Monetary and Economic Policy Problems Before, During, and After the Great War

Chapter 20. The Restoration of Austria’s Economic Situation

Chapter 20 The Restoration of Austria’s Economic Situation The current economic situation is the most dangerous facing the Austrian state and its people since the crisis began with the overthrow and economic partition of the former Austro-Hungarian Monarchy. The possibility for an immediate catastrophe confronts us. The continued depreciation of the Austrian crown destroys all prospects for reestablishing the state budget until a new bank of issue has been founded. It is not an improbable assumption that the state will be compelled to suspend all payments once it has become impossible to increase the circulation of banknotes—a possibility that entails almost unthinkable social consequences. In this perilous situation, the Vienna Chamber of Commerce deems it necessary to make an appeal to the lawfully qualified representatives of Austrian economic life—the Chambers of Commerce and the Boards of Workers and Employees—to cooperate in working out, on a purely economic basis and free from all party influences, a program that can tide us over the current situation without a social collapse. We must not allow ourselves to once again design a plan for economic reconstruction that is founded primarily on catchwords and purely party points of view, and which is taken to be “the only one possible” due to a lack of necessary preparation and adequate counter-proposals. To the contrary, the political parties should be compelled to acquire a full mastery of the perspectives of the economically productive classes— both workers and employers, equally. 1. [This paper, written in German, was prepared as a position statement for the Austrian Chamber of Commerce and presented on August 28, 1922. It has not been previously published.—Ed.] the restoration of austria’s economic situation  265 In what follows, we propose to outline the foundations for such a program for the transition period. Our sole aim is to point out the essentials for a discussion. We do not wish to assert that our ideas are the only correct or authoritative ones. Indeed, the discovery of the latter will be the purpose of the discussions. Above all, no further time should be lost in discussing whether or not the Austrian state can have a viable independent existence; all discussion of this subject must remain academic. Only a long period of experience under normal conditions of economic life can provide an answer to this question. Similarly, pointing to the current idleness of our industry proves nothing about the viability of Austria, insomuch as this idleness can be brought to an end through appropriate shifts in production and reallocations of the workforce. A private enterprise may show a deficit for several consecutive years without proving its inability to survive. Only if a cure for the problem is impossible would there be such a proof. For the present, therefore, valuable time should not be wasted on this question. Our point of view is a purely practical one. The greater part of the state’s expenditures automatically increase on the basis of a cost-ofliving index number. If the expenditures of the state are regulated by an index number, its receipts must be similarly regulated. In other words, the state must obtain a large proportion of its receipts in terms of a stable medium of exchange that is independent of the crown. Gold is such a medium. Receipts in gold, therefore, must be obtained in order to cover the given expenditures that are determined by this index number. The railroads and the postal and telegraph services could be the first to supply receipts in gold. The charges for these state enterprises would be fixed in gold, and the equivalent in paper crowns calculated on the basis of the rate of exchange that is published weekly. It must be pointed out that the present tariffs for these services are far below their prewar level (calculated in gold); therefore, the entire transition to the new postwar level could only be brought about gradually over about a year’s time. Considerable reductions in transport charges would have to be granted for the shipment of foodstuffs, essential raw materials, and coal. Also, efforts should be undertaken to alter those provisions in the peace treaty that require the same rates to be charged for foreign 266  selected writings of ludwig von mises goods in transit as those charged for goods destined for Austria. It is entirely unjust that Austria, as a leading transit country, should have to renounce...