Is Bimetallism Practicable?

Can this great nation coin silver and gold on the same terms, at the ratio
of 16 to 1, and maintain a substantial parity?

This question, like all others in political economy, may he argued
theoretically or on the basis of actual experience. The monometallists say
that one metal or the other always has been and always will be the cheaper
at any ratio; that if both be freely coined, the dearer will be more
valuable as bullion than as money, and will therefore go out of use. They
say that, in spite of all devices to the contrary, we must have
monometallism any how, and always on the basis of the cheaper metal.

The bimetallist replies that such is, in truth, the natural tendency; but
when the dearer metal is thrown out of use as money it thereby becomes
cheaper, and as the cheaper metal must take its place, a vastly greater
demand for it is created, and so it becomes dearer; thus an alternating
action keeps the two near a parity, provided that the ratio corresponds
nearly with the relative amounts of the two metals in the world's stock.
They claim that the world has thus a far less fluctuating standard of
value than it ever can have with one metal alone.

The monometallist rejoins that this is "all theory." This brings both
parties to the test of experience, and by common consent the experience of
France in the seventy years from 1803 to 1873 is taken as the best
practical test. At first view, it would seem as if the matter could easily
be settled, as the time is so recent that there could be no great
obscuration of the history; but on inquiry a determination of the real
facts is found to be no such simple matter, and as the disturbance of
natural law by war and other causes was almost constant, both sides find
enough in the facts to make a basis for their respective contentions. Let
us then consider this history.

Napoleon Bonaparte became First Consul and practically ruler of France in
1799, and at once addressed himself, with his usual energy, to the task of
establishing a stable monetary system. He found that in 1785 Calonne had
established the ratio of 15-1/2 of silver to 1 of gold, and that it had
worked reasonably well. He accepted it, therefore, as justified by
experience, and his Finance Minister carried through the Council of State
an act for the free coinage of both metals at that ratio. For seventy
years this law stood practically unchanged, and it is speaking with great
moderation to say that in those seventy years there occurred more
disturbance of every kind unfavorable to the maintenance of a ratio than
in any other seventy years in monetary history. France was twice
conquered, her soil overrun, and her capital held by the enemy. She four
times changed her form of government. Once she was subjected to the
payment of enormous war expenditures, and again not only to the payment of
still greater expenditures but to a fine exceeding in amount the largest
sum of gold ever held in the United States. During a large part of this
time the world's production of silver was in excess of that of gold to an
extent very much greater than it has been in recent years, and then, after
a very brief interval of something like equal production, there was a
sudden and tremendous increase in the production of gold until it exceeded
that of silver more than 3 to 1 in value. During these years, also,
several of the neighboring nations, including seventy million people,
demonetized gold and threw the whole burden of sustaining its equality on
the continent of Europe upon France, and during another portion of the
time there were monetary disturbances so far-reaching that they shook the
foundations of credit in every civilized country in the world. And yet,
through all these convulsions, France for seventy years maintained a
substantial parity, by welding the two metals together for monetary
purposes.

The contrasted figures are simply amazing. In the decade of 1811-20 there
were produced 47 ounces of silver to 1 of gold, and yet the market ratio
outside of France never stood higher than 16.25 to 1. In the decade of
1821-30 the production was 32 ounces to 1 and the average ratio 15-80/100
to 1. In 1831-40 the production was 29 ounces to 1 and the average ratio
15-75/100 to 1. In 1841-50 the production was 14-9/10 ounces to 1 and the
average ratio 15-83/100 to 1. The demonstration is as complete as that of
any proposition in Euclid. In spite of the enormous overproduction of
silver, the maintenance of the mint ratio in France held the two so nearly
together that in three years out of four the difference in other countries
only amounted to the cost of transporting the silver to the French Mint
and of coinage.

[Illustration: The above diagram shows the relative annual production of
gold and silver during the bimetallic period in France. The ratio given is
the commercial ratio, that of the mint being 15.50 to 1. Note the
marvellous steadiness of the commercial ratio and contrast it with the
enormous fluctuation in the relative annual production of the two metals
during this period.]

To this should also be added the fact that French coins would have a
slightly less value in other countries than the coins of those countries,
but it is not easy to estimate the sentimental difference this would make.
From the enactment of the law of 1803 to the limitation of the coinage in
1875 France coined 5,100,000,000 francs of silver and 7,600,000,000 francs
of gold, or $1,020,000,000 of silver and $1,520,000,000 of gold, very
nearly, or 40 per cent. of the total amount of silver and 33 per cent. of
the total amount of gold produced in the world during those years.

