Against the Tide

III

The Secular Significance of the World Crisis*

I

Some branches of the economy are cyclically sensitive, some are not. The same distinction may be applied to branches of science. While astronomy carries on its work with the majestic calm with which the stars pursue their courses high above all earthly troubles and confusion, there are other disciplines, such as, say, constitutional law, whose tasks are more and more wholly dictated by the rapid succession of political events. Economics follows not far behind; witness the fact that the world crisis, being a world economic crisis, has radically disturbed and revolutionized the subject of our science. Unexampled confusion reigns in our ranks. Some seem to want to go so far as to invoke Article 48 of the Weimar Constitution even for economics, declare a state of emergency in the science, and suspend or, indeed, permanently abrogate all its fundamental laws. Judging by this extreme group, economics appears to be in a state of dissolution, to consist of nothing but policy proposals of the most radical kind and of political rhetoric. The results of 150 years of economic thought seem to be buried under the rubble of the crisis, or at any rate they seem no longer to exist for these desperadoes. It is a golden age for persons who never underwent the intellectual discipline of studying the theoretical work of that century-and-a-half, and who now feel free to substitute a ready and melodramatic pen for economic knowledge. When big banks collapse overnight, and whole countries become insolvent, everything becomes possible in the realm of ideas as well. No opinion is so harebrained and no proposal so bizarre as not to find enthusiastic admirers—and indulgent judges among professional economists. For their ranks, too, are invaded by uncertainty and confusion. The shock of an unprecedented economic breakdown has largely undermined the firmness of their judgment and their convictions and so weakened their intellectual health as to allow entry to bacilli against which they used to be immune.

There can be no other explanation for the benevolent indulgence, not to say sympathy, with which economists nowadays accept ideas of autarky and economic planning. It is a widespread view that the unrivaled decline of the economy has invalidated some of the most important laws of economics and thus created a state of emergency matching the situation in national politics. Characteristically, this view is openly reflected in a recently published textbook by one of Germany’s leading theoretical economists.1 Is not this crisis maybe the beginning of a new epoch in economic history? Could it be that all our economics so far was a historically conditioned expression of the rise of capitalism, and that it now needs to be replaced by an economics of decline? What remains that is still valid? Perhaps the classical equilibrium theory of foreign trade? Or the common property of modern theories of capital and interest? Have machine techniques and rationalization made nonsense of economic progress? Are we not witnessing the merry resurrection of the mercantilist doctrine—that concern with the balance of trade and payments has to be the alpha and omega of economic policy? And, we may finally ask with some alarm, how many economists are there still who feel they are standing on firm ground amid all this confusion, and who are prepared to defend it against an overwhelming majority?

All these questions must be answered. But an answer to them can be found only by avoiding any flirtation with mass opinions and mass sentiments, and by managing instead to interpret the upheaval manifest in the current world crisis in terms acceptable to the intellect. This can be done only by shaking off the tyranny of the writers who dominate the field not only in Germany, to be sure, but more insufferably here than elsewhere. Their preferred method is to create a certain atmosphere by skillfully selected means, thus escaping the need to prove their theses. At a moment when in some countries output has shrunk to barely more than half what it was before the crisis, when throughout the world unemployment has assumed unimaginable proportions, at a moment when nothing seems to divide us from general bankruptcy except some open or disguised moratorium, it really does not take much to create the impression that this is the crash of a trunk long rotten within, and that the world is the victim of a destiny the fatal course of which had long been traced in advance. People have become receptive to such impressions and are only too willing to do without proof such as might convince the intellect, especially since those self-same writers do their level best to represent the use of the intellect as an incomprehensible aberration of the nineteenth century. Now, it is one of the peculiarities of these proclaimers of an era’s end that the decline they announce seems to warm the cockles of their heart, and that they see emerging from it a new economic system that meets their desires and ideals. Some acknowledge the historical mission of capitalism in the international economy and hold that it has now come to an end. Others fairly fall over themselves with heaping abuse on this age.

Not long ago, for instance, Salin used the columns of this review to pour a conservative’s full disgust upon the “nineteenth century, presumptuous in its arrogant hubris,” which for him was also “a century of unprecedented horrors.”2 Nobody can and nobody will prevent his doing so, nobody is going to deny respect to genuine indignation of this kind, and there are few who would not agree with him that this unique century, which ended in the catastrophe and moral bankruptcy of the great war, represented a fatal aberration in more than one aspect. We would perhaps prefer to use expressions that are not so strong, would consider that there were greater horrors in other centuries, would ask whether the nineteenth century’s unexampled population growth, which alone gave meaning, direction, and strength to the expansion of industry and world trade, is one of the “horrors,” and whether the most unedifying phase of that era was not already behind us when catastrophe overtook us. But this whole question is of no interest in our context. What is of interest is that the execration of the past, the abysmally pessimistic judgment of the present, and the paean sung to the future sound a treacherous chord that makes us prick up our ears. Surely, we know that tune and know also who wrote it. Was it not Hegel’s faithful disciple Karl Marx who developed in masterly fashion the method of wrapping up the quinine of economic policy aims in the neutral wafer of a philosophic interpretation of history? The success he achieved precisely in Germany, and the loud echo that our modern German doomsday prophets are arousing prove indeed that there is no better way to gain support for an idea in Germany than to endow it with the metaphysical consecration of being predestined and ineluctably prescribed by inflexible law. The German seems to have a special predilection for molding his thought to a historical and philosophic pattern, and for exulting in the feeling that he and his contemporaries stand on the threshold of a new era. Maybe this is the German’s own way of saving his ubiquitously threatened personality from being swallowed up by the void, and of preserving for himself some sort of significance when most of it has been stripped from him by modern mass civilization. Once more we are surrounded by a penetratingly chiliastic atmosphere, and millions are on the point of yielding to its narcotic influence. The aims of economic policy are something that can be discussed, and, indeed, we are doing so right now, but do let us be spared any attempt to smuggle the economic policy aim into the discussion as a res judicata and thus to cut short any further discussion.

