Hans Bayer, Vollbeschäftigung und Wirtschaftsfreiheit (1952)

Hans Bayer’s journal article is the second installment of a four-part discussion of economic freedom. Its three sections examine corrective social policy, Keynesian full-employment policy, and social security. Their common argument is that economic freedom cannot be secured merely by compensating for the failures of an otherwise unchanged economic order. The introductory framing distinguishes freedom from private concentrations of power from the capitalist conception of an economy freed from obligations to the common good. Bayer develops this distinction through the opposition between Wirtschaftsmechanik, reliance on market mechanisms supplemented by corrective interventions, and Wirtschaftsgestaltung, deliberate shaping of economic development.

The first section distinguishes social policy that repairs adverse outcomes from social policy that changes the conditions producing them. Bayer compares the former to a teacher who repeatedly marks grammatical errors without teaching correct sentence construction:

Von einer Lösung des Problems der Wirtschaftsordnung könnte man zweifellos nur dann sprechen, wenn es gelänge, die Fehlerquellen selbst weitestgehend auszuschalten.

English translation: One could undoubtedly speak of a solution to the problem of the economic order only if it were possible to eliminate the sources of error themselves as far as possible.

The distinction concerns both production and distribution. Corrective social policy primarily improves the position of labour and redistributes income, but does not directly organize production. Bayer invokes the complementarity of productive factors: improving one factor without developing the others eventually becomes economically unproductive. Redistribution encounters a further constraint because profitability remains the driving force of capitalist development. Measures that reduce profits or alter the balance between consumption and investment may therefore weaken the mechanism upon which they depend. These are arguments for connecting social provision to productive development, rather than dismissing its importance. Bayer also distinguishes European constraints from the extensive unmet needs of impoverished populations in Asia and Africa.

The longer second section asks not whether full employment is desirable, but how it can be achieved. Bayer reconstructs Keynes’s explanation of equilibrium with unemployment through entrepreneurs’ investment decisions, expected returns, and interest rates. In his account, higher demand, monetary expansion, and lower interest rates encourage investment; rising prices can also reduce real wages while nominal wages remain unchanged. Where private investment proves insufficient, government expenditure generates employment directly and indirectly through the multiplier, while increased consumer demand can stimulate further investment through the accelerator. Additional credit, money creation, and deficit budgets finance these interventions.

Bayer acknowledges Keynes’s foundational importance for modern economics, but judges these remedies insufficiently concerned with productivity and the structure of production. His criticism turns on the status of employment as a policy objective:

Gerade diese Grundeinstellung ist aber völlig einseitig, denn Vollbeschäftigung und soziale Sicherheit sind nicht unmittelbare Ziele der Wirtschaftspolitik, sondern Folgeerscheinungen einer geordneten volkswirtschaftlichen Entwicklung.

English translation: Yet precisely this basic orientation is entirely one-sided, for full employment and social security are not immediate objectives of economic policy, but consequences of an orderly development of the national economy.

Employment created through expenditure is thus not, for Bayer, sufficient evidence of a sound economic order. His objection to Keynes’s example of employing people to dig holes crystallizes the difference between generating jobs and expanding socially useful production. He also identifies a tension within redistributive demand management: taxing high incomes may increase consumption, yet taxing away profits may undermine the entrepreneurial expectations expected to initiate recovery.

The United Nations proposals of 1949 and 1951 provide a qualified contrast. Bayer welcomes the demand for production and investment programmes as recognition of deficiencies in a narrowly employment-centred approach. Nevertheless, he regards international price stabilization through a “shock absorber” plan as a short-term response incapable of overcoming a depression comparable to that of the 1930s. His conceptual conclusion is that policies incorporating economic programmes already move beyond economic mechanics toward economic shaping and planning. Their greater scope, rather than the slogan of full employment itself, matters for economic freedom.

The final section extends the argument to social security. Bayer distinguishes security for a particular person or firm from security for the economically vulnerable collectively and for the national economy. Preserving every existing position would freeze economic development. Technical output per worker-hour, however, is not automatically economic progress: the relevant standard is a lasting increase in aggregate benefit. Minimum wages cannot guarantee employment when sales collapse, and wage guarantees can bridge temporary or seasonal unemployment without sustaining incomes through a prolonged depression. Similarly, permanent protection of an identical job would obstruct the occupational shifts required by expanding production.

Soziale Sicherheit im modernen Sinne bedeutet dynamische Stabilisierung, das heißt die Sicherung aufsteigender Wirtschaftsentwicklung ohne weitgehende Rückschläge.

English translation: Social security in the modern sense means dynamic stabilization, that is, securing upward economic development without extensive setbacks.

This formulation reconciles security with change by locating security in the trajectory of the whole economy, rather than in the immobility of individual positions. The article’s relevance lies in this distinction between corrective welfare measures and structural economic policy. Bayer makes employment and security tests of development, but supplies no detailed planning blueprint here. His conclusion establishes the need for a different organizing principle: market mechanics, even supplemented by social corrections, cannot by themselves deliver the positive economic freedom he seeks.