It is further to be noted that, whether gold or silver was the dearer
metal at the ratio of 15-1/2 to 1 at any given time, France at that time
had more of gold and silver per capita than any country in the world, and
that, despite the enormous inflow of the cheaper metal, she held the
dearer and absorbed what now seems an astonishing amount of the cheaper.
Thus, in 1822 the imports of silver into France exceeded the exports by
125,000,000 francs, and in 1831 the amount had risen to 181,000,000
francs, and then it fell off and did not reach the latter sum again until
1848.

On the other hand, in the eight years 1853-60 there was a net import into
France of gold to the value of 3,082,000,000 francs, or $616,000,000; and
in the same years a net export of silver to the value of 1,465,000,000
francs, or $293,000,000. Thus in the short space of eight years France had
made monetary, or, rather, metallic transfers amounting to $909,000,000,
and that without a quiver of her financial system, and scarcely a
perceptible trace of the effects of that financial storm which swept
America, England, and Central Europe with such destructive fury in 1857-8.
It further appears that, despite the enormous import of gold, the
subsequent export was comparatively small, and thus, such was the
wonderful absorbing power of the nation under the free coinage law of
1803, that France came out of each successive financial storm with an
increased stock of the precious metals, and more than once has the Bank of
England been compelled to apply to France for the specie to arrest a
destructive panic growing out of an insufficient amount of coined money
upon a safe basis and an overissue of supplemental or faith money.

By the year 1860 it was supposed that the danger of the world being
"flooded with gold" was substantially over; and during that decade France
not only sustained the double standard single-handed and alone, but did it
against the tremendous pressure due to the demonetization of gold in
Austria, Germany, and other countries. It is not possible to say with
certainty how far gold would have cheapened, or, to speak in the current
language, how high the ratio of silver would have become, had France
during the decade abandoned her bimetallic system; but it is certain that
the disproportion would have been enormous, undoubtedly very much greater
than the present disproportion in the market between silver and gold,
resulting from the demonetization of silver. M. Chevalier gave it as his
opinion that the ratio would sink at least as low as 8 to 1, that is, that
gold would be worth but half what it was rated at in relation to silver in
the American coinage, and this he believed would certainly happen, despite
the power and willingness of France to maintain the old ratio. He did not
venture to say how low the ratio would sink if France abandoned her
policy, but he evidently looked forward to a time when gold would be
practically too cheap for money.

Years afterward, in writing as a philosopher rather than an advocate, he
took more rational ground, and compared the action of France to that of a
parachute which retarded the fall of gold. The maximum effect of the
enormous gold inflation of 1848-65 was to create a disturbance of less
than five per cent. in value of the metals in countries outside of France.
During all the years that the law of 1803 was in practical force the
variations as shown by a diagram seemed but trifling, despite the enormous
over-production of silver for many years and of gold for many other years,
and yet, immediately after 1873, although ten years were yet to elapse
before the world was to produce silver in excess of gold, almost instantly
the diagram shows the downward trend of silver far, far in excess of any
previous experience.

How was it through all these years with the industrial and financial
condition of France? It would indeed be little to the purpose to prove
that she had maintained the metals at a parity by free coinage, if, in the
meantime, her people had suffered loss. Monometallists tell us that not
only is bimetallism impossible, but that the attempt to maintain it is in
every way hurtful, in fact, disastrous. They point us to the fact that
England is the clearing house of the world; that those whose currency is
not assimilated to that of England are subjected to enormous losses in the
exchange, resulting from fluctuations; that by attempting bimetallism a
nation puts itself in the second or third rank, and that the results are
in every way bad. Well, all those conditions applied to France. She, like
the United States, may be considered as regarding England in the light of
the world's clearing house, and her currency may be said to have
fluctuated, as they declare ours would, with bimetallism. What, then, have
been the general results to France? What effect has it had upon her
commercial, social, and industrial development? On this point let us
return thanks that the testimony is universal. No other nation in the
world has made such stupendous progress in the general improvement of her
people as France has made since 1803. No civilized country probably had
sunk to such depths of popular misery as had France at the beginning of
her revolution, and we can hardly believe that the subsequent fourteen
years of war and internal turmoil had greatly improved her condition when
the policy of 1803 was adopted.

