Joseph Alois Schumpeter: 1919 National Assembly speech

This file is a single ministerial parliamentary speech: Schumpeter, finance minister of German-Austria, addresses the Constituent National Assembly on a provisional budget law. The immediate scope is narrow—maintaining budgetary legality until a definitive budget can be presented—but the argument is a compact theory of fiscal survival after imperial collapse. German-Austria, he argues, can endure only if Parliament restrains expenditure, social peace sustains credit, and the peace settlement leaves the state financially viable.

He begins by explaining why a normal budget is not yet possible: statistics still belong to old Cisleithania, provincial and central data are missing, new spending claims arrive daily, and peace terms remain unknown. Administrative delay thus becomes a symptom of state formation. Schumpeter turns the issue back on the deputies, making budgeting a moral and political task shared by the whole legislature.

Bedenken Sie, meine Damen und Herren, daß von Ihrem Verhalten die Zukunft dieses Staates abhängt!

English translation: Consider, ladies and gentlemen, that the future of this state depends on your conduct!

The provisional budget contains one politically decisive figure: a deficit of 2,000 million Kronen, perhaps more. Schumpeter refuses both concealment and panic. In normal times such a deficit would be fatal; after the collapse, before raw materials, production, and settled borders return, it is an emergency burden to be governed rather than a reason to despair.

Das ist eine furchtbar ernste Tatsache, aber keine Tatsache, wegen der man verzweifeln müßte.

English translation: That is a terribly grave fact, but not a fact on account of which one would have to despair.

The speech’s main conceptual move is to make finance inseparable from social order. Against accusations of reckless Banknotenwirtschaft, Schumpeter defends crisis expenditures as the price of keeping Vienna stable between Budapest and Munich. He does not glorify spending—he says it must be reduced rapidly—but rejects coercive austerity as politically and financially self-defeating, because credit itself depends on confidence and peace.

Wir haben eine einheitliche Front in sehr weitem Maße aufrechterhalten, nicht nur eine Einheitsfront des Proletariats, sondern eine Einheitsfront, die in wesentlichen Fragen noch weiter geht.

English translation: We have maintained a united front to a very great extent, not only a united front of the proletariat, but a united front that goes still further on essential questions.

His analysis of coverage distinguishes inherited monetary disorder from deliberate note-printing. The state uses short-term treasury bills to absorb liquidity created by the redemption of Austro-Hungarian Bank cashier’s notes and war-loan coupons; the note stock will rise, but not, he insists, simply because the government orders the press to run. This is a technical defense with political consequences: if trust in the state collapses, even this improvised credit mechanism will stop.

Unsere Banknotenmenge wird steigen, aber zunächst nicht wegen der Kreditbedürfnisse des Staates.

English translation: Our stock of banknotes will rise, but not initially on account of the state's credit needs.

Yet Schumpeter is not complacent about inflation. Higher money incomes feed prices, weaken the crown abroad, and make food imports dearer; his resistance to wage and salary increases is presented as an anti-inflationary necessity, not a denial of social need.

Allerdings ist das Problem der Banknoteninflation an sich ein sehr ernstes. Das ist die Hauptursache unserer hohen Preise.

English translation: To be sure, the problem of banknote inflation is in itself a very serious one. That is the main cause of our high prices.

The most dramatic limit of the argument is the peace treaty. A punitive settlement would make correct finance and the existing political course impossible, perhaps even legitimating a move to different principles of social-economic life. Schumpeter’s fiscal liberalism is therefore conditional: orthodoxy presupposes that the state is permitted to live.

Einen Frieden, der uns finanziell auf die Knie zwingt, können wir in keiner Weise bestehen, weder finanziell noch sozial.

English translation: A peace that forces us financially to our knees we can in no way endure, neither financially nor socially.

This condition also governs the proposed Vermögensabgabe. A capital levy can be justified only if citizens can believe that payment restores currency, interest burdens, and debt administration; if it merely prepares a transfer to the enemy, it becomes indefensible. The speech therefore proceeds from budget delay, to deficit, to credit mechanics, to inflation, to the political preconditions of a wealth levy. Its relevance lies in showing Schumpeter as a practitioner of crisis finance: monetary technique, parliamentary discipline, and social legitimacy are treated as one problem.

Eine Finanzpolitik ist nur möglich, wenn sie getragen wird von dem Bewußtsein des ganzen Volkes.

English translation: A financial policy is possible only if it is borne up by the consciousness of the entire people.

The closing appeal is severe but democratic. Schumpeter asks not for secret bureaucratic rule or force, but for public persuasion, criticism, and cooperation. His optimism is not sentimental; it is the hope that self-discipline and trust can keep a defeated successor state from turning a financial emergency into social collapse.