The greater Cartel by Dr. Rath

Arno Sölter

The Greater Cartel An Instrument of Industrial Market Regulation in the New Europe

Published by the Central Research Institute for National Economic Order and Large-Scale Economics, Dresden

1941

Meinhold Verlagsgesellschaft Dresden

All rights, in particular those of translation into foreign languages, are reserved. Published in 1942 by Meinhold Vertragsgesellschaft, Dresden. Printed by C. C. Meinhold & Söhne GmbH, D resden

Foreword

It is an old demand of Werner Daitz, that in a similar way as it was carried out in agriculture by means of the agricultural constitution and its instrument of market organization by R. Walter Darr é and his co-workers in an exemplary way, - also the constitution of the industrial economy develops an instrument of market organization out of state leadership and its own ideological attitude. So that also here all differentiating special knowledge and ability is bound again and again by the po licy, i.e. the leadership, to creative life unity and organization. Leadership, as the strategy of the economy, can only lie with the state, while the implementation of its leadership orders, i.e. the tactical measures, are primarily a matter for economic self-administration. The more instinctively sure the economy and its self -governing organs are in carrying out the state's orders out of their ideological and thus ethical attitude, the wider can be the scope of tasks left to the economy to regulate on it s own responsibility, and to that extent the economy is also able to determine the limits of its freedom of movement itself, to secure its freedom in the natural bond. - Only if it does not have this inner attitude of its own to a sufficient extent, the st ate is forced to set up its own close -meshed economic administration with the associated danger of bureaucratism in order to carry out its orders. Almost too much has been written recently about the relationship of the state to the economy and about the fr eedom of the entrepreneur. Nevertheless, we believe it is important to make this paper available to the public, since it represents an interesting attempt to develop and discuss a fundamental and systematic instrument for market regulation in the commercia l economy in the form of the steering cartel. In the steering cartel - as a market-regulating performance community - the author believes to have found a fruitful synthesis between the indispensable claim to leadership of the state and the natural freedom of the economy. The author describes in detail the development of the industrial cartel from an instrument of capitalist market domination, "organized self -interest," to an organ of national economic market order, "organized common interest. In order to ex press this fundamental change in the function of the cartel in linguistic terms, it would perhaps be appropriate in future to speak only of a "steering cartel". - Just as the national cartel is not an autonomous entity, but a body which carries out state economic directives within fixed limits on its own responsibility and creatively, so the large -scale cartel must carry out economic directives of the management bodies of European economies in an attitude which results from

the new European moral law, t he European common good, which binds all peoples of the European family of nations.

Dresden, September 1941.

CENTRAL RESEARCH INSTITUTE FOR NATIONAL ECONOMIC ORDER AND LARGE-SCALE ECONOMY E. V.

Preliminary note

The problem of a large-scale economy is new territory in economic science. Since Naumann's famous "Central Europe" (1915), a whole series of studies on the preconditions and possibilities of a European economic bloc have been published, but all these works have decisive de ficiencies if their assessment is based on today's conception of a large -scale economy. The most important drawback of these publications is the one -sided approach to large -scale economic relations and cooperation. Thus, for example, the possibilities of a European customs union are discussed without examining the problems of autarky of this metropolitan area. Or there are considerations of monetary cooperation in Europe, without any attention being paid to the questions of market organization. Thus, at bes t, treatises on a "large trade area" or a "large currency area" were produced, i.e. on partial problems of the "total large area economy". "If it is to be possible to speak of a large -scale economy, cooperation must extend to all areas of the economy. The goal is not merely a community of foreign trade, a community of currency or a community of transport; only all these together and a community of the other types of services result in a perfect large -scale economy. If a community is lacking in one or more types of services, the union achieved in the remaining areas is to be regarded only as a preliminary stage to a true large -scale economy. In the case of lower-ranking types of service, the more loose and less effective the merger will be. It will also be de scribed not as a macroeconomic, but merely as a partial economic one, which is still far removed from a true large -scale economy.1) Doctrine of the Large -Scale Economy". A coherent picture of the ideal and material2) preconditions of a large -scale economy is given. Above all, however, the foundations and methods for an expedient interaction of the productive large-scale forces will be developed. The result will be the ideal of a large-scale market organization in which a meaningful intergovernmental division of labor will help to overcome the so -called "trade barriers" (currency difficulties, prohibitive tariffs, quotas, import bans, etc.) 1) Ru d ol f H en k e " G e sch i ch t e u n d T h e or ie d e r Gr oßrau m w irt s ch a ft ", Vi e n n a 1 93 6, p ag e 55 . In n on e o f th e oth e r e c on o mi c w o rk s on th e la r ge - s cal e ec on o my i s th is in s igh t con v ey ed . Un for tu n at e ly , h o we v e r, H en k e ' s p r e se n tat i on o f p ra ct ica l lar g e - sca l e e con o m ic coop er ati on mu st b e d e s crib ed a s i n ad eq u at e . 2) In p r e sen tin g t h e mat e ria l p re con d it ion s of th e lar g e -s ca l e ec on o my, w e con fin e ou r s el v e s t o th e fu n d a m en ta l s id e o f th e p rob l e m. A ra w mat er ial an d f ood b a lan c e o f th e lar ge - s ca le e con o my i s n ot d ra wn u p . A s fa r as th e E u rop ean lar g e - sc al e eco n o my i s con ce rn ed , w e r e f er t o th e work o f Ge rh a rd G eb h a rd t, "E u rop a s Wir t sch a ft s f re ih eit " (E u ro p e ' s E con o m ic F re e d om ), Vo lu me 3 of th e s er ie s " Da s n eu e E u rop a " ( Th e N e w E u r op e) of t h e G e s el l sch af t fü r eu r op äi s ch e W ir ts ch a ft s p lan u n g u n d G roß rau m wi rt s ch a ft (S oc ie ty for E u ro p e an E con o m ic Plan n in g an d Lar g e -s ca l e E con o my ), E s s en 19 41 .

