UNEMPLOYMENT AS A PROBLEM OF TURNOVER CREDITS
AND
THE SUPPLY OF MEANS OF PAYMENT
1. FUNDAMENTAL CONCLUSION: NECESSITY OF A SATURATION WITH MEANS OF PAYMENT
We have seen the cardinal objective in the re-integration of the unemployed in the regular economic process. Our starting point was the goods and money circulation in a small payment community. We recognize that the COSTS AND EXPENSES involved in the production of goods, turn, in the hands of the workers, the clerks, the recipients of interest and dividends, into INCOME. We also recognize that the goods production either serves the direct supply of the population with CONSUMER GOODS or the MAKING OF LONG-TERM CAPITAL GOODS. In both instances credit plays an important role.
The supply of the population with consumer goods in the "regular economic process" is not possible without a solution of the PROBLEM OF TURNOVER CREDIT. We had recognised that the turnover credit in its present organization is far REMOVED from its ORIGINAL PURPOSE to promote the turnover and sale of goods. We have, moreover, recognised that in this separation of the money circulation from the goods circulation the following play a significant role: bank organisation, value standard and means of payment and especially the problems of the note issue monopoly of the central bank and the compulsory acceptance (and enforced and fictitious value! - J.Z.) (legal tender) for paper money.
The positive section, in which we gave as example some law drafts, showed us that merely with the removal of the lava which, in the course of historical development, has covered the system of turnover credit in most countries of the world, an adequate solution of the problem of re-integrating the unemployed is not yet possible. Therefore, the PRINCIPLE OF CLEARING was developed which, as a new solution principle, promises to solve a great part of the so far insoluble problem of turnover credit and of unemployment.
(Note by JZ : It is "new", in its explicit clearing form, only in the wage payment & consumer-spending sphere.)
As the FUNDAMENTAL CONCLUSION of our examination of turnover credit and unemployment, we can now state the DEMAND THAT ALL TRADE MUST BE AS ABUNDANTLY AS POSSIBLE SUPPLIED WITH MEANS OF PAYMENT.
If any issuing centre should issue too many means of payment then, under the system of a free market rate, these means of payment depreciate by suffering a discount. In case of compulsory acceptance an inflation would occur.
Both extremes should be avoided: the artificial scarcity and the over-issue of means of payment. In the middle between them lies, so to speak, the SATURATION POINT, which would offer the best guaranty that, as far as turnover credit is concerned, no worker is prevented from producing and exchanging whatever he and people like him want to consume.
2. PRACTICAL PART SOLUTIONS: THE CENTRAL BANKING SYSTEM AND THE FUTURE OF OUR BANK AND PAYMENT SYSTEM
Certain practical PART SOLUTIONS ARE SUBORDINATED to the above described fundamental conclusion:
RELATIVELY TOLERABLE CONDITIONS FOR THE RE-INTEGRATION OF THE UNEMPLOYED can also be achieved under the monopolistic regime of the central bank by the following measures
a) Keeping the central bank healthy.
b) Restricting the bank to the granting of turnover credit.
c) Re-linking of credit with the exchange of goods.
d) Preservation or restoration of the State's short-term and long-term credit.
e) Refusal to support unsound banks and industrial enterprises, since the means required for this would have to be
withdrawn from the sound portions of the economy and because such a policy is followed by either credit
restriction or inflation.
f) Cover of banknotes not by industrial bonds or state securities and similarly frozen stocks but by self-liquidating
commercial bills and similar claims.
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That one will fare much better with these time-honoured policies, abandoned by most countries today, than with the untested methods of the conjunctural and the open-market policies of the last years, which remind so much of the time of bank restrictions in England before 1844, is quite certain. Nevertheless, under today's changed circumstances, one will remain in great difficulties with these, as the next decades will show. Thus these measures will require further measures.
