Kreditpolitische Wirtschaftstherapie

This file is a compact dossier of Schumpeter’s Bonn-period public lectures rather than a monograph. It joins the 1926 “Kreditpolitische Wirtschaftstherapie” to the 1928 “Lohngestaltung und Wirtschaftsentwicklung,” showing the same analytic posture in monetary and labor policy: intervention is possible, but only when guided by the causal structure of capitalist development and constrained against inflationary wish-thinking.

In the 1926 lecture, Schumpeter starts from war inflation and the peace inflation that followed it. He does not idealize gold: gold currency is exposed to accidents of production, international distribution, and American monetary policy. Yet he defends the return to gold or a gold-core currency because it supplies discipline after the experience of inflation.

Denn alle Mängel des Automatismus des Goldes wiegen leicht gegenüber dem nach den Erfahrungen der Inflationszeit überragenden Vorteil, daß eine aus Gold bestehende oder an ein bestimmtes Verhältnis zum Gold gebundene Währung eben nicht willkürlich vermehrt werden kann.

English translation: For all the shortcomings of the gold automatism weigh lightly against the advantage—outstanding after the experiences of the inflation period—that a currency consisting of gold, or bound to a definite ratio to gold, simply cannot be increased at will.

Gold matters here less as doctrine than as an institutional brake. It makes preservation of the currency the central bank’s governing rule and subordinates discount policy, foreign-exchange policy, and ordinary bank conduct to that rule. From this Schumpeter turns to the real object of credit policy: not money in the narrow sense, but bank credit. Against the older textbook view of banks as mere lenders of prior savings, he insists on their power to create purchasing power.

Allein es ist eben nicht so, daß die Banken ausleihen würden, was sie von andern Leuten bekommen.

English translation: But the fact is precisely that the banks do not lend out what they receive from other people.

This is the lecture’s hinge. If banks create means of payment, then credit expansion can reshape prices, exchange rates, production, and the cycle. Schumpeter links this monetary mechanism to development itself: new enterprises are financed before their products exist, so credit first increases demand for labor, materials, and capital goods without a simultaneous increase in the commodity stream. The boom is therefore not merely an accident of psychology but part of credit-financed innovation. Later, when new goods appear and loans are repaid, purchasing power flows back to the banks and the price movement reverses.

Schumpeter distinguishes this developmental “credit inflation” from state paper inflation: it is normally tied to productive transformation and tends to liquidate itself. But the same mechanism becomes dangerous when credit is used to conceal losses, rescue frozen positions, or make bad business appear sound through cheap money. Hence credit policy can be therapeutic only if it remains disciplined. It may restrain abnormal booms, mitigate abnormal depressions, and perhaps support industries of national importance or high labor absorption; but its precision makes it politically and technically perilous.

Mit der Waffe bewußter, planmäßiger Kreditinflation und -deflation kann man offenbar den Pulsschlag des Wirtschaftslebens wirksam beeinflussen.

English translation: With the weapon of conscious, planned credit inflation and deflation one can evidently influence the pulse of economic life effectively.

The attached 1928 wage lecture applies the same anti-voluntarist reasoning to distribution. Schumpeter rejects both employer and labor slogans as substitutes for statistical and theoretical analysis. He argues that nineteenth-century capitalism greatly raised real wages, that the immediate margin for redistribution is narrow, and that durable improvement depends on productivity and capital formation rather than nominal wage pressure.

Schon vom Standpunkt der statistischen Ziffern beruht alle Hoffnung auf Verbesserung der Lebenshaltung der Arbeiter auf der Erhöhung der Produktivität, und nur darauf könnte sie auch in einer sozialistischen Organisationsform beruhen.

English translation: Even from the standpoint of statistical figures, every hope of improving the workers' standard of living rests on raising productivity, and only on this could it rest in a socialist form of organization as well.

His theoretical claim is that an economy enforces proportions among wages, prices, profits, quantities, and investment. A general wage rise cannot create general prosperity simply by enlarging mass purchasing power, because the same cost changes recur across industries. Sustainable wage gains must express higher productivity or stronger real demand for labor. Germany’s wage problem is therefore inseparable from taxation and capital accumulation: fiscal burdens that weaken saving and investment also weaken the future basis of real wages.

As a whole, the file does not present laissez-faire indifference. Schumpeter treats credit institutions, wage formation, and taxation as real policy levers. But he insists that they work only within capitalist development’s causal limits: bank-created credit finances innovation and cycles; convertibility restrains monetary abuse; productivity governs real wages; and social policy cannot escape the conditions of future growth.