which have been discussed ad nauseam, and will even remove the internal preconditions for their existence. In order to be able to implement the large -scale market organization in practice, a market organization is required. The further task of this paper will therefore be to work out the organizational foundations of the large -scale economy. The German economic organization will inevitably have to form the starting point of the considerations. Here the difficulty arises that the German organizational apparatus is far from having the design which corresponds to the requirements of a meaningful economic order or, as was once expressed, which "constitutes the true German economic style". Partly as a result of organizational mistakes and partly because of wartime n ecessities, we are currently in a state that is not far from a total planned economy. The most urgent task for the future will be to loosen up the economic administration and focus on its actual management functions. It is necessary to find the most appropriate synthesis between freedom and commitment1) so that that healthy interrelationship between man and community may be established which will be of the greatest benefit to both. The community is not an abstract, but a union of living people. If the commu nity threatened to be destroyed by individualism carried to extremes, the individual, conversely, could likewise perish in an exaggerated community order, i.e. over -organization; but this would in turn destroy the community as a connection of individuals. But how important it is now to find this harmony between the desire for freedom and the need for unity, when Germany is confronted with the task of leading the European continent towards a better future! In an area which contains such different national te mperaments, only the community idea will be crowned with success which knows how to take into account the national characteristics of the sub -areas to a large extent. Just as there must be free zones of the individual in the community of peoples, so there must also be free zones of the peoples in the community of peoples, in order to avoid from the outset the emergence of a "dislike of large spaces". It must be stated with regret that science has treated the organization and management problems of the industrial enterprise literary exhaustively, but that it could not develop yet a useful theory of the national, let alone large -scale economic organization and economic guidance! We believe that the reason for the inadequate scientific penetration of the proble ms of economic management and organization is that science and economic management have not yet sought or found the cross-fertilization which could show the organization of the economy the way out of its present inadequacy to more reasonable forms.

1) C f. in t h i s con n e cti on th e fu n d a m en ta l r e ma r ks b y W ern e r D ait z in h i s p a p e r We ltan s ch au u n g u n d W i rt sch af t, Be rl in 1 9 36 .

The disdain for "theory" is in any case in no other field so dangerous as in that of organization. There should be no doubt that by devel oping a good system of economic steering principles and organizational techniques, not inconsiderable simplification possibilities would be established in wide areas of economic bureaucracy. In the future, one should make it a principle not to pursue economic "order" until one has thoroughly ordered one's thoughts! For the industrial economy, we put up for discussion the "large -scale cartel" as an instrument of market order in the European economy.1) The present "international cartel", reorganized and expan ded in form and content according to its large -scale tasks, could represent a suitable organizational basis for the European economic community. Two outstanding advantages are connected with the use of the cartel as an instrument of large -scale economy: first of all, the cartel as a professional organization is interested in all questions of market organization of the product it is in charge of already from its inner nature. Thus, the cartel organization guarantees the uniform handling of all wide-area tasks - and how necessary is a "central clearing of projects" in the wide-area economy! On the other hand, the cartel is the organizational expression of true entrepreneurial community work and self -management. It could thus become one of the most important ca rriers of the future economic order based on private initiative - but working on behalf of the community and under the supervision of the state. We leave the agricultural problems out of our consideration.1) The market organization of the Reichsnährstand, which once served the industrial cartel as a model, has developed over the years into one of the most successful instruments of German economic management and is making every effort to be a model in the European large -scale economy as well. Although we are aware of the great structural differences between the agricultural economy and the industrial economy, we nevertheless believe that the industrial economy, for its part, should take the Reichsnährstand as 1) C f . th e p r el i min ary d is cu s si on of th is b o ok b y Wi n s ch u h , "D as Gro ßr au m kart e ll, " D AZ . No. 34 5, Ju ly 20, 1 94 1. It i s gr ati fy in g th a t th e au th or ' s co in a ge o f th e wo rd h a s a lr ead y b ec o me w id e ly ac c ep t e d in th e eco n o mi c p ol i cy lit e ratu re ( se e, a mo n g oth er s, Sa ek el "K art e ll v erän d e rt, " B B Z. N o. 39 5, Au gu st 2 4, 19 41, Me rk el, "E rn äh r u n g s wir t sch af t i m Kri e g e, " N at ion a l e Wir t sch a ft No. 9/ 1 94 1, page 2 44, f u rth er mo re Ar ze t " Ge m e in sch af t sau fg ab e n i m eu rop ä i sch en Gro ßr au m, " " W elt w irt s ch a ft, " H ef t 8/ 19 41, p a g e 22 3, C. Un g e wi tt er "In d u st ri e -O rg an i sa tion in E u rop a, " E u r op a - Kab el N o. 1 9, O ctob e r 1 0, 19 41 ), b e cau s e th e t e r m " in t ern a tio n al " ca rt el , w h i ch o ri gin at ed in th e er a o f l ib e ra li s m an d " in t er n at ion a li s m, " n o lon g er s e e m s ap p rop riat e in th e E u rop e of th e fu tu re . 1) A s M erk el ( "E rn äh ru n g s wir t sch a f t i m Kr i eg e ," Nat ion a l e Wi rt sc h a ft, No. 9/ 1 94 1, p a ge 24 4) p oin t s ou t, th e car te l i s u n su i tab le fo r ag ri cu lt u ra l p la n n in g in E u r op e, wh ich n o on e wou ld d i sp u t e. S i mi lar ly , th e c art e l wi ll h a v e n o p la ce in e con o mi c a re a s of a mo re p u b li c n atu r e ( e .g. , w at er man ag e men t, e n e rgy ma n ag e m en t, tr an sp o rt man a g e m en t) . Ho w e v er, if Me rk el a tta ch e s on ly l ittl e i m p ort an c e t o th e "la rg e - s cal e c art e l" e v e n for t h e in d u st ria l s ec tor, h e is p r ob ab ly t h in kin g m or e of th e car te l o f a l ib era l ch a rac t e r, wh er ea s w e ar e p rop o s in g a c o mp l et e ly n e w car t e l str u ct u r e, th e "to tal ca rt el " d e sc rib e d lat er .

a model, at least in one respect: like the Reichsnährstand, it should have the courage to reach into the heart of the market order, i.e. into production, and to shape it in joint cartel work for the ben efit of the whole. The "performance cartel" must replace the "pension security cartel" in Germany and beyond in the European area! We have regarded it as the most essential goal of our work to bring the large -scale economy and its economic order into a clo sed logical system. We have kept to the systematization of the material, even at the risk that our explanations might sometimes appear simplistic. In the pursuit of the set goal we have also avoided to bury the course of our thoughts too much under "examples from practice". The work has been written primarily for the practitioner. He can most readily weigh the value of our suggestions from his practical knowledge and insight. He therefore does not need examples. However, what his practical work does not alw ays provide him with is an overall view of large -scale problems and their internal interrelationships as well as a systematic overview of the possibilities of large -scale economic organization. In a work of this scope, it is of course not possible to give detailed recipes. Also, the treated area is too new to be able to find "patent solutions" already now - if these can be found at all in such a multifaceted problem area! We consider our task to be fulfilled if the reader is provided with suggestions for the further intellectual penetration of the economic problems which arise in the context of the reorganization of the European conditions of existence.