Let us be spared, likewise, other means of evading discussion. The swaggering tone of a popular German monthly, in which we were actually told in black and white not long ago that instead of discussion we should rely on the sword and the fist, is something we will pass over in silence. We have not reached that point yet. For the time being the methods used are more subtle. One of them is the attempt to treat the ideological shift toward illiberalism, the spread of which during the present crisis could, in fact, acquire secular significance, as though it were already an accomplished fact, in the face of which nothing remains but to lay down the arms of intellect and the arguments of experience. We all know tactics of this kind from meetings, where a skillful chairman can quickly and imperceptibly steer the debate in such a way as to create an atmosphere in which initially doubtful premises are accepted as established, so that the timid are afraid to question them any more. These tactics of taking people by surprise and intimidating them are used against those who oppose radical illiberalism. When they explain, soberly and without excitement, the meaning and true significance of economic developments and try to remind people of the elementary facts about the functioning of the capitalist market economy, they are represented as men belonging to a lost world, as mummies that have no place in the progressive era of illiberalism, as dry intellectuals insensitive to the new, wonderful ver sacrum supposedly sweeping across Central Europe. Anyone who contradicts and has no use for the esoteric language bandied about is—well, a liberal—and it is obviously taken for granted and as requiring no further proof that this adjective amounts to a crushing condemnation, especially when it’s used in the woolly form “liberalistic.” The whole thing is an attempt to promote an opinion, which, like any other in the democracy of opinions, has to fight for its power of conviction, to give it a head start by ceaselessly repeating that “it marches.” It is rather as though a government, based like any other on one political party, were to claim the authority of an above-party government. Among scholars, votes are not counted but weighed, and neither the circulation figures of illiberal books and periodicals nor any other symptom of the “awakening of youth” can ever take the place of valid arguments.

II

It was necessary to use plain, quite unmistakable words in order to place the discussion of the secular significance of the world crisis on a basis free from that atmosphere in which knowledge and purpose mingle, so that we can examine with detachment whether the distressing events that culminated in the world credit crisis of 1931 do or do not signify an abrupt break in economic history, and, in case we regard this as a catastrophe, whether it is one against which resistance is useless. To make our attitude clear: we are prepared for all possibilities, even the worst. It is perhaps unlikely but by no means impossible that the present crisis is the beginning of a most far-reaching process of disintegration, in which eventually the ultimate foundations of our economic and social system will be engulfed. Nobody can look into the future; nobody can, in a world taut with such tremendous tensions, guarantee that the world crisis will be overcome within the framework of the existing economic and social system. But how does this affect and alter our notions about the aims of economic policy? If we regard the idea of national economic planning as antagonistic both to the economy and civilization, is it not just, when we take the full measure of the dangerous strength of the disintegrating forces working in that direction, that we must multiply the counterforces and fight to the last ditch? For whatever the future may bring, it is we ourselves, in the last resort, who fashion the future.

My opposition to the economic policies and the ideas of social philosophy associated with the pessimism of our illiberals need not prevent my sharing their pessimism if I thought it justified. It certainly does not prevent me and should not prevent anyone like-minded from taking a detached look at all the circumstances that speak for or against the view that the present world crisis signifies a turning point in economic history.

In weighing these circumstances one against the other, we have to begin by conceding that in view of the developments since 1931, the world crisis cannot simply be regarded as the slump of a normal business cycle. Month after month it became less legitimate to compare this crisis with any of the great crises of the past; month after month it has been growing beyond any historical precedent. To put it in convenient, though not altogether unproblematical terms: the present world crisis has ceased to be a mere cyclical phase and has increasingly assumed the character of structural change, or perhaps better, of a whole set of structural changes. For the sake of a simple exposition, we might even concede that it is a case not merely of a crisis within the system but of a crisis of the very system itself.

But though we have to make this concession, its implications should not be overestimated. First of all, we may recall that the past, too, knew crises which defied comparison with any earlier ones, and that they led in the past to the same sort of doomsday mood that has developed today. Surely, every great crisis of the past equally had a structural character and called forth structural changes which by their nature ranged beyond the crisis, though without bringing to an end the system itself. The great crisis of the eighteen-seventies can furnish us with a wealth of material on this point. The whole history of capitalism remains incomprehensible unless it is appreciated that every great crisis of the past somehow closed one phase of development and opened a new one. The present crisis can hardly be an exception, seeing that it outstrips all preceding ones in intensity and extensity. The strikingly characteristic point, however, is that the breaks that the crises interposed in capitalist development left the constitutional features of the system unaltered and never interrupted for any length of time the trends corresponding to the essence of the system. These trends include in particular one that the present crisis is supposed to cut short for good, namely, the growth of economic interrelations throughout the world. More will have to be said about this presently.

Up to this point, the statement that the crisis has assumed the character of structural change means no more than that it is an economic crisis of unprecedented extent, and that it does more than any other has ever done to shake the foundations of our economic system. But the metaphysicians of the end-of-an-economic-era school go much further. They assert and, to prove their metaphysics, are forced to assert that the world crisis, far from being even originally and basically a cyclical crisis, was of structural origin to begin with. What they say is this: we are witnessing the collapse of an edifice doomed to collapse by virtue of long-period trends, that is, trends valid for the very distant future. In other words: the crisis is not the nemesis for the few preceding years of boom but the nemesis for a whole century.

We may ask whether anyone has yet managed to explain the world crisis in terms of one or more structural causes, in isolation from the mechanism of cyclical reactions. The answer is a conclusive No. Any attempts of this kind must, in fact, be regarded as unsuccessful. Even mere hypotheses of this kind prove untenable, though they would by no means involve anything like the end of an economic era or seal the fate of capitalism. This applies, for instance, to the hypothesis of structural causes of a monetary kind. Surely, nobody would any more seriously maintain that the primary cause of the world crisis is a structural shortage of gold.3 This hypothesis was faulted from the outset by its failure to explain why, nevertheless, the volume of money and credit was able to expand so much immediately before the outbreak of the crisis. Nothing better can be said of another view, according to which one of the causes of the crisis is to be found in the serious disturbances in the mechanism of the gold standard, as evidenced particularly by the wrong distribution of gold and by the ineffectiveness of the proven automatic controls of the gold standard. The truth is that the crisis, above all insofar as it is a crisis of confidence, came first, and that the gold standard cannot work when its conditions have been removed by the crisis, just as the parliamentary system and democracy cannot work when a nation has lost its political health, with the result that a “wrong distribution” of votes temporarily invalidates the mechanism of parliamentary democracy.

