APPENDIX 1
Fortunately for the economic historian, the nineteenth century was characterised by a protracted process of currency convergence. After the pound returned to its pre- 1797 Newtonian gold parity in the 1820s, other major currencies one by one established more or less stable exchange rates with it. It should be stressed that the gold standard proper was a late-nineteenth-century affair. Until the 1870s, France remained on a bimetallic (gold and silver) standard, along with the other members of the Latin Monetary Union (Belgium, Switzerland and Italy). Russia, Greece, Spain and Rumania were also bimetallist, as were most American states including the US. Most German states were on pure silver standards, as were the Scandinavian counties, Holland and most of Asia. Only Britain, Portugal, Canada, Australia and Chile were strictly speaking on the gold standard in 1868. However, despite these differences, European exchange rates were relatively stable. The French, Belgian and Swiss francs were more or less consistently equivalent to one-twenty-fifth of a pound (that is, £1 = c. 25 francs: in fact, the franc-sterling exchange rate fluctuated between around 25.16 and 25.40 francs). The Prussian thaler was equally stable at around 6.8 thalers to the pound. The Austrian, Italian, Russian, Greek and Spanish currencies were not so stable, however, and were subject to periods of inconvertibility and depreciation. Table a gives some approximate sterling exhange rates for major European currencies at mid-century, though these should be used with some caution.
Table a: Sterling exchange rates of major currencies (per pound), mid-nineteenth century.
Source: Rothschild correspondence.
The process of German unification was decisive in the shift from bi-metallism to the gold standard. The German decision to establish a gold-based mark rather than extending the silver thaler to the rest of the German Reich had a knock-on effect in France, which was reluctant for political reasons to smooth the German transition to gold by continuing to accept silver. Even so, until the very end of the century, a number of major currencies were not consistently on a metallic standard and were subject to periods of depreciation against sterling (this applies to the rouble and the dollar). It was not until the last two decades before the First World War that most of the world’s economies were members of the informally constituted system of fixed exchange rates known as the gold standard; only China, Persia and a few Latin American economies remained on silver. Table b gives the pre-1914 parities once most currencies had joined (strictly speaking, the currencies of Italy and Austria were not legally convertible into gold, but their exchange rates were relatively stable nonetheless).
Table b: Sterline exchange rates of major currencies (per pound), 1913.
Source: Hardach, First World War, p. 293.