Bimetallism

Political debate — 1890s U.S.

In the United States, toward the end of the nineteenth century, bimetallism became a center of political conflict. Newly discovered silver mines in the American West caused an effective decrease in the value of money. In 1873 the government passed the Fourth Coinage Act, at the same time as these resources were beginning to be exploited. This was later referred to by Silverites as “The Crime of ’73,� as it was judged to have inhibited inflation. Instead deflation resulted, causing problems for farmers with large mortgages but who could sell their goods for only a fraction of their post-Civil War price. In addition, improvements in transport meant it was cheaper for farmers to ship their grain to Europe, and they over-expanded production until there was a glut on the market. The Panic of 1893 was a severe nationwide depression that brought the money issue to the fore. The "silverites" argued that using silver would inflate the money supply and mean more cash for everyone, which they equated with prosperity. The gold advocates said silver would permanently depress the economy, but that sound money produced by a gold standard would restore prosperity. The gold advocates won decisively in 1896 and 1900.

Bimetallism and "Free Silver" were demanded by William Jennings Bryan who took over leadership of the Democratic Party in 1896, as well as the Populist and Silver Republican Parties. The Republican Party nominated William McKinley on a platform supporting the gold standard which was favored by financial interests in the East Coast. A faction of Republicans from silver mining regions in the West known as the Silver Republicans endorsed Bryan.

William Jennings Bryan, the eloquent champion of the cause, gave the famous “Cross of Gold� speech at the National Democratic Convention on July 9, 1896 asserting that “The gold standard has slain tens of thousands.� He referred to “a struggle between ‘the idle holders of idle capital’ and ‘the struggling masses, who produce the wealth and pay the taxes of the country;’ and, my friends, the question we are to decide is: Upon which side will the Democratic party fight?� At the peroration, he said “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.� However, his presidential campaign was ultimately unsuccessful due to economic upturn caused in part by the failure of Russian harvests and the resultant increase in commodity prices. The 1896 election saw the election of William McKinley who implemented the gold standard and ran on it in his 1900 reelection. The standard lasted until the Great Depression. It was abandoned in 1934 in FDR’s New Deal economic recovery program.

As Friedman and Schwarz (1963) have shown, the money supply was steadily expanding in the 1890s because bank checks were becoming common.

Wizard of Oz

Since the 1960s historians and economists have explored the bimetallism symbolism in The Wizard of Oz. See Political interpretations of The Wonderful Wizard of Oz for more details. The original 1900 book centers on a yellow brick road (gold), traversed by magical silver slippers (the 1939 movie changed them to red), as Dorothy leads a political coalition of farmers (Scarecrow), workers (Tin Woodman) and politicians (Cowardly Lion) to petition the President (Wizard) in the capital city of Oz (the abbreviation for ounce, a common unit of measure for precious metal). The real enemy of the little people (Munchkins) is the giant corporation or Trust (Wicked Witch of the West), whom Dorothy dissolves, just as the progressives of the era tried to dissolve the corporate trusts.

Monometallism

The practical difficulties which in times past had confronted the maintenance of a joint standard, a concurrent circulation of the two metals, led one nation after another to abandon the effort, and to adopt a system of monometallism, with gold as its basic unit of trade.

The historical development of coinage in modern nations has been from silver monometallism through a more or less unsatisfactory experience with bimetallism, to the single gold standard. Still, in the twentieth century, both metals lost their former importance within monetary systems. Now, monometallism in the form of the gold standard has been abandoned by all nations.

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