While the hypothesis that the crisis is due to structural causes of a monetary kind would not, even at worst, involve the fate of capitalism, it is not impossible to conceive of other trends that would, indeed, have such dire implications. One idea, for instance, that plays a major part in the end-of-an-economic-era philosophy is that the downward turn in the demographic movement is a completely new structural factor that has made its appearance in the western economy with this crisis. This is a very popular idea and is worth examining carefully. The statement of the problem is favorable and promising for the end-of-an-economic-era philosophy, for the tremendous population growth of the nineteenth and twentieth centuries really was unprecedented and something necessarily unique, which had to come to an end sooner or later. Furthermore, there can be no doubt about this population growth having been one of the strongest impulses for the flowering of worldwide industrial capitalism. Is it, then, the implication that capitalism must follow the down-turn of the population movement? Now, it is a fact that the slowing of the population increase cannot have been a contributory cause to the present crisis. First of all, this trend is for the time being and will be for some years to come merely relative. Nowhere in the Western countries has the population actually decreased so far; all that has decreased is its rate of increase, and this is not preventing the population from still growing quite considerably. Nor is it easy to see how this trend should have toppled the last boom, and how this boom was at all possible. It always is a weakness of all cultural explanations of the world crisis that, after all, the structural factors on which they rely must, as such, have already been present during the preceding boom, which, with its rapid economic growth, was as unrivaled as the crisis itself; the sudden end of the boom thus remains unexplained, and there seems no reason why there should not be another upturn on the old conditions. One argument is that the slow-down in the population increase does, at any rate, make it extraordinarily difficult to get out of the present depression, because we now lack the automatic increase in the demand for housing that in former depressions led building firms to step up residential construction at an early date and thus to give the initial impulse to the recovery. Undeniably, this is a problem, but it is greatly overestimated and also viewed in the wrong perspective. First of all, it is overlooked that the sluggishness of the building trade is to a far greater extent attributable to other causes, especially to the fact that owing to a number of circumstances—in Germany, thanks to public works—the last boom was, more than previous ones, an investment boom in civil engineering, which in turn has much to do with the effects of the war. This is another point of resemblance between the present crisis and the company promotion crisis of the eighteen-seventies. Secondly, it is wrong to calculate the need for housing simply from a count of heads and still more wrong to equate this need for housing with the demand for housing. So, there is little left of the whole argument. Finally, there is the almost viciously stubborn belief that eventually and in the long run the down-turn of the demographic curve cannot fail to narrow the margin for an expansion of production and markets, especially for the production of capital goods, and hence to lead to the decline of capitalism. What we have here is a common weed in the garden of economics, and it belongs to the large family of logical errors which Whitehead fittingly calls the fallacy of misplaced concreteness.4

In our case this is how it works: because purchasing power is, in practice, exercised by individual persons, the total volume of demand is taken to depend on the number of persons. This is to confuse people with Reichmarks and dollars. It is true that there are needs so inelastic that the total volume of demand does in their case depend more or less on the number of people, but in all other cases demand is independent of the number of people—it is a function of purchasing power, which in turn, as we all know, depends on production. The number of Christmas trees that can be sold is determined, by and large, by the number of families; this is a case of very inelastic demand, which, in combination with an equally inelastic supply, usually leads to sharp price fluctuations either way just before the holidays. On the other hand, the value and the amount of presents laying under the Christmas tree vary from one family to another in accordance with the bread-winner’s income. If, now, the population stops increasing, this will, indeed, put an end to any further expansion of the production of goods the demand for which is very inelastic. But what possible sense does it make even to moot the possibility of a saturation point in the case of all other conceivable goods? Even if the production increased a hundred times, it would still fail to raise the incomes of the masses to a level that is regarded as necessary in the high-income brackets today. There can be no doubt that the regressive demographic trend will cause many and probably very painful adjustments, but to assume that these adjustments will seal the fate of capitalism can be described only as a neurotic flight of imagination. It definitely has nothing to do with the present crisis.

The category of fallacies of misplaced concreteness includes another, extremely popular view, of which there are the most diverse variants, namely, that capitalism has come up against insuperable limits in space, and that the present crisis is a first reflection of the exhaustion of the store of square miles still susceptible to being “opened up” by capitalism. In this case, square miles are confused with Reichmarks and dollars, just as people were in the case of the population argument. This confusion is at the base of all the misuse made nowadays of the word “space”; it is the cardinal error of the Luxemburg-Sternberg theory of imperialism and also the of all the geopolitical and geo-economic aberrations, whether they refer to southeast Europe or some other seductive “space.” Every kind of geographical romanticism draws on it, and so does the notion that the United States has an advantage over Europe in its fast “free trade space” (whereas, in fact, the very extent of their “space,” which in the West is very thinly populated and unfertile, is more of a hindrance economically). It goes without saying that the size of the market depends not on the number of square miles but on the volume of purchasing power, and this, in turn, depends on (socially and economically correct) production. This puts paid to the idea that world capitalism is possible only if it can steadily expand in space. Its extent and intensity are determined not by space but by the world’s total purchasing power, and this cannot be raised more effectively than by the unobstructed expansion of world trade.5

One point that is most unclear in the pronouncements of the end-of-an-economic-era philosophers is the part played by technology in their view of the world. On the one hand they maintain almost unanimously that the pace of technological advance has become much slower, so that even this source of capitalism’s strength is drying up. On the other hand they make copious use of the popular notion that technology, machines, and organization have outgrown people. This tangle of thought is largely explicable in terms of still another case of the fallacy of misplaced concreteness. Technical inventions as such are confused with the economic exploitation of technical and organizational progress. It is true that the age of technical sensations has probably come more or less to an end, but this has not prevented the economic applications of existing knowledge (e.g., of the internal combustion engine) and its further technical and economic development, making the last boom a period distinguished by all the characteristics of a second industrial revolution. Without a simultaneous credit expansion of gigantic extent it would, of course, not have been possible; this has to be added for the benefit of those people, like Salin for instance, who blame the boom’s overexpansion on the demographic down-turn and on the growing size of firms and thus try to transpose the dynamics of the cycle into the field of structural change. It is very difficult to predict anything for the future, but if we do assume that technical change will play a lesser part in the future than in the past, I personally can only conclude that future economic development will be that much more steady, which can do nothing but strengthen our economic system. In any case, it is hard to see how the slowing-down of technological process is supposed to be a factor in reshaping capitalism into autarky and economic planning. There is, however, one sort of technical invention that we can only pray to be spared. I have in mind those that make it economically feasible to produce at home substitutes for certain goods so far produced only abroad. Suppose that German technicians succeed in making rubber, copper, cocoa, cotton, etc., from German raw materials and to do so at a cost perhaps no more than fifty per cent higher than production cost abroad; to judge from our experience with, say, German gasoline production, we can be sure in that case that for the sake of the “balance of payments,” and under the pseudo-patriotic slogan “Germans, buy German raw materials,” every possible means of trade policy will soon be applied to make the domestic substitutes competitive. No doubt the same prediction can be ventured for other countries. In that case, technological progress really would become the pacemaker of autarky and, with it, of immeasurable impoverishment. It would be a new and odd contribution to the old subject of “progress and poverty.”

