Finding common ground: rebuilding the Scandinavian Monetary Union in the interwar years

ABSTRACT

The Scandinavian Monetary Union (SMU) of Denmark, Sweden and Norway has been labelled ‘the most successful of the pre-World War I monetary unions’. It functioned smoothly throughout the first era of globalisation but is considered to have disintegrated during the Great War. However, attempts at rebuilding the union in the interwar years, in a spirit of increased intra-Scandinavian central bank cooperation, have been overlooked. In fact, the Scandinavian central banks frequently convened trying to re-establish the SMU. This paper is the first comprehensive account of these efforts. Based on archival material from these three central banks, it will answer questions on three different levels of analysis: How did the central banks consider future cooperation through the union despite interwar economic turmoil? As ending the leading symbol of Scandinavian cooperation would be politically costly, was it the central banks or governments who were the main actors in re-establishing the union? Given both the need to balance between national primacy and to cooperate to counter economic turmoil, and the fact that all Scandinavian countries followed suit as England abandoned gold in 1931, how are we to consider aspects such as isolationism versus cooperation and small state behaviour versus great power policies?

KEYWORDS:

• Central banks
• monetary unions
• interwar years
• central bank cooperation
• financial diplomacy

JEL CODES:

• N 14
• N 24
• N 44
• E5
• F4

Established in 1873, and functioning smoothly throughout the first era of globalisation, the Scandinavian Monetary Union (SMU)¹ of Denmark, Sweden and Norway has been labelled ‘the most successful of the pre-World War I monetary unions’ (Bartel, 1974, p. 703). During the First World War, however, after suspending gold convertibility, differing national policies to cope with supply difficulties and exchange rate fluctuations tested the union’s relationship. Generally, the war or its immediate aftermath is considered to have ended the union. Working with the archives of the three Scandinavian central banks I however noticed a discrepancy between the archives on the one hand and the official central bank histories and scholarly work on the SMU on the other. A striking feature in the former was that the idea of the SMU seemed vital also after the SMU was considered dead by scholars. Hence, in this article, I have approached the matter to explain this discrepancy and reconsider the SMU in the interwar years.

This article is the first comprehensive account of the efforts to re-establish the Scandinavian monetary union in the interwar years. It challenges leading narratives of the SMU while discussing how the Scandinavian central banks worked to restore the union. The resurrection of the SMU is analysed on three different levels of analysis. First: how did the Scandinavian central bankers see the prospects of bringing the union back to life despite economic turmoil and how did they work to make this happen? Second: As ending the leading symbol of Scandinavian cooperation could be politically costly, was it the central banks or governments who were the main actors in re-establishing the union? Third: Given the need to balance between national primacy and cooperation to counter economic turmoil, and the fact that all Scandinavian countries followed suit as England abandoned gold in 1931, how does restoring the SMU fit into interwar conceptualisations such as isolationism versus cooperation, and small state behaviour versus great power policies?

The article disregards a decision to exempt small non-gold coins in 1924 as a decisive end of the union, as argued by, e.g. Bergman et al. (1993), Bordo and Jonung (1997) and Talia (2004). In contrast, the central banks’ continued perspectives on and struggle to rebuild the SMU into the early 1930s is tracked, culminating in a short-lived resurrection with a renewed agreement in the spring of 1931 – before the SMU finally collapsed with the abandonment of the gold standard a few months later. One might conceptualise this as a way of restoring the pre-World-War-I world in the same manner as restoring the gold standard; to contemporaries, both were seen as a return to normalcy, which align with theoretical understandings of interwar initiatives to establish an economic order (Clavin, 2013). It was however also an instrument to get out of the economic misery: The most eager proponents of resurrecting the SMU, advocated a ‘modernised’ monetary union to alleviate intra-Scandinavian trade, and the article rejects that it was merely political desire that lay behind efforts to restore the union. The evidence suggests that it rather was economic desire, and its proponents were foremostly the central banks.

Finally, the article argues that the SMU illustrates how monetary authorities of three small powers were not merely followers of great power politics. Although Great Britain and the US were influential on Scandinavian monetary matters and international economic policy, the Scandinavian countries tried to adjust the unbalance in power and economic influence through economic-political cooperation. As such it can be argued that the combined efforts tried to make the Scandinavian small powers weightier than the sum of their parts, which is concurrence with Long (2017). Despite isolationist tendencies of interwar international relations, with competing policies to defeat national economic problems, these years are also considered a period of increased financial diplomacy and central bank cooperation (Moure, 2002; Borio & Toniolo, 2008; Clavin, 2013). The Scandinavian central banks were an integrated part of this both internally and externally through international conferences and institutions. At the core was the SMU, where central banks cooperated to meet the national economic turmoil of the interwar years – both in an intra-Nordic context and facing a new global order.

1. On sources, method, theory, and literature

This article’s main sources are qualitative material collected from the archives of the three Scandinavian central banks: The archives of Danish Danmarks Nationalbank, Norwegian Norges Bank, and Swedish Sveriges Riksbank.² The material analysed encompasses official writings and statements; official and private letters between the three Scandinavian central banks and their directors; letters between the central banks and their governments and ambassadors; letters between the Scandinavian central banks and other central banks, institutions and persons; internal notes; drafts; statistics; protocols; and perhaps most important – minutes from central bank meetings.³

This is a novel approach, as there has been hardly any example of researchers using archives to investigate if and how the SMU continued to exist after World War I.⁴ Its demise has been taken for granted, while much of the research front is also made up of quantitatively oriented studies. But not only has the research front been disinterested in the interwar SMU history, the central bank histories seem characterised by a methodological nationalism, which has disregarded common features and made it easy to overlook the SMU.

There are some methodological difficulties. Assessing large quantities of archival material might make nuances disappear and there is a danger of ignoring differences among the three central banks, including changing perspectives over time. Both difficulties are dealt with in the text. Although large quantities of material can imply sources sometimes pointing in opposite directions, the major story line remains a thorough assessment of the three central banks’ efforts over a long period.

When discussing the SMUs rise and fall, the article uses the research front on the SMU and the Scandinavian central bank histories as basis. Theoretically, the discussion is grounded both in classic studies on interwar central bank cooperation such as Toniolo (2005) as well as broader studies on financial diplomacy, such as Clavin (2013), which analyses the efforts to rebuild a global economic order. The theoretical perspective on cooperation helps to explain why and in what environment the efforts to resurrect the SMU were conducted. Combining the Scandinavian-specific with general studies on interwar financial diplomacy and central bank cooperation provides a fruitful foundation for discussing the process of reestablishing the SMU. I also find Long (2017) and his analysis of small-state power and influence, helpful when discussing small-state cooperation vis-à-vis greater powers.

Whereas the international central bank literature sees central bank cooperation as something that started to sprout during the First World War and expanding in the interwar years (Moure, 2002; Toniolo, 2005; Borio & Toniolo, 2008), this is downplayed in the Scandinavian central bank and SMU literature. This discrepancy between the interpretation of the international and Scandinavian situation is probably partly a result of the tendency to see the war as the end of the union. Most SMU accounts focus on the golden years up until 1914, where the war years are seen as an appendix (e.g. Bartel, 1974; de Cecco, 1992; Henriksen & Kærgård, 1995; Øksendal, 2007), while some accounts extend the union’s slow death until 1924 (e.g. Bergman et al., 1993; Bordo & Jonung, 1997; Talia, 2004). Another problem is the tendency to regard the interwar years primarily in national terms.

In Norwegian literature, the first exposition of Norges Bank’s interwar years was written by Nicolai Rygg – a period he served as Governor (Rygg, 1950). Rygg hardly mentions any cooperation or the SMU – the focus is on national policy. This perspective seems to have influenced most later takes, e.g. the book on Norges Bank’s first 150 years, written by Rygg’s successor, which completely disregards Scandinavian interwar cooperation (Jahn et al., 1966). In the more recent bicentenary central bank history of Norway, the SMU ends with the war, and the methodological nationalism of the interwar years is dominant (Lie et al., 2016).⁵ Also, Francis Sejersted’s study of Rygg’s reign (Sejersted, 2001) and Keilhau (1952), omits the cooperative efforts and diplomacy of the Scandinavian central banks. However, Tine Petersen’s master thesis on Norges Bank’s gold standard departure in 1931 treats Scandinavian central bank cooperation as a factor, although limited to the currency situation (Petersen, 2011).

