Josef Herbert Fürth: Contribution to “Divergencies in the Development of Recovery in Various Countries” (1939)

Josef Herbert Fürth’s round-table contribution examines whether democratic countries can adopt totalitarian economic policies without abandoning democratic government. His argument proceeds from a comparison of national recovery experiences to an account of Germany’s full-employment mechanism, then identifies the political coercion needed to sustain it. The central issue is not simply whether public expenditure can generate employment, but whether the controls accompanying German expenditure can operate within democratic institutions.

Fürth narrows the comparison by excluding Russia and Japan, whose social and economic conditions he considers too different from Western standards. Germany and Italy provide the relevant cases. Italy’s attempt, beginning in 1935, to imitate German policy combined large government expenditures and deficits with depressed wages, yet failed to achieve full employment. Citing Professor Welk’s figures, Fürth reports that Italian unemployment in 1937 was ten times its level when fascism came to power. He draws a methodological lesson from this divergence:

So it appears that imitating the German methods is, in itself, not sufficient for achieving the German results, even under similar political conditions.

Political similarity therefore does not establish that an economic programme is transferable. Fürth describes the German system as spending whatever is necessary to achieve full employment through public works, chiefly armaments, while counteracting inflation through comprehensive business controls, restraints on prices and wages, taxation, and government borrowing. Employment creation and the suppression of excess purchasing power form an interdependent mechanism.

Some resources supporting that mechanism were peculiar to Germany. Fürth points to the immobilization and partial confiscation of foreign holdings, valued at about 20 billion Reichsmarks, and assets belonging to actual or prospective emigrants, valued at about 8 billion. The major democracies, as creditor nations, could not obtain comparable resources from foreign holdings. Nor could they compel people to emigrate and surrender their property while remaining democracies. These examples establish practical and political limits to imitation, but Fürth locates the decisive difficulty in control over economic activity.

But I think it is impossible, by democratic methods, to keep wages down as soon as full employment is reached.

Full employment changes workers’ bargaining position. With unemployment no longer restraining their demands, workers have reason to seek higher living standards, strikes become more likely to succeed, and employers may themselves be willing to raise wages. Fürth argues that the resulting increases would initiate inflation and disrupt the German mechanism. His conceptual move is to treat full employment not merely as the policy’s achievement, but as the condition that makes its continued operation politically coercive.

Preventing workers from acting would require ideological propaganda insulated from counterargument, the destruction of independent labour organizations, and force against those whom propaganda failed to persuade. Fürth connects these requirements directly to the loss of freedom of speech and due process. His conclusion makes the choice explicit:

I think, therefore, that totalitarian economic policies are inseparable from totalitarian political methods: if we want the totalitarian guaranty of full employment, we must accept its political consequences; but if we prefer democracy, we must look for another way of fighting unemployment.

The contribution’s relevance lies in this institutional test of policy transfer: recovery cannot be assessed independently of the freedoms sacrificed to maintain it. Fürth does not develop an alternative democratic employment programme here. He instead establishes the boundary that such a programme must respect, refusing to treat the German employment result as separable from its coercive political conditions.