Berlin, September 1941.

The author

Introduction

The war as a precursor of the European econ omic community

"War is the father of all things!" This saying of Heraklit applies to the present European struggle for destiny more than ever. The birth of the political and thus also of the economic reorganization of Europe lies in the military decisions of June 1940 in the West. Even if we are convinced that in the course of years or decades the German economic and social order, by virtue of its inner logic, would have found its way peacefully into the peoples of Europe and especially into the Western de mocracies, the war gave this development an almost tumultuous impulse. Without the crushing of the military power of France, Belgium and Holland, without the cutting off of the European continent from the world economy by the British blockade1) , the revolutionization of the European order of life and economy which began with the French armistice would not have been possible. The Balkan campaign created new preconditions for the economic integration of the Southeast with Central Europe, which had already be en intensifying from year to year since 1933. The victorious Eastern campaign will have an impact on European existence of dimensions not yet foreseeable. The war for the life of Europe forced the peoples of our continent, on the one hand, to reflect on th eir own economic forces and their promotion - even at the risk of violating hitherto "sacred economic laws" - but, on the other hand, it also triggered the revival of the sense of space, i.e. the consciousness of a fateful interconnectedness of all the members of the European living space. The mobilization of the European power reserves is naturally expressed first and foremost in the promotion of agriculture as the basis of all economic activity. Increasing yields and opening up the soil for new crops is t he motto everywhere. The Balkan states, whose agricultural yields per hectare have so far been only about 50% of Germany's, are making enormous efforts to intensify their soil with German help. For the French, the slogan is: "France must become a farming c ountry again!" Thus, of the approximately 6 million hectares of fallow land from 1940 to 1941, 1 million hectares have already been cultivated. Many countries have limited their pastures in favor of cereal crops, thus limiting the calorie consuming product ion detour via the cattle stomach. In the Nordic countries, 1) " Ju st a s E n glan d , w it h it s b lo ckad e d u rin g t h e wor ld war o f 19 14 /1 8, ac c el er at ed th e ec on o mi c a u ta rkiz ati on of th e o v er s ea s con tin e n ts an d d e st roy ed it s o wn lib er al i st sy st e m of w or ld t rad e, s o tod ay E n g lan d an d F ran ce a re ag ain , wit h th e ir co n tin en ta l b lo ckad e i n vi ola tio n of i n t ern a tion al la w, th e in vo lu n t ary mid w i fe o f th e ac c el e ra ted e me rg en c e of a E u rop ean m et rop o lit an ec on o my . " W ern er Da it z, " Di e eu rop ä i sch e Gr o ßrau m wi rt sc h a ft, " Th e Fou r - Y ea r P lan , E p i s od e 2 2/ 19 39 .

feed is derived from cellulose. Fish oil takes the place of olive oil, sugar beet is grown, and so on. Following the German example and under Germany's leadership, the German nutritional battle has been replaced by the contin ental one everywhere! Since the beginning of the war, industrial activity in Europe has been no less vigorous. Whether we think of the exploitation of new mineral resources, the use of water power, the construction or expansion of plants for the production of new materials, everywhere the continent's drive for self -assertion has unleashed undreamed -of economic forces. One could now believe that all these measures were only born out of a kind of blockade psychosis and that after the war, when all the oceans of the world are open again, the individual states would again subscribe to the laws of the international division of labor, which "after all only brought the blessing upon mankind". All the signs indicate that this will not be the case. The world war has brought the first shock to the belief in the eternal flourishing of the world economy. A more artificial flare -up of the international free play of forces occurred after the war and initially made people forget the experience of the four years of hardship. The second shock to the idea of free trade, however, came during the world economic crisis, which, with its millions of unemployed, bore witness to the "blessings" of the individualistic era. The autonomous national-organic economic policy, which has sinc e been promoted consciously and intensively in many countries, but only hesitantly in others, may now have received a decisive impetus to adhere to the autarkic course, now that the peoples are having to pay their dues for the third time. The experience of the "rediscovery" of the European continent holds them spellbound. Therefore, they do not limit themselves to "war measures," but make long-term plans: Five-, eightand ten-year plans. The "continentalization" of Europe is storming forward with giant str ides! It is all too natural that Germany fights particularly passionately for the idea of a large area, both materially and ideally. Germany has had to atone in two ways for devoting itself with its proven thoroughness to the world economy. In the World War, it suddenly found itself cut off from overseas sources of raw materials, which it needed more in war than in peace. In the great crisis, the "workshop of the world" suffered most from unemployment. Germany, recognizing the untenability of this state of affairs, has been preparing the reorganization of Europe practically since 1933. It must be regarded as a tragic fate that the peoples of Europe, out of. It must be regarded as a tragic fate that the peoples of Europe, out of shortsightedness and conservat ism, did not see the necessity of this reorganization already then.

