My analysis of Eichengreen and Temin’s argument falls into three parts. In the first part, I elaborate their explanation of the cause of the Great Depression and why interwar gold standard failed while its predecessor succeeded. In the second part, I highlight two aspects of the strengths of their explanation. And in the last part, the weaknesses of their studies will be examined
Eichengreen and Temin attribute the cause of the Great Depression to the mentality amongst central bankers and political leaders that the restoration of pre-WWI gold standard was essential for restoring the healthy international order and economic prosperity. They admit that the initial economic decline may begin from the Wall Street Crash of 1929 in the United Stat...
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...redibility of individual national commitments to gold and the disputed issues of German reparations and war debts increased the distrust between countries which made international cooperation unlikely. Without credibility and cooperation the gold standard was not sustainable. Eichengreen and Temin successfully demonstrate that the success of prewar gold standard was because of the international cooperation rather than the existence of a hegemonic stabilizer. And they also employed compelling evidence to show that gold standard could not be a source of stability in the interwar period. However, there are loose ends in their explanation. First, they didn’t explain the different domestic politics of breaking with gold standard. Second, they also overstated the influence of gold-standard mentality and its power to change economic history through a small group of elites.
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