[Illustration: The above diagram shows the course of the commercial ratio
of the values of gold and silver during the bimetallic period of France.
The upper dotted line (A) shows the extreme high limit of ratio, and the
lower dotted line (C) the extreme low limit reached from the years 1803 to
1873. The central line (B) is the mint ratio of 15.50 to 1 fixed by the
French Government in 1803. The variable line (D) is the commercial ratio
of the values of the two metals during that period. Note the slight
variation in this ratio from 1803 to 1873, during which time the
bimetallic action of the French law was operative, and then contrast it
with the sudden and swift descent of the ratio after the demonetization of
silver by the various nations in 1873 and 1875.]

Bimetallism and a rigid adherence to a specie basis were two of the means
adopted by Bonaparte to restore France, and during all his wars, with
their terrible expenses, he never once departed from the specie standard.
After the Act of 1803 France was still to have twelve years of war and
severe trial. She has subsequently had two revolutions and a foreign war,
singularly destructive in its course, and ending in her subjugation, the
occupation of her territory, and the loss of two of her wealthiest
provinces.

Seventy years of bimetallism had left France saturated with gold and
silver when her Emperor rashly provoked the war with Germany; her expenses
were enormously increased, and she had to pay, in addition, a fine of
nearly $1,000,000,000. She paid it with a rapidity that amazed the world,
but in her hour of weakness she consented to gold monometallism. She had
become a creditor nation, and could endure the new system better than any
other, except Great Britain; nevertheless, she has suffered. Her exports
had steadily increased during all her years of bimetallism, and never so
fast as during the very years in which she was exporting silver so heavily
because of the influence of cheap gold. The very year of demonetization
her exports began to decline, and but once since have they reached the old
figures.

The statistics are fearfully suggestive. In 1840 her exports were valued
at $202,231,000, and her imports at $210,413,000; in 1873 her exports were
$964,465,000, and her imports $915,285,000, and in only six of the years
after she began to be "flooded with cheap gold" did her imports exceed her
exports. In 1874 her exports began to decline, and ran rapidly down to
$822,360,000 in 1878; and 1890 is the only year since demonetization in
which they reached the figures of 1873, being $968,030,000. On the other
hand, her imports have steadily outrun her exports until the excess has
been as high as $300,000,000 in one year (1880), and has only once since
(1885) been as low as $100,000,000. Here, then, are the points
demonstrated by France's official figures:

During seventy years of bimetallism she gained steadily and rapidly in
wealth, her exports increasing much faster than her population.

During the eight years (1853-60) in which she was "ruined by cheap gold,"
importing 3,082,000,000 francs of it and exporting 1,465,000,000 francs of
silver, a bullion operation to the amount of $909,000,000, she increased
her exports most rapidly and with no corresponding increase in imports.

During the twenty years following demonetization her exports have been
stationary or declining, being $99,000,000 less in 1893 than in 1873,
while her imports have increased.

Let us turn for a moment and trace the effects of monometallism in England
as compared with bimetallism in France during the same period.

England had in 1816, when she adopted gold monometallism, about
$10,000,000,000 in property and had in 1873 about $40,000,000,000. In 1816
she had about 18,000,000 people and in 1873 about 32,000,000; her per
capita wealth, therefore, in 1816 was $555, and in 1873 $1,250, or 2-1/5
times as much. In 1803 the property of France was valued at
$8,000,000,000, and in 1873 at about $40,000,000,000; in the former year
she had 29,000,000 people, and in the latter a little over 36,000,000. Her
per capita wealth, therefore, in 1803 was $276, and $1,081 in 1873, or
very nearly four times as much.

Thus, despite the immeasurable advantages which England enjoyed,
political, social, and industrial, her great colonial possessions from
which she drew enormous wealth, and her exemption from destructive war;
despite also the distressing condition of France and her recent enormous
losses, we find that in seventy years of bimetallism the working Frenchman
had gained wealth almost twice as fast as the working Englishman had in
the same number of years of monometallism.

France became a creditor nation, and yielded to the general pressure for a
single gold standard; she has lost heavily, as shown in her table of
exports, but she still retains a large part of the momentum acquired
during seventy years of bimetallism. Her wealth is still rated at
something over $40,000,000,000; her people have accumulated stocks of the
precious metals far in excess of those of any other country; and their
business is so solidly founded that the storm which recently shook the
foundations of credit throughout the British Empire scarcely produced a
quiver in France. They have wisely avoided the excessive issues of faith
money (or check money) which are the ever-present danger of England,
America, and other monometallic countries; and as a result, they have
almost entirely escaped those fearful convulsions have that threatened the
political stability of great nations. In fact, it is no exaggeration to
say that France has only felt the convulsions of recent years by their
reflex action on her from other countries; and twice within very recent
years has the Bank of England been compelled to go to France for the coin
to stay the devastating work of panics resulting from over-expansion of
faith money on an insufficient metallic basis.

