Dresden Meeting of the Verein fiir Sozialpolitik

Dresden Meeting of the Verein für Sozialpolitik

On January 4 and 5, 1932, in meetings of the board and of the committee of the Verein für Sozialpolitik in Berlin, Mises met some of these colleagues whom he so overestimated. He had unsuccessfully encouraged Hayek to attend the sessions, saying, “doubtlessly it will be interesting; maybe it is the last meeting before the abolition of usury [Brechung der Zinsknechtschafi].”¹¹³

Mises hoped to convince the committee to have value theory and the economics of cartels discussed at the forthcoming plenary meeting in Dresden. Both projects were thwarted when the committee, after a heated debate, decided to set the issue of national autarky—economic “self sufficiency” through trade isolation—on the agenda. Mises thought this decision was completely unacceptable and that it had the potential to destroy the Verein. There was no common ground for the discussion of autarky. Making it the subject of discussion was bound to intensify rather than alleviate the clashes among members.¹¹⁴

Disillusioned with the Verein's willingness to promote productive scientific cooperation, he did not even plan to attend the Dresden meeting, but changed his mind when he learned from Spiethoff that there would finally be a subcommittee meeting on value theory.¹¹⁵ In preparation for this meeting, Spiethoff and Mises edited a volume on the problems of value theory: Probleme der Wertlehre. The chapters of this book were solicited from proponents and opponents of the Austrian theory of value and prices.¹¹⁶ The selection of the authors ensured that all major points of view could be expressed. Superficially, the great divide was between the moderns (that is, advocates of marginal-value theory as the basis of price theory) and their Casselian (Kromphardt), historicist (Gottl), Marxist (Oppenheimer), and universalist (Spann) opponents. This divide was also reflected in the co-editorship of Mises and Spiethoff, who were known to be in different camps. But more to the point the book was part of Mises's strategy to spread the message that economic science was not a matter of mere personal opinion. There are certain fundamental facts on which all past and present economists agreed, despite all the differences separating the various schools.

The subcommittee meeting took place immediately after the plenary meeting, which was held on September 28 and 29, 1932. Mises gave the opening talk, emphasizing that marginal-value theory alone was able to explain all economic phenomena and that the different forms in which the marginal principle was advocated were not nearly as incompatible as the opponents of economic science claim.¹¹⁷ As one newspaper report put it, the meeting was attended by a large delegation from Vienna and by “advocates of the marginal-utility school working in foreign countries.” These participants showed “how productively the theories of the Vienna and the Lausanne schools could be further developed.”¹¹⁸

The discussion was less controversial than might have been expected because the main opponents of value theory—Lief-mann, Cassel, Spann, and Oppenheimer—had not even come to take part in the meeting. Neither had any of their disciples appeared. This was a remarkable fact in its own right and was duly noticed in the preface of the proceedings. The debate was then to a large extent a Viennese affair.

But the Dresden meeting was also a breakthrough from the point of view of contemporary history. It was a high point of the renaissance of political economy in Germany. During the preceding decade, economic theory had again become palatable in the places of higher learning where the Historical School had for a long time reigned supreme. Three publications in 1931 epitomized this change and the central role Mises played in it.

The most important of these publications was the third edition of Adolf Weber's textbook, which in Mises's judgment was the most significant German-language textbook of economics in its day.¹¹⁹ Similarly, the Frankfurt professor Budge published his textbook on monetary economics, Lehre vom Geld, in which he acknowledged Mises's achievements and critically discussed Mises's views.¹²⁰ Last but not least, Georg Halm published a revised edition of the late Ludwig Pohle's standard textbook on capitalism and socialism, based on Pohle's notes. The great bulk of the extensive additions brought a more radical rejection of socialist schemes, bolstered by quotations from Socialism and other of Mises's works.

In the same year, a Ph.D. student of Halm's in Würzburg, Karl Wagner, defended a doctoral thesis that ripped National Socialist ideology apart and received praise from Mises.¹²¹ Wagner was one of several promising young economists who were eventually swept aside by German National Socialism. The seeds Mises had planted in German soil were in for a long winter. Most of them died during the Nazi episode. Those few that survived experienced a short blossoming in the late 1940s and 1950s, and helped re-establish a market economy in the land of Bismarck and Hitler.

