Joseph Alois Schumpeter · 1919
This short newspaper intervention, written by Schumpeter as Austria’s State Secretary for Finance in April 1919, addresses the financial consequences of the Hungarian Soviet Republic for German-Austrian investors, banks, creditors, and shareholders. Its scope is not theoretical economics in the abstract but urgent financial diplomacy: Schumpeter seeks to calm panic while defining the minimum claims that German-Austria must press against revolutionary Hungary.
His opening move is a careful distinction between non-intervention in Hungary’s internal order and firm protection of Austrian financial claims.
Unsere Aufgabe ist es, die Interessen des deutschösterreichischen Kapitals, die durch die Vorgänge in Budapest berührt werden müssen, zu wahren, ohne daß wir uns in die inneren Verhältnisse Ungarns einmischen würden.
English translation: Our task is to safeguard the interests of German-Austrian capital, which must be affected by events in Budapest, without our interfering in Hungary's internal affairs.
The argument then enumerates concrete obligations: return of securities held in Hungary, full payment of obligations to Austrian nationals, free access for Austrian banks to their accounts, and protection of ownership and creditor interests in Hungarian industry. Schumpeter does not reject Hungarian socialization as such; his condition is compensation for foreign owners and shareholders.
Nur muß natürlich der deutschösterreichische Eigentümer oder Aktionär einer zu sozialisierenden Unternehmung entsprechend entschädigt werden.
English translation: Only, of course, the German-Austrian owner or shareholder of an enterprise to be socialized must be compensated accordingly.
The conceptual core of the piece is Schumpeter’s separation of domestic socialist policy from external commercial reliability. A Soviet republic may abandon capitalist methods internally, he argues, yet still need to behave credibly toward foreign creditors if it wishes to rebuild.
Auch eine Sowjetrepublik kann nach außen hin ein guter Kaufmann und verläßlicher Geschäftsmann sein, trotzdem sie sich im Innern von kapitalistischen Methoden abwendet.
English translation: Even a Soviet republic can, outwardly, be a good merchant and reliable businessman, even though internally it turns away from capitalist methods.
This is the key political-economic claim: credit disciplines regimes regardless of ideology. Hungary’s revolutionary government has an interest in honoring obligations because default would isolate it financially and make reconstruction impossible.
Ein solches Vorgehen würde die Räterepublik nach außen hin kreditunfähig und den Wiederaufbau ihrer Wirtschaft unmöglich machen.
English translation: Such a course would render the council republic incapable of credit abroad and make the reconstruction of its economy impossible.
Schumpeter’s optimism is not sentimental but transactional. He stresses that German-Austria has “important counter-services” to offer and that Hungary’s behavior toward Austria will become a European test of its creditworthiness. The argument thus turns private claims into matters of national survival and international reputation. Austrian capital in Hungary is not merely private property; it is treated as part of the economic balance sheet of the new state.
Wir sind uns vollkommen bewußt, daß die Ansprüche des Kapitals in Ungarn ein hochwertiges Aktivum der deutschösterreichischen Volkswirtschaft bilden und daß wir darauf nicht verzichten können, ohne zusammenzubrechen.
English translation: We are fully aware that the claims of capital in Hungary constitute a highly valuable asset of the German-Austrian national economy and that we cannot renounce them without collapsing.
The structure of the article moves from reassurance, to demands, to a theory of revolutionary creditworthiness, and finally to a report on negotiations. Schumpeter presents ongoing talks with the Hungarian legation as friendly, advanced, and likely to be formalized through agreements on coupon payments and related financial questions. The closing prediction is deliberately calming: Hungarian upheaval should not, he argues, translate into losses for Austrian holders.
Mit Deutschösterreich wird sich Ungarn auseinandersetzen, die deutschösterreichischen Besitzer werden ihre Coupons eingelöst und ihre Wertpapiere zurück erhalten und aus den Umwälzungen in Ungarn voraussichtlich keine Verluste erleiden.
English translation: Hungary will come to terms with German Austria; the German-Austrian holders will have their coupons redeemed and their securities returned, and will presumably suffer no losses from the upheavals in Hungary.
The relevance of the text lies in its compressed display of post-Habsburg financial statecraft. Schumpeter treats capital claims, bank accounts, securities, industrial shares, and coupons as instruments through which a fragile successor state defends its solvency. At the same time, he advances a broader proposition: even revolutionary governments must seek credit, and therefore must submit to the discipline of international obligation.
This work was divided into 1 sections when it entered the library's research corpus—an apparatus for search and citation, not necessarily the author's own table of contents. Each title opens its summary.
Put a question to this work; the Librarian answers from its 1 sections and cites the passage.
Ask the Librarian