Fritz Machlup, Industrialisierung, Autarkisierung, Arbeitslosigkeit. Was der Verein für Sozialpolitik darüber denkt (1932)

Machlup’s German article examines the Dresden meeting of the Verein für Sozialpolitik through the relationship between economic explanation and political action. Its opening distinction frames his assessment of debates over industrialization, unemployment, and national self-sufficiency:

Der Wirtschaftstheoretiker denkt, der Wirtschaftspolitiker lenkt (— oder will lenken).

English translation: The economic theorist thinks, the economic politician steers (— or wants to steer).

Although Sombart’s agenda appeared to invite an indictment of industrialization, Machlup finds that participants largely defended it while opposing autarky. He reconstructs this tendency from discussion rather than formal resolutions. Such agreement challenges the accusation that economists inspired prevailing policies, but agreement itself cannot establish scientific truth:

Die Ergebnisse wissenschaftlicher Arbeit und fachmännischer Beratung sind ja schließlich keine Angelegenheiten, über die man abstimmen kann.

English translation: The results of scientific work and expert counsel are, after all, not matters upon which one can vote.

The central theoretical discussion concerns technological unemployment. Responding to Manuel Saitzew, Machlup distinguishes the restoration of purchasing power after mechanization from the reemployment of displaced workers. Lower costs can benefit consumers, entrepreneurs, or remaining employees without necessarily providing jobs for those dismissed. Compensating expenditure therefore does not by itself answer the decisive question:

Wird in der unbehinderten Wirtschaft die Freisetzung von Arbeitern durch Einstellung von Arbeitern an anderen Stellen kompensiert?

English translation: In the unhampered economy, is the release of workers compensated by the hiring of workers in other places?

Machlup insists that compensation theory must examine money-wage flexibility. Yet he differentiates technical changes according to their capital requirements and allows that accompanying capital formation may enable reemployment without wage reductions. He also challenges comparisons between percentage changes in employment and costs when their denominators differ, and insists that machinery production enter the analysis. His argument separates the productivity benefits of technical progress from the conditions under which displaced labor is absorbed.

Gerhard Colm broadens industrialization to include relations between industry and agriculture, industrial expansion into agricultural territories, and changes in production processes. Machlup accepts that industrial development abroad need not destroy established export markets: industrial economies also trade with each other. He objects, however, to treating monopoly, price fixing, and wage rigidity as constitutive features of industrialization. This conflates productive transformation with institutional restrictions and risks presenting planning as the remedy for disturbances partly produced by intervention.

Alexander Rüstow’s proposal that intervention accelerate adjustment instead of protecting threatened producers receives qualified approval. Machlup recognizes its challenge to vested interests but doubts its practical feasibility. Knowledge of causal economic relationships does not furnish policymakers with exact knowledge of the equilibrium toward which an economy is moving. The proposal consequently offers a stronger criticism of protective intervention than a practicable program of directed adjustment.

Machlup’s own account treats unemployment as excess labor supply at the prevailing wage. He distinguishes why demanded wages exceed equilibrium wages from why equilibrium wages have fallen. Union pressure or state action may obstruct adjustment, while technical change can alter labor’s marginal productivity as workers move into less remunerative uses. Additional capital may modify the outcome. The methodological point is to replace explanations invoking “industrialization” indiscriminately with specified causal conditions, while allowing wage reductions to be discussed analytically rather than automatically interpreted as political declarations.

The autarky debate extends this argument. Trade restrictions redirect production toward less profitable uses, reducing labor’s marginal productivity and thereby lowering wages—or increasing unemployment when wages remain rigid. Machlup contrasts von Dietze’s concern for military food security with Emil Lederer’s statistical challenge to autarky as an inevitable historical tendency. Lederer also identifies dangers to intellectual life. Machlup reports broad resistance to autarky alongside support for regional trading arrangements and temporary tariffs. Against protectionist appeals to factor immobility, he argues that immobility strengthens the case for free trade.

The closing discussion highlights Mises’s defense of theory and Spiethoff’s acknowledgment of timeless economic laws. Lederer’s medical analogy returns to the opening problem: societies reject unpleasant economic prescriptions, embrace attractive remedies, and blame experts for the consequences. Machlup thus combines evidence of economists’ opposition to autarky with criticism of the insufficiently precise unemployment theories advanced at the meeting. Professional resistance to destructive policy, he suggests, requires rigorous causal explanation as well as agreement.