Woodrow Wilson’s Administrative State Vs. Gold

Posted: Jul 06, 2021 9:27 AM
Woodrow Wilson’s Administrative State Vs. Gold

Source: AP Photo/Seth Wenig

Statists like Woodrow Wilson and the very influential economist Irving Fisher desired, lobbied, and worked to establish an Administrative State, which would upend the gold standard.

Similar to Woodrow Wilson, economist Irving Fisher believed that technocrats in an Administrative State could guide and control the economy significantly better than any free market forces, which they saw as unwieldy and chaotic. Believing that stable prices were key, like the economist John Maynard Keynes, Irving stated, disparaging the gold standard, that, “We now have a gold dollar of constant weight and varying purchasing power; we need a dollar of constant purchasing power and, therefore, of varying weight. In this way,” declared Irving, “we can control the price level.”[1] Government controlling prices is economic tyranny and has never worked in improving prices and markets.

Irving’s statist dream is a reality today, and we have suffered immensely as a result of 20th century government interference in economic matters like interest rates, currency, taxes, spending, and regulations. Irving was wrong, and perhaps even delusional. As the Figure below illustrates, prices were, in fact, quite stable at the aggregate level. James Grant reports in his book, The Forgotten Depression, that, “A ounce [of gold] would buy in 1930 approximately the same basket of commodities as it had bought in 1650.”[2]

U.S. Price Levels from 1665 to 2001[3].

[1] Irving Fisher, 1920, Stabilizing the Dollar:  A Plan to Stabilize the General Price Level without Fixing Individual Prices, (New York, NY: The Macmillan Company), p. xxvii.  Also referenced in James Grant, 2014, The Forgotten Depression, (New York, NY: Simon & Schuster), p. 28.

[2] James Grant, 2014, The Forgotten Depression, (New York, NY: Simon & Schuster), p. 29.

[3] Adapted from John J. McCusker, 2001, How Much is that in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States,” (Worcester, MA: American Antiquarian Society), pp. 49-60, Table A-1, A Historical Price Index.