How much more generous could German economic planning have been and how many economic projects could have been carried out more sensibly from the continental point of view! Germany as the country of the center and as the radiation center of the large -scale forces has now since the beginning of the war, despite the orientation of its entire economic potential to the war goal, already partly realized and partly tackled comprehensive plans for the peaceful economic reorganization. The responsibility of the German economy for the continental future is felt in all areas. Germany has moved from national planning to continental planning, from national economic thinking to continental economic t hinking. Multilateral clearing, in a sense the ledger and thus the symbol of a closed economic enterprise, has already become a reality in its basic features. Trade relations between Germany and the rest of Europe have become ever closer; indeed, one does not stop at "exchange", but reconstructs the national economies in such a way and coordinates them with each other, eliminating the many trade barriers such as tariffs, quotas and the like, that one can speak of an ever closer interdependence in the sense of a constructive "intracontinental division of labor". Thus, the foundations have already been laid for a "block of the European car industry". In the field of textile raw materials, close production and sales cooperation has been initiated between German y and most other European countries. Numerous other joint ventures bear witness to the desire for particularly close economic integration, e.g. the Kontinentale Öl -A.-G. and the European Insurance Community. The German agricultural and forestry administrat ion is also a leader in Europe in the versatility and intensity of its market regulation measures. However, European cooperation goes far beyond the sphere of production and sales. There is already talk of European labor problems, European transport proble ms, European law, and so on. The future image of the European Economic Community is a postulate. However, it is not a project of "pan" -phantasts, but of responsible realists. The framework of the European economy is economic self -assertion, the content is social and national justice. The contours of the picture are already emerging. In some places we can already see forms that are close to completion. It is up to the economic people everywhere to add the missing pieces of the mosaic to the big picture of a united European continent. If, in the past, plans for a large -scale European economy were of a purely academic nature, the reason was primarily that the political conditions were not in place. If politics now puts us in a position to operate a large -scale economy, the German leaders and sub -leaders of the economy must always bear in mind the task they have been given: the task is to maintain and expand by peaceful means what has been created by wise political leadership and by the heroic deeds of the Wehrma cht. More than ever, therefore, we must speak of a committed economy in the future! It will have to be realized that in the long 11

run a pacified and contented Europe cannot be maintained by bayonets and combat boots, but that voluntarism and insight must forge the peoples of Europe together. Thought and action must be directed from the innermost conviction to continental primacy in all things. We know that there is still a long way to go before the political and social ideal we have in mind is achieved in Europe. But we are also aware that the sooner the economy is in a position to provide the peoples of Europe with a secure material basis and favorable opportunities for advancement, the sooner we shall approach our goal. If the stomach and the head approv e the reorganization, then the heart will be more inclined to enter into a new relationship, and the centrifugal development of the European regions towards Western Europe and the world economy will be all the more easily reversed into a centripetal one to wards Central Europe, towards Germany. The economy will share the responsibility that this decision struggle will not be the father of miscarriages, but of splendid descendants, which will master the destiny of Europe, for centuries. The economy must lead Europe out of the emergency community of war into a flourishing community of peace. But it must also contribute to the fact that Europe does not only remain a geographical concept, but also becomes a political concept, even forms a community of life of the European "family of nations" (Daitz).

First part

The Greater Economy

As the most powerful continental state, Germany and its allies would be in a position to dictate what economic form Europe should take. Germany co uld take the position that the realization of the European economy is a necessity because it takes into account German interests. In this case, economic science would have a simple task: it would have to underpin the political demand with the appropriate vocabulary and could bridge one or the other weakness in its thought construct with the sentence: If the German political demand is met, this and that necessity arises for the European national economies ...! The European metropolitan economy will now not b e an imperialist structure, but the economic organism of a "family of nations", in which each member community receives a right of co -determination according to its natural weight (= national mass + performance). Thus, the "Großraumwirtschaftslehre" will not be under political pressure, but will be able to work with purely scientific methods in order to prove that the Großraumwirtschaft is that form of economic cooperation of national economies which in the long run assures the individual states the highest degree of national self -assertion and of material well-being. Besides, it must be pointed out already now that the large -scale economy is not a political invention of the year 1940, but was already discussed years, even decades ago, with the course of the decline curve of the world economy being decisive for the respective extent of the discussion.1) For those who recognize the large -scale economy as such, but do not consider a "management" of the large -scale economy as expedient and also not as necessary, large-scale economics will have to prove that the economy of a community of nations must have a carrier just as every economic form and stage has had a carrier up to now. In the household economy it was the family, in the medieval city economy the communi ty, in mercantilism the state, in the modern national economy ... it should have been the people. Here there seems to be a gap in the evidence, because with the beginning of the liberal age the people in fact ceased to be the bearers of its national econom y. With the disintegration of state space and economic space, the popular ties of the economy were more and more torn apart. The economic principle gained dominance over the national (or, according to earlier views, the common economic-state) principle. Di d this mean that all economic activity was determined exclusively by the self -interest of the economic subjects? This was by no means the case. In the meantime, science has proved in detail that this "free play of forces" was by no means exclusively trigge red by the economic 1) Th e fol lo w in g st at e m en t i s in t er e st in g: "O ri g in an d o ri gin o f t h e w or d " Gro ßrau m " li e, as far a s I can d et er m in e s o f ar, ch ara ct er i sti ca l ly n ot in th e n a tion al, b u t in th e te ch n ic al in d u str ia l - e con o m ic - org an iza tion al a re a. In it s el f , th ou san d s o f wo rd co mb in ati on s with " Gro ß" ar e p o ss ib l e an d h a ve b een in u s e f o r a l on g ti m e : Gro ß ma ch t, G roß v erb an d , Gr oßh an d e l e tc . .. . T h e word " Gr oßra u m," h ow e v er, re c ei v ed i t s f i rs t con cr et e, a n d th e re fo r e fo r t h e for ma tion o f th e t er m, r e so u n d in g r ea liz ati on on ly a ft er th e Wo rld Wa r, an d th at i n th e co m p os it ion " G roß rau m wi r ts ch a ft ." " Car l S ch mit t "Vö lk er re ch t li ch e Gr oßr au mord n u n g ", B er lin 19 4 1, p a g e 4 .

