Money, Banks and Finance in Economic Thought

Money and banking in the French Liberal School: the debates on banking regulation in the 1860s

Raybaut Alain , University Cote d'Azur CNRS Gredeg

This contribution focuses on the debates on banking regulation within the French Liberal school in the 1860’s. France emerged from the 1848 political crisis with a centralized, single and monopoly bank of issue. At the same time, the country lacked banks and credit institutions. So some criticisms were voiced asking for the development of banks, and this led to a freebanking controversy. In the 1860’s, the debate started again with regard to the extension of the charter of the Bank of France beyond 1867, together with the discussion concerning the Bank de France’s policy. In their majority, the experts that were heard supported the monopoly of issue of the Bank de France and its policy of varying the discount rate. Although the debate was closed within professional circles, it continued for a few more years within academic circles, in particular within the Societe d'economie politique, until bimetallism became the main subject of debate. The French Liberal tradition is mainly partisan of the freedom of banking. Moreover, the view that the freedom of issuing banknote provides efficiency and stability is also largely dominant in the period. This is in particular the position of Coquelin, Garnier or du Puynode and Courcelle-Seneuil adamant partisan of free banking. Michel Chevalier’s contribution to the debate is sometimes more balanced. In theory, Chevalier is in favor of free banking, but in practice, his own position varied over time. He first considered in 1857 that free banking institutions were not adapted to the French case, whereas he suggested ten years later that it was. Finally, within the liberal school, Wolowski’s position is in the minority. La question des banques, published in 1864, is a virulent attack against free banking and provides, in sharp contrast, an ardent endorsement of the monopoly of the issue of banknotes and banking regulation, supported by historical arguments and experience from abroad such as the United States, but also Scotland, Germany, Belgium and England.

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Keywords: French Liberal School, Free banking, Monopoly of issuing, Banking regulation,

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