Denmark has also literature characterised by works from the central bank’s own men. Director Ussing’s exposition mentions some of the meetings of the monetary union, but it ends prematurely and is focussed on national affairs (Ussing, 1926). In the official six volume edition of Nationalbanken’s history, the interwar years was covered by Erling Olsen and Erik Hoffmeyer, whereof the latter served as Governor from the middle of the 1960s (Olsen & Hoffmeyer, 1968). Of all Scandinavian central bank literature, this is the only work where the efforts to re-establish the monetary union – all the way until 1931 – is mentioned (Olsen & Hoffmeyer, 1968, pp. 113–116). The latest work on the Danish central bank brings nothing valuable to this discussion (Abildgren, 2018). In contrast, Per H. Hansen uses archival material from the Scandinavian central banks to give an interesting analysis on parts of the Scandinavian central bank cooperation, although limited to the establishment of the Bank for International Settlements (BIS) in 1930 and response to the Austrian crisis the year after (Hansen, 2012). However, Hansen’s discussion of the small state vs. great power dynamics is interesting for our purpose.

Disregarding Scandinavian central bank cooperation and efforts to restore the union is characteristic also for the Swedish literature. The first official Riksbank history covers the years until 1924, and the last part, written by K. G. Simonsson, ends with a couple of pages on the SMU. This is framed as a decay history, with small denomination non-gold coins being exempted from the Convention as the very last sentence of the book (Simonsson, 1929). This might have influenced Krim Talia’s 2004 doctoral thesis on the SMU which also ends with the 1924 decision, which is described as the ‘Third and Final Nail’ in the union’s coffin (Talia, 2004, pp. 177–179). The Swedish Monetary Statistics refers to Talia’s thesis and concludes similarly (Edvinsson, 2010, p. 41). Gunnar Wetterberg’s official account of the Riksbank describes World War I as the end of the union, although it ‘took long before formally ending’ (Wetterberg, 2009, p. 277). Accordingly, Wetterberg mentions incidents after 1924 – including the period 1928–1931 – albeit superficially.

In addition, much of the standard academic literature on the SMU is done from a Swedish perspective, often in articles written by Lars Jonung with additional authors (Bergman et al., 1993; Bergman & Jonung, 2011; Bordo & Jonung, 1997, 2003; Jonung, 2007). These standard takes are often quantitatively oriented and seldom move beyond World War I. If they do, the union end with the 1924 decision to omit small non-gold coins from the Convention. Jonung (2007, p. 94) however notices an ‘interest of re-establishing the union’ after returning to gold in the late 1920s, while Bordo and Jonung (2003) briefly mention ‘political desires’ to restore the union, but neither of them elaborate on this.

In the latter stage of writing this article, the research field was expanded and benefited substantially with new and insightful perspectives. Ögren and Trautwein (2022) use central bank archives to analyse the SMU, including central bank cooperation in the interwar years. The SMU is discussed in terms of lender of last resort from the 1870s until 1924, and cooperation through a clearing mechanism until 1931. As such Ögren and Trautwein (2022, p. 438, 455 ff.) agree that the union did not end until 1931, and moreover analyse cooperation by displaying the practical-quantitative dimensions of one of the aspects discussed in my article: the clearing mechanism corresponds with what I label the ‘1885-agreement’. Despite showing how the practicalities of this clearing mechanism and some other contact indicate how the union was not considered dead after World War I, as well as discussing how contemporary economists perceived the SMU, Ögren and Trautwein do not analyse how the Scandinavian central banks continuously worked to rebuild the union. With respect to my two other research questions, these are not discussed. Nonetheless, their article corresponds well with mine and generally serves to strengthen my argument.

Apart from the latter study, what should be clear from the literature on the SMU, is that it downplays – or disregards – an interesting part of the union’s history, at a time when cooperation and coordination increased. Admittedly national monetary policy, economic turmoil and political chaos characterised these countries in the 1920s and 1930s. However, this was a period of extensive cooperation, which also aligns with and is an integral part of the international picture. For the SMU this is indicated by the analysis of Petersen on leaving the gold standard, Hansen on establishing the BIS, and more noticeably by Ögren and Trautwein, but also corresponds well with the international literature on central bank cooperation (Toniolo, 2005) and the overall efforts of reestablishing an international economic order (Clavin, 2013). This reflects that the solutions to many national problems were international and explains why the Scandinavian central banks emphasised this cooperation.

2. The end of the Scandinavian Monetary Union – a new perspective

The Scandinavian Monetary Union was established in 1873. The union was based on the Scandinavian Coin Convention, and the three countries adopted new krone⁶ currencies, joined the gold standard, and pegged their currencies. The union’s basis was the gold coin, and internally all central banks were obliged to buy and sell gold for central bank notes at a fixed price.⁷ The Convention stipulated free circulation and legal tender status within the union also of non-gold coins, exchangeable for gold at par within certain limits (Rongved, 2017).

Norway did not join the union from the onset, but in 1875 the parliament reconsidered, opening the door for Norwegian participation. In the years thereafter Scandinavian monetary integration and cooperation expanded. In 1885 Riksbanken and Nationalbanken opened bank accounts to each other which were not required to have a positive balance to be drawn upon. The central banks could draw at par value, and banks and tradesmen could utilise this without paying fees. This is what Ögren and Trautwein (2022) refer to as the ‘clearing agreement’, as it also was intended to reduce gold shipments. Norges Bank was part of this agreement from 1888. At the turn of the century, the central banks agreed to accept each other notes at par – Riksbanken and Norges Bank in 1894, Nationalbanken followed in 1901. With these developments, the SMU has been described as a ‘complete system’ of payments (Henriksen & Kærgård, 1995). Although it can be argued that this lasted only until 1905, when the Riksbank terminated the 1885-agreement, the central bank arrangements by all practical circumstances continued until the Great War, as new bilateral agreements – with minor limitations – were concluded in 1905. Hence, the SMU until 1914 has been described as a success history (Bartel, 1974; de Cecco, 1992), but the success rested on having developed into something far more than the original gold coins: mutual bank accounts with practically unlimited drawing and accepting central bank notes at par. It is important to take note that it was this progress – the 1885-/1905- and the 1894-agreements – which was essential when restoring the union was debated in the late 1920s.

The golden years were based on written communication and formal agreements, but from the First World War, a more integrated central bank cooperation sprouted. Scandinavian central bank meetings became a new feature, and this meeting ground, with forming of personal ties, were a basis for the interwar central bank cooperation. In the short term, the economic consequences of the war challenged the cooperation, as the central banks were made part of the governments’ efforts to secure supplies and uphold economic activity (Rongved, 2017). Hence, regarding the First World War as the end of the SMU, it is, as mentioned, a conventional perspective. But is it necessarily correct?

In the next main parts, I will rebut the argument that the war ended the union by showing the extent of central bank efforts to restore the union until they partially succeeded by agreeing on a test arrangement in 1931. Prior to this, however, the next paragraphs will explicitly address and dismiss the argument that removing non-gold coins from the Convention ended the union in 1924, which for odd reasons has dominated parts of the SMU literature.

Non-gold coins of minor denominations undoubtedly caused disturbances during the war and early 1920s. This was because the Convention not only stipulated free circulation and legal tender status of the main gold coins, but also non-gold coins minted in any of the three countries which could be exchanged for gold. These conditions belonged to a time when the three currencies were traded at par with a fixed gold price. After suspending gold convertibility in 1914, the Scandinavian currencies fluctuated: within the union, in relation to other currencies, and to the price of metal. Thus, the Convention functioned as a gateway to a spectre of arbitrage possibilities. People could remelt non-gold coins to earn a profit, resulting in a coin shortage. Coins could also be exchanged for gold in the central banks or exported utilising exchange rate differences. Despite implementing laws to prohibit remelting, the problem was sustained: in Denmark and Norway non-gold coins disappeared from circulation, while Sweden experienced massive inflows, being obliged to exchange them for gold (Talia, 2004, pp. 177–179).⁸ Eventually, there was no way around changing the Convention. In 1923 an official meeting was held in Oslo⁹ and the governments agreed to a supplementary paragraph which removed the Scandinavian non-gold coins’ legal tender status and allowed each country to mint separate non-gold coins, coming to effect in 1924.

