Preface

The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they were delivered and, as is explained in the first lecture, limitations of time made it necessary to choose between discussing the concrete problems of the present policy of Monetary Nationalism and concentrating on the broader theoretical issues on which the decision between an international standard and independent national currencies must ultimately be based. The first course would have involved a discussion of such technical questions as the operations of Exchange Equalization Accounts, Forward Exchanges, the choice and adjustment of parities, cooperation between central banks, etc., etc. The reader will find little on these subjects in the following pages. It appeared to me more important to use the time available to discuss the general ideas which are mainly responsible for the rise of Monetary Nationalism and to which it is mainly due that policies and practices which not long ago would have been frowned upon by all responsible financial experts, are now generally employed throughout the world. The immediate influence of the theoretical speculation is probably weak, but that it has had a profound influence in shaping those views which to-day dominate monetary policy is not open to serious question. It seemed to me better therefore to concentrate on these wider issues.

This decision has permitted me a certain freedom in the discussion of alternative policies. In discussing the merits of various systems I have not felt bound to confine myself to those which may to-day be considered practical politics. I have no doubt that to those who take the present trend of intellectual development for granted much of the discussion in the following pages will appear highly academic. Yet fundamentally the alternative policies here considered are no more revolutionary or impracticable than the deviations from traditional practice which have been widely discussed and which have even been attempted in recent years—except that at the moment not so many people believe in them. But while the politician—and the economist when he is advising on concrete measures—must take the state of opinion for granted in deciding what changes can be contemplated here and now, these limitations are not necessary when we are asking what is best for the human race in general. I am profoundly convinced that it is academic discussion of this sort which in the long run forms public opinion and which in consequence decides what will be practical politics some time hence. I regard it therefore not only as the privilege but as the duty of the academic economist to take all alternatives into consideration, however remote their realisation may appear at the moment.

And indeed I must confess that it seems to me in many respects the future development of professional and public opinion on these matters is much more important than any concrete measure which may be taken in the near future. Whatever the permanent arrangements in monetary policy, the spirit in which the existing institutions are administered is at least as important as these institutions themselves. And just as, long before the breakdown of the international gold standard in 1931, monetary policy all over the world was guided by the ideas of Monetary Nationalism which eventually brought its breakdown, so at the present time there is grave danger that a restoration of the external apparatus of the gold standard may not mean a return to a really international currency. Indeed I must admit that—although I am a convinced believer in the international gold standard—I regard the prospects of its restoration in the near future not without some concern. Nothing would be more fatal from a long run point of view than if the world attempted a formal return to the gold standard before people had become willing to work it, and if, as would be quite probable under these circumstances, this were soon followed by a renewed collapse. And although this would probably be denied by the advocates of Monetary Nationalism, it seems to me as if we had reached a stage where their views have got such a hold on those in responsible positions, where so much of the traditional rules of policy have either been forgotten or been displaced by others which are, unconsciously perhaps, part of the new philosophy, that much must be done in the realm of ideas before we can hope to achieve the basis of a stable international system. These lectures were intended as a small contribution to this preparatory work which must precede a successful reconstruction of such a system.

It was my good fortune to be asked to deliver these lectures at the Institut Universitaire de Hautes Etudes Internationales at Geneva. I wish here to express my profound gratitude for the opportunity thus afforded and for the sympathetic and stimulating discussion which followed the lectures. My thanks are particularly due to the directors of the Institute, Professors Rappard and Mantoux, not only for arranging the lectures but also for undertaking their publication in the present series.

I am also indebted to a number of my friends and colleagues at the London School of Economics, particularly to Dr. F. Benham, Mr. F. Paish, Professor Robbins, and Mr. G. H. Secord, who have read the manuscript and offered much valuable advice as regards the subject matter and the form of exposition of these lectures. This would certainly have been a much bigger and much better book if I had seen my way to adopt and incorporate all their suggestions. But at the moment I do not feel prepared to undertake the larger investigation which my friends rightly think the subject deserves. I alone must therefore bear the blame for the sketchy treatment of some important points and for any shortcomings which offend the reader.

I hope however it will be born in mind that these lectures were written to be read aloud and that this forbade any too extensive discussion of the more intricate theoretical points involved. Only at a few points, I have added a further explanatory paragraph or restored sections which would not fit into the time available for the lecture. That this will not suffice to provide satisfactory answers to the many questions I have raised I have no doubt.

F.A. von Hayek.

London School of Economics and Political Science.

May 1937.