Joseph Alois Schumpeter · 1919
This short newspaper report records Schumpeter’s remarks as Staatssekretär before the Budget Committee in Vienna in July 1919. It is not a systematic essay, but a compressed document of postwar economic statecraft: provisional budgeting, deficit uncertainty, monetary restraint, unemployment, and the proposed “Sozialisierungsbank” are treated as parts of one institutional crisis.
The first part frames Deutschösterreich’s fiscal position as grave but still numerically unstable. Schumpeter avoided exact deficit figures because the final territorial settlement remained uncertain; the widely cited six-billion estimate applied to Groß-Deutschösterreich, while the loss of the Sudeten territories would reduce but not remove the gap. The report’s central warning is that public finance and social stability cannot be separated.
Der Staatssekretär mahnte zur Sparsamkeit, erklärte, daß der Staatsbankrott auch eine soziale Katastrophe herbeiführen würde und daß mit dem gegenwärtigen Zustande der Arbeitslosigkeit so rasch als möglich ein Ende gemacht werden müsse.
English translation: The State Secretary urged economy, declared that state bankruptcy would also bring about a social catastrophe, and that the present state of unemployment must be brought to an end as quickly as possible.
Schumpeter’s position is therefore not simple austerity against reform. Rather, he presents solvency as the condition under which social policy can survive. The same logic governs his remarks on short-term finance: treasury bills may absorb liquid funds and cover immediate needs, but only if society remains orderly enough for such instruments to function.
Die Abschöpfung der flüssigen Gelder durch Schatzwechsel werde die Bedürfnisse für die nächsten Monate befriedigen, habe aber ruhige soziale Zustände zur Voraussetzung.
English translation: The absorption of liquid funds by means of treasury bills would satisfy the requirements of the coming months, but presupposes calm social conditions.
The monetary implications are equally clear. The report has Schumpeter opposing further note-stamping, rejecting state notes, and favoring a Deutschösterreichische Notenbank that would not conduct business with the state. Fiscal reconstruction must not be reduced to inflationary finance. Even in this brief report, the governing idea is institutional credibility: the state must finance itself without destroying the monetary basis of recovery.
The second part turns to the Sozialisierungsbank. The immediate occasion was an interpellation about whether hundreds of millions had already been reserved for socialization and the takeover of enterprises. Schumpeter denied that claim, but acknowledged that plans for such a bank were under discussion.
Diese letztere Tatsache bezeichnete der Staatssekretär als unrichtig, dagegen erklärte er, daß Pläne wegen der Errichtung einer Sozialisierungsbank in Beratung seien.
English translation: The State Secretary described this latter fact as incorrect; on the other hand, he declared that plans for the establishment of a socialization bank were under consideration.
This denial is central to the report’s meaning. Socialization is not depicted as an already funded expropriation campaign. It is to be mediated through a financial institution that could prepare a wealth levy, manage compensation securities, and provide industrial credit. The bank would translate political demands for socialization into calculable claims, loan operations, and negotiable state obligations.
Diese Bank solle die Vorbereitung der Vermögensabgabe, der Sozialisierung und der Förderung industrieller Organisationen zur Aufgabe haben.
English translation: This bank is to have as its task the preparation of the capital levy, of socialization, and the promotion of industrial organizations.
The proposed bank thus stands between revolutionary expectation and fiscal constraint. Its significance lies less in immediate nationalization than in the attempt to design machinery for valuation, compensation, and credit allocation. The report also stresses the tentative character of the scheme: no firm negotiations with the banks had yet occurred, and the institutional form remained under discussion, though a joint-stock structure with a larger state profit share was contemplated.
The document’s scholarly value is its snapshot of Schumpeter as a ministerial economist under revolutionary pressure. He does not reject socialization outright, but seeks to subordinate it to solvency, monetary discipline, and banking technique. The “Sozialisierungsbank” appears as a device for making social reform administratively and financially possible without collapsing into deficit finance or paper-money expedients.
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