Emil Lederer, Die Volkswirtschaft im Kriege (1914)

Emil Lederer’s periodical article examines how Germany’s economy must be reorganized after mobilization. Its central distinction is between overcoming the immediate monetary panic and sustaining production through a potentially prolonged war. The successful provision of emergency liquidity does not establish that the productive economy can continue unchanged. War transforms the population, available labour, supplies, and demand so fundamentally that measures appropriate to an ordinary commercial crisis may become dangerous. Moving from the initial credit disturbance through shortages and military expenditure to investment policy, Lederer argues for coordinated production and circulation of goods usable in the present.

The opening locates economic work within the national war effort: those remaining at home must sustain the internal strength on which military success ultimately depends. Lederer assumes that Germany will largely escape becoming a battlefield and praises the authorities’ initial response. Yet his confidence in military organization contrasts with his account of private economic uncertainty. Mobilization removes workers, changes the prospects of whole industries, and destroys confidence in deferred payment. The normal chain of credit linking raw-material producers, manufacturers, and consumers gives way to demands for immediate cash. Increased note issuance, supported by state authority, permits settlement and limits financial collapse. International isolation paradoxically facilitates this monetary response, although it subsequently constrains material provision.

The decisive transition comes when Lederer separates this liquidity emergency from the deeper disruption of production:

In der gegenwärtigen Lage aber leiden wir nicht an einer Ungleichmäßigkeit der wirtschaftlichen Entwicklung, sondern darunter, daß die Voraussetzungen unserer Volkswirtschaft weggefallen oder grundsätzlich verändert sind.

English translation: In the present situation, however, we suffer not from unevenness in economic development, but from the fact that the underlying conditions of our national economy have disappeared or fundamentally changed.

An ordinary crisis follows excessive investment and labour commitments in particular branches; wartime dislocation instead makes the existing productive apparatus inappropriate to society’s altered requirements. Restricted imports threaten industrial materials and agricultural feed, while geographically concentrated industries suffer especially sharply. Military demand does not simply replace civilian spending: the army purchases different goods from those previously consumed by the men it mobilizes. Meanwhile, agriculture and armaments accumulate purchasing power that other industries must learn to serve. Lederer therefore proposes substitutes for unavailable imports, inventories and economical allocation of materials, and redirection of export industries toward domestic buyers. Cultivating unused land and expanding agricultural machinery can support domestic provision even where production costs exceed those of former imports.

His argument then turns from industrial adaptation to the monetary consequences of war finance. State purchases absorb substantial goods without generating corresponding goods for civilian exchange. Payments financed through note issuance consequently create nominal purchasing power without an equivalent increase in available products:

Für die Währung bedeutet das dann, daß sich die Masse der Zahlungsmittel vermehrt, ohne daß die verfügbaren Gütermengen reichlicher geworden wären.

English translation: For the currency, this means that the mass of means of payment increases without the available quantities of goods having become more abundant.

Lederer does not claim that general price increases have already occurred. He attributes their absence to military price controls, municipal provisioning, and reduced private demand. Nor does money’s return to banks as deposits remove the underlying imbalance. Agriculture and military suppliers retain growing monetary claims, and their subscriptions to war loans make them creditors of the wider community. The monetary problem thus concerns the relationship between purchasing power and real production, not merely the location of cash.

This analysis grounds his qualified warning against large emergency public works and other long-term investments. Their wages become immediate demand, especially for food, whereas their products become available only later. In an economy unable readily to supplement supplies through imports or borrow abroad, expanding such projects can intensify pressure on scarce present goods. Lederer does not reject investment altogether: necessary adaptations must proceed, but adding labour to existing establishments is preferable where possible to constructing new facilities requiring amortization. Employment policy must respect the balance between current consumption and future productive capacity.

Daher ist die Belebung der Industrie von Fertigfabrikaten, die Forcierung des Absatzes von Industrieerzeugnissen die wirtschaftlich wichtigste Aufgabe der Gegenwart.

English translation: Therefore, reviving the finished-goods industry and intensifying sales of industrial products is the economically most important task of the present.

The reason is circulation. When manufacturers produce goods that farmers actually purchase, money spent on agricultural products returns to industry and supports renewed production without repeated additions to the means of payment. Long-term construction, by contrast, can leave purchasing power accumulated in agriculture while offering no immediate goods in return. Lederer’s distinction between present and future goods makes the timing of production central to wartime economic stability.

The conclusion advocates an overview of food, materials, labour, and military requirements, followed by coordinated allocation in consultation with interested groups. Defence needs take priority; beyond them, production should answer effective demand rather than consume scarce resources on unsaleable goods. Profitability alone may mislead when isolation prevents the usual international adjustments. His criterion is explicit:

Das wichtigste ist, daß sich möglichst alle Arbeit in derselben Wirtschaftsperiode in einem verwendbaren Gut reproduziert, nicht erst in den Jahren des Friedens einen Ertrag bringen wird.

English translation: The most important thing is that, as far as possible, all labour reproduces itself in a usable good within the same economic period, rather than yielding a return only in the years of peace.

The article’s significance lies in this shift from financial reassurance to the material and temporal conditions of economic survival. Even production requiring more labour can be justified if it sustains current exchange. Under the burden of war expenditure, national saving cannot be presumed: keeping the economy alive means maintaining the circulation of consumable goods.