Political Economy Seminar

GA 341 — 4 August 1922, Dornach

Fifth Seminar Discussion

X raises the problem of exchange rates and their fluctuations for discussion. He suspects that certain personalities are behind this.

Rudolf Steiner: This does exist and is one of the partial causes. It is very difficult to say that something is the main cause, because this has changed a lot at different times. But the most diverse causes converge in the foreign exchange conditions. The main cause of the more recent foreign exchange losses is the discrepancy that has arisen between the gold and paper currencies in one's own country.

It is essentially the case that the gold currencies no longer play a decisive role in countries with weak currencies. On the other hand, in countries with a sound currency, the cover is still there, which naturally means that those countries that have gold currencies are in a significantly different credit situation than the others. First of all, the foreign exchange question is a credit question. Then, of course, when something like the credit damage of an economic area occurs, one can also use such a cause to go further. You can drive down credit again on the stock market. In addition, there are the rather senseless ventures in one's own country. There is no question that at present there is no reason for the fall of the German mark to the extent that it actually occurred, but that speculation in one's own country, which sells abroad and thereby adds to the situation, plays a significant role. All this then causes the foreign exchange to start rolling downhill. Then it is the same as in Austria. It is difficult to say what else contributed in Russia. In Austria and Germany the thing started from the decrease of the gold stock, from the decrease of the credit conditions, from speculation in one's own country. In Germany there is speculation on exports, in Austria there is speculation right now in such a way that the foreign stock is held back, making it even more expensive, so that in Austria the crown is being pushed down by francs, dollars and so on that are in the country. This could not have happened if the currencies of high value had not already risen. Then it could even continue in its own country, and as a result this matter could reach immeasurable proportions. But it was the beginning of the evil that German gold was collected to such an extraordinarily strong extent during the war and transferred to the state, which ensured that the gold came out of the country. There is no gold among the people at all. That is the essential thing. Today, the Reichsbank's gold holdings can only be compared with the population's total gold holdings before the war.

Of course, other factors have been added, but they cannot be grasped at all. It only takes a certain currency to be retained in a country for the exchange rate to be affected. Depending on the value of the foreign currency, an acceleration or deceleration can be initiated; after that, the currency of the country with little foreign currency sinks and falls. From this point of view, it is easy for certain individuals to damage the other state. It is difficult to determine how much of the country's debt stems from its own actions. It will be a considerable sum that has been gambled away by the speculation of certain people.

Question: Some say that the blame for the foreign exchange crisis lies in the change in the balance of payments of the poorer countries in relation to the other countries. In the case of Germany, this deterioration was mainly due to expenditure abroad, without any equivalent value coming in. This creates a balance in favor of the Entente. That is the decisive factor.

Rudolf Steiner: This could never have led to such a devaluation of the currency as occurred in Germany and Austria. The opinion that the discrepancy between gold currency and paper money is only on the surface is not correct because the fact simply exists that before the war paper currency was covered by gold currency. That is a real economic fact. And now this comes into consideration, that as long as there is essentially gold coverage for the paper currency, essentially no inflation takes place. That is how it is connected. When the gold is gone, inflation sets in. And then you can, with that senseless inflation, which was only possible because people did not feel the need to still count on the gold standard, make money as cheap as possible, of course. So because we have the gold standard because of England's power, one of the causes that first comes into play and then undermines credit is essentially the soaring price of gold when it is not there. And then, when the matter comes to credit money, the balance of payments begins to play its role. The matter must first get off the ground.

The cause of the devaluation of the currency lies before the war. You will remember that during the war it was always said that Germany would perish because of her lack of money. That could not happen during the war. But when the war was over and when the borders opened up a little economically, what was developed during the war came into consideration. That was what started the avalanche. Then all possible causes worked together. The balance of payments should only be invoked after the balance sheet figures have been made into named figures. As long as they are mere balance sheet figures, the balance of payments cannot be invoked. It must first mean something, not just a difference.

X: Gold just migrates abroad and has a devaluing effect as long as the gold standard exists.

Rudolf Steiner: Given our current economic circumstances – with the gold standard being the underlying factor – there is no doubt that countries that do not have any gold are essentially dependent on countries that have a gold reserve for the valuation of their products, and the value of money then depends on this. The matter can be understood quite well from the tremendous upheavals in the world; but the effects are so tremendous that one would still like to find “very secret causes”. But precisely this devaluation of the currency is not as hidden as one would always like to say; rather, it is based on the fact that, curiously enough, people today are such that they cannot evaluate events at all.

