Marianne von Herzfeld: Die Geschichte als Funktion der Geldbewegung (Zum Problem der inflationistischen Geschichtstheorie) (1926)

Marianne von Herzfeld’s German-language article examines the claim that monetary expansion, especially increased supplies of precious metals, drives economic progress and explains capitalism’s emergence. Published in 1926, it moves from a critical survey of inflationist historical interpretations through monetary theory to a comparison of Spain and northwestern Europe. Its central distinction is between money’s contingent historical effects and a universal law of development: additional purchasing power can facilitate productive transformation, but does not necessarily produce it.

Herzfeld begins with Paul Barth’s classification of Brooks Adams and extends her discussion to Werner Sombart and other monetary writers. The explanatory ambition under examination reaches beyond modern capitalism to the fortunes of ancient civilizations:

Auf- und Abstieg der Völker des Altertums bis zu ihrem völligen Untergange als Folge ausbleibender Goldfunde.

English translation: The rise and decline of the peoples of antiquity, down to their complete demise, as a consequence of the failure of gold discoveries.

This formulation exposes the scale of the causal claim: discoveries of precious metals, or their absence, become explanations for civilizations’ rise and collapse. Sombart provides Herzfeld’s principal modern case because he assigns American gold and silver a decisive role in capitalism’s development while recognizing additional causes. The argument links capitalism to an enlargement of private fortunes:

Denn letztere sei durch die Entstehung des Kapitalis- mus charakterisiert, welche »eine Vergrößerung der privaten Vermögen« zur Voraussetzung habe.

English translation: For the latter, it is said, is characterized by the emergence of capitalism, which has as its presupposition "an enlargement of private fortunes."

For Herzfeld, however, the need to explain growing private wealth does not establish that a larger monetary stock increases productive capacity. Nor does acknowledging multiple historical causes solve the problem if monetary expansion is still assigned an inherently progressive tendency.

Drawing on Max Weber’s counterfactual method, she asks whether capitalism could have developed without the historical discoveries of precious metals. Chronological coincidence cannot decide the issue: technical development might increase metal extraction, rather than result from it. Conversely, historical counterexamples alone cannot supply a theoretical refutation. What requires examination is the mechanism connecting additional money, higher prices, profits, and production.

Herzfeld reconstructs this mechanism through an algebraic analysis of producers, costs, and scarce inputs. Producers who first receive additional expenditure may enjoy exceptional profits and expand output. Expansion, however, requires bidding resources away from other uses, raising costs and eventually weakening the incentive to produce more. Under otherwise unchanged conditions, the initial stimulus therefore does not establish a lasting increase in aggregate wealth. The general-benefit proposition at issue appears in the conditional formulation:

Und insofern dies so wäre, würde die materielle Lage der Menschheit im ganzen betrachtet verbessert«$^{20)}$.

English translation: And insofar as this were so, the material condition of mankind, considered as a whole, would be improved.

Her analysis challenges the inference from monetary enrichment to this collective improvement. Prices do not rise simultaneously or uniformly; monetary expansion redistributes purchasing power. Its consequences depend on who gains and how those gains are used. Recipients may purchase imports, enlarge consumption, or finance productive change. Institutions, economic circumstances, policy, and ethical dispositions help determine which possibility becomes actual.

Schumpeter’s distinction between static economic conduct and entrepreneurship sharpens this argument. Repeating established production on a larger scale differs from introducing new combinations that reorganize economic activity. Additional money can support the latter when redistribution places resources at entrepreneurs’ disposal, but it cannot guarantee entrepreneurial action. The decisive historical link thus exceeds what an exact theory operating with given conditions can determine. Theory can identify possible mechanisms without predicting their concrete realization.

The comparison of Spain with France, England, and Holland makes this limitation tangible. American metals accompanied Spanish decline while benefiting expansion elsewhere. An account of bullion outflows and spending leaves unanswered why Spanish producers could not satisfy the new demand and why foreign producers could. Herzfeld locates the explanatory task in the economic position and conduct of those receiving the redistributed wealth.

The article consequently preserves monetary causation while rejecting monetary determinism. Precious-metal expansion can enable major changes in production and ownership, but those changes may promote or obstruct prosperity. Explaining the outcome requires a history of recipients, institutions, and uses of purchasing power—not a general law equating more money with progress.