Emil Lederer: Intervention on Coal Mining (1920)

Emil Lederer’s recorded commission intervention, published in 1920 in volume II, pp. 629–632, as intervention no. 70, examines the proposed socialization of coal mining through an exchange with Rathenau and Vogelstein. The discussion moves from entrepreneurial incentives and coal-price formation to the power of organized economic groups, then to compensation and the acquisition of mines. Its central concern is whether institutional arrangements can counteract interests and expectations that formal pricing rules alone leave intact. Lederer presents collective ownership as a stronger means of redirecting distributive conflict, without suggesting that it immediately abolishes that conflict.

His opening objection concerns the incentives created by the proposed regulation of production costs and markups. The intended operation of a rule must be distinguished from the expectations of those subject to it. Wartime economic administration has encouraged entrepreneurs to anticipate higher markups when costs rise. Their representation in the deciding authority, and their expectation that the arrangement will be temporary, reinforce their belief that increases can be obtained. Lederer therefore questions whether the proposed safeguards will restrain conduct in practice.

Ich glaube nicht, daß die Tendenz, die Selbstkosten zu steigern, durch die Kautelen, welche Sie eingeführt haben, in einer wirksamen Weise bekämpft werden würden.

English translation: I do not believe that the tendency to increase production costs would be effectively counteracted by the safeguards you have introduced.

The objection is institutional and psychological: formally specified safeguards may lack credibility when inherited habits and influence over decisions work against them. Lederer then qualifies the period during which these pricing arrangements matter decisively. Against Rathenau, he defines the transition through the substantial difference between German and world-market coal prices, rather than through currency depreciation alone. Once that difference disappears, domestic prices cannot indefinitely remain above world prices. Material discussed in recent sessions suggests that convergence may already be close, or achieved for particular kinds of coal.

Vogelstein interprets this appeal to international competition as evidence that socialization ultimately rests on free competition. Lederer accepts the importance of competition while challenging its characterization as a general feature of existing private industry. International markets exert pressure only where the costs and conditions of transport make competing supplies accessible.

International wirkt die freie Konkurrenz aber nur in denjenigen Gebieten, in welchen die Frachtlage eine Konkurrenz gestattet.

English translation: Internationally, however, free competition operates only in those areas where freight conditions permit competition.

This qualification prevents world-market prices from becoming an abstract, universally effective constraint. Competition depends on the geographical and economic conditions under which coal can reach buyers. Lederer also distinguishes competitive pressure from the actual organization of private producers: syndicates have limited competition and allowed returns to arise through restrictions on output.

Es hat also eine freie Konkurrenz, solange Syndikate bestehen, nicht gegeben, und es konnten sich daher in der Privatwirtschaft durch Einschränkung der Produktion Renten bilden.

English translation: Thus, free competition has not existed as long as syndicates have existed, and rents could therefore arise in the private economy through restrictions on production.

The relevant comparison is consequently between existing private organization and the proposed organization of socialized industry, not between public control and an ideal competitive market. Lederer locates protection against rent extraction in countervailing forces within the socialized governing body. These would prevent restrictions of production intended to raise either prices or wages. His proposal is thus not unrestricted control by producers or workers: its justification depends on an institutional balance capable of checking sectional interests.

Rathenau shifts the discussion toward contemporary behaviour. Employees and miners demand subsidized operations, while economically powerful groups seek rents from one another. Lederer accepts this diagnosis but disputes the remedy. His opponents expect an equilibrium of wages and prices eventually to emerge under the existing order. He argues that transferring the means of production to the community offers a more effective way of changing the psychological setting. Under private ownership, workers continue to confront the apparent wealth of the entrepreneur. Ownership reform would alter that setting, although the argument does not demonstrate that distributive struggles would disappear.

The financial discussion similarly tests seemingly straightforward calculations against their assumptions. Rathenau regards annual amortization of 50–100 million marks as manageable through coal prices. Lederer notes that the calculation uses prewar investment values: 1½ per cent of five billion marks yields 75 million. Compensation demands allowing for monetary depreciation would produce substantially larger sums. Leaving eventual takeover dependent on political decisions over thirty years would also introduce prolonged uncertainty into production.

Finally, Lederer clarifies that his criticism of a rent guarantee concerns preserving differential rent through prices and markups recognizing previous profitability, rather than guaranteeing returns to the worst enterprises. His compensation formula combines investment items with an earnings-value component; unprofitable operations can contribute negatively to the latter. The formula must therefore be assessed as a whole. Socializing the industry need not entail purchasing every uneconomic mine. In responding to objections, he adds that prevailing high prices leave few actual loss-making cases and that substantial assets also enter the assessment. The intervention joins institutional design to practical valuation: collective control must address both the distribution of economic power and the terms on which productive assets are acquired.