I often said after the war was over: Those who look at things in the right way will find that we have lived through as many centuries since 1914 in terms of changes that have occurred as we have lived through years in time. And actually, it seems like an anachronism that certain things have remained the same. You get the feeling that after five or six hundred years, the language would have changed; it's like an anachronism that people still speak essentially the same way as they did in 1914. But this has not made a very strong impression on people.

When you look back in history, you usually overlook larger periods of time. Just try to study the fluctuations in grain prices in 15th/16th century England, for example, and you will see that even with changes that did not occur so tumultuously, there are fluctuations in grain prices of up to twenty times the usual price. From this you can see how things that have happened in life since 1914 must actually be valued. People do not believe this because they have no sense of the qualitative side of life. People only noticed when what later happened became apparent – because money is an dishonest companion – when money was exposed. People only have an instinct for appreciating their wallet. It is only when things show up there – after all, people only think in terms of money – that they notice it in the exchange rate plunge. But if we now look at life qualitatively – please take Russia, take a whole complex of Russian life, permeated with the attitude from “Father Czar” to Lenin – what do you have to interpose in terms of metamorphosing forms? Basically, even the Russian devaluation of currency is only a kind of barometer for what has otherwise happened in life. So it is not so inexplicable. It is just the effect of a terrible and will become even more terrible. But the matter is simply understandable from the course of the other events.

Question: Do we already have a world economy today?

Rudolf Steiner: You can't formulate the thought that way. You have to take the state before the world war first. This was to a high degree a yielding of events to a world economic process. You only need to take international check transactions to have a yardstick for the high degree to which the world economy had already been achieved. People's thinking did not keep pace with the emergence of the world economy. They still stuck to the formulations of the national economy. It would not have been possible to keep up with the facts if people had kept up with the thinking, that all the torment of humanity through all possible customs barriers would have emerged even before the war. This was already in line with the Versailles world upheaval. People did not want to catch up with the thinking. They wanted to correct the facts. They opened a customs barrier somewhere at the border when something was wrong. But the situation is such that we had already achieved a high degree of world economy, despite all the tariff barriers. When there is already a high degree of world economy, the price you pay when you take the tram from Dornach to Basel depends on the conditions in America. Everything has gradually been incorporated to a high degree into world economy prices. So that was already there. In terms of its real value, much of it had simply been priced into the world economy to a high degree. Now, suddenly, the barriers caused by the war, which necessitated economic intercourse that was not in line with what had already emerged.

And since people still have not begun to think in more modern terms, an attempt was made at Versailles to correct things in the old style. The dismemberment of Austria was a mistake at any price, for example, the loss of the Austrian steamship industry, the price of coal, nothing. This only led to chaos, this desperate attempt to use old ideas to control the facts, while the world economy was already in place to a high degree. With limited thinking, one could say that national economies would arise again. But that is not the case. The fact that foreign exchange rates fluctuate so much proves that there is a world economy: because all kinds of goods from all over the world are in Austria, and so you can influence the world economy with them. These are things that prove that it is no longer possible to simply ignore the world economy.

Question: If America gives Russia loans to help Russia rise — by building railroads and so on — the result will be that the money will be put into Russia and that the Americans will simply have the title to the property without any way of getting it back.

Rudolf Steiner: If America were to decide to make this monetary contribution, in whatever form, it would be a gift. The great loan that has taken place must give rise to a gift. But America will not make up its mind to help Europe until Europe offers guarantees that it will not get involved in further military or economic entanglements. The only reason why America is not helping - for America would benefit from doing so because its own economy would become healthier - is that Europe presents a picture that says: what I put into it is lost. People in America are afraid of every loan. It will not come about unless Europe gradually comes to the point where, I might say, more personal credit would be given again. You can see from this how easy it would be, in principle, to help Europe, if only it were thought that the prospects had opened up at that moment, even if only seemingly, because Rarhenau was not an able man and Wirth was not either. But if, especially in the Entente and the defeated countries, new people came into the leading positions who had nothing to do with the pre-war situation, and if all people disappeared from public life who still represented the names of the past, then Europe would be helped at that moment: Europe would have personal credit. Things are so that the real credit no longer exists, that the personal credit must raise the real credit again. Then it could come to a slow ascent. If once Krone and Mark would rise a little, then there would be a completely different mood again, then there would be all kinds of causes that would only then emerge to further rise. But the moral level has sunk so far.

