author of Unsettled Account: The Evolution of Banking in the Industrialized World since 1800.He applied the “Page 99 Test” to his new book, Wrong: Nine Economic Policy Disasters and What We Can Learn from Them, and reported the following:
Wrong tells the story of nine significant economic policy blunders from the last two centuries, including why each was adopted, how it was implemented, and its short- and long-term consequences. A main conclusion of Wrong is that policy goes horribly wrong when it is based on ideology rather than cold, hard economic analysis. For example, Wrong looks at how America's unfounded fear of a centralized monetary authority caused it to reject two central banks, condemning the nation to wave after wave of financial panics during the nineteenth century. It also describes how Britain's blind commitment to free markets, rather than to assisting the starving in Ireland, led to one of the nineteenth century's worst humanitarian tragedies--the Irish famine.Learn more about Wrong at the Oxford University Press website.
Page 99 comes at the end of the chapter that analyzes Britain’s return to the gold standard in 1925. Before 1914, Britain had been on the gold standard for much of the preceding two hundred years, and had been on it consistently for almost one hundred. World War I and the accompanying risk of gold-carrying ships being sunk by the enemy made it impossible for gold to be shipped internationally—effectively ending the gold standard.
Only a few countries reestablished the gold standard after the end of World War I, but that trickle became a flood after Britain returned in 1925. To the British, the gold standard conjured up an era during which they were the world’s dominant political, military, and economic power. Yet the idea of the gold standard was more appealing than the reality that emerged in the interwar period: exchange rates were misaligned, gold holdings were inadequate and poorly distributed, and the equally unappealing alternatives of leaving the gold standard or maintaining it at the cost of domestic economic prosperity put central bankers in an impossible position.
Britain was not the first country to return to the gold standard after World War I. However, because it had played such an important role in the pre-war gold standard, its return provided the signal for many other countries to reestablish the gold standard as well. The widespread return to gold played an important role in propagating and intensifying the Great Depression, as well as preventing policy makers from undertaking steps to counteract the downturn. Had Britain not been ideologically committed to gold, the interwar period might have been quite different.
The Page 99 Test: Unsettled Account: The Evolution of Banking in the Industrialized World since 1800.
--Marshal Zeringue
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