by Wilhelm Bauer
The following is based on a
lecture which I gave at the Amerika-Institut, Berlin, on August 11, 1938 before
a group of American Professors headed by Professor Dr. Bruner of Teachers
College, Columbia University, New York. It provides a short systematic sketch
of the various measures of economic policy undertaken by the German Government
in the course of the past few years in order to regulate production and
consumption in accordance with the aims of German economic policy. For more
detailed information I refer the readers of this article to the Weekly Reports
of the German Institute for Business Research (Institut für
Konjunkturforschung, Berlin-Charlottenburg 2, Fasamenstr. 6)
State and business.
The basis for
all government intervention in business in Germany is to be found in the
National-Socialist conception of the relation between business and the State.
According to the German theory business is subordinated to the State. Formerly,
it was believed that the fate of the State and of the nation lay in business,
for it was said that business was of such great importance and so powerful that
it controlled the State and determined State policies.
In the National-Socialist
State the relation between, business and State is just the contrary. Today the
State or State policy controls or rules business.
I must emphasize that in
National-Socialist eyes the State incorporates in itself no absolute value as
is the case, for instance, in an absolute monarchy. The supreme value is the
nation which we call in German Volksgemeinschaft, the community of the
nation. The State is only the form of organization and the manifestation of the
will of the people.
This means that the State is
not concerned with economic conditions as long as they do not conflict with the
welfare of the nation. The principle of private initiative has been maintained.
However, where it seems necessary to bring business into line with the welfare
of the nation, the State will not hesitate to intervene and direct business
into the desired channels. In Germany, contrary to the usual belief, we have no
„planned economy“, but rather a „directed“ economy if I may use such an
expression.
The aims.
The aims of the present
regulation of production can be summarized in a few words. First, the securing
of supplies of raw materials for industry. All measures serving this aim are
included in the Four-Years-Plan the aim of which is to make Germany as independent
as possible of imports by increasing domestic production.
Second, an increase in
domestic agricultural production with the aim of making Germany, as far as
possible, self-sufficient in the field of foodstuffs.
Germany has only a few raw
materials and has always been faced with the necessity of importing the greater
part of her raw material requirements. But as you realize, imports can only be
paid for out of export proceeds or other credit items in the balance of
payments such as shipping, insurance, or proceeds from capital investments
abroad. As a result of the War, Germany is no longer a creditor but a debtor
country. In other words, she was burdened with a tremendous indebtedness and
had at her disposal no great income from investments abroad, while her other
income from abroad is today less than it was before the War. Germany must
therefore limit her imports to the extent of her exports, with the consequence
that Germany's raw material and foodstuffs imports are dependent on the amount
of goods which other countries are able and willing to take from her in
payment.
Indirect and direct Regulation of Production.
The German government follows
no definite theory in establishing the methods by which intervention in the
field of production is to be accomplished. This is one of the most
characteristic traits of National-Socialist economic policy. In combatting
unemployment, the government did not follow one theory such as the theory of
direct public works or the theory of the stimulation of private initiative, but
followed both theories impartially according as to which seemed best at the
time. The same is true of the regulation of production.
The various measures may be
classified as: 1. indirect and 2. direct.
The State undertakes indirect
measures when it intervenes not in production and capital investment themselves
but in conditions which govern them.
There are four special groups
of indirect measures:
1. Regulation of taxes,
especially reduction of taxes.
For example, in order to
revive automobile production, which was at an extremely low level, and thus to
stimulate motorization in Germany, which had lagged far behind the level of
motorization in other countries, as early as 1933 the Government abolished the
tax on all new passenger cars, later extending this to all automobiles. This
made automobiles much cheaper and increased the sales of the industry. In the
last five years, these measures together with the economic upswing have brought
about a great advance in automobile sales and a great improvement in German
motorization. In 1932, only 19 out of every 1,000 people in Germany owned cars
as compared with 41 in France and 37 in Great Britain; today, however, the
figure for Germany is 35 in every 1,000, as compared with about 51 per thousand
in France and Great Britain.
A further example of
regulation of production by means of tax reductions was the exemption of short
term capital goods from income tax. After 1933 the value of these goods could
be deducted from taxable income of the individual and from the taxable profits
of an enterprise. This stimulated the purchase of such goods and was a means of
increasing the low activity of the capital goods industry. The elasticity of
the National-Socialist economic policy can be seen in the fact that this
measure was repealed as soon as the capital goods industry was fully employed.
