Joseph A. Schumpeter, “Aktuelle Wirtschaftsprobleme” (1921)

This file is a short newspaper interview, not a systematic treatise: Schumpeter answers three current questions on Austrian postwar finance—asset valuation under currency depreciation, industrial finance bills, and the danger of a cyclical reversal. Its central thesis is pragmatic and transitional: monetary disorder has distorted prices and incentives, but abrupt deflation would be socially and economically disastrous; policy must stabilize the crown while keeping industry liquid enough to survive until world recovery arrives.

Schumpeter first reframes the fashionable contrast between “Substanzwert” and “Ertragswert.” Substance value is not metaphysical; it names assets whose prices have lagged behind depreciation.

Was man mit dem Worte Substanzwert meint, ist lediglich die Tatsache, daß eine Reihe von Vermögensobjekten nicht entsprechend der Geldentwertung und zwar sogar nicht einmal entsprechend der inneren Geldentwertung im Preise gestiegen ist.

English translation: What is meant by the term 'intrinsic asset value' [Substanzwert] is merely the fact that a range of asset items have not risen in price in line with the depreciation of money, and indeed not even in line with the internal depreciation of money.

He accepts the attraction of land, houses, and some shares as protection against money depreciation, but adds two limits: such assets may become illiquid in a credit squeeze, and purchases financed by credit can collapse when loans are called. His conceptual move is to restore time and liquidity to valuation. “Substance” is defensible only if future earning capacity remains plausible.

Das Schlagwort von den Substanzwerten hat also mit einigen Einschränkungen gewiß seine Berechtigung.

English translation: The catchword of 'intrinsic asset values' therefore, with certain qualifications, certainly has its justification.

The warning is directed against indiscriminate flight from money into things. Schumpeter rejects the idea that physical or corporate “substance” has value apart from viable use.

Ein lebensunfähiges Unternehmen hat weder einen Ertrags-, noch einen Substanzwert, denn ein produktiver Apparat, mit dem man nichts machen kann, ist überhaupt wertlos.

English translation: An unviable enterprise has neither an earnings value nor an intrinsic asset value, for a productive apparatus with which nothing can be done is wholly worthless.

The second section turns to whether industrial finance bills discounted by the Austro-Hungarian Bank are inflationary. Schumpeter concedes the principle: if bills do not correspond to additional goods, they resemble note issue.

Wenn man die Frage so stellt, so müßte man allerdings sagen, daß die Diskontierung eines Finanzwechsels, dem keine Warenvermehrung gegenübersteht, prinzipiell ebenso Inflation bedeute, wie wenn der Staat direkt Noten emittierte.

English translation: If the question is posed in this way, one would indeed have to say that the discounting of a finance bill against which no increase in goods is set constitutes, in principle, just as much inflation as if the state directly issued notes.

But he insists on an economic distinction between state note-finance and credit extended to industry. The debtor, the channel of spending, and the effect on expectations matter. Industrial credit is less immediately consumer-price-inflaming than state expenditure, and private obligations command more confidence than state promises. Schumpeter’s anti-deflationary argument is social as much as monetary: England’s deflation shows that a policy of hard money can break employment and social order.

Wir haben ja gesehen, welche Folgen die Deflationspolitik in England hatte.

English translation: We have seen what consequences the policy of deflation had in England.

The third section links this to the business cycle. Austria’s falling money value has been destructive, yet it also shielded domestic production from the world depression by keeping work and sales moving.

Unsere Situation ist dadurch charakterisiert, daß das stete Sinken des Geldwertes, so zerrüttend und traurig es auch ist, uns davor bewahrt hat, in die Weltwirtschaftskrise hineingezogen zu werden.

English translation: Our situation is characterised by the fact that the steady decline in the value of money, however disruptive and sorrowful it may be, has preserved us from being drawn into the world economic crisis.

Stabilization will therefore not be painless. Schumpeter expects a new adjustment not only to a stable crown but also to altered world-market conditions.

Ein neuer Anpassungsprozeß, nicht nur an eine stabile Krone, sondern auch an neue Verhältnisse des Weltmarktes, wird notwendig, schmerzvoll und verlustreich sein.

English translation: A new process of adjustment, not only to a stable krone but also to new conditions of the world market, will be necessary, painful, and full of losses.

His remedy is temporary central-bank support for banks and industry, preferably at a high interest rate to ration credit to urgent needs. This is not a general doctrine of easy money; it is an emergency bridge until world recovery—especially construction and capital renewal abroad—can pull Austria forward.

Da ist doch das gegebene Gegenmittel reichliche Kreditgewährung seitens der Notenbank an die Bankwelt und Industrie.

English translation: Here the obvious remedy is ample extension of credit by the central bank to the banking world and to industry.

The essay’s relevance lies in its early interwar theory of stabilization without liquidationism. Schumpeter does not deny inflation, asset bubbles, or maladjustment; he denies that formal monetary purity is enough when deflation would destroy firms, employment, and social peace. The closing move joins cyclical credit policy to institutional liberalism: recovery also requires relieving private initiative from taxes and controls that prevent productive adaptation.