Hermann Schwarzwald: Review of Ernst Wagemann’s Die Wirtschaftsverfassung der Republik Chile (1915)

Hermann Schwarzwald’s 1915 review of Wagemann’s 1913 study interprets Chilean monetary history through class power and redistribution. His central question is not whether paper currency promotes economic expansion in the aggregate, but whose wealth and income monetary policy increases or diminishes. He credits Wagemann’s attention to sources while challenging theoretical explanations that present benefits to particular interests as gains for society.

Chile provides the review’s principal example. Despite the country’s comparative stability, its monetary unit had depreciated sharply over forty years. Schwarzwald singles out the reversal of an earlier stabilization:

Besonders charakteristisch ist die im Buch auch gehörig ins Relief gesetzte mutwillige Papierinflation, die mit dem Jahre 1898 einsetzte, nachdem kurz vorher Zetteleinlösung und Festlegung der Werteinheit auf 18 Pence Gold stattgefunden hatten.

English translation: Particularly characteristic is the wanton paper inflation, duly thrown into relief in the book as well, which set in with the year 1898, after the redemption of notes and the fixing of the unit of value at 18 pence gold had taken place shortly before.

The description of inflation as deliberate establishes the review’s interpretive emphasis: depreciation was a political choice, not simply an unavoidable response to fiscal distress. Schwarzwald reports that, without financial necessity, the state issued 150 million pesos in inconvertible legal-tender notes over nine years. Almost the entire issue financed purchases of mortgage bonds. This supported property interests while reducing the value of the currency in which wages and interest were paid. Monetary expansion thus becomes intelligible as a mechanism of unequal transfers rather than an undifferentiated increase in prosperity.

Schwarzwald’s acknowledgment of the book’s empirical breadth is coupled with a pointed reservation:

Die Schrift behandelt übrigens alle Seiten des chilenischen Wirtschaftslebens, wobei die Darstellung leider in etwas schülerhafter Weise von sogenannter Theorie durchsetzt wird.

English translation: The work deals, moreover, with all sides of Chilean economic life, whereby the exposition is unfortunately interspersed in a somewhat schoolboyish manner with so-called theory.

His criticism concerns both organization and explanation. The placement of immigration, population, racial analysis, and politics within a schematic account of the money economy appears forced. More fundamentally, he disputes the concept of state “money creation,” maintaining that the state can create credit but not money. He also resists the suggestion that disadvantaging capitalists and consumers through note issues might stimulate national productive activity. Such claims, he argues, require scrutiny of the concrete beneficiaries and the actual character of the supposed advance.

The payment of nitrate workers in employers’ tokens makes this objection tangible. What could be described as an economy in metallic currency becomes, in Schwarzwald’s account, an interest-free loan extracted from workers: employers avoid borrowing the coin needed to meet their wage obligations. A private saving cannot therefore be assumed to constitute a general economic benefit.

The review closes by connecting Wagemann’s reasoning with contemporary theoretical defenses of redistribution through note issues. Its governing methodological demand is to trace gains and losses among identifiable groups. Schwarzwald’s qualified appreciation of the study consequently supports a broader critique of monetary theory whenever its aggregate categories conceal the unequal consequences of state policy.