In a volume published a few days ago "Exchange Depreciation" Harvard University Press, Seymour E. Harris '20, Professor of Economics, studies the epidemic of exchange depreciation that since 1931 has directly affected almost the entire world, and attempts to answer the question whether it has done the world more good than harm. Part I is devoted to a discussion of various theoretical issues raised by current experiences with exchange depreciation. The most important question raised is whether depreciation tends to raise prices in the markets of countries off gold or whether it tends more to depress prices in world markets. The weight of evidence is that the national prices tend to rise; as depreciation becomes the rule and not the exception, the pressure of world prices subsides; and even if present, becomes of little practical significance.
Part II offers overwhelming evidence that economic conditions in paper countries have steadily improved while they have gone from bad to worse in gold countries. Since the crucial difference in the condition of the prosperous countries on the one hand, and the depressed countries on the other, lies in depreciation of currencies of the former, the obvious conclusion is that the most important explanation of the varying fortunes of the two groups of countries must be in varying currency conditions. It is the task of those who deny this to explain the economic developments and contrasts of the years 1931-36 without an appeal to these conditions, l. e., currency depreciation.
Whatever the index need--prices, employment, output, or trade--the conditions of paper countries improve in a sensational manner relatively to those in gold countries. Naturally depreciation of itself could not have accomplished these miracles, but in freeing nations of the concern over reserves, budgetary balances, and in assuring these countries of low money rates and necessary monetary expansion, the authorities show a resort to exchange depreciation gave their economics the necessary stimulus. In so doing, moreover, they put pressure on gold countries, now faced with "unfair" competition, also to give up the gold standard. The longer the list of paper countries the more likely that the remaining gold countries will be forced off gold. World-wide depreciation in terms of old gold parties has been the inevitable result of British-American leadership in these matters.
The discussion in Books III and IV of the American and British episodes of depreciation which include a discussion of the New Deal are a vindication of the monetary policies of the Roosevelt and Mac-Donald-Baldwin regimes. That the American officials frequently chose weapons that were not too effective and the use of which they did not understand does not matter so much as the fact that they moved in the right direction.
Depreciation alone could produce results rapidly enough during the crisis of 1933-34. Three years of sindy have convinced the author of this volume that in the peculiar conditions of 1931-3 depreciation was the correct policy. In 1933 he had not been so sure of that position.