Eric Voegelin · Year unverified
Eric Voegelin’s journal article argues for a statutory commitment to stabilizing the dollar’s purchasing power. Moving from American business practices through agricultural price evidence to the Federal Reserve’s institutional conflicts, it supports the supplementary bill introduced by James G. Strong on 6 March 1928 and concludes with its full text in German. Its central claim is that monetary stabilization cannot securely depend on administrative discretion: an explicit legal objective must protect it against governmental pressure and sectional interests.
Voegelin begins by defining stabilization through the expectations on which economic activity depends:
Darunter ist der Versuch zu verstehen, die Geschäftserwartung für möglichst lange Zeiträume berechenbar und schwankungsfrei zu machen.
English translation: This means the attempt to make business expectations predictable and free from fluctuations over the longest possible periods.
Budgeting, dividend smoothing, seasonal adjustments, forecasting, and coordinated production all serve this purpose. Industrial coordination also signals an ethical change: destructive competition gives way to hierarchical leadership in which smaller firms follow larger enterprises without being driven out of existence. Protective tariffs shelter these arrangements. Agriculture, however, remains exposed to international competition, while changes in gold’s value threaten the entire stabilization effort through unexpected redistributions of wealth.
Drawing on statistics assembled from John R. Commons, Voegelin contrasts agricultural and industrial price fluctuations and examines cotton harvests. Falling cotton output accompanied by falling prices, and rising output accompanied by rising prices, indicate that monetary conditions can overwhelm the expected relationship between supply and price. Deflation injures farmers twice: their crops yield less money with which to discharge fixed debts, and contracting industrial activity reduces demand for their products. Subsequent recovery cannot compensate farmers who have already lost their farms. Stabilizing purchasing power thus concerns the survival of economic actors, not merely the averaging out of fluctuations.
Strong’s bill would give legal force to a policy Voegelin considers already operative:
Das Federal Reserve Board verfolgt also seit 1923 faktisch eine Politik der Stabilisierung des Goldwertes und des Preisniveaus.
English translation: Thus, since 1923 the Federal Reserve Board has in fact pursued a policy of stabilizing the value of gold and the price level.
The historical distinction between practice and mandate is decisive. A price-level objective had been proposed in 1913 but dropped amid public fears of entrusting “price regulation” to a few officials. Wartime inflation and postwar deflation subsequently made aggregate price movements more intelligible. Yet the Board initially expressed its stabilization policy through guarded references to general credit conditions. For Voegelin, this evolution leaves the policy vulnerable because neither its continuation nor its public accountability is assured.
He identifies two institutional dangers. First, legal independence from the Treasury did not prevent practical subordination: in 1919, the Treasury’s need to place government securities cheaply overrode monetary restraint. A statutory objective would not eliminate such pressure, but would give public opinion a standard against which to challenge departures. Second, members appointed to contribute regional and occupational expertise instead acted as representatives of competing interests. The creation of a special farming representative in 1922 exposed this failure:
Damit war anerkannt, daß der ursprüngliche Gedanke eines unparteiischen Boards, das die Interessen der Gesamtwirtschaft vertreten sollte, zusammengebrochen war.
English translation: This acknowledged that the original conception of an impartial Board, intended to represent the interests of the economy as a whole, had collapsed.
Voegelin interprets the divided vote over the 1927 discount-rate reduction as a conflict between agricultural and industrial regions. Measures facilitating crop sales could consequently appear as inflationary favoritism rather than impartial economic management. His proposed conceptual move is to fix the governing objective in law, allowing members’ expertise to inform its implementation instead of reopening struggles over monetary policy’s purpose.
The appended bill extends this project beyond a price-level mandate. It links preservation of the gold standard and dollar purchasing power to stability in trade, industry, agriculture, and employment, within the capacities of monetary and credit policy. Research into policy instruments, gold supply, international influences, and purchasing-power measures would accompany publication of decisions and reports to Congress. The article’s significance lies in joining monetary stabilization to institutional design: technical knowledge becomes publicly accountable through a legally specified purpose, while stable purchasing power supplies a condition for more dependable economic expectations.
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