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Chapter 17 How Can Austria Be Saved? An Economic Policy Program for Austria In spite of the wretched condition in which we find ourselves I consider our situation not to be an unfavorable one. Vienna and Austria would have a positive future ahead of them if we didn’t do everything to worsen our own situation. What is occurring is practically the opposite of what needs to be done. It is no wonder, therefore, that things are going badly for us. We are living today, and have been living for years, by devouring what several previous decades of freer economic policy had produced. What makes me optimistic is the fact that, on the whole, in comparison to the prewar period, the raw materials and foodstuffs that we import from abroad have risen less in world-market price than the manufactured goods that we would be in a position to produce for export, and less than the commercial profits which Viennese business can generate . Indeed, our earnings from the sale of finished goods could be greater than they were in that earlier period. The objective prerequisites for a flowering of Austria are given; unfortunately the subjective ones are not. Our fellow citizens have not grasped the realities of the moment and instead they chase after illusionary ideas. But, eventually, reasonableness must prevail. Just a few days ago a politician asked me to draw up an economic policy program in a few short sentences. Here it is: 1. The progressive devaluation of the crown, which manifests itself in a rise in both the foreign exchange rate and in prices and wages, is a consequence of banknote inflation. It can be brought to a standstill only if we succeed in eliminating the government’s budget deficit. 1. [This article originally appeared in German in Die Börse (February 17, 1921).—Ed.] how can austria be saved?  249 2. The federal, provincial, and municipal budget deficits principally all spring from the same two sources: the inefficient management of public enterprises and of the food subsidy scheme. The goal should be to transfer the public enterprises into the hands of private businessmen and to dismantle the food subsidies. At the present time the very opposite is happening. The public enterprises are being expanded through nationalization; and the food subsidy scheme is being expanded, as represented by the fact that the difference between the buying price and the selling price for foodstuffs is being allowed to grow. 3. If things continue to be managed in this way, then inevitably the time will come when the currency will collapse, that is, the crown will become completely worthless. Then there will be a frightful catastrophe . Suddenly the country will no longer be in a position to maintain these public enterprises or to sustain the food subsidies. If dismantling both of these occurs in time, then it will be possible to avoid such a collapse, and it will be possible to reduce the difficulties in making the transition to a normal economy. 4. The attempt must be made to stabilize the value of the currency with the establishment of a fixed rate of exchange between the crown and either gold or the dollar. The new parity should be set at a level which corresponds to the domestic purchasing power of the crown. To go beyond this parity would be injurious to the economy; any further rise in the foreign exchange value of the currency beyond this point would only hamper exports and stimulate imports, with severely harmful consequences , that is, unemployment. The catchphrase of a fall in prices is absurd. Those who are today most loudly demanding a reduction in prices would be hardest hit by such a fall in prices. We do not need decreasing prices, but incomes that are increasing. That, however, can only be achieved by a rise in industrial and business activity. 5. The peace treaty requires that the banknotes in circulation must 2. [In the immediate postwar period, the new Austrian government instituted a huge food subsidy program at artificially low prices and rationing of food through a coupon system to urban, and especially Vienna, residents. When farmers in the rural areas refused to sell their food supplies to the central government in Vienna at those below-market fixed prices, the government attempted to confiscate those supplies. This resulted in the provincial governments in the new, smaller Austria setting up customs barriers and visa requirements to enter or exit their respective jurisdictions to conserve...

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