performance of free contracting partners and their interplay of forces, but that this system very well had a carrier. The actual ruler of the world economy, the more or less visible force which largely controlled the rules of the game of supply and demand, was England! With its outstanding sea power, its infinite colonial possessions and its world -spanning money and credit system, England possessed practically the monopoly position, i.e. rule, over the world trade. It was not the market mechanism guided by private -sector initiative but specific political forces that triggered, for example, the inten sification of Indian jute plantations or Egyptian and Indian cotton crops. On the demand side, it was trade policy guided by a conscious political will1) that made the world market dependent on British influence, or at least its right of co determination. The failure of a system speaks against its sponsor. England did not manage the world economy in such a way that the self -confident national economies saw a benefit in the long run in the unconditional adherence to the system advocated and zealously propaga ted by England. The division of the world into haves and have-nots was "only" one, though the most serious, consequence of the English-style liberal economy, which was bound to provoke natural counter-currents. Nevertheless, we are of the opinion that the liberal system would have failed in the end, even with the best will of its bearer, on the one hand because of the principle of organization prevailing in it, and on the other hand because of its spatial extension. In the long run, the principle of acquisition is not capable of forming a useful system of economic order. The basis of the principle of acquisition is expansion, the permanent development of new spaces. However, this "broad" expansion is limited by the increasing development of the earth. A cert ain market rigidity (structural crisis!) must occur, which forces a transition to the demand coverage system - if the economic crises have not already triggered this tendency prematurely. If, however, the principle of covering needs were to replace the pri nciple of acquisition, the spatial extent of the world would be too great to guarantee a meaningful control of the economic process. For an orderly economy, a 1) Th e an t itru st p o lit ic i an wil l b e in t er e st ed to kn o w, fo r exa mp l e, th a t E n g lan d in clu d ed th e fo ll ow in g p ro v i si on i n th e In t er n ati on a l Ru b b er R egu lat ion Co m m itt e e tr ea ty at a t im e wh en it wa s st il l d e rid in g th e Ge r man e con o mi c st e er in g m ea su r e s : "Wh oe v er vio lat e s th e le gi s lat ion sh a ll b e l iab l e to fi n e, i mp r i son m en t or b oth u n d e r th e A ll i e d Mal ay St at e s A ct of O ctob e r 1, 1 93 6. Hou s e s ea rch e s ar e to b e h eld on r ea s on ab le su sp i cion o f vio lat ion o f th e la w, an d e ve n a r re st s may b e mad e. " ( Re p rod u c ed in " In t e rn ati on a l Car t el s, " In t ern a tion al Ch a mb e r of C om m e rc e Pr in t ed P ap e r No . 4 fr om th e 1 9 37 B er lin Co n gr e s s, p ag e 1 2. )

relatively closed "economic circle "1) is needed to achieve the desired goals of order. The task of large -scale economics will now be to prove with economic-theoretical arguments that the large -scale economy is a natural complementa ry economy of the national economies of a closed living space. Above all, however, it will have to explain what function the "bearer" of such a family of nations has to perform, so that, on the one hand, the tasks which are justifiably to be assigned to th e metropolitan economy are fulfilled and, on the other hand, the members of the metropolitan area do not lead a more or less tributary existence at the mercy of a non -spatial bearer, as was ultimately granted to them under the sign of the free world econom y.

1) E xp r e s si on ac co rd in g t o F ra en k el, Gr oßr au mw ir ts ch a ft ," B er lin 1 93 6, p a g e 3 5.

q u oted

Ny iri ,

L.,

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A: Concept of large scale economy

The term "large-scale economy" was probably coined for the first time by Werner Daitz, the pioneer of the European idea of large -scale economy. Daitz says: "As far as I know, the first time in 1916, out of the war experience, the concept of the large -scale economy was then set by me in conscious contrast to the theory of the wor ld economy, which had been the only one prevailing until then, and the attempt was made to give form and content to the concept of the large-scale economy "1). If we want to classify the term "large -scale economy" in a system of economic science, we are co nfronted with a difficulty which seems to be caused by the connection of the term "space" with the term "economy". In fact, the treatment of the concept of space has been strongly neglected in economic science. This could be countered by the fact that the term "economics" clearly refers to the spatial extent, i.e. to the area over which the economic activity of a nation extends. Economics has certainly interpreted the historical forms of economy (e.g., household economy, city economy) in terms of their spat ial orientation, but it has dealt only little with the spatial problems of modern economics. The reason is to be found in the fact that national economy reached some importance only in an epoch in which the economy was practically spaceless, i.e. a world e conomy of liberal character. Classical economics is therefore not concerned with the relations of a nation to its economic space, as might be inferred from this term, but with general economic topics, such as money, credit, business cycles, income, etc., w hich are in themselves problems of a general "economic theory". Few attempts have been made to present a real theory of economics. It will be the future great task of economic science to relate economic knowledge to the factors of "space" and "people", i.e . to create a "holistic doctrine" which modifies the classical laws of national economy according to the spatial conditions and political objectives of the national economy. The theory of the large -scale economy would thus have,

1. To present the economic constitution of an economy belonging to a metropolitan area association, 2. to discuss the ideal and material motives of a metropolitan union,

1) W er n e r Da itz " Gro ßrau m w irt s ch a ft " in Ni ck li s ch ' s Be tr ieb s w irt s ch a ft, 2n d ed i tion , S tu tt ga r t 1 9 38, colu mn 2 24 0.

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3. To make studies on the possible transformation of the individual subdivisions of the metropolitan area within the framework of the metropolitan area economy; and 4. thus to develop an overall regulatory system of the large -scale economy. It is difficult to give a definition of the large -scale economy, because the multitude of characteristics would lead to a confusion of terms rather than to a clarification of concepts if one tried to squeeze them into a short "definition". Never theless, we venture to define as briefly and as completely as possible: A large-scale economy is the totality of economic relations between autarky conscious economies of a relatively closed living space, ordered according to the principles of mutual prefe rence, rational supplementation of productive forces, fair evaluation of performance, and the greatest possible currency of national interests.1) It will be our task in the following to explain this definition, i.e. to give an account of the nature, causes , goals and preconditions of the large -scale economy. In doing so, we will endeavor to elaborate general laws of the large scale economy, i.e. not to take European conditions as a specific starting point.

1) T h i s d e fi n it ion i s b a s ed on th e a s su mp ti on t h at th e la rg e - sc al e e co n omy i s p ri m ari ly a co m mu n i ty o f p u rp o se . I f we tak e W er n e r D ait z' s lin e o f th ou gh t a s a b a si s ( s e e th e ch ap t e r " Th e La w o f Sp a ce 1 a s t h e L if e La w o f P eop le s " p ag e 6 0) , th e d e f in i tion wou ld h a v e to r ead as fol lo w s : " Th e l ar ge - s c al e e con o my i s th e tota l ity o f th e e con o m ic re la tion s b et w e en th e m e mb er s o f a f a mil y o f p eop l e s. He r e th e id e a of th e b iol og ica l c on n ec t ed n e ss of t h e p eop l e s s tan d s i n th e f o re gro u n d . Th e ec on o mi c coop er ati on i s on ly a c on s eq u en c e o f th e ex i stin g h ab it at co m mu n it y - alth ou gh th e latt er t er m wou ld h a ve to b e o u tl in ed in mo re d eta il .