This decision has prompted several authors to see the decisive end of the SMU in 1924 (e.g. Bordo & Jonung, 1997, pp. 343–344; Bordo & Jonung, 2003; Talia, 2004; Edvinsson, 2010). Bergman, Gerlach and Jonung place the end of the union in 1920/21, but their argument seems linked to the decision allowing separate small coins, and the end year merely seems misplaced (Bergman et al., 1993, pp. 513 and 516). It can be argued that the end of the SMU came with the war – I have also argued along such lines (Rongved, 2017) – but that it was no mort subite; it did indeed take its time. However, confining anything particular to 1924 seems mistaken.

A closer look at the small coins issue sheds a different light on the matter. Among the main Scandinavian intellectual-political actors who constructed the SMU in the 1860s and 1870s, there were strong proponents preferring the SMU to be without small coins. Hence, these were not a necessary part of the union. Although this might seem irrelevant to what the SMU later became, the perspective resonated with the central bankers in the 1920s. When re-establishing the union was discussed after 1924, without small non-gold coins, it was argued that this would be like the union the ‘Union Fathers’ had originally wanted (Rygg, 1928, pp. 488–489, 495). Indeed, in 1923 the Riksbank stated explicitly that small coins were ‘not of vital importance’ for the SMU, small coins ‘could be completely excluded from the convention without it thereby losing its ability to fulfil its task’, and ‘using the current small coins troubles as a motive for terminating the convention is illogical’.¹⁰ The decision was also effectuated after a 1923-agreement, but in 1924 the union was formally expanded with the inclusion of Iceland. Hence, contemporary actors did not regard 1924 as a defeat of or an end. If it had been a ‘nail in the coffin’, it would be rusty, and no hindrance to the central bankers trying to resurrect the SMU.

So how can we conceptualise efforts to restore the SMU? The 1920s was an ambiguous decade, pulled between forces wanting to return to pre-war normalcy of the old, liberal nineteenth century, and forces aspiring to something new, pointing towards thoughts and policies belonging to the twentieth century. In general, central banks were intellectual environments deeply rooted in the former. Returning to gold was the most notable symbol of such traditional affinities. The international gold standard literature sees the war as a time out, but not the end of the gold standard. Admittedly, the period from 1870 until 1914 is often labelled as the ‘classical gold standard’, and the interwar return is portrayed in its own terms: sometimes given its own name (the ‘gold-exchange standard’), being more diverse than its classical form, and often analysed in terms of being to blame for enlarging the consequences of the Great Depression (e.g. Eichengreen, 1995; Kindleberger, 2013). But it is seen as part of the gold standard, and politics of the 1920s as a struggle for its restoration. This perspective is helpful when conceptualising the SMU and efforts put into restoring it. The SMU was also part of the old, well-functioning world the central bankers wanted to restore. Although returning to gold was a precondition when restoring the SMU, it does not imply that the union was merely a byproduct. It can rather be seen as two sides of the same coin, where the gold standard and the SMU were integral elements in restoring the pre-war order. And just like the gold standard had to be rebuilt somewhat differently after the First World War, the Scandinavian actors found the same thing for the SMU. Despite war time disagreements and discussions of altering the union’s Convention, the SMU was never seen as abandoned. The union was seen as alive, albeit sleeping, and restoring and reforming it was important. Hence, from the contemporary perspective, reviving the SMU was the right thing to do to re-establish normal conditions. In this perspective these efforts deserve scrutiny and to be understood on their own terms.

Before we move to an assessment of these efforts, a short ‘quantitative’ illustration of the new and intensified Scandinavian central bank cooperation follows. Table 1 indicates an intense cooperation, in contrast to the ‘golden years’ of the SMU.¹¹ This was a new feature starting with the First World War, initially to mend war-inflicted difficulties. From 1916 and until 1939 I have registered over 25 meetings, and more than 20 in the interwar years. The central banks convened almost every year – sometimes several times a year – to discuss and coordinate many issues. Reviving the union was a major issue at least until 1931. In the 1930s, most meetings included the Finnish central bank, and on at least one occasion the Icelandic central bank, and have been labelled ‘Nordic meetings’.¹² A few ‘SMU official conferences’ were summoned to change the Convention, and participants were official governmental designates. In addition, there were unformal meetings between central bank directors and mint departments meetings.

Table 1. Scandinavian and Nordic Central bank meetings, 1916–1939.

Year	Type	Location	Date
1916	SMU meeting	Stockholm	23−24 February
1916	SMU meeting	Gothenburg	7 October
1917	SMU off. conf.	Stockholm	17–19 April
1918	SMU meeting	Copenhagen	8–9 May
1918	SMU meeting	Oslo*	25–26 October
1918	SMU off. conf.	Stockholm	12–13 November
1920	SMU meeting	Copenhagen	9–11 February
1920	SMU meeting	Oslo*	23–25 February
1921	SMU meeting	Stockholm	12–13 November
1921	SMU meeting	Oslo*	13–15 December
1923	SMU off. conf.	Oslo*	29–31 October
1923	SMU meeting	Stockholm	14–15 December
1924	SMU meeting	Copenhagen	12–13 October
1925	SMU meeting	Oslo	23–24 October
1928	SMU meeting	Stockholm	7–9 December
1929	SMU meeting	Gothenburg	22–23 November
1931	SMU meeting	Copenhagen	21–22 February
1931	Nordic meeting	Stockholm	27 September
1932	SMU meeting	Oslo	22–23 October
1933	Nordic meeting	Stockholm	24–25 May
1935	Nordic meeting	Copenhagen	25 February
1936	Nordic meeting	Oslo	25–26 October
1937	Nordic meeting	Helsinki	27–28 September
1938	Nordic meeting	Basel	10 May
1938	Nordic meeting	Stockholm	17–18 December
1939	Nordic meeting	Basel	9 May
1939	Nordic meeting	Copenhagen	14–15 October

Source: Based on material from the archives of the Riksbank, Nationalbanken and Norges Bank. Oslo* refers to Norwegian capital Kristiania before it changed its name in 1925.

Based on this material, it is reasonable to conclude that efforts to enhance Scandinavian central bank cooperation increased in the interwar years. We will return to more qualitative aspects of this, but it included e.g. the Swedish Riksbank offering to lend Norges Bank and Nationalbanken gold in order to strengthen the Norwegian and Danish krone. This is in concordance with Barry Eichengreen’s theory of central bank cooperation under the classic gold standard (Eichengreen, 1995, p. 8), and can be seen as a regional, small state expression of this in the interwar years. Cooperation also included discussing and coordinating discount rates, sharing experiences about discounting treasury bills and relations with the government, informing each other on the national and international economy, steps taken to assist trade, industry, and the financial sector – as well as discussing mutual action vis-à-vis other central banks, the BIS, and in international negotiations. Restoring the SMU was a major issue, but also cooperation to mend other difficulties. The cooperative spectre was wide and included both ‘low-key’ and ‘high-profile’ cooperation, as defined by Borio and Toniolo (2008, p. 17).

3. How did the central banks consider the prospects of re-establishing the Scandinavian Monetary Union?

The First World War was detrimental to the international economy and monetary system. After suspending gold convertibility, war time inflation was coupled with the expansion of governmental scope, also into the sphere of independent central banks. With peace came the impetus to return to the old order, to cooperate and rebuild the well-functioning system of the first globalisation (Clavin, 2013; Tooze, 2015). Central to this was returning to gold. The aim was stated at the International Financial Conference in Brussels in 1920, including the need for reestablishing central bank independence (Decorzant, 2007; Clavin, 2013). Two years later, the International Economic and Financial Conference in Genoa likewise concluded that returning to the gold standard was necessary, although as the suggested gold exchange standard.

Financial stabilisation and returning to gold were however dependent on the economic situation in each country, and happened at different times and parities, with distinct grades of struggle to get there (Bernanke & James, 1991). Some countries deflated and returned to gold at par, like Great Britain in 1925, others devalued – ‘stabilised’ – their currencies, like France in 1928. Between these years most countries returned to gold, and generally, it was economically costly for countries that took a long time and returned to the old parity, thus needing a longer time to deflate. A quick return to gold – at a devalued rate – removed the need for harmful, deflationary policies (Feinstein et al., 1997). The Scandinavian countries returned to gold at par, but at different times and forms. In the following, the article will firstly address the arrangements, discussions and efforts to restore the union before all Scandinavian countries had returned to gold in 1928, and secondly, Section 3.2 will adress the efforts to restore the SMU after this prerequisite was in place.