Objection: A survey of the causes of the suffering caused by the lack of foreign currency yielded the most contradictory answers.

Rudolf Steiner: The solution to this question lies not in the fact that everyone was wrong, but that everyone was right; namely, everyone hit on certain partial causes from their own circle of experience. This is borne out by the necessity of associative life. In economic life, there is no possibility for anyone to make a comprehensive judgment. So most people were right. But the one who seems to me to have been most right, in pointing to the deepest cause, albeit in matters akin to morality, was Edison, who was able to think entirely in economic terms and who said: The main thing lies in the principles according to which you select the people you take into the business. The shrewd businessman asks people to be hired questions that have nothing to do with the management. They will find their way into the management if they are only otherwise capable: That's why, as a businessman, I ask them questions that prove to me whether they still know what they learned at school, for example, or have forgotten it. If the person I ask tells me absolute nonsense, then the answer to my question is that I consider him to be not open-minded enough. Edison asked a whole series of such questions when he wanted to hire someone. If you approach the matter so practically, it makes a difference whether I hire someone who cannot tell the difference between wheat and rye and have him at the office desk, or someone who can distinguish between the two. And this is what people do not believe today. People believe that you can be a very capable accountant without knowing what a sunflower is. That is cum grano salis speaking. But what Edison gave as a suggestion seemed to me to be an extraordinarily apt one. It is economical, it shows how far the mind is taking hold of labor.

Question: What do current economic necessities demand of those who believe they have to found a new economy?

Rudolf Steiner: To a large extent, I try to give you partial answers to this question every day. For what is most important is to really grasp this transition of the national economies into the world economy, which has been taking place for about fifty years, and to stop working with the old economic categories. Instead, we need to understand how certain things have to be created today that were not there before and that can only be created out of thinking.

Take earlier economies, and you have them simply existing side by side. The even earlier state of affairs was where the economies were completely divergent. This economic state of affairs existed in the time when some areas were still simply to be conquered. It does not depend on the distances. You can imagine uncultivated France and the migrating Franks who found the empty areas. This gives rise to completely different economic conditions than if one came into a relatively closed area with more culture. The Visigoths had a different fate from the Franks because they moved into an area that could not be economically improved. And the greatest example is precisely for these disparate national economies, which then interact, the relationship between England and India, and its colonies in general. Here, dissimilar national economies have been incorporated into a common territory, either by conquest or by peaceful conquest. That is the first condition. The second is when the territories border on each other and are independent national economies. And the third is when a closed territory is created in such a way that nothing can coexist in the economic sense – for we are not talking about completely deserted lands. Now we must be aware that we are in the midst of a tremendous upheaval, and that the most important thing is the global challenge of the world economy, to which we must adapt. This understanding of all things in the national economy is what matters.

You have a very interesting example of how little people know about this in the book by Spengler, “The Decline of the West”, which also has an economic chapter. Spengler really speaks in excellent aperçus, but has no idea what things are really like. His concepts do not correspond to reality anywhere. In the economic field, it is particularly bad now, in the second volume, because Spengler has a relatively good insight into how certain ancient economic areas operated. He thus understands the peasant natural economy extraordinarily well on the one hand, and on the other hand, he also understands modern economic life quite well. He differentiates there – and this is Spengler's coquetry! — the Faustian from the Homeric. Now, the tremendously significant thing is that even a man as brilliant as Spengler cannot possibly realize that what has once been overcome apparently still enters into what comes later, so that all that he describes as ancient economics is, after all, right among us as a field.

Where we are dealing with what I have called purchase money, what Spengler attributes only to antiquity intrudes everywhere, except that the form has changed somewhat. He believes that whereas in his opinion money was once material money, today it is only functional money, while our money today must be based on the fact that the relationship between material money and functional money is being seen through: He throws around terms that have been so coquettishly tailored that they do not adequately describe reality. That is why there is something brilliant about Spengler's concepts. The dazzling effect and, on the other hand, the confusion caused by the way he mixes up the terms – it is indeed a danger for those who are not immune to this confusion. Our task is to think about the conditions as they are required.