B. The basics of the large-scale economy

I. The self-sufficiency consciousness

The core of all large -scale economic striving lies in the consciousness of self sufficiency. I}The self-sufficiency consciousness expresses itself in the will of a people to be able to live by its own strength, i.e. not to be dependent on forces and powers over which it cannot have any influence for the satisfaction of its needs of life and prote ction. Its own space and the productive forces developed from it must be capable of ensuring self -sufficiency, self determination and self -defense for all time. "Such an attitude to life, however, is the supreme law for all orders of life in this world. Fo r nature as eternal life allows only those orders of life to exist as stable, which are able to live in the first place from their own space and their own strength; which base their life on self-defense. "1) The concept of autarchy, however, has another im portant characteristic: autarchy strives for a healthy harmony of economic creation and - since the economy is an important expression of human life - thus of life in general. It means "organic and thus harmonious assignment of man and soil, tribe and landscape, people and space".2) Monoculture, as it presents itself to us in the world economy based on the division of labor, is "as a spiritual attitude: addiction, as a principle of life: one -sidedness, as an economic principle: division of labor with the da nger of its excessive increase, as professional training: specialization, as a biological form of being: impoverishment. Monoculture is not a permanent form of life. It ends in depletion. It requires a constant expenditure of energy resulting from a one sided drive in order to be preserved. It is susceptible to outside influences because it lacks the abundance of escape possibilities that the organically balanced state of autarky possesses. "1) This concept of autarky differs fundamentally from that of libe ral economic theory. There, autarky meant as much as self -sufficiency in the sense of self -

1) W ern e r Dai tz, " Au ta rki e al s L eb en s - u n d W irt s ch a ft so rd n u n g. " N at ion a l soz ial i sti s ch e Mon at s h e ft e, i s su e 1 2 9, D ec e mb er 19 4 0, p a g e 7 39 . 2) .H au sh o f er - Voh win c kel , p r ef ac e to th e sp e ci al i s su e on " Stru ktu r f rag en d er Gr oßr au mw ir ts ch a ft " in th e " Z eit s ch r i ft fü r G eo p oli tik, " 1 2th i s su e, D ec e mb er 1 94 0, p ag e 56 9. 1) Hau sh o f er - Voh w in ck e l, op . c it., p a ge 5 70 .

segregation, seclusion, isolation, and forcible separation fr om the "living organism of the world economy." It used to be judged negatively, as it were, as something to be rejected, and the advocates of the self -sufficiency idea were accused of backwardness. Autarky in our sense, on the other hand, is an expression of the proud will of a people for self -assertion and thus a spiritual attitude and principle of life. Such a will to live must reject the world economic division of labor. The international division of labor places the individual and his economic considerations in the foreground; autarky subordinates economic processes to national economic interests. It is not the place here to make detailed investigations of the extent to which the maximum international division of labor, which must necessarily be associat ed with a genuinely free -trading policy, has existed at all in the real life of the economy. Even if it had existed or could exist, however, there is a fundamental flaw in this system. The idea of the international division of labor "is based on the idea t hat the economy exists. The idea of the international division of labor "is based on the idea that the economy exists in isolation and without connection with the other spheres of the life of peoples. It overlooks or disregards the fact that the greatest possible profit in the international division of labor can be obtained only at the expense of other interests of the people: at the expense of a healthy population distribution, at the expense of a settled peasantry, at the expense of many cultural and soci al goals and, last but not least, at the expense of militancy and security".1) Since, therefore, the economy of a nation does not have an existence of its own, one can even conclude, conversely, that ultimately the world economic division of labor is also unreasonable from the economic point of view and must therefore be rejected. Autarky, however, is not to be equated with the complete isolation of an economy from the world economy. Indeed, in most cases the goal of self sufficiency would be endangered if this isolation were to take place to its full extent. For all economies which have only a limited "internal carrying capacity "2) - and most of them do - would have to reckon with rising expenditures and diminishing returns to the extent that their withdra wal from the world economy is pursued, and they would even come up against the technical limits of autarky at a certain point.

1) Pr ed öh l, " Th e So -C al l ed Ba rr ie r s t o T rad e a n d th e R e con st ru c tion o f th e Wor ld E co n o my, " We lt wi rt sc h a ftl ic h e s Ar ch i v, 5 2n d vo l . (1 9 40 II ) , Pa ge 1 97 . 2) E xp r e s s ion ac cord in g to A. Fi s ch er, " Z eit s ch r ift fü r G eop ol iti k," 2n d vo lu m e 1 9 25, 2n d h al f vol u me, p a ge 8 46 .

If the policy of autarky, i.e., the abandonment of the international division of labor, were to be pushed too far, the inevitable consequence would be that the interests of the people, for whose sake autarky is sought in the first place, would ultimately no longer be guaranteed. As the exaggerated monoculture means spiritual and biological impoverishment, the exaggerat ed autarky would mean material impoverishment and thus inevitably also spiritual and biological decay, or in other words: as with the international division of labor with the people the economy, so with consistent autarky with the economy the people must p erish (Predöhl). An autarkic economic policy must therefore strive "for the optimum of the interests of the people". It has to advance autarky up to the point - but only up to this point - where the ideal and material total benefit for the national economy is highest.

II. The large-scale self-sufficiency

It is the tragedy of most national economies that, in spite of the most intensive promotion of their economic potential, their national optimum lies in a zone which still requires a far -reaching "external orientation". In order not to be dependent on the world economy, which is influenced by foreign forces and powers, for the satisfaction of vital needs, the natural consequence is that the economies striving for self -sufficiency seek to satisfy their vital supplementary needs in neighboring areas. Here, however, the problem of the supplementary economies, i.e. the large -scale economy, begins logically. The dogmatic one sidedness, the bias in the world market -oriented way of thinking, and not least the earlier political constellations and concepts have so far only allowed the antithesis "autarky or world economy". The idea of a large -scale economy, i.e., the close union of several independent national economies to form an organic trade- and production -based complementary economy, has been discussed from time to time, but almost without exception it has been described as practically unfeasible, essentially because the political and organizational conditions necessary for such cooperation were not considered fea sible.1)

1) We rn er Dait z, on th e oth e r h an d , h a s u n wa v er in g ly ad vo cat ed t h e i d ea si n c e th e Fir s t Wor ld War th at th e e st a b li sh m en t o f l ar ge - s ca le li v in g sp a ce ec on o mi e s is th e on ly way ou t of th e ch ao s o f t h e wo rld e con o my an d th e o n ly way to r eo rgan iz e r e lat ion s b e tw e en n ation s . ( C f. We rn er Dai tz: Au s ge w äh lt e Re d en u n d Au f sätz e, Par t 1: D eu t s ch la n d s Wir t sch a ft s ord n u n g au s ei g en er Kr af t u n d e ig en e m Rau m. Pa rt 2: G er ma n y an d th e Gr eat e r E u rop ean E con om y . B erl in 1 93 8 ).