3.1. Efforts at re-establishing the SMU before all Scandinavian countries had returned to the gold standard

After the war, there was general positivity of reestablishing the SMU, exemplified with Riksbank Governor Moll’s statement from 1921: ‘[i]f resuming the coin convention is a common Scandinavian interest, and for my own part I am convinced that this is the case, the three countries in cooperation and uniform should work towards this goal’.¹³ Restoring the gold standard and the monetary union was interwoven, but although the former had to be done first, the union also complicated the return to gold, because the Convention was considered automatically operative again if one state re-established the gold standard. In the early 1920s, Sweden was closest, with exchange rates closer to par and a more stabilised economy. But restoring gold in Sweden only would open for exploiting exchange rate disparities via the Convention. Hence, returning to gold needed to be done in consensus with the union partners.¹⁴

The Scandinavian countries however wanted the USA and Great Britain to take the lead, and thus waited for Britain to resume gold convertibility. Until then they agreed that it would be best if ‘every small state should refrain from all experiments to stabilise their currencies’ – hence to devaluate.¹⁵ In January 1922 Moll urged Bank of England Governor Norman to return to the gold coin base. Had it not been for the SMU, Sweden could immediately have followed suit, stated Moll, but if England took the lead, all three might end up following.¹⁶ Norman’s response was discouraging: it was too early for England, at least until the USA’s position regarding the interallied debt was sorted out.¹⁷ Even if England took the lead it was too early also for Denmark, but, asserted director Winther, the SMU should not prevent Sweden’s return to gold without Norway and Denmark.¹⁸ For all practical purposes, this was the outcome. In 1922, Sweden de facto returned to the gold standard, and on 1 April 1924 also de jure, as the first European country, while simultaneously restricting gold flows (Edvinsson, 2010, p. 41).

Reestablishing the SMU lay dormant, as Denmark and Norway were far from such a position. The finance sectors were in massive troubles, and the 1920s was characterised by bank failures and central banks’ ad hoc efforts to handle the banking crisis with expansionary politics – contrary to the deflationary policy needed to return to gold. In both Norway and Denmark, there were growing sentiments in favour of stabilising below par. This was troublesome, because ‘a cut […] would imply a termination of the Coin Union’.¹⁹ This was echoed by Moll at the 1924 Copenhagen meeting, warning the other two of stabilising: in case it would be ‘evident that it must be terminated’.²⁰

Perhaps the warnings had an effect. When Denmark returned to gold early in 1927, it was at par. But in contrast to Sweden, it was not the old gold coin standard. Denmark listened to Governor Norman and followed the ‘pioneering country’ England, choosing gold bullion.²¹ However, the Danish decision was also made with consideration to the SMU: resuming the gold coin standard ‘would imply that the Scandinavian Coin Union with regards to the main coins would take effect immediately’.²² As there was ‘strongly differing perspectives considering restoring the Scandinavian Coin Convention’, the question had to be kept open.

With both Sweden and Denmark back on gold, the issue of resurrecting the union resurfaced. But, in contrast to the start of the 1920s, it had evidently become contested. What were these ‘strongly differing perspectives’? This is not straightforward to pinpoint; there are no clear indications of major differences among the three central banks. The closest we might come was when Governor Moll in December 1927 privately stated to economist David Davidson that the easy way out would be to follow his suggestion and ‘repeal the current coin convention’, but this ‘would be poorly received by the co-contractors, particularly in Norway’.²³ But Moll did not want to end the union. Even to Davidson, he suggested that the best would be a new convention. Also in the mid- and late-1920s, Moll seems eager to return to the union and did not question the SMU in the central bank meetings. But, like others, he saw the need to reform it.²⁴ The main difference seems to have been that when talks of the union intensified in 1927–1928, Moll seemed somewhat more backward looking, more focused on gold coin. And perhaps the ‘strongly differing perspectives’ simply was the gold-bullion-question. The Scandinavian central bankers might have had some minor differences of opinion, but these varied with time and situation. The overall picture is that all central banks wanted to restore the SMU until 1930–1931, at which the Riksbank became more lukewarm.

Another interpretation of these ‘strongly differing perspectives’ is that it might refer to political differences between governments, but as I have not found any indications of this either, the most likely explanation is perhaps differences of opinion among economists. With Denmark’s return to gold approaching, the matter was discussed at the Nordic economic meeting in September 1926 (Olsen & Hoffmeyer, 1968, pp. 114–116). There are at least two interesting points to extract from this meeting. Firstly, it seems to be here that we can see the first seeds of a split regarding what kind of SMU should be re-established. The leading Danish economist Axel Nielsen – supported by amongst others Norwegian economists Jæger and Jahn – was strongly in favour of re-establishing the SMU, but mostly interested in restoring the 1885-agreement (drafts), as well as the agreements from 1894/1901 (bank notes at par). Hence it seems as he had in mind a modernised version of the ‘complete system’ from the turn of the century. This contrasts with the union Moll advocated.

This brings us to the second point: economists differed substantially when discussing the SMU (see also Ögren & Trautwein, 2022, p. 486 ff.). This substantiates that this was not a question of economic rationality versus political rationality. Nielsen met little understanding from one of the leading Swedish economists, Eli Heckscher, who found the SMU of little economic value, despite acknowledging the Scandinavianist sentiments. If a more flexible monetary system than the gold standard emerged, the fetters of the SMU could become troublesome. In addition, Norwegian economist Wilhelm Keilhau launched a ‘powerful attack’ on the SMU because he wanted neither Danish nor Swedish influence on Norwegian monetary affairs (Olsen & Hoffmeyer, 1968, p. 115). In contrast, economists in favour of the SMU not only welcomed its political dimension by praising scandinavianism but found it to be economically beneficial: focussing on drafts and central bank notes, the union was believed to enhance trade.

Interestingly it seems like Olsen & Hoffmeyer think that Keilhau’s attack affected the Danish and Swedish central bank and made them fear to arrange a new central bank meeting. In Olsen & Hoffmeyer’s words: ‘There was quite simply fear that the Norwegians would use the opportunity to destroy the Scandinavian Coin Union completely’ (& nbsp;Olsen & Hoffmeyer, 1968, p. 115). The Danish decision to land on gold bullion rather than the gold coin standard was thus an attempt to avoid the Norwegians from abandoning the SMU. However, this interpretation seems skewed. Keilhau was not a bearer of any official Norwegian position and has not been considered to have had particularly weighty perspectives. More importantly: there were no influential persons in Norway eager to ‘destroy’ the union – politicians, central bankers and most economists wanted to restore the SMU. Letters between the Swedish and Danish central bank indicate that arranging a meeting at this time was thought to be difficult for Norway but unintendedly could lead to the union’s destruction.²⁵ Nonetheless, Denmark choosing gold bullion postponed the decision on re-establishing the union. As seen from Table 1, there was no new meeting in 1927, and the discussion did not resurface until Norway had returned to gold on 1 May 1928.

3.2. Efforts at re-establishing the SMU after all Scandinavian countries had returned to the gold standard

With all countries back on gold, the impetus to rebuild the SMU strengthened, and the discussion concerning on what grounds the re-established union should be built became more tangible. Two platforms can be distinguished: on the one side were ‘conservative’ proponents of reinstating the union according to the 1873 Coin Convention, i.e. primarily as a gold coin union, preoccupied with ending up on the same kind of gold standard. Riksbank governor Moll was somewhat more grounded in such perspectives than the other two governors, although his perception was not static. On the other side were more ‘reformist’ advocates of what can be interpreted as a modern version of the union and more in line with monetary development, as voiced particularly by Nielsen at the 1926 meeting and supported by Nationalbanken and Norges Bank. These disregarded the gold coin origins, and highlighted developments after 1873, focussing on mutual feeless drafts (the 1885-/1905-agreements) and accepting Scandinavian central bank notes at par (the 1894/1901-agreements).

At the Nordic trade meeting in September 1928, the SMU was a major theme. A chief contributor was Governor Rygg of Norges Bank. Rygg’s initial speech stated that

[t]he major question that needs to be answered is if a cooperation is wanted or not. If not, the case is clear. However, I believe that within the crowd gathered here, the value of this cooperation is understood, and efforts will be made to reinstate this work. (Rygg, 1928, p. 496)

Referring to the SMU-friendly statement of the Scandinavian Trade Meeting in 1917, Rygg concluded thus:

There the trade community pointed the way and the finish line needs to be crossed. The trade community sees in the arrangement a valuable asset which our forefathers struggled to create. This asset should be maintained. Conditions which we were not master of, have more or less suspended it, so it needs to be assessed and put back in order. The time has come to go to work. ( Rygg 1928, p. 498)

The finance and trade community was still positive in 1928, and more so than the economic meeting in 1926. Hence, the Nordic trade meeting unanimously agreed on a resolution encouraging the governments to establish an expert group ‘with the task of preparing a proposal for coin convention adapted to the existing conditions’ ( Rygg 1928, p. 485).