2. The second means of
indirect regulation of production is price policy. This can take place in two
ways: by a reduction in costs and by an increase in, or guarantee of, sales
prices. These methods have been chiefly used in the field of agriculture, where
production reacts quickly to price changes. An example of this reduction may be
seen in the prices for artificial fertilizer, farm machinery and agricultural
implements. On the other hand, by a scaling of farm prices it has been possible
to increase considerably the acreage given over to winter barley, the
production of fiber plants and oil fruits, and the number of sheep.
3. Closely related to this
price policy is tariff policy, the utilization of which is necessary where
domestic goods compete with foreign products. This is particularly important in
the case of agricultural products, the prices of which are considerably lower
on the world market than in Germany. Special boards have been set up in order
to compensate for these differences in prices, and are empowered to regulate
imports.
4. The last method of indirect
regulation of production is the prohibition of new private issues on the
capital market. Since new issues are permitted only for special purposes all
those branches of trade and industry which are shut off from the capital market
are thus limited in their capital investment possibilities. They can only
extend their plants, etc., to the degree that their own funds allow. Thus in
1933 a special board was set up under the control of the Reichsbank, to
which application must be made before new issues are floated. Permission is
only granted for private issues in the case of companies which serve the ends
of the Four-Years-Plan, where, moreover, no other possibility of financing
their work exists.
Capital investment policy.
Among the large number of
methods of directly influencing production, I have to mention first the
government orders which predominate in some economic branches.
Apart from this a good deal of
direct regulation of production by the Government consists of the regulation of
capital investment activity.
Thus the regulation of capital
investment activity really means a planned direction of capital investment.
This was proved especially necessary when work was started on the
Four-Years-Plan. In a certain sense capital investments were scaled according
to urgency. Four-Years-Plan, rearmament and exports are the most important.
A number of measures have been
introduced in this connection. They may be classified as follows: -- There are
capital investment prohibitions, the purpose of which is to prevent industries
whose capacity is sufficient to cover demand, from extending their plants. This
prevents needless using up of the limited capital and material available, and
avoids over-production and consequent disturbances of the market. We have such
capital investment prohibitions, for instance, in the paper industry, in the
glass industry, in part of the textile industry and in part of the chemical
industry.
In the second place the
regulation of capital investments and production by profits and sales
guarantees given by the government. I have already emphasized that
National-Socialism adheres to the principle of private initiative. However this
does not prevent the State, if it seems necessary, from relieving private
business of some of the risk it runs in undertaking certain projects. These
profits and sales guarantees given by the State are especially important in the
production of staple fibre, motor spirit and synthetic rubber. The companies
engaged in such production in Germany are private firms; their profits however,
have been guaranteed by the State to a certain extent, since their products are
of great importance for the economic policy of the State.
In some fields the State
itself has gone into production, and has for this purpose made capital
investments. The principle that business is to be left as far as possible to
private initiative does not mean that the State cannot engage in economic
activity in certain fields of production and under certain specific conditions.
This is the case, for example, in the field of iron ore production.
After the loss of territory in
the War, only a small part of Germany's iron ore requirements could be covered
by domestic production. In view of the fixed costs and prices prevailing and
under the usual methods of exploitation only part of Germany's iron ore
deposits could be mined with profit. The dependence on imports in the case of
such an important field as iron ore had to be eliminated. But the conditions
and problems in this type of production were so peculiar and so extensive that
the State correctly assumed the initiative itself. The Government, founded a
company, the Hermann Goering Reichswerke, the business of which is the
mining of the low content iron ores which abound in Germany.
Subsidies.
One of the oldest and
best-known methods of State intervention both here and abroad is the granting
of subsidies by the State. Outside Germany, especially in the United States,
subsidies are well-known, above all in the shipping industry. Here too private
business is not in a position itself to operate an economic branch in the way
the State considers desirable. The same thing holds in Germany for some spheres
of production. For example, certain building projects, such as the building of
dwellings for agricultural workers or the erection of settlements for industrial
workers, are carried out either directly with the help of contributions from
the State, or indirectly with the aid of loans granted by the State on
extremely favorable terms. Furthermore, the production of nonferrous metals has
been supported by State subsidies for many years.
Regulation of raw material consumption.
