Hans Bayer, Das 3. Lohn-Preis-Abkommen und die Grundprobleme der österreichischen Volkswirtschaft (1949)

Hans Bayer’s journal article examines Austria’s third wage–price agreement as an emergency response to problems that postwar economic policy had failed to address. Its central distinction is between temporarily suppressing economic distress and reorganizing the productive economy that generates it. Bayer neither dismisses the agreement nor accepts the expectation that it can secure lasting recovery. The article’s three sections move from structural deficiencies, through their alarming manifestations, to the contradictory demands placed on financial policy. Its opening establishes the limits within which the agreement should be judged:

Man mag vieles dagegen einwenden; nach Jahren einer im Grunde planlosen Wirtschaftspolitik kann man aber von einer Übergangsmaßnahme — und mehr konnte das Lohn-Preis-Abkommen von vornherein nicht sein — nicht die dauernde Lösung entscheidender Aufgaben der österreichischen Volkswirtschaft erwarten.

English translation: One may raise many objections to it; but after years of economic policy that was fundamentally unplanned, one cannot expect a transitional measure—and the wage–price agreement could never have been more than that—to provide a permanent solution to the decisive tasks facing the Austrian economy.

The first section redirects debate from who should bear reconstruction’s burdens to how increased production could reduce them. Planning, for Bayer, means coordinating the use of available resources, not merely compiling investment requests. He rejects the claim that it necessarily destroys private initiative, citing Italy’s state-supported industrial programme. Austria’s “Long-term-Programm,” by contrast, combined independently prepared sectoral plans whose technical compatibility did not establish their economic coherence. Enterprises’ inflated investment demands produced an excessive total and an undue preference for primary production. The conceptual move is from individual projects’ desirability to their contribution within a coordinated national economy.

This coordination must include labour as well as machinery and raw materials. Bayer does not equate productive work exclusively with manual work; commercial and administrative activities become unproductive when their scale is disproportionate to the production they support. He sees this imbalance in both public administration and private business:

Es ist klar, daß unproduktive Arbeit die produktive Tätigkeit belastet, ihren Erfolg schmälert und unter Umständen vernichtet, zum Beispiel, wenn durch Steigerung der Kosten keine Absatzmöglichkeiten mehr gegeben sind.

English translation: It is clear that unproductive work burdens productive activity, diminishes its success and, under certain circumstances, destroys it—for example, when rising costs eliminate opportunities for sales.

The issue is therefore functional proportion, not a categorical condemnation of office work. Administrative reform and employment offices capable of directing labour belong to productive reconstruction even when unemployment is not imminent. Likewise, agricultural and industrial development require coordinated planning. Foreign trade should inform domestic investment beforehand: building capacity and only subsequently discovering inadequate export markets reverses the necessary sequence. Taxation must also recognize income’s double function as household support and an incentive to individual effort. Across these examples, Bayer argues that isolated policies fail when they ignore economic interdependence.

The second section distinguishes visible symptoms from underlying causes. Luxury imports can create an appearance of prosperity while concealing national impoverishment. Comparing the situations after 1918 and 1945, Bayer warns that the later starting point was no better and possibly worse. Yet this comparison is not an assertion of inevitable failure: Austria’s inability before 1938 to secure employment and adequate incomes becomes a warning against repeating earlier policy errors. Recovery depends on decisive reorganization rather than reassurance drawn from appearances.

The budget deficit is similarly significant because of its causes, not simply because it exists. Bayer explicitly allows that modern public finance recognizes circumstances in which deficits need not damage an economy. Financial measures may nevertheless conceal structural deficiencies without correcting them. His medical analogy grants the wage–price agreement a legitimate emergency role:

Wenn z. B. der Arzt durch bestimmte Mittel unmittelbar hohes Fieber bekämpft, so beseitigt er damit noch nicht die Ursachen der Erkrankung; trotzdem mag es oft notwendig und lebenserhaltend sein, das Fieber herabzudrücken, um Zeit für andere Maßnahmen zu gewinnen.

English translation: If, for example, a doctor uses particular remedies to combat a high fever directly, this does not yet eliminate the causes of the illness; nevertheless, reducing the fever may often be necessary and life-preserving in order to gain time for other measures.

Temporary stabilization can thus be necessary without being sufficient. Bayer attributes the emergency partly to neglected planning and economic direction—repeatedly demanded by the trade-union federation—and partly to mistaken control measures. The agreement’s proper purpose is to gain time for reforms, not to substitute for them.

The final section, “Squaring the Circle,” exposes the incompatible expectations attached to the agreement. State expenditure exceeded receipts, substantial expenditure reductions were not discussed, and conventional revenue measures were nevertheless expected to avoid burdening the population. A nine-percent average increase in gross wages could not confidently offset higher food prices and utility and transport charges, since these increases would also raise costs elsewhere. Falling demand might subsequently force prices and excessive margins downward, but could also weaken investment; higher costs posed particular risks to exports. Bayer condenses the contradiction:

Wie immer man aber die Fernwirkungen der Belastung abschätzen mag, zweifellos kann auch dem Lohn-Preis-Abkommen nicht die Lösung der Quadratur des Zirkels gelingen, nämlich die Bevölkerung zu belasten, ohne sie zu belasten.

English translation: However one may assess the longer-term effects of the burden, the wage–price agreement undoubtedly cannot succeed in squaring the circle either, namely in burdening the population without burdening it.

He extends this criticism to optimistic forecasts of tax receipts and a proposed loan launched after public warnings of state bankruptcy. Even the agreement’s longer-term investment incentives remain inadequate: more generous relief could have been justified if directed toward enterprises whose expansion served national economic needs. Undifferentiated assistance confuses private expenditure with increased productive capacity. The article’s lasting analytical contribution is its insistence that stabilization, distribution and development cannot be treated separately. Emergency compromise is defensible, but only purposeful coordination can turn the time it purchases into durable recovery.