A month later the Scandinavian central banks met for the first time since all three had returned to gold. Seemingly the conditions were finally all in place. All were back on gold and at par, the international economy was flourishing, the Scandinavian economies were stabilised, and in the business and financial communities there was widespread hope for a revival of the union, which even was supported by several economists. Thus, reinstating the SMU was the main theme on the December 1928 central bank meeting. Governor Moll stated that it would be fortunate ‘if the Coin Convention and the central bank agreements of 1905 again could be put into effect. On this issue, there is practically no disagreement within Sweden’.²⁶ Moll was however somewhat sceptical of a bank note union, as this would imply ‘a broad community with regards to financial affairs, which hardly is thinkable until the day arrives, that the three countries is made into something which could be called the United States of Scandinavia’.²⁷ But also the ‘conservative’ Moll had moved somewhat closer to the ‘reformist’ platform, and wanted an agreement that included drafts, although with restrictions: these had to be confined to the 1905-agreement, and not the unlimited drawing rights of the 1885-agreement. He also continued to stress the gold coin base and was hesitant concerning bank notes at par.

The meeting’s official statement was narrower but clear: ‘the three central banks find it desirable that the coin convention, as far as gold coin is concerned, as soon as possible is made fully effective again’.²⁸ Because the question of coin vs. bullion as the union’s basis was still unsettled, the decision to revive the union – and renewing the Convention – needed to be postponed. Nonetheless, the question of drafts was considered independent of concluding the gold base question, and to ‘reformists’ loudly advocating a modernised SMU, drafts had become the vital question. Hence, the 1928 meeting formed a working group with the three governors – Moll, Rygg and Schröder – aiming at a new agreement with drafts to facilitate trade. The urge to conclude new agreements, also before the gold base was settled, points towards a desire to see the SMU resurrected as a modernised monetary union.

Albeit slowly, the SMU was rising from the dead. Unfortunately, the opposite was true of Governor Moll. Shortly after the 1928 meeting and the working group was created, and Moll had outlined a sketch for an agreement based on the 1905-agreement, he suddenly passed away.²⁹ The new Riksbank Governor Ivar Rooth had to get familiar at home, and the working group was put on ice. However, Rooth had a clear intention of expanding central bank cooperation, particularly with the neighbours (Rooth, 1988, pp. 54–55, 60–62), and in November 1929, Rooth met his Scandinavian colleagues for the first working group meeting. Since Moll’s passing, Rygg had developed Moll’s sketch of the revived union further and argued that the 1885-agreement – with less limitations – would be a better basis than the 1905-agreement. The meeting also discussed accepting each other’s bank notes at par, which likewise signals ambitions for a broader and ‘reformist’ monetary union.³⁰ This was more than Moll had wanted, but Rooth had no objections. Early in January 1930, Rygg sent Rooth and Schröder a sketch for an agreement, which basically was a renewal of the 1885-agreement, but somewhat adjusted to meet the developments since the turn of the century.³¹ Things were finally starting to materialise. Rooth responded positively but asked to return to the matter – he had become ‘very busy’.³²

They were all becoming very busy. An international financial and economic crisis was in the making after the October 1929 Wall Street Crash. Generally, central banks increased interest rates to protect their gold reserves. Rygg’s sketch agreement lay unanswered, and there was no meeting in 1930, which most likely was a combination of the central banks having more than enough to handle at home, and the need of engaging in the international meetings in the creation of the BIS.

Nevertheless, in 1931 there was a new initiative, this time from Nationalbanken. It was time to negotiate, ‘paving the way for a resurrection of the Scandinavian Coin Union’,³³ which became a major topic at the 1931 Copenhagen meeting. Nationalbanken’s director Rosenkrantz initial remarks concentrated on the 1885- and 1905-agreements, and even though he did not dare to suggest the banks to ‘bind themselves to resume the old practice’, he suggested that ‘there might also be made an attempt – e.g for one year – on mutual accepting the central bank notes at par value’.³⁴ He moreover dismissed gold coins: ‘by all practical circumstances this has no significance, as the gold coin does not circulate. The public has become fully used to bank notes’.³⁵ It was basically a ‘reformist’ suggestion: a modernised version of the SMU based on how it had developed prior to the war. As the trade communities, parts of the economists, and now even the central bankers were arguing, the original coin union was unimportant. However, a distinct schism had occurred. Although the Swedes still said they favoured the union, the Riksbank was visibly more reluctant than Nationalbanken and Norges Bank. Rooth had also adapted the ‘conservative’ perspective, focussing on the gold coins, rather than drafts and bank notes. Negotiations ended without a result, while the official reason was explained to be the international economic havoc.³⁶

Nonetheless, despite a mounting economic crisis, Riksbanken’s reluctance, national economic turmoil, and currencies with differing gold basis, Nationalbanken and Norges Bank found it was time to stop talking and start acting. In the aftermaths of the Copenhagen meeting, bilateral negotiations continued, aiming at establishing ‘closer economic relations between the Scandinavian countries’.³⁷ The two central banks soon agreed on a test arrangement where they by holding the same pound sterling exchange rate would accept each other’s bank notes and coins at par, and drafts at close to par value. It was meant to facilitate official payments, like railways, postal services, telegraph, and customs.³⁸ The arrangement was also expanded to encompass payment from the public, and small coins was a new feature. Nationalbanken also pushed to include payments from private banks. Norges Bank and Nationalbanken even opened to include Swedish notes and coins at par in their bilateral arrangement. Thus, the efforts to restore the SMU since the First World War had finally led to some practical results. Although it was a test arrangement not all three central banks were part of, it was a major part of the union being restored, it was the part most relevant to modern economic affairs, and it was regarded as a steppingstone towards more cooperation and a complete restoration of the union. By medio April 1931, its implementation was dependent on clarifying details with a range of institutions like public offices and banks,³⁹ but Olsen and Hoffmeyer (1968, pp. 115–116) claim that the arrangement was effectuated the same month and that Danish train services accepted Norwegian money during the summer.

The ink on the paperwork was however hardly dry before the revived SMU had to be abolished – this time for good. The international economic situation continued to deteriorate, and over the summer the situation for Great Britain was looking grim. In September 1931 Britain decided to abandon gold and float the pound. The shock waves hitting the international economy were severe. Within days the Scandinavian central banks convened in Stockholm – for the first time with the Governor of the Finnish central bank – for a crisis meeting in Rooth’s home (Rooth, 1988, p. 61). It was decided to follow the British lead and suspend gold. As currencies started to float, the prospects of reinstating the SMU vanished. The 1931 test agreement was the closest the Scandinavian central banks came to recover the SMU. The SMU was discussed also later, but after 1931 there were no real efforts. By the 1939 meeting, Governor Rygg’s defeatist words – before openly discussing terminating the union – illustrate the development since 1931: ‘There is not much left of the proud work which the coin convention once was’.⁴⁰

4. Was it the central banks or governments who were the main actors in re-establishing the union?

We now turn to a related question, if it was the central banks or governments who were the main proponents of re-establishing the union. The SMU had been established as part of Scandinavianist ideas in the nineteenth century, making the SMU a major institutionalised political expression of Scandinavianism. Moreover, the development after it was established, with expanded scope and perceived success prior to the First World War, and tighter cooperation evolving from the war years on, was a symbol of something which was desired – both among the three countries’ governments, central banks, and the Scandinavian public. In this perspective, the question of who the main proponents of restoring the union were, is interesting.

