E. Lederer, “Wirkungen des Lohnabbaus” (1931)

Lederer’s 1931 lecture attacks the Depression orthodoxy that unemployment is proof of excessive wages and can be cured by wage cuts. His target is not merely one policy but a way of theorizing: simple equilibrium formulas, whether Ricardian or purchasing-power, miss the concrete totality of technology, monopoly, credit, crisis, and politics.

Die Diskussion über den Lohnabbau leidet daran, daß sie mit sehr einfachen Argumenten geführt wird. Die Wirklichkeit aber ist weit davon entfernt, so einfach zu sein, sie ist ein kompliziertes Gebilde aus ökonomischen und außerökonomischen Elementen.

English translation: The discussion over wage-cutting suffers from being conducted with very simple arguments. Reality, however, is far from being that simple; it is a complicated structure of economic and extra-economic elements.

The first section reconstructs the static model: if labor is a commodity like any other, a lower price clears the market. Lederer grants that a ruthless wage fall might absorb workers for the moment, but only by freezing the analysis before its effects begin. Seasonal unemployment, technical rigidity, and the contraction of workers’ consumption disappear from the model. Lower wages may shift labor into personal services or capital-goods production while shrinking demand for consumer goods and creating new disequilibria.

Insbesondere dürfen wir nicht das Bild des Arbeitsmarktes isoliert betrachten und dürfen nicht annehmen, daß uns das Indiz der Arbeitslosigkeit allein über die Frage der richtigen Lohnhöhe Aufschluß gibt.

English translation: In particular, we must not view the picture of the labor market in isolation, nor may we assume that the mere symptom of unemployment alone gives us information about the question of the correct wage level.

The second section identifies unemployment not caused by wages. In cyclical crisis, overexpansion, credit inflation, and distorted proportions force contraction; wage pressure follows, but is not a healing force. Technical change is more radical still: labor-saving inventions dismiss workers immediately, while later absorption through cheaper goods, profits, or new industries is slow, uncertain, and often in another region or country. The combine harvester shows the point: European agriculture cannot meet mechanized North American grain costs by imposing hunger wages.

Hier versagt eklatant der Automatismus, der bei steigender Effizienz der Arbeit an sich — nach der Theorie — nur zu besserer Versorgung, nie aber zur Arbeitslosigkeit führen dürfte. Wie inadäquat ist gegenüber diesem Bild die Vorstellung, daß nur die Lohnhöhe die Gleichgewichtsstörung herbeigeführt habe!

English translation: Here the automatism strikingly fails—the automatism which, with the rising efficiency of labor as such, according to theory ought to lead only to better provision, never to unemployment. How inadequate, in the face of this picture, is the notion that the wage level alone brought about the disturbance of equilibrium!

The third section applies the argument to Germany in winter 1930/31: industrial crisis coincides with agricultural depression and vast unused capacity, even in efficient plants. A wage cut does not create demand; it transfers purchasing power from workers to entrepreneurs. Employment rises only if the gains are invested, yet in overbuilt basic industries further investment may worsen the imbalance. If firms instead hoard gains to improve liquidity, deflation deepens; if consumer demand falls, layoffs offset the saving.

Eine Lohnsenkung vermehrt aber noch nicht den Absatz, sondern verschiebt nur die Kaufkraft vom Arbeiter auf den Unternehmer.

English translation: A wage reduction, however, does not yet increase sales; it merely shifts purchasing power from the worker to the entrepreneur.

This is why Lederer rejects Brüning’s program of simultaneous wage and price reductions. If prices fall less than wages, real wages and demand fall; if both fall together, firms gain little, while debts, public charges, and reparations grow heavier through the rise in money’s value. Deflation purchases social conflict at high cost for little advance.

The fourth section makes the decisive structural move: the wage question must be posed within monopoly capitalism. Cartels and trusts hold prices rigid, protect weaker plants, and distribute output by quota, preventing the best firms from running at full capacity. Crisis no longer performs the competitive cleansing assumed by older theory; unit costs may stay high or rise as capacity is idled. Overexpanded coal, iron, cement, and other basic industries cannot be repaired by reducing wages.

Soll dann eine Senkung der Löhne den Widersinn falscher Produktionslenkung sanieren?

English translation: Is a reduction in wages then supposed to remedy the absurdity of misdirected production?

Lederer’s answer is no. Germany suffers less from simple capital scarcity than from maldistribution of capital through monopolistic self-financing, bad investment, and politically favored transfers. The final section adds the political circle: unemployment strengthens National Socialism; National Socialist success frightens capital, encourages capital flight and credit withdrawal, and worsens unemployment. Wage cuts therefore cannot restore confidence or investment. The lecture’s relevance lies in its pre-Keynesian insistence that unemployment is systemic, dynamic, and institutional, not a mere labor-price error.

Nur wenn wir die Probleme der ökonomischen Organisation entschlossen anpacken, werden wir wieder Raum für alle schaffen, die arbeiten wollen — die primitive Vorstellung aber, man könne immer, wenn Arbeitslosigkeit herrscht, durch Herabsetzung der Löhne das Gleichgewicht wiederherstellen, gehört in die Rumpelkammer der Theorie.

English translation: Only if we resolutely tackle the problems of economic organization will we again create room for all who want to work—the primitive notion, however, that whenever unemployment prevails one can always restore equilibrium by lowering wages belongs in the lumber-room of theory.