But we have not yet come to the central assertion of the end-of-an-economic-era philosophy. It is that the disintegration of international economic relations is the most important of the structural changes that threaten the future of capitalism. The extraordinary contraction of world trade in the course of the present crisis and the related moves of countries to close themselves off from the rest of the world suggest, if we follow writers like Sombart, Salin, and Fried, that the crisis is indeed closing the era of the worldwide economy and bringing in a new epoch of more or less autarkic “national” economies. “The tower of Babel was built on firm ground—but the world economy at the turn of the nineteenth and twentieth centuries was built on intellectual and political foundations so brittle, that the first impact of creative or destructive events could turn them to dust and blow them away like shifting sand,” states Salin,6 and similar eloquent explanations have been proffered by other writers of the same ilk. It seems preferable to reply in a dry tone. Recalling earlier remarks in this paper, we would point out that no thoughtful person would dream of denying the possibility of a complete decline of international economic relations and thus of a relapse into a more primitive stage, but that it is an entirely different question whether this possibility has any great likelihood, and whether, if it turns into reality, it will do so in accordance or in contradiction with the inner logic of economic evolution. In the latter case, it must be expected that the inner logic of economic evolution will eventually prevail again. And it is still another question, finally, whether the possible decline of international economic relations is to be considered good or bad.

If the present decline of international economic relations is supposed to be an event of secular significance, then, surely, it must have been long prepared by prior economic developments, that is, it would have to be the result of forces that were not unleashed merely by the present crisis and will disappear with it. Otherwise, it would really be frivolous to philosophize in saeculum on the basis of what happened during the last year and a half—for the marked decline of international economic relations dates no further back than the summer of 1931. There is no need on this occasion to take issue with this kind of frivolity. Instead, let us turn our attention to those who seriously try to discover long-term trends of decline. Now, such attempts are contradicted by the sober fact that the present crisis followed a period of extremely vigorous expansion of international trade, by which the world economy explosively overcame the preceding disruption caused by the world war and inflation—another time of overhasty prognostications. A reaction was bound to follow. The thing to do at this point would be to examine in detail whether the relative importance of world trade in fact rose or fell up to the present crisis. This would require extensive special research and is impossible on this occasion.7

As a starting point, we have the calculations of the Kiel Institut für Weltwirtschaft und Seeverkehr, as published in the fundamental work Der deutsch Aussenhandel unter der Einwirkung weltwirtschaftlicher Strukturwandlungen.8 The statistics do not bear out the thesis of a falling export quota having the validity of a general law. Between 1890 and 1895 world trade grew at the same pace as industrial production (measured by a carefully calculated raw material index), and between 1895 and 1913 slightly outpaced the latter; after the war the distance first widened and then diminished. The volume of world trade expanded more between 1925 and 1929 than it did between 1908 and 1913. However, for various reasons there is always a very wide margin of statistical error in calculations of this kind. Condliffe,9 for instance, reaches the result that throughout the period 1881-1929 (with the exception, of course, of the years 1913-1921) the rate of increase in world trade was always slightly higher than the rate of increase in world production. Careful appraisal suggests the conclusion that there is no proof of any fall in the relative importance of world trade up to 1929, and that with the best will in the world no more than a very slight decline can be read out of the statistics. But this is still far from settling the question.

First of all, it seems surprising that the strong expansion of world trade since 1925 occurred at a time when trade policies were already doing much more to cut the nations off from each other than before the war.10 This speaks for the strength of the forces making for economic internationalism, seeing that they caused world trade to expand despite the steadily mounting obstructions to trade. This bears out once more what I recently had occasion to write elsewhere:11 that in spite of all protectionist obstacles, economic interrelationships throughout the world have become denser, that the trend envisaged by the liberals has gained unimagined force, and that protectionism, insofar as its aim is to slow up the integration of any country’s economy in the nexus of world trade, is much further from this aim than liberalism is from the opposite one. But even if all this were not so, even if the statistics unequivocably proved the thesis of a relative fall in the importance of world trade, nothing whatsoever could be concluded therefrom as regards the alleged structural “disintegration of the world economy.” The point to remember in this context is that the quantitative ratio between domestic and foreign trade in no way does full justice to the true economic importance of international economic relations. Strangely enough, this point of view is usually overlooked precisely by the illiberal autarkists, whose whole social philosophy otherwise makes them recoil in horror12 from every quantitative and mechanical approach. The mere existence of a world market and the mere possibility of substituting foreign for domestic sales and playing off the national against the international market are of immense importance for the rational conduct of the national economy, an importance that cannot be measured statistically. Similarly, industrial exports are of far greater economic importance than the bare figures suggest. To appreciate this point, it must be remembered that the exported portion of industrial output represents that peak margin of production which, by virtue of the economies of scale, makes the whole of mass production possible and with it the very existence of modern industrial concerns. Lucien Romier13 is right when he says, in another context, that even the United States with its apparently secure independence could not stand the test of a blockade, because it would prevent the export of “peak output” and would thereby destroy the country’s social equilibrium. As regards United States imports, A. Rühl14 notes that barely more than ten per cent of imports were goods produced domestically in equal quality and sufficient quantity, whereas almost ninety per cent of imports were supplementary to home production, that is, goods that had to be imported because they were not produced domestically in equal quality and sufficient quantity.

It will be seen that the tissue of the world economy is rather more dense and intricate than our illiberal autarkists imagine, and it is high time that they should cease keeping a double set of books in which the national economy is presented as an organism and the world economy as a mere mechanism.

But the greatest error committed by the illiberals in this connection is that they keep making great play with the patent contraction of world trade in the present crisis but overlook that this contraction is part of a general process of contraction. In point of fact, world trade has not, until quite recently, been shrinking more than production, and until 1931 it shrank less.15 In other words: the relative importance of foreign trade has been rising considerably, precisely in the crisis, in defiance of all the hysterical measures by which countries are trying to close their frontiers, and despite the fact, above all, that it was only during this period that the new U.S. customs tariff, the Hawley-Smoot tariff, began to exercise its calamitous effects. Here again, of course, allowance must be made for the statistical margin of error, and the figures must be used with caution. The one point to grasp is that the decline of world trade in absolute terms during the crisis is no proof at all of the secular end of the international economy, because the absolute contraction of world trade has not diminished its relative importance. If the world market has shrunk along with domestic markets, why on earth should it not expand again with recovery in domestic markets? Are we to believe seriously that the forces making with ineluctable necessity for international economic relations will, in the future, not be strong enough to overcome all the obstacles that certainly are not to be underrated and that Salin and others rightly point out, such as England’s departure from the gold standard, the decline of British financial supremacy, etc.?