France has an area less than that of Texas by some 60,000 square miles,
yet its aggregate wealth is two-thirds that of the United States; and on
the basis of assessed value her agricultural wealth is very much greater
than ours. Mulhall, the great British statistician, says of France that
she is "the best cultivated country in Europe." Her 6,000,000 peasant
proprietors are the owners of nearly all her cultivatable soil, which is
worth, on an average, $160 per acre. She has over 400,000 miles of the
finest common roads in the world, which have cost her, at the ordinary
rate of labor, over $5,000,000,000. Their benefit goes chiefly to
agriculture, binding the farmers of different provinces and farmers and
city dwellers together. She has over 10,000 miles of canals and canalized
rivers; she has 25,000 miles of railways, all in the highest state of
efficiency. She has, during her bimetallic period, become the second
colonial power of the world, and has acquired foreign territory at such a
rate as to excite the jealousy of England. She has become the second naval
power on the globe, and the second exporting nation, her exports averaging
some $900,000,000 per year, an amount larger than the exports from this
country, which has a population nearly double that of France, nearly all
of it being manufactures; and had the same rate of growth continued as was
maintained before France became monometallic, it is fair to presume that
her exports at this time would have equalled those of Great Britain. Best
of all, the great increase of wealth is in the hands of those who created
it. It is the universal testimony of all observers that the condition of
the French people and the general aspect of France has steadily improved
throughout this century. It is a country in which poor-houses are unknown;
in her cities a beggar is a curiosity. In their country's emergency the
common people came forward and out of their savings paid $1,000,000,000
accumulated during the bimetallic period. Despite the loss of $240,000,000
in the Panama Canal and of $1,000,000,000 in the indemnity to Germany, as
well as two of her richest provinces, France has accumulated hundreds of
millions of dollars in the securities of other countries, and has only
recently been able to subscribe twenty-five times over the Russian loan,
and is negotiating a loan to China, the money for which is to be supplied
by her working people.

Be it noted also that the debt of France is held by the people of France,
largely by the industrial class, and especially by the agricultural class,
and the interest thereon paid, instead of being a foreign drain, is a
perpetual renewal of the current circulation.

One more brief contrast between France and England. No reader of current
literature need be told of the appalling prevalence of poverty in Great
Britain. As France is a country without poor-houses, so it may be said
that England is a land of poor rates and poor unions. The latest official
announcement is that the agricultural interest is declining more rapidly
than ever before; and in regions where only fifteen years ago the land
rented readily at several pounds per acre, statesmen and economists are
appalled at the sight of that which so alarmed our New England people a
few years ago: the phenomenon of abandoned farms. We are told that there
is a revival of industry because British capitalists have withdrawn their
money from other countries and will put it in anything rather than have it
entirely idle; but the condition of agriculture steadily grows worse.

And have we anything to boast of in our own happy land in comparison with
France? Our natural resources so far exceed those of any old country that
a comparison would be ridiculous; and the monometallists tell us, when
they are trying to prove that gold is not enhanced in value, that, by
reason of inventions, a day's labor will produce at least twice as much as
in 1870, and in many lines a great deal more than twice as much. Why,
then, does not the laborer receive twice as much as he did in 1870? As
wages are labor's dividend of its own product, and as capital had its
dividend then as now, if a day's labor does not bring the laborer twice
what it did, he is wronged; and, considering our resources, if we are not
five times as well off as the French people, the only reason can be that
we have slighted our opportunities, and blundered most fearfully in our
management.

The monometallists profess to be great sticklers for experience and
demonstrated fact; to have a horror of "theory." We present them the
example of France as an unanswerable proof that one great nation can
maintain bimetallism, and that by maintaining it she escaped the worst
evils that have affected the monometallic countries, and assured for
herself an extraordinary progress and prosperity. We present them, in
contrast, the example of England, and point them especially to the great
difference in the progress of the common people of the two countries. We
ask them, with this experience, to consider the present condition of this
country, and the evils that have affected it since 1873, and seriously to
consider the question as to whether something is not radically wrong;
whether some malign influence has not gone between us and the reward of
our work, and robbed us of that to which we are honestly entitled.



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