Far BETTER CONDITIONS for the re-integration of the unemployed are given when one can resolve upon the ABOLITION OF THE ENFORCED MONOPOLY AND THE COMPULSORY ACCEPTANCE (AND COMPULSORY VALUE! - J.Z.) and a return to the more free and efficient bank and money policy of the last century, which, by the way, also developed a stronger and more independent type of man. This was a system under which Europe once before flourished extraordinarily, both intellectually and economically.
STILL BETTER conditions for the re-integration of the unemployed and avoidance of economic crises and collapses, will be established if one removes redemption in specie and the cash-repayability of banknotes and bank deposits and if, instead, one changes over, by means of internal and external purchasing certificates (goods warrants etc.) to the NEW SOLUTION PRINCIPLE OF CLEARING which has also a proud history. All conceivable precautionary measures are to be used in this. Only few of them could be discussed here. (30)
3. THE LIMITS OF THE IMPORTANCE OF TURNOVER CREDIT FOR THE SOLUTION OF THE-UNEMPLOYMENT PROBLEM
No matter how great the importance of an advantageous organization of turnover credit may be for the solution of the unemployment problem, however optimistic our practical conclusions may make us, yet we must not overestimate the part solutions so far offered.
Firstly, unemployment is by no means caused exclusively by monetary factors. Only this present paper has confined itself to the treatment of the monetary and credit causes.
Moreover, at least until a short time ago, the turnover credit in Europe was still by far the best developed of all credit branches, leaving aside mortgage credit in some countries. Despite this and already from 1929 onwards, unemployment was very large in most countries of the world. This is a phenomenon which cannot be traced back to disturbances in turnover credit alone. Only after the breakdown of the turnover credit system (a collapse which was latently prepared in various ways), in Germany, in the year 1931 and in other countries shortly before or after, has the question of turnover credit become especially acute.
Nor should it be forgotten that the achievements of machines in the production of today's consumer goods are so great that ALL unemployed could not be employed (in the production of consumer goods) even once all of them begin to consume fully.
There is an excess of productive capacity. The existing consumer goods production and sales organization could, if it newly employed merely ONE million workers, produce, perhaps, the consumer goods for TWO million additional consumers. THUS, TODAY, PART OF THE UNEMPLOYED WOULD NO LONGER BE NEEDED FOR THEIR OWN SUPPLY WITH CONSUMER GOODS, IF THE ECONOMY IS WORKING AT FULL CAPACITY.
If one wants to employ this portion of the unemployed also, then one must let them produce not consumer goods but long-term capital goods and pay their wages with the consumer goods remaining within the productive capacity of the consumer goods industry. As is known, this has been done especially by the German Government in the year 1933/34 with great success.
(Note by JZ: The reader ought to keep in mind here that this work was written under Nazi censorship. The least criticism would either have prevented its publication or led to great difficulties for the author. Thus, as an insurance, he inserted some praise. Actually, Prof. Rittershausen was a member of the resistance and
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survived the Nazi regime only by a fluke. Later, when he could speak freely, he pointed out that under the Nazi's economic rule no miraculous recovery was achieved. The worst of the crisis was already over, anyhow and further recovery, under Nazi rule, was slower in Germany than in many other European countries. But the myth of economic successes of this regime persists even until today. Just compare the unemployment statistic in the above table, page 16. Large scale unemployment still persisted under the Nazi regime for years, in spite of natural recovery trends. From 1935 onwards, at least, the statistics were shamelessly forged. They were not faultless before, either, nor are they now, in "democratic" countries.)
Thus one has to beware, to speak with Karl Diehl (31), of an over-estimation of the "sphere of circulation" as probably an as large number of the causal factors of the boom and bust cycle is not to be found here but in the "sphere of production". But this kind of problem need not be discussed here. (32) The difficulties in consolidating the floating debts contracted in these investments, due to lack of liquidity in the Banking and Exchange apparatus, make this road impassable (in the near future) as State Secretary F. Reinhardt has rightly pointed out. The reorganisation of the machinery of turnover credit, which was to be the introductory subject of the Bank Enquiry, should now find general attention.
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