The 1932 Dresden meeting of the Verein gave a taste of what might have been possible if Mises's campaign to demonstrate the libertarian political implications of economic science had been allowed to run its course. The first day of the meeting featured a session on “industrialization and unemployment.” Werner Sombart was now a vice president of the Verein and in charge of selecting the invited lecturers. He had difficulty finding lecturers he considered suitable. Eventually he opted for his disciple Manuel Saitzew of Zurich and for Gerhard Colm of Kiel. But neither one endorsed the Sombartian line, which presented the massive unemployment in Germany and Austria as a consequence of economization and streamlining in industry. They argued that such technological changes could not cause unemployment on a massive and permanent scale. Saitzew contended that the real reasons included high tariffs, and Colm pointed to the inflexibility of wage rates and other prices, which resulted from powerful labor unions and cartels. Colm also stated that the selection process of the market was hampered by modern bankruptcy laws, which were too lenient on debtors, and by subsidies paid to unprofitable firms. Clearly, these views were not to the liking of Sombart or the Verein establishment.¹²²

The next day of the meeting, Thursday September 29, 1932, demonstrated even more forcefully how much economic common sense had displaced the old allegiance to the interventionist creed. The sessions were supposed to deal with the question of autarky, but the meeting once again took an entirely different course from what the Verein leadership had anticipated. Here too, Sombart had had difficulties finding suitable candidates who could make a substantial case in favor of autarky. He eventually settled on Constantin von Dietze and Emil Lederer, who were only moderate autarkists at best.¹²³ Dietze half-heartedly defended autarky by arguing that “food freedom” was necessary in war and that agrarian workers were physically better suited as soldiers. But he concluded his talk insisting that autarky offered no solution to unemployment, and that his real confidence lay with the forces of the free market. The high point of the meeting approached when Emil Lederer, with the full authority of his position at the University of Berlin, “in a brilliant speech that was based on the traditional arguments of the free-trade doctrine and on the most recent statistical data,”¹²⁴ argued that no country was less suited to engage in protectionism than Germany. In the ensuing debate on autarky, almost all the speakers emphasized that it was wrong to oppose free trade as contrary to the national interest and that it would be wrong to make free-trade policies conditional on the trade policies of other countries.

Commenting on the meeting for a major Vienna business newspaper, Louise Sommer noticed the historical irony of the Verein majority's now advocating free trade and free markets. Sommer traced the emergence of this new majority to the early 1920s when Heinrich Herkner's endorsement of Mises's Socialism caused a “crisis of social policy.” Mises's ideas, wrote Sommer, were the primary agent of the transformation of Germany's intellectual landscape in the 1920s:

The ideas that Mises developed [in this book] have affected the entire ideology of the Verein für Sozialpolitik and turned it toward an endorsement of the free-market economy. It is from this point on that the Verein has unmistakably changed its goals. It has now become a battlefield for the debate of questions of economic principle and economic order. It is a milestone of the history of this association... that free-market ideas have had a renaissance at this year's meeting, that the fight against autarky, against the whole system of restraints and regulations that fetters economic life, has been taken up at the meeting with much energy.¹²⁵

Just as Mises was finally beginning to stir the spirit of liberty among the young generation of German economists, the old Kathedersozialisten had a final and devastating triumph. On January 30, 1933, their intellectual scion, Adolf Hitler, was appointed chancellor of the German Reich.

When the Nazis rose to power, they immediately began with their program of Gleichschaltung (enforced conformity, literally “synchronization”), whose goal was to subordinate all organizations to the central Nazi organizations that controlled the federal government. Faced with the choice of becoming part of the Nazi apparatus or self-dissolution, the Verein, honorably, chose to disband in December 1936. Even more honorably, Mises quit the Verein three years earlier, in immediate protest against the Gleichschaltung laws.¹²⁶

Mises was also one of the initiators of an international effort to provide new career opportunities to the academics whom the Nazis expelled from Germany. At the end of March 1933, Beveridge and Robbins were in Vienna and met Mises for dinner. Their Austrian friend stormed into the lobby of the Hotel Bristol, breaking the news that the Nazis had fired a number of Jewish academics such as Bonn, Mannheim, and Kantorowicz. On the spot, the three men discussed what could be done to help these German socialists. Would it be possible to set up relief funds in France and Britain to employ them? Beveridge announced that he himself would oversee a relief action at LSE. Back in London, Robbins organized a meeting of LSE's Professorial Council, which voted for a scheme of “voluntary” deductions from staff salaries to finance the relief fund. He also convinced Beveridge to support an even larger scheme, and eventually a relief fund was created on a national scale. In a letter to Mises, in which he reported on progress, Robbins praised his correspondent for having seen the practical implications of the new situation and for initiating an effective response.¹²⁷