Emil Lederer: Staatsbudget, Zahlungsbilanz und Wechselkurs (1921)

Emil Lederer’s newspaper article examines the connections between public finance, international payments, and exchange rates in the postwar capitalist economy. Its organizing question is why British newspapers and American businessmen demand the elimination of European state deficits. Why should foreign capitalist powers care about Germany’s recovery when German weakness might appear to strengthen their position? Lederer’s answer turns apparent rivalry into economic interdependence: foreign producers need solvent customers, and those customers must recover the productive capacity that makes international payment possible. The article moves from the ordinary mechanisms of trade and private credit to the exceptional position of the state, before drawing a pointed conclusion about military expenditure and selective economy.

Lederer begins with the crisis of accumulating inventories. Exporting goods on credit can temporarily relieve producers, but favorable accounts do not guarantee eventual payment. International trade consists of innumerable private transactions, and their continuation depends on buyers earning the means to pay. At the level of a national economy, this ultimately requires production and exports. Credit can postpone settlement; it cannot permanently substitute for the productive activity on which settlement depends.

Under ordinary conditions, individual exporters need not investigate the entire economy of every destination country. Lederer attributes this relative security to the discipline exercised by private interest:

Denn die kapitalistische Wirtschaftsordnung sorgt ja im großen ganzen und auf die Dauer dafür, daß kein Kaufmann, kein Industrieller mehr Kredit findet als er verdient, also mehr Produkte beziehen kann, als er zu bezahlen vermag.

English translation: For the capitalist economic order ensures, by and large and in the long run, that no merchant, no industrialist obtains more credit than he earns, and thus can obtain no more products than he is able to pay for.

This is a qualified claim about the system’s tendency, not an assertion that fraud or insolvency disappears. Lederer explicitly acknowledges deception and fraudulent bankruptcies. Nevertheless, the pressure on private businesses to balance their accounts normally permits trade to function across differences in currency, productivity, and legal order. He then identifies the limitation of this argument: a national economy includes the state as well as private businesses, and the state can continue spending beyond its receipts.

Before the war, public borrowing concealed the external consequences of persistent deficits, particularly in militarized states. Domestic and foreign savers supplied resources in the expectation of eventually receiving equivalent value. War and currency depreciation exposed the fragility of that expectation. Lederer interprets the deficit through the relation between national consumption and production:

Das staatliche Defizit war schon damals ein Anzeichen dafür, daß in der Volkswirtschaft mehr verbraucht als produziert wurde, aber es fanden sich immer Leute, welche dieses Mißverhältnis durch Hingabe von Ersparnissen ausglichen.

English translation: Even then, the state deficit was an indication that more was being consumed than produced in the national economy, but there were always people who offset this imbalance by providing savings.

The loss of lenders’ confidence explains the new insistence on budgetary restraint. Creditors now ask not simply whether goods can be sold, but how debtor countries will eventually pay. Lederer does not demand that economies emerging from four years of war immediately discharge every import liability. He instead requires credible prospects of reconstruction. Restored production could improve the currency and allow foreign suppliers to gain both from their sales and from favorable exchange-rate movements.

The decisive qualification is that excess consumption during reconstruction need not be economically sterile. A damaged economy may have to consume more than it currently produces, but it should do so productively, creating facilities that increase future output. Lederer consequently resists treating every public deficit as equally wasteful. Railway deficits may finance repairs and acquisitions that restore and improve operating capacity. Unemployment assistance also has a significance that cannot be read directly from its budgetary cost:

Die Arbeitslosen-Unterstützungen, deren Betrag meist sehr übertrieben wird, verhüten gefährliche soziale Ausbrüche und sind daher als Versicherungsprämie auch der ausländischen Kapitalisten und ihrer Guthaben bei uns zu betrachten.

English translation: Unemployment benefits, whose amount is usually greatly exaggerated, prevent dangerous social upheavals and should therefore be regarded as an insurance premium also for foreign capitalists and their claims on us.

Here social protection becomes part of the security of international investment. Spending that preserves social stability may protect the very creditors demanding economy. This is the article’s crucial distinction: the economic consequences of expenditure depend on its purpose, not merely its appearance as a charge on the state budget.

By contrast, Lederer classifies military and administrative expenditure as unproductive because it generates no corresponding increase in present or future production. Where such spending cannot be met from the population’s savings, it diminishes the capacity of citizens, and therefore of the national economy, to pay. The experience of financing armaments, followed by war, currency destruction, and repayment in depreciated money, has made lenders unwilling to repeat the transaction.

The conclusion translates this account of credit into a defense of socialist disarmament policy. Reducing armaments and military budgets is economically necessary as well as politically justified. More work alone cannot restore the German currency; resources must also be saved in the right places. Lower Reichswehr and administrative expenditure would, Lederer argues, strengthen confidence, attract foreign credit, improve the exchange rate, and reduce prices.

Es ist eben nicht nur wichtig, daß, sondern auch woran gespart wird.

English translation: What matters is not only that savings are made, but also what they are made on.

The article’s relevance lies in this refusal to separate budgetary policy from production, international solvency, and the composition of expenditure. Lederer takes the capitalist demand for balanced finances seriously while redirecting it against militarism rather than reconstruction or social protection. His closing accusation—that capitalist leaders insufficiently understand their own machinery, while the people pay the bill—makes the economic explanation a critique of those who prescribe indiscriminate sacrifice.