Richard Kerschagl, Vollbeschäftigung und Inflation (1953)

Kerschagl’s essay argues against the hope that full employment can be secured by monetary technique. It begins by placing Keynes within a longer line of reformers who, in Kerschagl’s view, repeat John Law’s error: trying to replace a missing production factor, capital, with credit. The central claim is that uncovered credit does not abolish scarcity; it creates purchasing power before consumable goods exist and thereby forces present consumers to finance future production through lower real consumption or higher prices.

Wundermittel, die etwas derartiges verhindern können, gibt es nicht und jeder, der etwas Gegenteiliges behauptet, täuscht sich selbst oder — was noch schlimmer ist — andere.

English translation: There are no miracle cures capable of preventing such an outcome, and anyone who claims the contrary is deceiving himself or—what is worse—others.

This passage condenses the essay’s main conceptual move. Inflation is not an accidental policy failure but the likely expression of a temporal mismatch between income formation and goods formation, especially when credit is used to produce capital goods whose consumer benefits arrive only gradually. Kerschagl’s anti-Keynesianism is therefore a real-factor argument: money can redistribute command over goods, but it cannot conjure the capital that makes additional employment productive.

The second part anchors the thesis in recent Austrian experience. Kerschagl allows that political emergencies may make inflation the price of state preservation, and he stresses that no theory can exactly predict the moment or degree of depreciation. Yet such uncertainty only explains why the policy is tempting; it does not make it harmless. Austria’s postwar employment was maintained through wage-price agreements, redistribution, overtaxation, and damage to the one path toward genuine full employment, new capital formation.

die „Vollbeschäftigung um jeden Preis" sehr wohl mit einem Preis bezahlt worden ist und dieser Preis hieß Inflation.

English translation: "Full employment at any price" has in fact been paid for at a price, and that price was called inflation.

His discussion of Dobretsberger’s proposal to finance hydropower by note issue gives the argument its clearest test case. The plan may be technically possible because most inputs are domestic, but printed domestic money is not foreign exchange, and new purchasing power would appear long before electricity enlarged the consumer-goods supply. If heavy taxes accompany the issue, the policy becomes partly self-cancelling and partly forced saving. Kerschagl’s point is not that investment is unnecessary, but that it must be paid for by real sacrifice rather than disguised as monetary creation.

From there the essay turns constructive. The failure of full employment is defined as a failure to combine production factors in the required proportions, usually because capital is lacking. It is not enough that something be produced: it must be sellable at home or abroad without artificial demand expansion or premature consumption of the social product.

Nichtvollbeschäftigung ist das Resultat der Nichtergänzung und Ergänzbarkeit des erforderlichen Einsatzes von Produktionsfaktoren, und zwar meistens des Produktionsfaktors Kapital.

English translation: Less-than-full employment is the result of the failure to supply, and of the possibility of supplying, the requisite input of factors of production, and most often of the factor capital.

The remedy follows with deliberate austerity. New capital must be formed through saving and work, not through fiscal or monetary illusion. Kerschagl links weak capital formation to historical and institutional causes: three inflations have damaged the psychology of saving; wrong price and interest policies have distorted the money sector; anti-capitalist sentiment, overconsumption, heavy taxation, social insurance, and public pension burdens have displaced private accumulation. The argument is thus cultural and institutional as much as technical.

Eine solche Neubildung ist nur durch Sparen und Arbeiten möglich, eine für viele gewiß nicht sehr sympathische Lösung, die aber durch keine andere vollgültig ersetzt werden kann.

English translation: Such new formation is possible only through saving and working—a solution certainly not very congenial to many, but one that cannot be fully replaced by any other.

The final section shifts the employment problem from nominal demand to productivity. Kerschagl rejects the belief that greater output per worker destroys jobs; lower costs and prices expand real purchasing power, improve export competitiveness, and open new marginal groups of buyers. Productivity, not protected inefficiency, is what turns capital and labor into saleable output.

Erhöhte Arbeitsleistung je Arbeiter zerstört nicht Arbeitsplätze, sondern schafft neue.

English translation: Increased output per worker does not destroy jobs; it creates new ones.

The essay closes by turning this argument into a theory of responsibility. Noninflationary full employment requires productivity gains in all sectors, together with will and sacrifice, and it rejects belief in the state’s omnipotence. Its final policy claim is that the state may choose inflation in an emergency, but it cannot abolish the real cost of capital scarcity.

Der Schlüssel zu möglichster Vollbeschäftigung ohne Begleiterscheinungen inflatorischen Charakters liegt ausschließlich in verstärkter Produktivität.

English translation: The key to the greatest possible full employment without accompanying phenomena of an inflationary character lies exclusively in increased productivity.