DIPLOMACY AND GOLD: AMERICAN ATTITUDES TOWARD THE ROLE OF GOVERNMENT IN WORLD RECOVERY FROM VERSAILLES TO THE FIRST NEW DEAL

In 1919 no one disputed that the restoration of the gold standard was essential to post-war reconstruction. Twelve years later, both the gold standard and the international system built around it had collapsed, changing conceptions of the interaction of governments and economies.; The gold standard was a lynchpin of "New Era" policy. It was intimately linked with the Versailles treaty by the machinery of war-debts and reparations. These were the great weaknesses of postwar international finance. The Americans had hoped that the restoration of financial stability would create political stability. It proved impossible, however, to graft a cooperative financial system onto a world dominated by intense nationalism.; The world financial crisis made this clear. Republican administrations sidestepped domestic opposition to continued involvement with Europe by creating an informal diplomacy that preserved the illusion of non-involvement. But in 1931, fear of domestic political repercussions constrained Hoover from supporting German and British finances. The postwar reconstruction had failed.; Problems with the international economy had engendered a reexamination of the gold standard and the neo-classical liberalism it was based on. Even before the 1931 crisis and international critique of gold had appeared. When panic and crisis were followed by depression, this critique gained strength. As pre-keynesian economics focused on monetary phenomena as the causes of depression, the standard appeared the chief culprit. Recovery seemed to lie in rejecting market institutions for government economic management. In the U.S., opposition to the gold standard by managed economy advocates was buttressed by a powerful group of agrarian legislators, who drew inspiration from their involvement in the populist movement of the 1890s. The populists had combined nationalism with support for managed currency, the antithesis of 1920s Republican policy.; Franklin Roosevelt was attracted to the ideas of the economic managers. He needed the support of the populist bloc in Congress. His administration moved rapidly from support of cooperative internationalist recovery efforts based, as in 1919, on the nationalist economic management. "Torpedoing" the London Economic Conference demolished the old internationalism. Governments new economic role required a new internationalism, and the next decade would be spent assembling it.