INTRODUCTION

Considering that the gold standard stands at the heart of Polanyi’s account of nineteenth-century liberal governance, there has been curiously little discussion of his conception of this institution. Beyond casual references, few scholars have enquired into Polanyi’s analysis of the gold standard. Instead, most of the attention has gravitated towards his analysis of the commodification of labour. It is thus the reform of the Poor Laws in 1834 and its impact on labour that became the focal point of much writings on this author, despite Polanyi claiming that it was the gold standard which had been the supreme vehicle of the Market society.

The gold standard, however, played a pivotal role in the argument of The Great Transformation. Polanyi develops the thesis that it was the policies implemented in the nineteenth century in the name of progress, and more specifically Market progress, which were responsible for the apparent breakdown of European civilization in the first half of the twentieth century (two world wars, the depression and the rise of fascism). By forcing people to become more and more competitive on the market, pro-market policies pushed people to make more and more sacrifices (e.g. cutting wages, working longer hours, being less attentive to the community) until these threatened the very fabric of society. In order to demonstrate this argument, Polanyi needed to link as directly as possible the tragic developments of the twentieth-century events to what he saw as the market policies of the nineteenth century. Here, the gold standard seemed well suited to bear this analytical burden as an institution that spanned the whole period covered in this book. It also appeared as a logical choice since the gold standard is often seen as the quintessential deflationary regime of governance. The term of deflation is usually associated with a regime that intensifies market pressures by limiting the amount of money in circulation. When there is less money, its value increases and market actors have to compete harder to get it. In the case of the gold standard, this would have been achieved by forcing banks to back their banknotes with reserves of gold, a rare metal that made it more difficult to create new money.