The third group of measures of
government production regulation concern raw material consumption. Almost the
whole of German industry is subjected to the system of raw material quotas. The
essence of quota-fixing lies in the control of imports, which was introduced in
1934 as part of the New Plan for German foreign trade. The control is carried
out by 27 control boards, one of which has been set up for each branch of
industry. Factories which use imported raw materials are only allowed to
purchase a certain volume of raw materials abroad. Normally, the basis of the
quota-fixing is the consumption of a certain month. But the importance of the
orders which the company has to fill, is also taken into account, export orders
being given special consideration.
Apart from this system of
import regulation there exist a number of decrees dealing with the use of raw
materials. For instance, as a result of the scarcity of wool and cotton it has
been decreed that all wool and cotton cloth manufactured in Germany for the
domestic market must contain a certain percentage of staple fibre. Certain
products, for example doorknobs, may no longer be made of brass. In private
residential buildings only a certain amount of construction iron may be used.
This system of regulation has been carefully worked out and is not too strictly
bureaucratic in its application. In many cases the usual raw materials must be
replaced by new synthetic raw materials which can be produced without any
import. The use of these new synthetic raw materials does not mean a lowering
of the quality of the finished product. On the contrary, the shortage of raw
materials leads to new inventions and improvements and even brings about as in
the case of buna (synthetic rubber) a technical progress which otherwise would
not have occurred.
Regulation of labor supply.
When in the course of the last
few years unemployment disappeared in Germany and turned into an ever greater
shortage of labor, it was impossible for the government to view this passively,
since otherwise there was danger that some industrial branches would be
compelled to restrict their production. Thus the government had to regulate
labor supply and distribution of labor among the various branches. Labor
reserves today in Germany can be secured by the employment of additional female
labor, later retirement, and employment of superfluous independent workers as
wage earners in industry. But these reserves are relatively small so that the
question arises how to increase efficiency of labor.
But the problem is not that of
merely employing more people, it is the employment of people in industries
where they are most needed. Thus it was necessary to take care that in certain
industries there was no diminishment of the labor supply. A law was passed
recently which makes any change in employment dependent on the approval of the
labor office. This law applies to the following branches and industries:
agriculture, forestry, mining (excepting coal mining), chemical industry,
building industry, building material industry, iron and metal industry. By this
the German government hopes that in these important branches the especially
urgent needs of the state will be covered.
Increase of production.
If you were to ask me what
success has been achieved in the sphere of production regulation, I could not
do better than to give you a few figures which will show you the extent of the
increase of production in Germany. Total industrial production in Germany is
today 144 % greater than in 1932. Even the peak year of 1929 was exceeded as
early as 1936, while today about 30 % more industrial goods are produced than
in 1929. The production of capital goods has risen much more strongly than has
the production of consumption goods, being now four times as great as in 1932
and more than one and a half times as great as in 1929.
Progress in the field of
domestic raw material production has been even greater. Iron ore production has
risen from an average of 843,000 n metric tons for the first 3 months of 1938
to 1,226,000 metric tons in the first three months of 1939. This means an
increase of 45%. Furthermore, there has been great progress in domestic oil
production. In 1938, staple fibre production has reached 155,000 metric tons as
compared with 5,400 metric tons in 1933 and 102,000 metric tons in 1937.
Consumption policy.
A number of measures of
production regulations, namely all those which affect production of consumption
goods, also influence consumption. When, for example, in the interest of a
sufficient bread supply it is decreed that all bread should contain a certain
amount of maize flour, this is felt by each individual consumer. (Incidentally,
in view of the good harvest, this particular measure was abolished on October
1st, 1938.) The same is true of the changes in the textile field and in other
fields where the new synthetic materials are gaining a foothold.
The idea of „consumption
regulation“ is undoubtedly something completely new to you. In the economic
textbooks and handbooks nothing will be found on this subject. Of course, the
fact that -- contrary to general belief -- man cannot consume what he desires,
is as old as the hills. And even today in the modern economic systems the
individual is subjected to many restrictions in his consumption.
In the Middle Ages there were
strict provisions as to the clothing worn by the various classes. The
Mercantile countries, that is, the countries of the 17th and 18th centuries,
restricted consumption for economic reasons, mainly in order to stimulate home
industry and to cut down imports. And if you consider your own position you
will find none or only a few restrictions in your consumption as the result of
State action (you will remember of course the days of prohibition!), but you
will probably find great restrictions in consumption as the result of custom,
fashion, habit, social viewpoint and, last but not least, industrial
production.
