Republicans are searching for big, bold ideas that will inspire voters to embrace a conservative agenda. To unite its disparate segments, the GOP needs to uphold our nation’s founding principles—a key requirement for Tea Party adherents—while fostering the aspirations of those who believe the United States should play a strong leadership role in the world. A prime opportunity presents itself in the most compelling problem America faces: the need to restore confidence in its economic future.
Uncertainty over interest rates and the Federal Reserve’s next policy move is discouraging private sector decision-making and hampering growth; without economic growth, we cannot tackle other pressing concerns. On the global front, the disconnect between the money-pumping actions of central banks and the lackluster performance of real economic variables, such as wages, is fueling the political tensions of income inequality.
To reinvigorate faith in democratic capitalism as the best path to liberty, opportunity, and prosperity—at home and abroad—Republicans should focus on sound money as the logical foundation. But “sound money” cannot be invoked as a mere platitude; it’s time to consider profound monetary reform to establish the reliability of America’s currency and help build a new international monetary system.
And yes: We should be prepared to debate the potential role of gold in our nation’s monetary affairs and as an anchor for international monetary stability.
Should the soundness of the dollar be subordinated to other policy objectives, as determined by a small committee of Federal Reserve officials meeting in Washington, D.C., eight times a year? Would private individuals make better economic and financial decisions if they knew the value of the dollar was not slated to deteriorate annually by some unknown percentage?
Rule-of-law versus rule-of-men is a fundamental aspect of the American idea, after all. It seems an anomaly to allow the Fed to conduct monetary policy in ways that rob individuals of purchasing power, suppress returns on savings, and favor stock market investors. If the notion of self-rule based on equal rights that cannot be usurped by government is to resonate universally, as the Founders intended, America must address this glaring incongruity. How can we extol the benefits of free trade and open markets in the absence of an orderly and ethical international monetary system?
The pursuit of honest money through a gold-linked dollar remains the unfinished agenda of the late congressman Jack Kemp, a conservative Republican whose bold ideas reflected his commitment to economic opportunity and justice. For Kemp, sound money had a strong moral dimension: “People trade with each other in time because they believe they will not be defrauded by a change in the currency.” An international gold standard would provide a reliable medium of exchange that would move the whole world toward liberalized trade and strong growth, he contended.
A savvy politician, Kemp thought it was possible to make the case for sound money and stable exchange rates in terms that made sense to the average citizen. “The monetary issue is anything but remote from people’s experience,” he told a congressional summit in November 1985. “In my experience, honest, sound, stable money is a popular, blue-collar, bread-and-butter, winning political issue.”
A Columbia University economics professor gave Kemp’s approach academic validation. Robert Mundell masterminded the pro-growth “supply-side revolution” carried out under President Reagan. He and Kemp co-hosted a monetary conference in May 1983 to focus attention on the negative consequences of unpredictable exchange rate fluctuations. “You will only get confidence in future monetary policy,” Mundell explained, “if you have a monetary system that doesn’t just depend upon pure political, practical politics, and that provides a stable monetary rule such as a gold standard in at least one country.”
Mundell—who would win the Nobel Prize for economics in 1999—emphasized the necessity of reconciling monetary policy with a unified global market for goods and capital investment to avoid the inefficiencies of distorted prices across national boundaries: “The only closed economy is the world economy.”