Emil Lederer: Review of J. M. Keynes, The Economic Consequences of Mr. Churchill (1926)

Emil Lederer’s German review endorses Keynes’s critique of Britain’s return to the pound’s old gold parity, then develops its implications for wages, class power, and economic regulation. It moves from the causes of currency appreciation through the unequal costs of deflation to a proposed wage–price adjustment whose significance, for Lederer, extends beyond the immediate British crisis.

Lederer accepts Keynes’s argument that the pound’s appreciation reflected American assistance, government determination, and speculative support rather than an increase in its internal purchasing power. Restoring the old exchange rate consequently placed British prices about ten percent above world-market levels, damaging export industries, including coal. Maintaining gold parity required domestic prices to fall. Although a long-run abstraction might depict this adjustment as leaving real incomes and their distribution unchanged—with an exception for fixed interest incomes—Lederer insists that the actual transition determines who bears its costs.

Daher bleibt nur eine vorausgehende Senkung der Löhne und nachfolgende Senkung der Preise übrig, d. h. ein Prozeß, welcher die Opfer dieser Neuadjustierung auf den Reallohn überwälzt.

English translation: Hence there remains only a prior reduction of wages and a subsequent reduction of prices, that is, a process which shifts the sacrifices of this readjustment onto the real wage.

The sequence matters: wages fall before prices, imposing losses on workers. Lederer grounds this account in a critique of classical equalizing mechanisms. Monopoly prevents capital from entering protected industries, while wage equalization operates only imperfectly. Monetary adjustment therefore proceeds slowly and unevenly, favoring stronger social groups and producing durable disturbances rather than a frictionless restoration of equilibrium.

The review then asks whose interests justified restoring parity. Lederer identifies political prestige and British banking’s desire to recover the pound bill’s international standing. He also considers a possible American interest in expanding effective gold currencies and redistributing accumulated gold reserves. These motives make the allocation of adjustment costs a question of justice, not merely technical necessity:

Gerade wenn diese Gründe, wie auch aus diesem Pamphlet hervorgeht, klar auf der Hand liegen, so ergibt sich daraus zunächst die Konsequenz, daß nicht gerade die Arbeiterschaft die Kosten dieses Währungsexperimentes tragen dürfte.

English translation: Precisely if these reasons lie plainly at hand, as this pamphlet too makes clear, then there follows from this first of all the consequence that it ought not to be the workers of all people who bear the costs of this currency experiment.

Government denials cannot indefinitely conceal the connection between unemployment and policy-induced deflation. Rising American prices might ease Britain’s predicament, but Lederer treats this as a contingent possibility, unsupported by the latest price figures he cites.

The final section turns to Keynes’s practical proposal: workers would accept a five-percent wage reduction on condition that prices fall correspondingly within a reasonable period; a second reduction would complete the adjustment. Lederer reports no evidence that the parties have accepted this approach. The coal compromise instead subsidizes profits and, to some extent, wages at public expense without organizing a systematic price reduction.

For Lederer, however, the proposal’s deepest significance lies in the principle that its adoption would establish:

Es wäre nämlich damit indirekt das Recht der Arbeiterschaft auf Erhaltung des Reallohns anerkannt und es wäre zunächst für diesen speziellen Fall anerkannt, daß die Gesellschaft die Macht besitzt, den Reallohn zu sichern.

English translation: For thereby the right of the workers to the maintenance of the real wage would indirectly be acknowledged, and it would be acknowledged, for this particular case at least, that society possesses the power to secure the real wage.

Conditional wage adjustment would recognize both workers’ entitlement to preserve real wages and society’s capacity to secure them. Lederer thus turns a review of monetary policy into an argument about deliberate distribution. If monetary and banking institutions can influence the business cycle and real wages, class-based social policy can pursue a conscious allocation of the social product with greater precision.

Die Regulierung der Volkswirtschaft ist dann nicht mehr eine Utopie, es besteht kein prinzipieller Unterschied mehr zwischen Macht und ökonomischen Gesetzen, wenn die Gesellschaft durch die Erkenntnis ihrer eigenen Bewegungsgesetze die Macht erlangt, sich selbst ihre Gesetze zu geben.

English translation: The regulation of the national economy is then no longer a utopia; there is then no longer any difference in principle between power and economic laws, once society, through the recognition of its own laws of motion, attains the power to give itself its own laws.

This conditional conclusion supplies the review’s broader theoretical relevance. Economic laws cease to function as an argument against collective intervention when knowledge of their operation becomes a means of social self-direction. Lederer’s distinctive move is to draw this prospect from the distributional consequences of a concrete currency experiment.