Hans Bayer’s conference report and commentary examines the Verein für Sozialpolitik’s meeting on the problems of full employment. It selects significant arguments from the proceedings and develops an increasingly critical assessment of Keynesian economics. The report distinguishes three questions: whether postwar Europe presents the conditions presupposed by Keynes’s policies; whether his theory adequately explains unemployment; and whether economic reconstruction should rely on market self-regulation or deliberate economic coordination. Bayer’s central contention is that neither aggregate demand management nor unrestricted market mechanisms can resolve unemployment without attention to productive capacity, sectoral proportions, and income distribution.
The meeting brought together theoretical and practical perspectives. Bayer records papers by Erich Schneider on employment theory, Walther Hoffmann on full employment in a growing economy, Theodor Wessels on economic policy, Karl Schiller on credit, Waldemar Koch on fiscal policy, and Heinrich Rittershausen on foreign trade. His account organizes their contributions thematically rather than reproducing the papers individually. Although most speakers accepted much of Keynes’s theory, the applicability of its policy prescriptions to Germany remained contentious. Bayer initially preserves this distinction between analytical tools and historically conditional remedies.
The first section argues that European unemployment arose principally from wartime destruction, postwar disruption, barriers between countries, and, in Germany, the refugee problem. Germany’s regional disparities resist treatment through undifferentiated national aggregates: the report contrasts unemployment rates of 24.3 percent in Schleswig Holstein and 16.5 percent in Niedersachsen with 2.6 percent in Württemberg-Hohenzollern. It also notes strong entrepreneurial willingness to invest, contrary to the investment reluctance assumed in the policy diagnosis under discussion.
The decisive conceptual distinction is between a full-employment production level and a bottleneck level. Scarce productive resources can halt expansion before all willing workers obtain employment. Credit must therefore finance additional capacity while allowing employment to follow its growth. Electricity supply provides the example: investment in water power could raise the productive ceiling. Demand expansion alone, however, could drive prices upward where output cannot respond.
Das heißt: In Deutschland würde jene Inflation, die nach Keynes erst nach Erreichung der Vollbeschäftigung einsetzen könnte, bereits bei Erreichung des Engpasses eintreten.
English translation: That is: in Germany, the inflation that, according to Keynes, could begin only after full employment had been attained would already occur when the bottleneck was reached.
The report thus treats inflation and unemployment as potentially simultaneous consequences of constrained production, rather than successive stages of aggregate expansion. Its initial conclusion is conditional: even if Keynes’s theory were correct, his policies could succeed only in particular areas of the European economy.
The second section moves from applicability to theoretical validity. Bayer reports objections to the assumed relationship between rising income, consumption, and saving, particularly when individual behavior is generalized to aggregate magnitudes. He also challenges the direct derivation of policy from abstract models whose assumptions have not been brought into correspondence with concrete conditions. The Austrian school’s principle of diminishing abstraction supplies his alternative methodological reference. His strongest criticism concerns the neglect of the material organization of production:
Er denkt vor allem in Geldgrößen und vernachlässigt die zugrunde liegenden realen Vorgänge.
English translation: He thinks primarily in monetary magnitudes and neglects the underlying real processes.
This claim connects the earlier bottleneck analysis to a broader objection: expenditure and employment totals do not establish whether investment produces useful output or sustains appropriate relations between economic sectors. Bayer also argues that Keynes’s rejection of nominal wage reductions nevertheless permits reductions in real wages. Production and distribution must therefore be examined together. He credits A. Hansen with introducing dynamic elements and recognizes the significance of economic maturity, but maintains that later Keynesian developments retain the fundamental explanatory weaknesses.
Bayer assigns economic theory a task distinct from identifying the immediate triggers of particular crises. Statistics and economic history investigate those circumstances; theory should explain the general relationships through which depressions recur. This distinction supports his rejection of full employment as an independently sufficient economic objective. The example of an Egyptian economy in which everyone worked exposes, for him, the inadequacy of employment alone as a measure of economic success.
Es ist vielmehr so, daß, wenn Produktion und Einkommensgestaltung dem Wirtschaftsziel entsprechen, sich als Folge Vollbeschäftigung ergibt.
English translation: Rather, when production and the shaping of incomes accord with the economic objective, full employment follows as a consequence.
Although the report does not fully specify that objective, its conceptual hierarchy is clear: employment should follow from appropriately organized production and income formation, not substitute for them.
The final section rejects the inference that Keynesian shortcomings vindicate laissez-faire. Bayer contests demands to let market mechanisms operate without interference before judging their limitations. Historical experience and theoretical reasoning already permit such judgment; likewise, failures of particular controls do not logically prove that abolishing all planning would improve matters. Public direction remains necessary for capital formation and sectoral coordination.
The report closes with proposals to improve labor mobility through wages and housing, enabling workers to move toward available employment. Bayer regards these measures as valuable but incomplete:
Im Verlaufe der Diskussion wurde von mehreren Seiten geltend gemacht, daß diese partiellen Maßnahmen zweifellos wichtig seien, daß sie aber doch erst ihren vollen Sinn erhalten und entsprechende Erfolge erzielen, wenn sie nicht isoliert, sondern im Rahmen eines Gesamtwirtschaftsprogramms durchgeführt werden.
English translation: During the discussion, several participants argued that these partial measures were undoubtedly important, but that they acquired their full meaning and achieved corresponding results only when implemented not in isolation but within an overall economic program.
Bayer’s report documents a reconstruction-era debate while advancing its own position: effective employment policy requires coordinated attention to real productive constraints and distribution, beyond both aggregate Keynesian remedies and confidence in automatic market adjustment.
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