THE REPUBLICAN PLATFORM hints at a return to the gold standard. What is one to make of that? It's true that a platform is not legally binding. After the campaign gets under way, it's what the candidates say that will count. But platforms reflect currents running in the parties, and views of the world. On those terms, they should not be entirely dismissed.
The platform declares: "The severing of the dollar's link with real commodities in the 1960s and 1970s, in order to pursue economic goals other than dollar stability, has unleashed hyper-inflationary forces at home and monetary disorder abroad." The real commodity foremost in the author's minds, they say, was gold. The next sentence declares that it is now urgently necessary to restore "a dependable monetary standard." Since the people who wrote that language -- Reps. Jack Kemp and David Stockman among them -- are rising figures in the party, gold seems to be on the way back, at least in the political commodity markets.
In reality, the gold standard was in effect for only a short period -- from the 1870s to the outbreak of World War I -- and even then was never rigorously enforced. Those four decades were, incidentally, a time of repeated panics and crashes. In this country there was inflation after the turn of the century because the price of gold fell. The idea that gold can promise stability is, on the historical record, incorrect.
Instead, it seems to work the other way around. A gold standard is too rigid to survive amidst rapid economic change. The attemprs to resurrect it after World War I proved costly and unsuccessful. Over the past decade, it wasn't American inflation that pushed the price of gold up over $600 an ounce. It was, above all else, the sudden increase in oil revenues and the enormous flows of cash to citizens of small and unstalbe countries, who wanted their wealth in a form that was portable in an emergency and not easily tracked by the tax authorities. Their grab for gold would have destroyed any god-based currency system in the 1970s.
But if the gold standard is a failure as practical policy, it continues to have importance as an expression of distrust for government itself. To those who embrace it, the charm of the gold standard is its automaticity. When a country begins to live above its means, its balance of payments goes into deficit and gold flows abroad. That shrinks the money supply, forcing business decline and unemployment. Inflation is avoided, although other economic evils are not.
The gold standard appeals to people who believe that calculated decisions by government can only make matters worse for the economy -- that it's better to leave everything to the blind workings of a mechanical system. The return to a gold standard is a fantasy, but it floats on a suspicion of public policy that is altogether real.