In an exposition by Michael Bordo and Lars Jonung, albeit only swiftly mentioned, the responsibility is placed on politics: ‘The union was officially terminated in the early 1920s although the political desire to maintain the union accounted for proposals to resurrect the Scandinavian monetary union later on’ (Bordo & Jonung, 2003, p. 56). Although the first part of the sentence at best is imprecise – the union was not formally ended until the early 1970s and it is difficult to find any ‘official’ termination in the early 1920s – the more important latter part is also dubious. The best interpretation of ‘political desire’ is probably that this was grounded in politics – not economics – and exerted by politicians. This might imply that the central banks were under the pressure of politicians, and that some – or all – of the Scandinavian central banks did not want to resurrect the SMU. Another interpretation of ‘political desire’ could imply that the central banks wanted to resurrect the union out of political reasons, but not out of economic reasons. However, this is not only implausible but also inconsistent with empirical findings. Examining the references unfortunately does not help to illuminate what Bordo and Jonung based their claim on or what they mean by political desire.

The central bank archives give little support to the notion of a ‘political desire’ in terms of governments overriding the central banks to uphold the union. The closest seems to have been during the worst strain of World War I, when there are indications that the Riksbank might have seen leaving the SMU as an option, but that the Swedish government did not want to risk giving up on the union. However, there is no evidence that the Riksbank wanted to leave the union but was forced to follow the government’s dictate (Rongved, 2014, p. 45 ff.; Rongved, 2017). Riksbanken’s signalling might rather have functioned as a technique to gain leverage vis-à-vis Norway and Denmark prior to and during negotiations. There are indications of such signalling also in the early 1920s, as official negotiations to exempt small non-gold coins were prepared, at which I likewise have found no evidence of government pressure.⁴¹ This does not exclude that pressure could have taken place, as the present analysis is based mainly on the central banks’ archives, but I find it likely that such pressure would have been reflected in the material.

As discussed, other evidence points towards Riksbanken simultaneously wanting to uphold the SMU. A bird’s eye view also substantiates that restoring the SMU was ongoing central bank endeavours – and hence lends little support to the idea of ‘political desire’ in terms of governments taking the lead. It was at the initiative of the central banks, and despite economic turmoil and hindrances along the way, the target did not slip away. That the central banks were concerned that missteps could end the union, is evident e.g. from when Moll warned the other two of devaluating in the early 1920s and from the Danish-Swedish fear of opening for negotiations too early after the Nordic economic meeting in 1926. In active policies, we remember how Governor Rygg of Norges Bank publicly spoke of the need to resurrect the union in 1928. The Danish initiative in 1931 also stands out. As such there were continuous official as well as private initiatives and arguments from all three central banks aiming at restoring the union over the interwar years. The major difference came towards the end of the period, when Riksbanken early in the 1930s either lost interest, disagreed with the others on what scheme would be best, or perhaps just found returning to the SMU too early due to the international economic situation.

Why these hard efforts? As argued, it was a return to normalcy, in the same manner as returning to gold. The three central banks were simply trying to find out when the time was right and how the union had to be adjusted to a new era and under new circumstances to be economically viable. In this perspective, it was not political desire from the central banks either, it might as well be seen as economic desire. Trying to re-establish the union on a ‘reformistic’ basis, was done out of economic concerns – e.g. to facilitate intra-Scandinavian trade. It was not done out of politics while disregarding economics; in this case, the central banks simply would not have put in the effort. This does not rule out that the central bankers also had a political desire to restore the SMU; it was obviously a beacon of Scandinavian cooperation. The confusion about alleged political desire may come from such expressions, like when Governor Moll in 1927 wrote that restoring the SMU was not only an economic matter, it was also a political matter.⁴² But this was merely stating the obvious. However, politics was not and could never be the central banks’ main concern.

Finally, another indication why the political pressure bit simply does not fit, is the fact that these years are seen as a period of substantially increased central bank independence (Borio & Toniolo, 2008). This has also been seen in relation to a weakened political environment. By seeing central banks as the foremost bearers of continuity, having initiative in the widespread attempts to rebuild the old economic order, this also points towards the central banks as having the initiative in restoring the SMU.

All in all, there is little evidence of a ‘political desire’ in the form of political pressure on the central banks to restore the SMU in the interwar years. In contrast, there is much evidence to support this being a central bank driven effort. As mentioned, ‘political desire’ could also be interpreted to imply that there was a desire from the central banks to restore the union, despite believing that this would be counter to economic sense or even perhaps be harmful to central bank policy, but that it was done to uphold Scandinavianism. But this interpretation of political desire finds little support in empirical findings. The central banks wanted to restore the union, and they were the main proponents of this, because it was the right thing to do to restore the old world order – and because it could make economic sense.

5. What can the SMU and international central bank cooperation tell us about small state behaviour in interwar international relations?

This brings us to the third research question. The efforts at restoring the SMU display a clear attempt of international central bank cooperation. Furthermore, the cooperation was much broader than the SMU, as mentioned earlier, and sometimes served several purposes. An example is the credit lines offered by the Riksbank in the early 1920s, intended to help the other central banks in boosting their currencies to level out Scandinavian exchange rates and thus being able to resurrect the SMU.⁴³ As such the Riksbank took initiative to help her partners by helping herself, and thus being able to restart a shared project. Hence, the cooperation was broad and deep, it strengthened over time with the determined actions of key persons, and it moreover expanded as Finland and Iceland were invited into the partnership.

The central banks acknowledged the need to cooperate to counter economic hardships and political turmoil of the interwar years. Issues were larger than one nation could sort out alone, and cooperation gave a stronger position internationally. This perspective is rarely seen in the Scandinavian central bank literature – neither by central bankers nor historians. Although much of what the central banks dealt with was national problems, this does not conflict with the need to cooperate. An analogy is a state’s security policy, in where any state’s first priority is securing its own existence and citizens. But this does not imply that international cooperation is less important or in conflict with this priority, a notion which the concept of alliances demonstrate well.⁴⁴ To small states such cooperation generally means more than to greater powers. As such the economic-political cooperation of the Scandinavian countries in the interwar years can be seen as a way of securing own economy and looking out for oneself. This was particularly the case as much institutionalised international economic cooperation had not yet been established or was in its infancy. But the interwar years were a period where such initiatives blossomed, illustrated by Clavin’s (2013) analyses of the international economic institutions and cooperation centred in the League of Nations. In 1930 the BIS was likewise founded (Toniolo, 2005; Eichengreen, 2008). Yet, the optics used in much of the Scandinavian central bank literature of the interwar years focus on national actions and policy while disregarding international or regional cooperation.⁴⁵ But Scandinavian central bank policy seems far less ‘isolationist’ and nationally oriented than often perceived.

The Scandinavian literature seems to activate an international perspective mostly when central banks were in contact with their counterparts in the great powers – and in particular Bank of England. Indeed, Governor Norman took steps to strengthen central bank cooperation after the First World War, pointing towards the new and institutionalised cooperation of the 1930s and the post-war-era. Governor Rooth’s memoirs show how the Scandinavian central banks were absorbed into these efforts. Norman invited Rooth to come and stay with the Bank of England just after Rooth was appointed Governor, and in the Autumn of 1929, he spent several weeks there. He had similar visits at the Banque de France and stayed a month at the Federal Reserve in New York in 1930 (Rooth, 1988). As such, Riksbanken was at the forefront of the contact and cooperation with the major central banks, as neither Norges Bank nor Nationalbanken had similar arrangements. However, any direct contact with the major central banks seems to be an important point to mention also in the Norwegian and Danish literature (Rygg, 1950; Olsen & Hoffmeyer, 1968).

This contact however highlights the increased Scandinavian cooperation in at least two ways. Firstly, there are indications that when one Scandinavian central bank was scheduled to meet or was in direct contact with, e.g. the Bank of England, the central banks would inform each other. Information of meetings after they were held were common, and distributing communications with other central banks, seemingly aiming at coordination of a joint response or approach, was also part of the intra-Scandinavian cooperative efforts.⁴⁶ This implies that when e.g. the Bank of England interacted with Riksbanken, it could sometimes – to some extent – be said to have been negotiating with all of the Scandinavian central banks. As Riksbanken was more connected to the central banks of the great powers and more informed with regards to e.g. the BIS in the 1930s, she also used her position to keep Nationalbanken and Norges Bank oriented.⁴⁷ This bears witness of how Scandinavian central banks would coordinate their activities in communications with the outside world, and how they – again, at least to some extent – would adjust their national interests to a common good.

