Hans Bayer, Gelenkter Freihandel (1948)

Hans Bayer’s serial journal article presents an extract from his lecture at the International Economic Congress in Genoa. The supplied text includes its opening installment and continuation, moving from a criticism of unconditional free-trade doctrine to a programme for planned European economic integration. Its central claim is that free trade requires institutions capable of creating and sustaining its conditions. Planning, transitional protection, and enforceable international agreements are therefore instruments of integration, not necessarily obstacles to it.

Bayer begins by questioning the classical assurance that removing trade restrictions benefits every participating country. In his account, Smith and Ricardo assume that resources displaced by cheaper imports will find more productive employment elsewhere. If that assumption were universally valid, the restrictions imposed between the world wars and afterward could largely be attributed to governmental stupidity. Bayer acknowledges nationalist policy failures but argues that unconditional liberalism also causes harm by treating conclusions derived from an abstract model as universally applicable prescriptions.

Er vergißt, daß seine Ableitungen nur unter bestimmten eng begrenzten Annahmen gelten, die in der Wirklichkeit nicht gegeben sind.

English translation: It forgets that its deductions hold only under certain narrowly limited assumptions that do not obtain in reality.

This distinction between model and reality organizes the article. Drawing on Schüller, Bayer separates increased exports from increased domestic production and welfare. Exports can rise because unemployment reduces consumption at home, leaving more goods available for sale abroad. Nor does the closure of import-competing firms ensure that export industries will absorb their workers. The relevant test is consequently not trade volume alone, but income formation, employment, and the distribution of benefits. Imports of luxury goods sharpen the problem: a small wealthy group may gain while displaced workers bear the costs.

Bayer then connects this argument with Keynesian developments in trade theory. His discussion of Joan Robinson and Kaldor challenges the claim that protection must always injure the country adopting it. Under specified demand conditions, tariffs can improve national real income or the terms of trade. Crucially, Bayer reports Kaldor’s qualification that the tariff remain below a critical level and provoke no foreign retaliation. These arguments do not establish an unrestricted case for protection; they explain why individual states may have rational reasons to resist liberalization, and why integration cannot depend on doctrinal reassurance alone.

Postwar European impoverishment makes these theoretical distinctions urgent. Limited export capacity constrains access to imports, while unrestricted purchasing can direct scarce resources toward less necessary goods rather than essentials.

Es ist klar, daß es einen wesentlichen Unterschied ausmacht, ob die Bedürfnisse der Menschen oder ihre Kaufkraft die Gestaltung der Produktion beeinflussen.

English translation: It is clear that it makes a substantial difference whether people’s needs or their purchasing power influence the organization of production.

Bayer’s contrast is distributive as well as economic: effective demand reflects income, not the urgency of need. War damage creates a further obstacle to the classical adjustment mechanism. Where destruction has undermined competitiveness across much of an economy, displaced productive resources cannot simply move into viable alternative industries. Immediate liberalization without accompanying measures could therefore devastate whole national economies rather than produce efficient specialization.

The continuation adds monopoly and depression to the critique. Drawing on theories of imperfect competition, Bayer rejects the assumption that monopolies arise solely behind tariff barriers and disappear when those barriers fall.

Es werden also auch nach Aufhebung der Zollschranken Monopolorganisationen bestehen bleiben.

English translation: Monopoly organizations will therefore continue to exist even after tariff barriers have been abolished.

Removing protection may transform separate national monopolies into an oligopoly or a larger international monopoly, rather than restore competition. The result could be reduced capacity and higher prices. Accordingly, free trade does not automatically locate production where costs are lowest: concentrated power can determine industrial location on other grounds. Specialization also exposes small economies to crises, particularly when their industries produce goods whose demand is highly elastic. These sections extend the argument from adjustment costs to the continuing structure and instability of an integrated market.

Bayer nevertheless regards European economic union as indispensable. His constructive section makes the apparent paradox of “directed free trade” explicit:

Gerade um eine solche Entwicklung sicherzustellen, ist es notwendig, daß in den einzelnen Ländern eine einheitliche Planung des Außenhandels gewährleistet ist.

English translation: Precisely in order to ensure such a development, it is necessary that coordinated planning of foreign trade be guaranteed in the individual countries.

The development at issue is a negotiated, gradual dismantling of controls through multilateral agreements and an agreed sequence of reforms. National coordination must be supplemented by broader planning against monopolistic domination and by transitional assistance for economies temporarily unable to compete. A European union may initially require protection against economically stronger states, but Bayer rejects permanent external closure: worldwide integration must remain the planned destination.

Enforcement completes this institutional argument. Using Goetz-Briefs’s concept of marginal morality, Bayer argues that a state pursuing immediate advantage can compel others to adopt defensive restrictions. A central authority able to impose measures under specified conditions is needed to prevent such conduct from unraveling cooperation. Yet even successfully organized free trade is only one prerequisite of recovery. An international monetary order and reforms addressing the economic and social causes of depression are also necessary. The article’s distinctive contribution is thus to redefine liberalization as a coordinated political achievement: its benefits depend on reconstruction, competitive conditions, distribution, and institutions, rather than on the removal of barriers alone.