Joseph Alois Schumpeter · 1919
This file is a confidential governmental memorandum appended to a cabinet protocol: a single financial plan. Schumpeter’s scope is the fiscal rescue of postwar Deutschösterreich under uncertain peace obligations, a collapsing krone, food-import constraints, and vanished credit. Its thesis is stark: bankruptcy is neither necessary nor useful; the state must accept the real effects of depreciation, stop further note issue, rebuild revenues around the new price level, and mobilize private credit—especially foreign-credit relations—through the wealth levy.
The opening diagnosis treats the crisis as moral and institutional as much as budgetary. Deficit, hoarding, import failure, and the sale of art treasures all signal that ordinary finance has broken down.
Wir müssen immer wieder zur Notenpresse greifen und verfallen dadurch einer steigenden Demoralisation.
English translation: We must again and again resort to the printing press, and thereby fall prey to a mounting demoralization.
Schumpeter therefore begins by defining “bankruptcy” narrowly. Depreciation is not default; default is repudiation, and it would destroy banks, public bodies, enterprises, welfare institutions, households, and ultimately the state’s cohesion.
Ich verstehe darunter eine Repudiierung der Staatsschulden, eine Verweigerung der Zahlungsverpflichtungen des Staates.
English translation: By this I mean a repudiation of the state debts, a refusal of the state's payment obligations.
The plan is structured in two parts: first, the definitive budget after roughly four years; second, the emergency financing of the intervening three-year crisis. The future budget comes first because present credit depends on showing a credible road to order.
His key monetary move is to reject restoration of the prewar krone. Deflation would raise the real debt burden, reward rentiers, force wage cuts, and prolong depression. Stabilization must mean no further inflation, not revaluation.
So unerschütterlich das Hauptprinzip der Politik sein muß, nicht eine einzige Note mehr zu drucken, so sicher ist, daß wir uns an einem Versuche der Hebung des Geldwertes verbluten würden.
English translation: However unshakable the guiding principle of policy must be — not to print a single further note — it is equally certain that we would bleed ourselves dry in any attempt to raise the value of money.
This implies a distributive settlement. Wages and state salaries must gradually rise toward the new price level, while rentiers absorb the real loss already imposed by depreciation. Schumpeter’s argument is not sentimental egalitarianism but a politics of productive survival.
Keine Hilfe gibt es für den Rentner.
English translation: There is no help for the rentier.
The budgetary program then raises state income to match depreciated money: selective income-tax and inheritance-tax reform, enforceable fees, higher indirect taxes, and concentrated excises on beer, wine, spirits, tobacco, railways, post, meat, sugar, luxury consumption, and housing space. The measures are severe, but they are meant to appear as a coherent public order rather than scattered exactions. A remaining deficit is acceptable if it proves governable.
Part II turns to the immediate bottleneck: foreign exchange and domestic credit without printing money. Food, raw materials, debt service, and industrial repair require finance before future taxes yield revenue.
Jeder Finanzplan für die nächsten drei Jahre ist ein Mißerfolg, wenn er nicht zeigt, wie wir ausländische Guthaben bekommen und uns im Innern ohne neue Noten behelfen können.
English translation: Any financial plan for the next three years is a failure if it does not show how we can obtain foreign balances and manage domestically without issuing new notes.
The wealth levy is therefore the hinge of the plan. It is not a miracle cure, but the instrument for reducing debt while compelling capitalists to place foreign assets and credit relations at the state’s disposal.
Die Vermögensabgabe ist nicht die Rettung, sondern der wichtigste Schritt auf dem Wege zur finanziellen Rettung.
English translation: The capital levy is not the salvation, but rather the most important step on the road to financial salvation.
Schumpeter rejects an objective seizure of assets because it would damage the very private credit channels needed for imports. Even socialization must wait on fiscal order.
Ich bin Anhänger einer geordneten Sozialisierung, eine solche ist aber nur bei einem geordneten Budget möglich.
English translation: I am an adherent of an orderly socialization, but such a thing is possible only on the basis of an orderly budget.
The memorandum’s relevance lies in this fusion of emergency administration and political economy. Schumpeter accepts the irreversible loss embedded in inflation while trying to prevent its continuation; he preserves nominal state obligations while making their real burden bearable; and he treats money, taxation, wages, debt, and class sacrifice as one system of state survival.
This work was divided into 5 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 5 sections and cites the passage.
Ask the Librarian