We have this threefold coexistence: the very ordinary conquest and the coexistence of economies and the original natural economy, which is hidden by the fact that we use money for everything. There is this dispute between nominalists and materialists. The former are of the opinion that money is only a sign, that is, that the material it is made of has no value at all, but only the number on it; while the materialists are of the opinion that it is the material value that essentially constitutes the money. People argue about such things, whereas the fact of the matter is that in the one area, where we are still more concerned with agriculture and related matters, the materialists are right with regard to the function of money in the economy, whereas in industry and in the free life of the mind the nominalists are right; for there money plays the role that the nominalists ascribe to it. And then we have the interplay of the two. We have to grasp such things! People fight for things that are far too simple, while we have a complicated life.

Objection: But now we would have to rename our economics course to a “course in world economic theory”!

Rudolf Steiner: Well, the names remain. You see, there was even a time when morality was considered an economic matter. In the first and second Christian centuries, morality was considered an economic matter.

Question: I cannot understand the reciprocal movement of natural product – labor – capital and so on. The means of production has already undergone a transformation.

Rudolf Steiner: But the reversal does not refer to the fact that the means of production is produced, but that it produces. The transformation only takes on significance at the moment when the means of production ceases to be a commodity. It remains a commodity until the moment when it can be transferred to production. Where it begins to produce, the flow of national economic activity changes for the means of production. From that moment on, it is removed from the context in which it was, where it was a commodity. In the “key points” I have stated that it begins to be very much like nature because it can no longer have a price. It is just as much a part of the economic process as mere nature. So it moves back to nature again.

Question: Is this reflected in the balance sheet?

Rudolf Steiner: You mean this disappearance of value? It only appears in the balance sheet in abnormal cases. It only appears when someone, let's say, sets up a business, so to speak, brings about a sum of means of production, then goes under, and another takes it over, who is more skillful and succeeds. Then, when you put these two balances together, the one of going under and the one of continuing, you will find that a partial phenomenon of devaluation has been brought about. Through going under, the second - simply through the process of going under - has bought the sum of the means of production more cheaply than he could ever have had them otherwise. As a result, he has received a part as a gift. So that this could then be expressed in the balance sheet. If you were now to follow the consequences of such a process in the further course of the new balance sheet, you would have in it a much cheaper work, that is, one that has partly passed over without cost. In this way it could already be proved arithmetically.

Note: These are of course exceptions. Today, the abnormal is normal.

Rudolf Steiner: But this must gradually lead to monstrosity, because the means of production are directly transferred into pensions, while the land rent only arises when I invest the capital in it.

Question not noted.

Rudolf Steiner: You must not forget: if you put capital into a business, it means something essentially different economically than if you do not have the capital in the business. A completely different agent is at work when you have it in it than when you do not have it in it, although not having it in it is basically also only an illusion. Things lead to such illusions. You may ask: where, then, is the capital, say, the loan capital, that is not invested in enterprises? It is only present as production and land rent. And if someone wanted to have some money for themselves, they would have to withdraw it completely from the economic process for a while, thereby creating tension, and give it away again at a different value. They would come off badly because the money is progressively devalued – otherwise it is inconceivable that the process would occur radically, and that shifts the circumstances.

If we took a healthy approach to the economy, the right conditions would arise. Today, it is often comical to see how the wage issue, for example, is handled: people demand higher wages, which in turn lead to more expensive production conditions. Then the wages are not enough again. People demand higher wages again, and so it goes, and no one knows where it will end. These things make people see sand in their own eyes. Whereas in an associative economy, if we keep to the term 'wages', which is not correct, wages arise that can arise. Wrong wages do not arise.

Question: Why do wages have to 'arise'?

Rudolf Steiner: Try to examine the following: a worker receives an average of, say, two francs a day. Now you can say: that is a very low wage. - How can this wage become a very high wage without it being more than two francs?

Comment: By making the products cheaper.

Rudolf Steiner: Then you will get the final values first. Then you will see that everything I have said comes out. You do not have to keep putting the cart before the horse. You have to ask the question like this: We will leave him two francs. But under what circumstances will two francs be a wage twice as high as today, or three times as high? You have to start from the dynamic conditions. You always start from the static. Then you want the stationary things to cause movement. It is indeed: if I put five cents in my pocket, nothing in itself, but only something in relation to the whole economy.