The silver standard and Asia’s integration into the world economy, 1850-1914

In the late-nineteenth century, silver depreciated rapidly against gold. Countries throughout the world stabilised their silver currencies against gold, often by adopting the gold standard. Governments of most Asian countries were slow to react. They had to weigh several facts. Silver currencies were widely used in their economies for their intrinsic rather than nominal values. The control of governments over the monetary economy was less effective compared to Europe and North America. Governments did not immediately have the gold reserves required to support the introduction of a gold standard. Still, the increasing integration of Asian economies into the world economy required stabilisation of silver currencies in order to further trade and investment. In the end, most governments in Asian countries did not adopt a gold standard, but rather a gold exchange standard which used a fund stocked with gold-based foreign currencies to guarantee the value of the currencies of their countries in terms of gold. The article describes the stabilisation of silver currencies in eight Asian countries and explains why governments of most countries were relatively slow to take action. It also assesses in brief the question whether stabilisation indeed impacted on the development of foreign trade and furthered the inflow of foreign investment, as theoretical insights would suggest.