The development of the last years h as now shown not only in Europe, but in the whole world as a natural consequence of the departure from the liberalistic economic conception the formation of complementary economies, compound economies or large -scale economies. Starting from free trade as the expression of the theoretical maximum of the "cost -space" oriented world economy and the "corrected" free trade of the (still strongly mechanizing) most-favored-nation system, an increasing "regionalization" of trade relations through the border, region al, colonial and other "clauses" already began in the liberalist foreign trade epoch. Of the numerous trade policy blocs of the past, only the Nordic, Baltic, Iberian and, in particular, the British Empire clauses should be mentioned. Block formations such as the Oslo Convention and the Balkan Entente can be seen as going beyond the scope of mere regionalization in customs policy. However, an even more intensive interconnected economy was only initiated with the expansion of the reciprocity principle throug h the clearing agreements.1) If the formation of blocs in terms of trade and clearing policy already brings about a far -reaching interdependence of the economies involved, the metropolitan economy has even higher goals. Not only does it aim to intensify tr ade between the sub members of the metropolitan area, but it also seeks to mobilize all the complementary economic forces of the metropolitan area for the benefit of all the economies involved, thereby intervening deeply in the structure of an economy and reshaping it in accordance with the objectives of the metropolitan area economy.

III. The spatial consciousness

But this is where the problem of "small countries" comes in. In our considerations about the "self -sufficiency consciousness", we started from the aspiration of an economy to independent economic organization. If we consider the European economy of a large area, the self -sufficient areas could mean only Germany ' and its axis partner. The other countries, especially the smaller ones, lack the mo st necessary preconditions for an independent autarky policy, unless they wanted to maneuver themselves into a hopeless "forced autarky", which would ultimately mean their downfall in the sense of our above remarks on the "optimal policy".

1) " Th e i mp orta n c e o f c le arin g tra f fi c i s e v id en t fro m th e fa ct th a t in 19 36 G er man y wa s alr ead y co n d u c tin g ab o u t 8 0 % o f it s t ota l f or e ign trad e in t w o - w ay t r af fi c. " Fro m " D er We lth an d e l i m C l ear in g v erk eh r, " K u rt S ch n eid er, B erl in 19 3 7.

It was therefore the lack of s elf-sufficiency which made the small countries zealous advocates of free trade up to the last period. If we now set up the postulate of autarky for the Axis, we must examine the possibilities for the behavior of the small countries vis -à-vis the "great hulk" in accordance with the remarks we made at the beginning, according to which the Axis powers do not intend to bring about a European "compulsory great space:

a) National self -sufficiency, which would enable them to live on their own strength and in thei r own space, is completely out of the question for them. b) Another possibility would be that the small economies would expand into large economies by means of an appropriate expansion policy and would thus be enabled to shape their destiny sovereignly.1) The example of Holland and Belgium could be cited here, which could pursue a more or less effective autarky policy by means of their overseas possessions. But even if a self -sufficiency of these economic areas would be possible, nevertheless, with referenc e to our later remarks on the "spatial situation" of the metropolitan area, this entity must be denied a permanent and secure viability. c) The 'small economies' could furthermore join together in groups to form a large area. This would result in regional trade policy mergers, as we have already seen in the Balkan League and the Oslo Conferences. But even these regional alliances were not viable, on the one hand, because of the lack of complementarity between the sub -regions and, on the other, because of th e complete strategic dependence on great powers outside this spatial structure. d) The small economies could perhaps take the view that their existence is guaranteed as before without being bound to other areas in "free trade". But it must be said that the system of free trade or of the international division of labor was already largely inoperative before this war and broke down completely during it because of its internal inadequacy. Even after the war, it is unlikely to return, for the world economy as a whole is now striving with giant strides toward regional bloc formations. What would be the consequence for the small economies if they were to adhere to free -trade tendencies? They would be practically condemned to "forced autarky" because of their space less orientation. 1) C f. H er m an n B en te : "E n g lan d u n d D eu t s ch lan d i m Ka mp f u m d i e Neu o rd n u n g d er We lt wi rt sc h a ft ": ; B erl in 19 40 , p a g e 3 2.

e) The lack of all possibilities for "long -distance orientation", the lack of self-sufficiency, as well as the inne r inadequacy of all other trade political projects, therefore imperiously demands the connection to the metropolitan rump, which, by the way, was their best trade partner even at the time of the most prosperous free trade era. Thus, it is not the political "pressure potential" of the core powers that forces the small states to align with the metropolitan area, but the natural geographic conditions and the most elementary economic necessities of the small states force them to do so! There is therefore no oth er way out for the small economies than to join the metropolitan economy for better or worse. With it , it should be clarified unambiguously that the large space economy is an inevitable consequence of the world economic development also without any "initia tive" of the victor states. If now Germany is the appointed "bearer" of the greater economy, this bearer must make it his duty to administer his fiefdom in such a way that the sub members of the greater area do not see in it a poor substitute for the world economy1) , but a community of life which has far more to offer them than the pseudo-freedom of the liberal epoch. Although we have seen that the metropolitan area is originally an economic entity and that the individual economic interests of the sub -areas bring about the metropolitan area union, no fruitful cooperation can be guaranteed in the long run without common economic interests. In the case of a purely economic organization of the large -scale economy, there would be a danger - as we have already seen in the evaluation of the international division of labor - that the interests of the people would not be respected to the necessary extent in the organization of the intracontinental division of labor. The bearer of the large scale economy must therefo re be not only an economic shaper, but also a responsible leader of the family of peoples of the large -scale area. The degree of this sense of responsibility, however, determines the degree of trust that the sub-regions have in the leader. The sense of res ponsibility on the one hand and trust on the other hand constitute the "Greater Area Consciousness". It is necessary to describe this problem area in more detail because of its decisive importance for the lasting existence of a large -scale economy. 1) I t w ou ld b e f oo li sh to cl o se o n e ' s eye s t o th e fa ct th at th e s ma ll eco n o mi e s o f th e E u rop ean ar ea l i v e o r w il l l i v e u n d e r le s s fa vo rab l e e con o m ic c on d i tion s d u rin g t h e d u r ati on of th e w ar an d p r ob ab l y al s o fo r s o me y ea rs a ft er th e war th an w as t h e ca s e b e for e th e wa r. Bu t th e s e e con o mi e s mu st b ear in min d t h at th i s fa ct i s p ri ma ri l y th e fau lt o f th e Br iti sh - A me ri can b l ock a d e of E u r op e, wh ich h i t on th e on e h an d an in t en si f ica tion o f th e m etr op ol ita n a re a th at wa s on ly in i ts in it ial sta ge s, an d on th e o th er h a n d a m et rop o li tan are a e con o my t h at h ad b e en stra in ed b y th e d e man d s o f a to tal wa r. W h en th e ar m am en t req u ir e m en t s can b e r e d u c ed , wh en a n exp an s ion o f th e E u ro p e an ec on o my on a b r oad b as i s wi ll b e p o s s ib l e an d wh en f in a lly a fl ou r i sh in g s u p p l e m en ta ry t rad e w ith o ve r s ea s can tak e p l ac e aga in , th e vi e w s o f th e s mal l e con o mi e s w il l n o l on g er n ee d to wa n d er b ack t o th e " gol d en ag e " o f th e lib era li s t - cap ita li st e p oc h of w or ld tr ad e!

