In 1926 – the year of the General Strike and the year after the reintroduction of the gold standard in Britain – R.G. Collingwood published an article called ‘Economics as a Philosophical Science’.
It’s an intriguing piece, and one I’d like to write more about sometime. At the end, there is a strange argument:
A sound currency, by creating wealth, would certainly create opportunities for the misuse of wealth. But anyone who advocated an unsound currency on the plea that a sound currency would be a dangerous weapon in the hands of government might be asked what he thought of allowing governments to handle other dangerous weapons, such as legislative power or the control of armies.
Who does Collingwood think he’s arguing against? I know of no authors from this period who argued that a sound currency is a dangerous weapon in the hands of government.
There were many who argued the opposite: an unsound currency is dangerous in the hands of government. It allows the government to buy votes by printing cash and handing it out, heedless of the inflation thus caused, which hopefully won’t manifest until after the election.
Earlier on in the article, Collingwood argues that ‘the only sound currency is one which is “manipulated” so as to maintain a constant ratio with the amount of goods on the market’. Perhaps, then, by ‘anyone who advocated an unsound currency’ he meant to refer to people who argued that the government should be stripped of all power to adjust the gold price of its currency. In the same passage he imagines a situation in which there are ‘large discoveries of gold’, in which case it would of course be silly for the government to maintain its gold peg at the same rate.
Was he thinking of anyone in particular? Was he making a veiled attack on Churchill’s decision to peg the pound at $4.80? How does his argument apply against that decision? Historians of economics, please help.