Emil Lederer: Compensation in the Socialization of Coal Mining (1920)

Emil Lederer’s recorded commission intervention, published in volume II, pages 524–526, addresses compensation for enterprises transferred into collective economic ownership. Taking State Secretary Hirsch’s remarks as his starting point, Lederer asks what principles should govern compensation within socialization. His central distinction is between a defensible standard of compensation and a practicable method of calculating it. Owners should receive what an ordinary sale would yield, but neither the diversity of enterprises nor contemporary monetary depreciation permits that principle to be translated into a single reliable formula.

The intervention proceeds from differences among forms of socialization to the assessment of valuation methods, then to the choice between statutory calculation and case-specific judgment. Lederer first distinguishes municipal acquisition of individual enterprises from the transfer of an entire key industry. These transactions differ in scale and economic consequences; consequently, a compensation rule suitable for municipalization need not suit coal mining. Differences also arise within industries: an established enterprise occupying a stable market position presents another valuation problem from a business undergoing substantial change. New investment may require separate treatment, with the relevant time boundary itself varying by industry.

Zunächst einmal würde ich es prinzipiell nicht für notwendig halten, sich auf eine einheitliche Formel in allen Fällen der Sozialisierung zu einigen.

English translation: First of all, I would not consider it necessary in principle to agree on a uniform formula for all cases of socialization.

This refusal of uniformity is not a refusal of general principles. Lederer seeks to make the compensation problem manageable by distinguishing economically different cases before selecting valuation rules. His substantive benchmark is the price an entrepreneur could obtain through a normal sale. Compulsion changes the circumstances of the transaction, but should not create an additional entitlement beyond that benchmark.

Der Umstand aber, daß der Unternehmer gezwungen wird, zu verkaufen, soll ihm nicht ein Vorrecht auf eine höhere Entschädigung gewähren gegenüber der Situation, in welcher er selbst verkaufen würde.

English translation: The fact that the entrepreneur is compelled to sell, however, should not confer on him an entitlement to higher compensation than in the situation in which he would sell voluntarily.

The ordinary-sale principle limits compensation without denying it. Lederer accepts compensation as the premise of the discussion and argues against a premium for the compulsory character of the transfer. He also explicitly separates this principle from any completed formula: identifying the appropriate economic standard does not yet determine how its amount can be established.

His most developed criticism concerns reproduction value. Asking what it would cost to recreate German coal mining is, he argues, an economically unreal counterfactual. Rebuilding an entire industry would itself alter wages and prices throughout the economy; its costs cannot coherently be estimated while holding the surrounding economic conditions fixed. Nor does calculating the present cost of sinking a single shaft resolve the problem. That narrower calculation still fails to provide an economically justified basis for valuing the existing industry. The conceptual move is to reject a seemingly concrete engineering calculation because it abstracts from the economic changes its own hypothetical operation would produce.

With reproduction value rejected, and cost-based valuation treated as impracticable in light of Hirsch’s remarks, Lederer turns to market value and use value. He recalls that the previous year’s socialization commission had emphasized these approaches while also considering original establishment and investment costs. He asks whether market and use values could be combined into a resultant, or whether legislation should instead supply criteria for judicial decisions. Agreement between the parties remains preferable wherever possible.

The Austrian socialization commission supplies a revealing comparison. There, entrepreneurs preferred a precise formula even if it might produce unfavorable results. Its principal elements were the earnings value of the last peacetime years and the present investment value established from the accounts, averaged together and supplemented by detailed provisions. Lederer does not reproduce those provisions. The example instead demonstrates the attraction of calculability: an owner could know exactly what socialization would bring. Predictability is thus a genuine institutional advantage, not simply a device for maximizing compensation.

Yet that advantage does not make a formula feasible under current conditions. Lederer stresses that economic development is continuous and that neither market values nor use values can be definitively established. Monetary depreciation makes the attempt to fix a dependable calculation especially problematic.

Nach meinem Gefühl ist es heute in dem Prozeß der Geldentwertung, in welchem wir stehen, nicht möglich, eine solche Formel zu konzipieren. Das ist meine persönliche Auffassung.

English translation: In my judgment, it is not possible today, amid the process of monetary depreciation in which we find ourselves, to devise such a formula. That is my personal view.

His preferred response is to establish general criteria centered on market and use value, weighting them according to the concrete case. Market value might matter more in municipalization, use value more in other branches of industry. The consequence is a loss of advance certainty: the entrepreneur cannot read the definitive compensation amount directly from the law, but must negotiate with the expropriating authority or submit the matter to a judge. Lederer acknowledges that a general calculable formula would be desirable; he nevertheless considers it presently unattainable.

The intervention’s significance lies in this tension between predictable law and economically defensible valuation. Socialization requires compensation rules, but rules must recognize differences of industrial scale, investment history, and monetary conditions. Lederer offers neither a finished tariff nor an unrestricted appeal to discretion. He proposes bounded judgment guided by an ordinary-sale benchmark and differentiated valuation criteria, while candidly accepting the uncertainty that this approach leaves for owners.