjon om et for de tre riker felles på gull bygget myntsystem (Parliamentary committee recommendation on the ratification of the convention between Denmark, Sweden and Norway on the introduction of a joint coinage system based on gold). 51Innstilling S. no. II (1873) Innstilling fra den forsterkede bankkomité om myntkonvensjonen. 52Innstilling S. no. II (1873) Innstilling fra den forsterkede bankkomité om myntkonvensjonen. 53In this he followed an old argument of Broch. The professor had earlier argued that private debts had been entered in silver and thus involved a legal commitment to pay in silver, a private commitment the legislators could not repeal. To solve the problem of long-term debts, the authorities could publish quarterly conversion rates for debts due to mature, on the basis of the prevailing market quotes for silver. The ministry had been highly negative: compared to the inherent difficulties and inconveniences of such schemes, creating a single Scandinavian currency would be a minor problem. In his dissenting report Broch abandoned his view, on the grounds that as all other countries had opted for converting debts at the market price at the time of the transition, it would be difficult for Norway to choose another path. Ot.prp. no. 1 (1873) Om overgang til gullmyntfot. Særlig votum fra Professor O. J. 54Stortingsforhandlinger (Parliamentary Proceedings ) (1873), 554–650; Odelingstingsforhandlinger (1873), 485–540. The Norwegian parliament (Stortinget) is unicameral. However, for passing legislation the parliament is divided into the lower (Odelstinget) and upper (Lagtinget) legislative chambers. The ratification of the convention of the Scandinavian Currency Union was debated first by parliament as a whole. After the defeat of the union, the parts of the new legislation that referred to the union were omitted from the proposed law on the move to gold by the parliamentary committee and was debated in the two legislative chambers. Innstilling S. III (1873) Innstilling fra den forsterkede bankkomité angående det ved kongelig proposisjon av 20. februar 1873 fremsatte utkast til Lov om Pengevesenet (Ot. Prp. nr.1 (1873) (Committee recommendation on the legal bill on the monetary system). 55Stortingsforhandlinger (1873), 640. 56Stortingsforhandlinger (1873), 589–597. 57Stortingsforhandlinger (1873), 607–10. 58Stortingsforhandlinger (1873), 559–63. 59Stortingsforhandlinger (1873), 581–9. 60Stortingsforhandlinger (1873), 581–9. 61Stortingsforhandlinger (1873), 581–9. 62Stortingsforhandlinger (1873), 589, 625–6. 63Stortingsforhandlinger (1873), 622–3. 64Stortingsforhandlinger (1873), 616–7. 65Stortingsforhandlinger (1873), 557–9. 66Stortingsforhandlinger (1873), 625–6. 67Stortingsforhandlinger (1873), 631–2. 68Stortingsforhandlinger (1873), 597–600, 632–4. 69Stortingsforhandlinger (1873), 637–8. 71Stortingsforhandlinger (1873), 563–5. 70Stortingsforhandlinger (1873), 581–9. 72Innstilling S. III (1873) Innstilling fra den forsterkede bankkomité om utkast til Lov om Pengevesenet. 75Lagtingsforhandlinger (1873), 493–4. 73Innstilling S. III (1873) Innstilling fra den forsterkede bankkomité om utkast til Lov om Pengevesenet 74Lagtingsforhandlinger (1873), 492, 500–2. 77Lagtingsforhandlinger (1873), 507–9. 76Lagtingsforhandlinger (1873), 502–4. 78Lagtingsforhandlinger (1873), 513–5. 83Stortingsforhandlinger (1875), 95–6. 79Ot.prp. 14 (1875) Angående Tiltredelse for Norges vedkommende av den under 27. mai 1873 mellom Sverige og Danmark avsluttede myntkonvensjon (Legal bill on entry into the Scandinavian Currency Union). 80Stortingsforhandlinger (1875), 84–5, 87–8. 81Stortingsforhandlinger (1875), 96–7, 88–91. 82Stortingsforhandlinger (1875), 86–7. 85Innstilling fra Næringskomité no. 1 om den kongelige proposisjon angående tiltredelse for Norges vedkommende av den under 27. mai 1873 mellom Sverige og Danmark avsluttede myntkonvensjon (Committee recommendation on the legal bill on entry into the Scandinavian Currency Union). 84Stortingsforhandlinger (1875), 84–5, 87–8. 86Stortingsforhandlinger (1875), 75–6. 87Stortingsforhandlinger (1875), 94–5. 91Stortingsforhandlinger (1875), 86. 88Stortingsforhandlinger (1875), 86. 89Stortingsforhandlinger (1875), 86–7, 88–91. 90Stortingsforhandlinger (1875), 76. 92The bank was established in Trondhjem as a part of a political compromise in connection with the bank's foundation. One of motives behind the decision was to create distance between the bank and the government. From 1897 onwards the Norges Bank has been headquartered in the capital.