But let us once more give the floor to the illiberal end-of-an-economic-era philosophers, just to be told that none of our arguments will stand up to the higher judgment of world history. I quote Salin:16 “Only this once were the casual economic relations of the past combined by an apparently worldwide network of prices into a mechanism which linked the economic destiny of individuals and whole nations alike and made it dependent upon economic actions in all other parts of the globe—only this once did people and states place such blind trust in the indestructibility and durability of the artificial construction that they were prepared to cover even their vital needs by imports from across the frontier, if only they were cheaper, and to produce the most useless goods at home, if only there was a prospect of profitable sale.” If this is supposed to prove that we must now finally bury world trade, it is merely another substitution of emotional atmosphere for proof. It may be true that nothing like the modern world economy ever existed before,17 but the conclusion that something that never previously existed is by that very fact necessarily or probably doomed to ruin, and that this ruin must come about just now—that conclusion may be conservative, but it certainly is not convincing. Everything, after all, once happened for the first time. Perhaps some contemporary of Columbus thought that the existence of America was something novel and unique that was bound to disappear again. All we can say is that he was wrong, and the very fact that he was wrong is not the least of the reasons for the advent of the world-wide economy and for its remaining with us, so long as we do not revert to the belief that the world ends at the Pillars of Hercules.

No doubt it would be possible to discover evidence that, at the time when the Zollverein created the German national economy, there also were calamity-howlers who declared the economic integration of the separate German states to be an act of presumptuous originality. A man like Friedrich List18 was more farsighted when he viewed the growth of the geographical sphere of economic integration merely as stages of one unitary process of integration, explaining: “Even now it can be predicted with certainty that a few decades hence the improvement in means of transport will cause the most civilized nations of the world to be no less, or even more, closely linked together by relationships both material and spiritual than were the counties of England a century ago.” Finally, those who put the stress on the historical primacy and uniqueness of the international economy overlook the fact that the tremendous population growth during the nineteenth and twentieth centuries was likewise something unprecedented. “Only this once” the population increased faster than ever before in history and thereby created an objective fact which simply cannot be evaded. If the international economy is the “most artificial construction,” it will still have to be conceded that the millions of people whose very basis of existence was created by industrialism and world trade will certainly not put up with being described as artificial constructions that can be made to collapse and disappear for the sake of ingenious theories. These people have entered life in a very natural way; they certainly are not creatures of rationalism but products of the most irrational of all processes on earth, and they have every right to demand that they be respected as such. All this talk about the international economy being artificial, about industrialism, the telephone and the railways being destructive of civilization, about corporative, planned or otherwise, anti-capitalist and anti-industrialist economy rejuvenating the nation—all this talk remains empty and meaningless, so long as we are not told how the millions thereby uprooted economically are to be painlessly killed off, and by what selection criterion the necessary decimation and “cooliefication” is to be carried out. Naturally, we would expect the champions of these ideas to come forward as volunteers. So great is the mental confusion that only the bluntest language can help to clear the atmosphere. The disastrous effects of the first steps taken so far by Germany in the direction of autarky, which in the name of “food freedom” have already led to “freedom from food” for thousands of workers in the German export industries, give us a foretaste of what will be our lot if we turn our backs on the allegedly “artificial” world market. Whoever despises “economic-thinking” as the “mortal enemy of ethnical idealism,” who prefers “blood” to “money” or dismisses the rational arguments against a “national” economy by some similar phrase of the kind that is so popular nowadays with public opinion, must accept the verdict that he has no right to claim as his motive the plight of the unemployed masses.

The international economy marches not against the inner logic of economic evolution but with it, as Friedrich List said in the passage quoted. And ultimately this is proved by the incontrovertible fact that the area of integration by trade and by the international division of labor has steadily grown during the last five hundred years and certainly has not shrunk. This process of integration did not stop at national frontiers, just as it did not stop earlier at the frontiers of Länder and cities, and, indeed, one can see no reason why it should have done so. Among the forces operative in this process of integration, there is one that indeed has the demerit of being of the material and mechanical kind, but for all that is all the more powerful and tangible, namely, the steady progress of communications techniques. Their latest branch, broadcasting, has already forged at least Europe into a unit the length and breadth of which can be traversed every evening, and in which no customs barriers, no import restrictions, no exchange controls, and no ethnical metaphysics can prevent people from switching from German lectures to Danish chamber music or Hungarian folk songs, or the other way around. Of course, no absolute force is inherent in this circumstance; of course, people can ignore the contradiction implied in their cheering the “Graf Zeppelin” and the trans-Atlantic flights, and in the same breath approving the economic and cultural isolation of their country, stripping railways and ports of their traffic and, as once before in history, between antiquity and the Middle Ages, letting the roads go to ruin. But it still is a contradiction, and it is of no mean importance that it exists and can be explained to people. Just how strong is the resistance which progress in communications opposes to the isolationist tendencies of nations is evidenced by the vigorous growth of world trade in defiance of mounting obstacles, as we had occasion to point out before.

All these explanations would still lack the ultimate power of persuasion if we did not deal with one more argument, to the effect that the world’s increasing industrialization constitutes a mounting threat to the sales markets of the old industrial countries and thus forces them to turn back to agriculture and thereby to loosen the traditional international division of labor. According to this view, there is an ineluctable trend toward the industrialization of the countries that are primary producers both of agricultural commodities and raw materials and toward a revival of agriculture in industrial countries, so that all along the line every economy would contain a balanced mixture of industry and agriculture. As a result, world trade would be reduced to the exchange of goods produced at specially favored locations.