This brings us to a second way in which regional central bank cooperation was enhanced by outside contact. As the international institutionalised central bank cooperation started to materialise both before and after BIS was established, the Scandinavian – and eventually Nordic – countries would coordinate their perspectives and have a common approach when dealing with international institutions and conferences.⁴⁸ This seems to have been a strategy aimed at gaining strength and leverage vis-à-vis the great powers. Without such strategies, the small state perspective was considered difficult to uphold internationally. Moll’s fatalistic perspective from the early 1920s illustrates this:

The representatives of the small states at such conferences often becomes nothing more than marionets, who might be useful to help pull the chestnuts out of the fire of the great [powers] but has rather minimal chance of gaining attention for their own interests.⁴⁹

To help take care of the small state perspective we can see a strategy of common interest to give more strength than the sum of the parts. Per Henning Hansen sees international organisations like BIS to be a meeting place where small powers could be heard (Hansen, 2012, p. 102). Seen in the perspective of the SMU, it was more than this. By using common efforts and establishing a regional group, the Scandinavian countries expanded on the way Tom Long (2017, 2022) analyses the leverage of small states. Long sees ‘collective power’ as one of three ways in which small states can gain influence by seeking ‘strength in numbers’ (2017, p. 198). Although his focus is on the post-World War II-era, the way in which the small Scandinavian countries grouped together and cooperated was perhaps an important way of gaining influence both vis-à-vis one great power and vis-à-vis international institutions also in the interwar turbulence. There is also an interesting overlap here to small state economic cooperation of the Oslo-states in the 1930s (van Roon, 1989).

However, the effect is uncertain, there were limitations to this collective power, and dealing with the great powers was obviously not merely a matter of joining forces trying to reduce the uneven power balance. It was also a case of following the ‘conductor of the international orchestra’, to use Keynes’ description of Bank of England’s dominant role pre-1914 (Bordo & Redish, 2013, p. 10). Small states needed great powers to take initiative, adopt and commit to a system. Hence, following the leader was done both to safeguard own national interests and because the international system was dependent on the great economic powers. This holds generally but was particularly the case in a period of economic turmoil and international tension like the interwar years (Hansen, 2012, p. 88; Kindleberger, 2013, p. 301). In a Scandinavian perspective, the most distinct example is the 1931 decision to follow the Bank of England’s suspension of the gold standard. Nonetheless, two things need to be said: breaking the golden fetters was perhaps the only viable solution when Great Britain, the centre of gravity for the Nordic economies, led the way. If gold exchange was not suspended, the Scandinavian gold and currency holdings were expected to dwindle quickly.⁵⁰ Leaving the gold standard implied entering a new paradigm in terms of monetary policy, and when entering uncharted waters in stormy weather, it was better to stay close to the larger ships. But it does not mean that the Scandinavian central banks always followed the central powers. We remember how it was preferred that Bank of England lead the way before returning to gold in the early 1920s, but Sweden’s decision exemplifies that it was not imperative. Now, there are differences compared to the situation in 1931 – in the early 1920s there was international agreement to return to gold and US was already on gold. In addition, the Riksbank had the financial muscles to make such a move in the early 1920s – in 1931 these muscles were absent. However, no one knew for certain what the future would bring, and it nevertheless illustrates that minor states had some leeway.

6. Conclusion

The Scandinavian Monetary Union was far from dead during the interwar years. In contrast to conventional wisdom, it can be argued that the end of the union came with the end of the gold standard in 1931 rather than with the start of the First World War. Linking the end of the union to the 1924 Coin Convention amendment makes little sense. The ideas of resurrecting the union were alive and well in many communities, it intensified from 1928 and even led to an agreement between two of the union partners pointing optimistically into the future. Although the test agreement was short-lived, it remains a fact that new arrangements were concluded to resurrect the union as late as in 1931 – before the gold standard collapsed.

Parts of the explanation for why this has been overlooked lay in the methodological nationalism of the interwar economic-political literature. Vital parts of the central bank literature have also been written by the actors, which seem to have had little incentive to expand on issues which hardly materialised, and in a new era was considered pointless. But a major point of this article has been that restoring the SMU can be seen as returning to a part of normalcy in the same manner as trying to return to the gold standard in the interwar years. This was part of the general effort to return to the institutions and arrangements of the pre-war order. Thus, the idea of reviving the SMU was not merely subordinated to reinstating the gold standard – they were two sides of the same coin.

Scandinavian central banks continuously convened and cooperated throughout the interwar years, where restoring the SMU was a vital feature. Interestingly, efforts to rebuild the union were done with a progressive perspective, where key aspects of the revived union were originally not part of the union. As such the SMU was not only seen as something old, but also as helpful in modern monetary matters. These perspectives were shared by the Scandinavian trade and financial community, parts of the economic community, as well as the Scandinavian central bankers. Although the SMU had a political function and was praised as a beacon of Scandinavianism, the archival material does not support that efforts to resurrect the union was a result of political desires in terms of governmental pressure or initiative. The efforts were led by the central bankers and based on economic reasoning.

Finally, re-establishing the SMU and broader cooperative efforts were not in conflict with mending national economies – in contrast it could help countering national economic and political turmoil. The cooperation expanded, with information sharing, meetings, and establishing a shared understanding of reality and measures to conduct a common policy. The Scandinavian countries also took steps to establish a common and stronger approach vis-à-vis the great powers and the increasing international economic cooperation. As such the SMU and the cooperation surrounding it was thought to make the small Scandinavian – and eventually Nordic – countries more powerful than the sum of the parts.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The literature refers to the union both as the ‘Scandinavian Monetary Union’ and the ‘Scandinavian Currency Union’. Here I use the former, while ‘[Scandinavian Coin] Convention’ refers to the very agreement, and ‘Coin Union’ and similar are used when citing sources.

2 I would like to thank Mira Barkå and her colleagues at the Riksbank for their very kind assistance with the Riksbank archive at my stay there in September 2022.

3 See Appendix for an overview of the material referred to. All translations from Scandinavian sources are mine.

4 When the work with this article started, I had found no such example, but in the latter stage of writing, Ögren and Trautwein (2022) added a most valuable and interesting article to the research field. More on this below.

5 It should be noted that I wrote the chapters on the creation of the SMU (Rongved, 2016a) and the First World War (Rongved, 2016b).

6 It was called krone in Norway and Denmark, and krona in Sweden. For the sake of convenience, they will henceforth all be referred to as krone.

7 Norwegian Parliamentary Papers [NPP], Oth. Prp. No. 1 (1873), ‘Om Overgang til Guldmyntfod’.

8 See Norwegian National Archives [NRA]/Norges Bank’s Archives [NB]/Board of Directors II [DII]/D0641 and D0642; Danish National Archives [DRA]/Danmarks Nationalbank’ Archives [DN]/Board of Directors, Cases [BDC]/box 31 labelled ‘1818–1936 Sager, Skanderborg Savværk – Skandinaviske Møntunion, Den’; Riksbank Archive [RB]/Riksbankschefers arkiv, Victor Moll [VM]/box marked ‘Skandinaviska myntkonventionen’ [SMK]/folder marked ‘Skiljemyntskonferanser i Kristiania 29–31/10 1923 och i Stockholm 14–15/12 1923’ [XIII].

9 Formally ‘Kristiania’ until 1925.

10 Undated memo, probably Moll’s remarks at the central bank meeting in October 1923, RB/VM/SMK/XIII. See also Victor Moll’s article ‘Den skandinaviske Mønt-Union’ in Danish newspaper Berlingske Tidende, January 1927, RB/VM/SMK/folder marked ‘Skand. Myntkonventionen’ [SM].

11 The only conference I have seen so far, is Ögren and Trautwein (2022, p. 455) mentioning a meeting in connection with the 1885 agreement.

12 Iceland was formally part of the union from 1924, but hardly participated due to travelling difficulties. In the late 1930s it caught Nationalbanken and Riksbanken by surprise that Iceland formally had been affiliated to the union since 1924. I have found no discussions of including Finland in the SMU, although Eli Heckscher had recommended this to the Finnish central bank in 1923 (Kuusterä & Tarkka, 2014).

13 PM from Moll, appendix no. 2 to letter from the Riksbank to Norges Bank, 17 November 1921, NRA/NB/DII/D0641. The PM can also be found in DRA/DN/BDC/box33 and RB/VM/SMK/XI.

14 PM from Moll, appendix no. 2 to letter from the Riksbank to Norges Bank, 17 November 1921, NRA/NB/DII/D0641. The PM can also be found in DRA/DN/BDC/box33 and RB/VM/SMK/XI.

