International Monetary Conference of 1878

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The International Monetary Conference opened in Paris on 10 August 1878. The conference was called at the request of the United States, which wanted to push for an international bimetallic monetary system. It utterly failed to live up to expectations. On 23 July 1878 the New York Times had printed an editorial with the heading, “Promoting the Federation of the World,” suggesting that the conference would lead to the establishment of an international gold metric coinage unit and the new coinage unit would inculcate “true notions of the nature and purposes of money.” The idea of an international coinage unit lingered in the background of the conference, partly as a pretext for some countries to attend the conference, but it never surfaced as a goal to be reached.

The seeds for the conference were sown with the passage of the Bland-Allison Act in the United States. This act began in Congress as a free silver act, but passed Congress, over a presidential veto, as an act requiring the Treasury to coin silver up to a fixed amount and asking the government to call an international conference to negotiate a world bimetallic standard. A world bimetallic standard would fix worldwide an official ratio of gold to silver. The United States hoped that if all governments set the same official ratio of gold to silver, the official world ratio would dominate the free market ratio, arresting the plunge of silver values in the free market.

The United States, possessing vast silver deposits, wanted to retain silver as a monetary metal, but the wealthier nations were rapidly shifting to a gold standard. England practiced “imperial bimetallism,” maintaining herself on a gold standard, and India on a silver standard. Germany was selling off silver reserves after the adoption of the gold standard in 1871 and refused to attend the conference. The Latin Monetary Union countries, the largest being France, had ceased the coinage of silver because of its plunging value and were not favorably disposed toward resuscitating silver.

The representatives of the United States, isolated from the outset of the conference, found no crack in the diplomatic armor of the forces arrayed against a revival of bimetallism. A Dutch delegate suggested that the United States might look for monetary allies among the less-developed world (Latin America, Asia, etc.), hinting that the United States might belong with the less-developed countries itself and prompting a United States delegate to ask for a clarification. The European conference delegates offered to let the United States save face by turning the Conference into a series of sessions on coinage and bullion practices around the world, but the United States remained unswerving in its commitment to an international bimetallic standard.

On 28 August 1878 the conference delegates recessed for 45 minutes to let the European delegates reach an agreement on an answer to the American proposal. The European delegates flatly turned down the American proposal, saying that each nation, governed by its special situation, should set its own monetary standard.

The Conference of 1878 dropped the curtain on bimetallism, and by 1880 the world was squarely on a gold standard. The United States, the staunchest supporter of silver among the monetary powers, stood against the adoption of a bimetallic standard unless it was part of an international agreement.

The idea of an international monetary unit surfaced in the late nineteenth century and it is an idea that may yet be realized. Adoption of an international monetary unit would encourage international trade by reducing the risk of changing exchange rates between currencies and facilitating cost comparisons between goods produced in different countries. Europe has already launched a European currency, the euro, to replace national currencies in Europe, and the growth of international trade may push the world toward the adoption of an international monetary unit. Presently, the United States dollar fulfills some of the roles of an international monetary unit.