Now, first of all, there is not so far any evidence at all to prove such a trend. So far all experience with the industrialization of primary-producing countries points to the exact opposite. One country after another followed England on the road to industrialization, and the result was an unrivaled growth of world trade. To mention only the last of the major cases: the United States, too, was once an overseas supplier of raw materials, but here, as elsewhere, the result of industrialization was an enormous increase in the country’s effective demand, not the least of which was for the industrial products of Europe, while the falling-off of American agricultural exports benefited both European farmers and, even more so, the not as yet industrialized agricultural countries (Canada, Argentina, etc.), whose rising farm exports in turn paid for growing industrial imports. During the last ten years before the world war these developments led to an appreciable rise in agricultural prices, that is, an improvement in the terms of trade between industrial and agricultural products to the benefit of the latter. Now things have long been going the other way, with the terms of trade steadily and strongly improving for industrial products. It can only be concluded that the world has not too much industry but too much agriculture or too little industry, and that the agrarian understructure of the world is too broad and the industrial superstructure too narrow—certainly not the other way around. This conclusion cannot be denied by anyone capable of abstracting from the present disturbances in the structure of industry and the efficacy of the credit mechanism. It follows that the present world crisis is no proof at all for the assertion that international economic relations are being undermined by increasing industrialization.19 It should hardly be necessary to point out that the world agrarian crisis has been going on for more than ten years, while world industry as a whole has only just emerged from an unprecedented boom. And now we are told that never again can things be even approximately like that. Are we really to believe that within a few months the industrialization of the new countries created consequences that it never created during the whole of the preceding century?

The truth is, of course, that the catastrophe that overtook the world economy came from an altogether different direction, namely, from the disruption of the network of international short-term credit. It is this that led to all those symptoms of breakdown without which no one would have thought the “twilight” theory of international economic relations even worth discussing. It is this that led individual countries to vie with each other in putting up obstacles to trade—the debtor countries in order to protect their balance of payments and the creditor countries in order to keep out additional exports by the debtor countries. It was only the resulting general aggravation of the economic crisis everywhere that caused autarkic tendencies to spread through the world. The accumulation of international short-term debts, which in July of 1931 were estimated by the Bank for International Settlements to amount altogether to some 40 billion Reichsmark, and the sudden collapse of the short-term credit mechanism were calamities of unprecedented proportions, but they still remain historically unique calamities and not ones in any way inherent in the nature of international economic relations. These exceptional calamities in their turn connected with a series of other exceptional circumstances, among which we may mention the last aftereffects of the war, the enormous political debts (reparations and inter-Allied debts) combined with high protective tariffs in the United States as the main creditor country, the effects of the general adoption of the gold exchange standard (that is, the partial dethronement of gold, a practice so popular in the illiberal camp), the unsound financial policies of many countries, balance-of-payments difficulties as a result of the rigidities introduced into the economy of many countries by government intervention, the repercussions of the world agricultural crisis, unsound investment practices by the banks, and many others. The very fact that so dense a network of international capital movements ever came into existence at all is in flat contradiction with the autarkists’ assertion that the international mobility of factors of production has been steadily diminishing up to the crisis.

Our present troubles stem precisely from the circumstance that the international mobility of capital has assumed proportions and forms that led to such extraordinarily severe strains.20 Although, therefore, the dense network of international capital interrelations, which alone has, via an international liquidity crisis, led to the present symptoms of breakdown, is in no way part of a necassary secular trend, it does raise the question as to what consequences it is likely to have in the future. As we all know there are some (e.g., Fried) who argue that the debtor countries’ enormous foreign indebtedness hardly leaves them a choice other than to withdraw from international economic relations and, come what may, to stop all payments of interest and principal. This argument applied in the first place to reparations. Now that it is made inapplicable by the virtual discontinuance of reparations payments, attempts are being made to build up acceptance of the idea that Germany’s foreign commercial debts, in their turn, are not genuine debts that have to be honored but are only another form of reparations. The proofs adduced for this idea are not convincing. We quite certainly have not paid reparations twice over; on the contrary, our commercial debts abroad have enabled us to create assets that are no more affected by the present crisis than are those financed by internal borrowing. Germany’s foreign indebtedness has to be regarded as a reflection of inflation, that is, of the process that led to an immediate radical depreciation of Germany’s war debts and to the depletion of German capital reserves. Any attempt to jettison the principle that pacta sunt servanda with respect to Germany’s foreign commercial debts is to be sharply repudiated in our own most urgent interests, if we are not to burn our bridges and range ourselves alongside Russia, which surely no sensible person could suggest.21

This is not to imply that things can go on as they are. Every day it is becoming more urgent to consolidate international short-term debts, and, as regards total indebtedness, the disproportion between the volume of output and trade and the price level, on the one side, and the volume of indebtedness, on the other, has become so great that some adjustment has become inescapable. It would probably be more rational to adjust the volume of output and trade and the price level to the volume of indebtedness, rather than the other way around. Nothing could be more out of place than to deduce therefrom an argument for autarky in the sense that we are allegedly at a turning point of history, from which onward we are predestined to follow the way of autarky, and it is all the more out of place as the problem arises for internal just as much as for external indebtedness.

III

We return to our starting point. We said that the present world crisis cannot simply be regarded as the slump of a normal business cycle. It certainly has assumed the proportions of a major break in economic history, and thereby has assumed secular significance. On the other hand it has been shown that every attempt to trace the crisis back to any causes of secular structural change has to be given up as hopeless. The two statements can be reconciled only by saying that what caused the crisis was a cyclical reaction to the preceding phase of credit expansion and overinvestment, which phase in its turn is to be interpreted as an immense effort of capitalism to overcome the loss of wealth caused by the war as well as to take advantage quickly of all the numerous technical inventions during that time. That the crisis should have become so severe and so stubborn can be explained by four circumstances.

1. It happened to occur in a world full of tensions and unassimilated structural changes, among which the worst is the agricultural, and especially the wheat crisis. Among these tensions and unassimiliated structural changes there is another that probably ranks as high as the wheat crisis, and that is excessive government intervention of all kinds and, in connection with it, the formation of monopolies.

2. The credit expansion and overinvestment are now seen to have assumed such exceptional proportions that a strong reaction was to be expected even in ordinary circumstances.

3. When we already had a crisis so heavily loaded in advance, another one broke out right in the middle of it, namely, the international liquidity crisis that caused so much havoc. The international liquidity crisis cannot simply be regarded as a logical link in the chain of events, for the credit structure did not really collapse before a new element appeared in the shape of the ultimate repercussions of the political crisis that emerged in September, 1930.

4. There was the circumstance that, for reasons which it yet remains for business cycle theory to explain convincingly, the crisis eventually gave rise to a cumulative downward process, a process of “self-deflation,” which pushed the economy more and more deeply into a dead end.