It would probably be very hard
for you to secure outside the six to eight different forms of straw hats to be
found in almost every shop, one which was especially light and comfortable and
in a form designed by yourself. This is nowhere manufactured and it would be
hard for you to find someone to make you a straw hat according to your own
design and measure. Industrial hat production, which is rationally based on
machine production of hats, will certainly not do it. While on the subject of
hats, it would be impossible for you to walk around in America, in a round
plate-like felt hat, instead of the usual form of felt hat, without being
laughed off the street, for that would be contrary to American custom and
habit. And finally the fact that each family must spend a certain part of its
income on food, the amount being in inverse proportion to the income, is most
certainly a restriction of freedom of consumption which weighs quite heavily on
the individual.
As you can see, complete
freedom of consumption is a rather doubtful matter. Once you have realized
this, it will no longer seem absurd to you when I speak of government
consumption regulation. In the authoritarian states, a direction of consumption
forms part of the totalitarian claim of the State, which subordinates the
individual to the higher needs of the nation.
The aim of consumption policy
in Germany is to increase consumption and thus raise the standard of living of
the entire nation, -- especially that of the working class -- to adjust
consumption to production and to regulate consumption along National-Socialist lines.
The aims of consumption regulation are partly of a political nature and partly
determined by the economic situation.
It is far harder to regulate
consumption than it is to regulate anything else in economy. For every measure
of consumption policy affects the largest unit, the entire population. A decree
concerning the iron ore producing industry affects only a few hundred firms.
However, an appeal to the consumer affects 19 or 20 million households with 75
million people. This fact alone makes special methods necessary for regulation
of consumption.
I have hinted at these methods
in telling you about the bread supply and textile production. Of a similar
nature are certain limitations imposed upon trade, whereby only a fixed amount
is allowed to each customer, as for example in the case of fats in months when
there is a shortage.
The most important means of
regulating consumption is publicity. Of course, this method does not guarantee
as sure a success as do legal measures. But it has the great advantage that it
gives the consumer the feeling that he is doing something of his own free will
and that the only pressure exerted upon him is that which is exerted by his
conscience.
Nutrition.
Germany is in the unfortunate
position that there is a limit to which those foodstuffs the consumption of
which increases with a rise in income, such as fats, butter, eggs, etc., can be
produced or imported. Thus, the aim has been to influence the consumer to use
as much as possible those foodstuffs which are abundant in Germany and to use
to a less degree those which are not so plentiful or which have to be imported.
At the same time, there was a possibility of directing nutrition in the best
ways from the point of view of health. For instance everything possible was done
to convince people that for a great part of the population, for example those
who do not do hard physical labor, a diet too rich in fats is not especially
healthy. Along the same ideas, great success has been achieved in increasing
the consumption of fish. Today Germany consumes 26.9 lbs. per head per annum,
as, as compared with 18.7 lbs. five years ago.
A summary of everything
desired in the field of consumption regulation may be found in the food list
which the German Institute for Business Research has worked out. The Institute
classified the food-stuffs into three groups, those whose consumption should be
increased, those whose level of consumption should be maintained, and those
whose consumption should be restricted.
The foodstuffs concerned are as
follows:
Consumption to be increased:
potatoes, sugar, jam, skimmed milk, whey cheese, barley, oatmeal, sago,
artificial honey, buttermilk, Harz cheese, Limburg cheese, vegetables grown in
Germany, fish, mutton, rabbits.
Consumption to be maintained:
bread, pastry, flour, fruit, lentils, pork, eggs, milk, venison, rice, peas,
dried fruits, poultry, cocoa,,beans, honey.
Consumption to be restricted:
beef, veal, butter, lard, bacon, margarine, cooking oils, fats, buckwheat,
millet, imported vegetables, high fat cheese.
In Germany we do not have a
regular supply of all foodstuffs throughout the year as you do in America. The
Institute therefore drew up a list of those foodstuffs which are to be
especially pushed in certain months. As an example I shall quote two months:
January: pork, geese, fish, cabbage, root vegetables, fruit and vegetable
conserves. September: mutton, poultry, mushrooms, pickles, tomatoes, beans,
salad, spinach, plums, pears and apples. However, I would like to emphasize
that these are not the only goods which may be consumed, but the public is to
be educated to adjust its diet to conform more or less with the fluctuations in
the supply of certain foodstuffs. Publicity to this end is not carried out by
the Institute for Business Research or by the Government direct but by
organizations like the Reich Food Estate (Reichsnährstand) and private
companies.