15 Joint statement from the Scandinavian central banks after the Stockholm meeting in November 1921, appendix no. 6 to letter from the Riksbank to Norges Bank, 17 November 1921, NRA/NB/DII/D0641.

16 Letter from Moll to Norman, 27 January 1922, from undated and untitled resume of communications to and from Moll in the year 1922, NRA/NB/DII/D0643.

17 Letter from Norman to Moll, February 1922, op. cit., NRA/NB/DII/D0643.

18 Letter from Winther to Moll, 8 March 1922, op. cit., NRA/NB/DII/D0643.

19 Letter from Nationalbanken to Norges Bank, 2 October 1924, NRA/NB/DII/D0643.

20 Undated minutes from the October 1924 meeting in Copenhagen, NRA/NB/DII/D0643.

21 PM, Nationalbanken, dated 30 October, probably 1930, DRA/DN/BDC/box 33. See also Olsen and Hoffmeyer (1968, pp. 107–109).

22 PM, Nationalbanken, dated 30 October, probably 1930, DRA/DN/BDC/box 33. See also Olsen & Hoffmeyer (1968, pp. 107-109).

23 Letter from Moll to Davidson 19 December 1927; from Davidson to Moll 27 December 1927; from Moll to Davidson 5 January 1928, all in RB/VM/SMK/SM.

24 Based on unofficial an official minutes of the Scandinavian central bank meetings.

25 Letter from Green to Moll, 27 September 1926, RB/VM/SMK/IIIb. See also letter from Moll to Green 17 September 1926, DNA/DN/Attachments to the Protocol of the Board of Directors 1818–1936 [BDAP]/box 54/no. 2522.

26 Moll’s remarks during the 1928 central bank meeting in Stockholm, 7 December 1928, attached to the protocol, NRA/NB/DII/D0641.

27 Moll’s remarks during the 1928 central bank meeting in Stockholm, 7 December 1928, attached to the protocol, NRA/NB/DII/D0641.

28 Protocol of the 1928 central bank meeting in Stockholm, NRA/NB/DII/D0641.

29 Letter from Moll to Schröder, 19 December 1928, DNA/DN/ BDAP/box 58, 10 July 1928–17 January 1929/no. 2606. See also letter from Rygg to Schröder with attachments, 24 December 1928, DRA/DN/BDC/box 33.

30 Protocol of the 1929 central bank meeting in Gothenburg, NRA/NB/DII/D0641.

31 Letter from Rygg to Schröder, 4 January 1930, DRA/DN/BDC/box 33.

32 ‘PM om Den Skandinaviske Myntunion og Seddelbankoverenskomstene’, 19 February 1931 (referring to a letter from Rooth dated 7 January 1930), NRA/NB/DII/D0642.

33 Letter from Nationalbanken to Norges Bank, 13 February 1931, NRA/NB/DII/D0643.

34 Protocol of the 1931 central bank meeting in Copenhagen, NRA/NB/DII/D0643. See also minutes/notes titled ‘The Nordic bank note meeting in Copenhagen 21 and 22 February 1931’, DNA/DN/BDAP/box 62, 17 December 1930–27 April 1931/no. 2668. Rosenkrantz’ remarks can be found in a PM titled ‘Should the Coin union be put into effect again?’, DNA/DN/BDAP/box 62/no. 2668.

35 Protocol of the 1931 central bank meeting in Copenhagen, NRA/NB/DII/D0643. See also minutes/notes titled ‘The Nordic bank note meeting in Copenhagen 21 and 22 February 1931’, DNA/DN/BDAP/box 62, 17 December 1930–27 April 1931/no. 2668. Rosenkrantz’ remarks can be found in a PM titled ‘Should the Coin union be put into effect again?’, DNA/DN/BDAP/box 62/no. 2668.

36 Protocol of the 1931 central bank meeting in Copenhagen, NRA/NB/DII/D0643. See also minutes/notes titled ‘The Nordic bank note meeting in Copenhagen 21 and 22 February 1931’, DNA/DN/BDAP/box 62, 17 December 1930–27 April 1931/no. 2668..

37 Letter from Nationalbanken to Norges Bank, 26 March 1931, DRA/DN/BDC/box 33.

38 Letter from Nationalbanken to Norges Bank, 26 March 1931, DRA/DN/BDC/box 33; undated letter from Nationalbanken to the Danish Royal Bank Commissioner, DRA/DN/BDC/box 33. See also DNA/DN/BDAP/box 62/no. 2669.

39 See e.g. letter from Schröder to Rooth, 16 April 1931; letter from Nationalbanken to the Danish Royal Bank Commissioner, 14 April 1931, both in DNA/DN/BDAP/box 62/no. 2669.

40 ‘Notes from Nordic note bank meeting in Copenhagen 14 and 15 October 1939’, 16 October 1939, p. 40, NRA/NB/DII/D0644.

41 See RB/VM/SM/XIII.

42 ‘Den skandinaviske møntunion’, Victor Moll in Berlingske Tidende, January 1927, in RB/VM/SM/XIII.

43 Letter from Moll to Stephensen, 16 November 1921, RB/VM/SMK/IIIa.

44 The same point is made by Hansen (2012, p. 88).

45 Notable exceptions are Petersen (2011), Hansen (2012), Ögren and Trautwein (2022), and in a broader economic sense Stachurska-Kounta (2023). For economic cooperation in the 1930s, see van Roon (1989).

46 See undated memo in Norges Bank’s archive from 1922, referring to communication between Riksbanken and several European central banks concerning returning to gold, NRA/NB/DII/D0643. See also letter from Moll to Rygg 6 March 1922, RB/VM/SMK/IIb; letter from Moll to Schröder, 6 March 1922, letters from Moll to Winther, 22 June 1922 and 11 September 1922, letter from Winther to Moll, 10 October 1922, all in RB/VM/SMK/IIIa; letters from Rygg to Rooth 11 October 1929 and from Moll to Rygg 15 October 1928, RB/Ivar Rooth korrespondens [IRK]/Norges Bank 1929–1936 [NB], box marked F1A:88.

47 See e.g. letter from Rooth to Schröder, 1 and 7 February and 17 March 1930, DNA/DN/BDAP/box 60, 22 June 1929–27 July 1930/no. 2642.

48 See e.g. correspondence regarding BIS in DNA/DN/BDAP/box 63, 11 May 1931–6 May 1932/no. 2680. See also e.g. letter from Rooth to Moll 17 February 1931; Minutes from SMU meeting in Oslo 22–23 October 1932, p. 17 ff, 26–27; Protocol sketch, SMU meeting in Oslo 22–23 October 1932; Minutes from Nordic meeting in Stockholm 24–25 May 1933, p. 3, all inn NRA/NB/DII/D0643.

49 Letter from Moll to Winther, 8 May 1922, RB/VM/SMK/IIIa.

50 Notes from meeting in Stockholm 27 September 1931, DNA/DN/BDAP/box 64, 4 September 1931–16 December 1933/no. 2690.

Appendix

Working with this article, I have analysed substantial quantities of archive material from the three Scandinavian central banks concerning cooperation and the SMU. The material listed below is limited to material explicitly referred to in the footnotes.

Archives of Sveriges Riksbank

Riksbankschefers arkiv [RB]/Victor Moll [VM]/box marked ‘Skandinaviska myntkonventionen’ [SMK]/folder XIII.

RB/VM/SMK/IIb.

RB/VM/SMK/IIIa.

RB/VM/SMK/IIIb.

RB/VM/SMK/XI.

RB/VM/SMK/folder marked ‘Skand. Myntkonventionen’ [SM].

RB/Ivar Rooth korrespondens [IRK]/Norges Bank 1929–1936 [NB]/box marked F1A:88.

Archives of Danmarks Nationalbank

Danish National Archives [DNA]/Danmarks Nationalbank [DN]/Board of Directors, Cases [BDC]/box 31.

DRA/DN/BDC/box 33.

DNA/DN/Attachments to the Protocol of the Board of Directors 1818–1936 [BDAP]/box 54.

DNA/DN/BDAP/box 58.

DNA/DN/BDAP/box 60.

DNA/DN/BDAP/box 62.

DNA/DN/BDAP/box 63.

DNA/DN/BDAP/box 64.

Archives of Norges Bank

Norwegian National Archives [NRA]/Norges Bank [NB]/Board of Directors II [DII]/box D0641.

NRA/NB/DII/D0642.

NRA/NB/DII/D0643.

NRA/NB/DII/D0644.