That is the point at which we still are, even though deliberate credit expansion and stimulants of all kinds now seem to herald the moment when this secondary, cumulative decline is approaching its lowest point. The present crisis, therefore, probably has to be interpreted as a special constellation, namely, the collision of a strong, cyclical reaction with a series of historically “random,” non-recurring accidents.

This interpretation detracts nothing from the severity and gravity of the crisis and does not preclude that it has secular significance. But its secular significance does not lie in a total breakdown of the system as the result of a long-term process of disintegration, nor in the crisis presenting us with accomplished facts that dictate the direction of our future economic policy and invalidate or make inapplicable the basic principles of economic policy which rest on a century’s work of economic and social analysis. We need neither a new social philosophy nor a new economics, and we need not refashion the foundations of our economic system. “Destiny” plays no part in this, and neither an “era” nor the “economy” is at its “end.” The less talk there is of such things, the better. Nothing has happened to make the system of equilibrium theory irrelevant or even needful of revision, and the same applies to the theory that a differentiated economy, based on division of labor, is infinitely superior to an undifferentiated economy made up of more or less autarkic, separate, economic areas. Nothing can excuse the lack of discipline with which some of the leading spokesmen of the illiberals violate economics in an attempt to adapt it to their radicalism in economic policy.

The secular significance of the world crisis lies in an entirely different sphere. Its historical mission is not that it confronts us with accomplished, objective facts, but that it is a crisis in the original, medical sense of a condition in which the decision has not yet been reached but is still to come, in which the patient is in danger of his life, and it is uncertain whether he will overcome the fever or succumb to it. This original meaning of the expression “crisis,” which has become dim, must be restored in the economic context if we are to take the true measure of the present crisis. Our economic system and with it our whole social system are still on the danger list, in spite of all the symptoms that suggest that the fever may be abating. Only with reservations can this condition be described as a crisis of capitalism. It may be so described if we mean thereby to indicate that capitalism is in danger of its life; it may not be so described if we mean thereby to suggest that the present crisis with all its severity has been caused by some inner defect of the capitalist system as such. Everyone knows or should know that the war, the peace treaties, reparations, inter-Allied debts, political radicalism, government interventions of all kinds, socialist experiments, and many other things subjected capitalism to tests so severe that none but as resilient an economic system as capitalism could have withstood them. It is only apparently paradoxical if we say that nothing proves the astonishing vitality of our economic system better than the very fact that in spite of these tremendous stresses we can still speak merely of a crisis, and not—unless we happen to need an attractive book title—of the end of capitalism.

And so there is every justification for expecting capitalism eventually to stand the test of this crisis, just as it has stood the even greater test of the world war. In any event, the crisis has already done much to ease the strains and clear the atmosphere. Reparations are, to all intents and purposes, out of the way, and there is legitimate hope that they will soon be followed by the inter-Allied debts. Considerable flexibility has been reintroduced into the price and cost structure made rigid by government intervention. The credit system of the major countries has regained much of its former liberty of action and functional efficiency. It even looks as though the world is about to learn a few lessons from the extravagances and exaggerations of the last ten years. It could be that the secular significance of the world crisis is that the world had to be hurt to learn wisdom, that there had to be a crisis to redress the balance after the long list of distortions and exaggerations. Perhaps this will be our considered judgment in a few years’ time.

But in the meantime we still have a long and difficult road ahead of us, a road so fraught with dangers that it will need our utmost effort to overcome them. The greatest danger of all lies in the psychological state of people who cannot grasp that the economic system is merely part of the whole social system, and that one cannot make experiments with the social system without destroying the roots of the economic system. It is impossible to rouse the masses against reason, freedom, and peace without the sorry ending of thirty million unemployed in the world. These three elements make up the air vital to our economic system, and it is impossible to pollute its air and then, when it cannot breathe, say that it is no good. No one can expect to reap reasonable results when he sows a storm of destructive and undisciplined emotions. Nothing spells greater danger to our entire social system than the “revolt of the masses”22 emancipating themselves from the leadership of an intellectual élite. Never has the world been more thoroughly ruled by vapid catchwords resting on mass moods and sentiments and throwing up as leaders of the masses those who excel in interpreting these mass sentiments. “Liberalism”23 has never had any appeal for the masses; among them, tolerance, discussion, humanitas, reason, and fair play do not prosper, but all the more propitious is the field for violence, resentment, emotional fog, and destructive action. Instead of “live and let live,” we get “die and let die.” The easiest victim of these developments is trade policy. The masses readily lap up catchwords that appeal to the emotions but are shy of the critique of reason, such as “protection of national labor,” “food freedom,” “Buy home-produced goods!” and other half-baked emotional arguments. By contrast, free trade, unless tangibly in the interests of the masses, has always been an aristocratic matter appealing only to the élite, since it requires serious thought and control of the emotions by reason and independent judgment; this is why free trade eventually fell victim to the rule of the masses.24 Seen from the angle of the free trader, therefore, we have the paradoxical situation that a trade policy that serves the well-being of the masses against the interests of individuals or groups is supported by an élite, whereas the masses back a trade policy that runs counter to their own interests. However, even here things are so arranged that even the longest rivers come somewhere to the sea, and so we may justifiably hope that, once a cyclical economic expansion is under way and the spasm in international payments and capital movements has been overcome by the consolidation of short-term debts, there will be a reaction against the present orgy of protectionism. We shall still be left, however, with the great problem of the international agrarian crisis. The crisis of the agricultural processing industries may, of course, be expected to solve itself with the rise in industrial purchasing power, but the wheat crisis will remain with us in all its severity so long as there is no drastic reduction in the cultivated area in the world as a whole, and this, in turn, depends on the industrial countries of Europe coming to understand that all their “grain battles” have ended in terrible Pyrrhic victories.

The present world crisis should teach us also that the rule of the masses threatens our economic and social system at another, closely related point. I have in mind the bellicism and nationalism of our age, which, with the support of the inflamed masses, have created an inconsistency, intolerable in the long run, between the areas of economic and political integration.25 An economy on the world scale in a world in which, barring a few praiseworthy exceptions, nationalism is at a boiling point as never before, in which people are told they must reckon with the possibility of another war and at the same time know that this is going to mean Europe’s suicide—that is indeed a blatant contradiction, which cries out for a solution. There are only two alternatives. One of them is to adapt the degree of political co-operation among nations to the degree of their economic co-operation and thus to supplement economic integration by political integration. This is the way of peace, prosperity, civilization, and the continuance and rise of Europe. Or else we fail in building a new system of international security and peace and in cooling down nationalism in all countries. In that case, political disintegration will be followed by gradual economic disintegration. The secular significance of the world crisis is ultimately this—that the economic, political, and hence also the cultural future of Europe depends upon whether the first alternative can be achieved soon enough. Success turns on our being able to break the front of unreason, mass hysteria, ruthless egoism, and emotional fog and to confound nationalism by the motto that Friedrich List placed at the head of his magnum opus: Et la patrie et l’humanité.