Another measure serving the
same purpose is the Anti-Waste Campaign. The purpose of this is clearly to be
seen in its name.
Other fields of consumption.
The problems of consumption
regulation in other fields are just as great as those in the field of
foodstuffs. It is well-known that Germany must import the greater part of the
raw materials required for the manufacture of textiles, shoes, etc. As a result
of the considerable rise in income in the course of the last five years, the
demand for these goods has increased greatly. Thus there arose the danger that
consumption would exceed production possibilities. Since it is impossible
forcibly to restrict the consumer in this field, the aim was, mainly by means
of publicity, to direct consumption in those paths where there was practically
no limit to consumption possibilities. Therefore, consumption was directed to
all such services as travel, theater, sport, diora, etc. The introduction of
the low-priced popular car also means a direction of consumption to a ware
which can be produced in quantities sufficient to meet demands.
Of course publicity is not in
itself sufficient. For it is precisely in those fields of consumption where the
consumer feels himself free, that it is hardest to get him to use his money for
the things which it is desired that he buy. Therefore, publicity has been
effectively supported by price reductions of all kinds. Here, too, the
low-priced popular car is the best example. This will cost about 1,000 RM. and
will be much cheaper than any other car. Moreover, the low-priced popular radio
set has promoted purchases in this field. This is being continually improved
and reduced in price. The Reichsbahn, the German State Railroad, has
established reduced fares for trips to all large exhibitions, such as the
automobile exhibition, the radio exhibition, sports meetings, etc. so that more
people can take advantage of these occasions.
Organized consumption.
A special field in consumption
regulation is the organization of consumption which is carried out by the large
political units, especially the German Labor Front. Here political and social
aims correspond to economic aims. Everything is being done to influence the
worker to spend his income as much as possible for such things as mean a
substantial rise in his standard of living and as little as possible for such
things as burden the German foreign exchange balance. Through organization it
is possible to effect price reductions, and these price reductions are to make
it possible for the worker to do those things which formerly only the
better-situated classes were able to afford.
The main factor in the field
of organized consumption is the organization Kraft durch Freude „Strength
through Joy.“ The following figures and examples show what has been done. Up to
1937, 9 million German citizens had taken journeys and walking trips. The
following were taken at random from a list of 350 vacation trips from Berlin
which have been arranged for the period from May to September 1938: --
A two-week trip to
Upper-Bavaria costs 60-50 RM., while an eight-day stay on the Baltic costs only
31 RM., and a 16 day trip to East Prussia but 41 RM. These costs include
everything: railroad fare, room and board, trips, etc. In the last theater
season, 1937/1938, the „Strength through Joy“ arranged 7,000 theater
performances. For the workers on the auto highways alone some 7,000 concerts
and entertainments were arranged. In the last four years 34 million people have
participated in the evenings of culture and entertainment arranged by the
organization „Feierabend“ which I might translate into English as „The
Evening Off.“ Seven million have taken part in sport exhibitions, gymnastics,
games, etc. On the island of Rügen a large seaside resort is being constructed,
which will offer 20,000 an opportunity for recreation and rest.
Sea trips take German workers
to Portugal, Madeira, Norway and Italy. By the end of 1937, over 180,000 had
made such trips. Recently the German Labor Front launched its own ships, the Wilhelm
Gustloff and the Robert Ley, which were especially built and fitted
for such sea trips. It is planned to build about 20 steamers for this purpose.
The comfort and living conditions in that ship are but little different from
those in the great liners. just as on the great luxurious liners, so on the
Wilhelm Gustloff and the Robert Ley, you can have your daily bath in fresh water,
enjoy running hot and cold water in your cabin, drink ice water, swim in a
large pool, play in the sports room, enjoy all the deck games and dance in the
evening or attend some entertainment. The land trips which are taken are not
different from those arranged by the North German Lloyd or by the
Hamburg-America Line. Yet the whole three weeks only cost the sum of 158.37
RM., including the railroad trip from Berlin to Genoa and the railroad trip
from Hamburg to Berlin. The usual rule is that only those workers are allowed
to take these trips whose income is not over 300 RM. per month; most of the
participants, indeed, earn less than 200 RM. monthly.
No comments:
Post a Comment