* Weltwirtschaftliches Archiv, January, 1933.

1 O. v. Zwiedineck-Südenhorst, Allgemeine Volkswirtschaltslehre (Enzyklopädie der Rechts- und Staatswissenschaft. Abt. Staatswissenschaft, 33) (Berlin, 1932). p. 265.

2 E. Salin, “Von den Wandlungen der Weltiuirtschaft in der Nachkriegszeit,” Weltwirtschaftliches Archiv, Vol. 35, No. 1,1932, pp. 1 et seq.

3 Gold production has, in fact, been rising ever since 1929, and there is every prospect that it will continue to do so. See W. Sundheimer, “Die amerikanischen Wahlen und der Gold-Standard,” Währung und Wirtschaft. Mitteilungen des Währungsinstituts Berlin, I, 1932, pp. 65 et seq.

4 A. N. Whitehead, Science and the Modern World (New York, 1926), p. 75.

5 For this reason H. Ritschl, who, in his article “Wiederaufstieg der Konjunktur” (Der deutsche Volkswirt, V (Berlin, 2 1930–1931), pp. 1207 et seq.) made a praiseworthy attack on the errors mentioned in the text, cannot be followed when he concludes from the shift in the area of capitalist expansion that the main emphasis must noiu be placed on the domestic market. There are no grounds whatever for this assumption, which likewise rests on the fallacy of misplaced concreteness.

6 Loc cit., p. 11.

7 See especially M. Victor, “Das sogenannte Gesetz der abnehmenden Aussenhandelsbedeutung,” Weltwirtschaftliches Archiv, Vol. xxxvi, No. 2 (1932), pp. 59 et seq.

8 Der deutsch Aussenhandel unter der Einwirkung weltwirtschaftlicher Strukturwandlungen. Prepared and edited by the Institut für Weltwirtschaft und Seeverkehr an der Universität Kiel (Berlin, 1932).

9 League of Nations, Economic Intelligence Service, World Economic Survey 1931-32. Series of League of Nations Publications. II. Economic and Financial. 1932, II, A. 18 (Geneva, 1932).

10 Ibid., p. 152.

11 W. Röpke, “Liberale Handelspolitik,” Archiv fur Rechts- und Wirtschaftsphilosophie. Vol. xxiv (1930-1931), p. 365.

12 See, as one example among many, E. Salin, op. cit., p. 1.

13 L. Romier, Der Mensch von heute (Freiburg im Breisgau, 1930), p. 46.

14 A Rühl, “Zur Frage der internationalen Arbeitsteilung,” Vierteljahreshefte zur Konjunkturforschung, Special issue 25 (Berlin, 1932).

15 Der deutsche Aussenhandel, op. cit., II, pp. 463 et seq.

16 E. Salin, op. cit., p. 11.

17 The historical accuracy of even this assertion may be doubted. The economic network that covered the Imperium Romanum at the time of the emperors was really nothing else than a “world economy” in the modern sense. It might be objected that “world economy,” too, collapsed. But was its collapse a matter of compelling necessity? And what followed its collapse at the time is surely in no way alluring. It does not make much difference whether barbarism breaks in “horizontally,” as it did then, or “vertically,” as it now threatens to do.

18 Friedrich List, Das nationale System der Politischen Ökonomie. Reprint of the author’s own last revised edition. Fourth edition (Jena, 1922), p. 210.

19 See E. Döblin, “Internationale Konjunkturabhängigkeit und Autarkie,” Archiv fur Sozialwissenschaft und Sozialpolitik. Tübingen. Vol. LXVII (1932/33); pp. 303 et seq. The train of thought outlined in the text does not exclude that the industrial hegemony of Western Europe is declining, just as the industrialization of Germany and the United States in their time broke the industrial hegemony of England. Apart from the disappearance of former industrial quasi-rents, this has the consequence that manufactures, both semi-finished and finished, are coming to account for a steadily growing proportion of world trade. See World Economic Survey, op. cit., pp. 148 et seq.

20 According to Sprague, of the Bank for International Settlements, more than 20 billion Reichsmark of the total 40 billion were mobilized internationally and transferred within one year; this surely proves the immense vitality of our economic system, not its decadence. (Journal des Nations, May 12, 1932, Geneva.)

21 It is just another case of the fallacy of misplaced concreteness to work out, as has been done, what, “bankruptcy dividend” the German economy might pay its foreign creditors. This strange notion has been encouraged by the standstill agreement, but it is surely obvious that the foreign debts have been incurred not by the German “economy” but by individual debtors, of whom some are good and some bad. This new form of the fallacy of misplaced concreteness has the economically most questionable consequence that all the stress is laid on Germany’s ability to transfer, while the question of the debtors’ private solvency is neglected. On the one hand, solvent debtors are prevented from repaying their foreign debts, and on the other hand, debtors in need of economic protection are forced to repay theirs. See A. Lansburgh, “Die deutschen Stillhalte-Kredite,” Die Bank, Vol. XXV (1932), pp. 1528 et seq.

22 J. Ortega y Gasset, The Revolt of the Masses.

23 It might be well to use Benedetto Croce’s term “liberism” instead of “liberalism,” so as to make things easier for those who imagine liberalism to be all sorts of things except what it really is, namely, a social philosophy to which we owe all the few somewhat brighter periods of world history, from antiquity to our age, from the Stoa to Spinoza and Goethe.

24 See W. Röphe, “Liberale Handelspolitik,” Archiv für Rechts- und Wirtschaftsphilosophie, Vol. XXIV (1930-1931), pp. 354 et seq. The same line of thought can be found in A. Rüstow, “Interessenpolitik oder Staatspolitik?” Der deutsche Volkswirt, VII (1932-1933), pp. 169 et seq. and, above all, in W. Eucken, “Staatliche Strukturwandlungen und die Krisis des Kapitalismus,” Weltwirtschaftliches Archiv, Vol. XXXVI, No. 2 (1932), pp. 297 et seq.

25 See W. Eucken, op. cit., pp. 309 et seq.