1. The spatial awareness of the submembers

The confidence of the spatial me mbers is expressed in the awareness that the connection to the large -scale economy ultimately means the best material and also ideal welfare for them. The existence of this spatial awareness is necessary for the following reasons: The connection to the met ropolitan area means first of all the renunciation of the unrestricted economic principle. If in a large-scale economy the economic processes cannot always be carried out according to purely economic aspects, there must be a spiritual balance, an insight, which makes it possible to accept possible sacrifices. Through the community idea of the large area, any temporary or permanent individual disadvantages must be accepted in the interest of the whole. The idea of the sacrifice of the metropolitan area, whic h can be summarized in the term "priority of the area", i.e. giving priority to the interests of the area in all economic considerations and actions, must be carried into the members of the metropolitan area and constantly promoted. If the. If the peoples of the metropolitan area fulfill this service to the community with sincere will, all the members of the metropolitan area will find that, in the end, the concentrated and sensibly directed power of the metropolitan economy will surpass even the "blessings " of the purely economic principle. (Cf. the section on "Spatial potential" on page 49). In the following, a systematic presentation is given of those basic rights and basic obligations of the constituent members which are indispensable for the awakening a nd promotion of the Greater Consciousness:

a) the securing of the space. The metropolitan area must constitute a secured community of peace. The duties arising from this requirement are primarily the responsibility of the spatial leadership (see page 41) . But the other members of the region must also make a decisive contribution to this fundamental objective of the region: Ties to other metropolitan areas or subspaces of them are to be omitted if they are likely to cause tensions with other metropolitan areas. Scarfoglio says in this regard: "The exact formulation of the continental sentiment can only be the following: Anything that harms or oppresses one nation of the continent harms or oppresses the whole continent; anything that brings advantage to one nation of the continent, without disadvantage to others, is advantageous to the whole continent; anyone who sets one continental nation against the other is an enemy of the whole continent and must

be put out of action without hesitation. "1) In addit ion, in order to safeguard the space unit internally and space protection externally, the space member must make a reasonable contribution, which may be positive in the form of benefits or negative in the form of renunciation. b) the integrity of nations: The sovereignty or better the independence of the states must remain untouched. This refers first and foremost to the preservation of the peoples' own life of the space members. The metropolitan economy is not to be a "cultural sphere" or a "melting pot" o f American character. Ethnic homogeneity is in no way desired; on the contrary, heterogeneity, insofar as it arises from a healthy ethnic substance, must be encouraged within the family of nations. However, in all fields which touch upon the interests of t he greater region, the spatial member must, as it were, free itself mentally from its spatial narrowness and think in terms of the greater region. This applies in particular to the purely economic sphere. In order to bring about a sensible spatial division of labor, i.e. to secure large-scale planning, it will often be necessary to take measures which at first seem to run counter to national interests, but which in the long run will ultimately prove useful to the national economy. Fostering this "metropolitan insight," i.e., reconciling the zones of national sovereignty with those of metropolitan precedence, will be one of the most difficult metropolitan tasks. That this task must be solved is, to emphasize it again, not a political demand of our days, but a n old economic insight. As early as 1932, Karl Krüger wrote: "... In a period which is probably still quite distant, the individual states, as "cooperative members" of the greater region, will have to make themselves comfortable, in order to increase the p rosperity of the whole, to depart from their previous egoistic -nationalistic economy and to integrate it in a planned way into the overall economy. 1) c) the durability of the large -scale economy. The guarantee for the lasting existence of the metropolitan economy must not only come from the military side, but also from the economic side. If a state expands or restructures its economy with a view to metropolitan interests to an extent which it would never have done in the absence of metropolitan interdepende nce, it must be assured that its connection with the metropolitan economy is permanent, for a

1) Ca rl o S ca rf og lio, "E u r op e w ith o u t E n glan d ," D re sd en 19 4 0, p a g e 1 4. 1) Ka rl Krü g er, " D eu t sc h e Gr oßra u mw ir ts ch a ft ," Ham b u r g 1 9 32, p ag e 17 .

fundamental change in economic policy would naturally lead the country concerned into a catastrophe of incalculable proportions. d) the fair evaluation of performance (reciprocity principle). In order to promote the consciousness of the metropolitan area, it is also essential that the individual members of the metropolitan area can count on a fair evaluation of their performance. One of the most difficult tasks of the metropolitan area economy is the equitable measurement of performance, which is expressed in the intergo vernmental quantity and price policy. Quantity determination in the form of supply and purchase commitments, as well as performance evaluation, must be established between sub -members in a loyal and equitable manner. It is imperative that surplus performan ce be respected and remunerated. The large-scale economy must on no account be induced by feelings of envy to press the entire area into an "all -leveling economic unitary form" (Landfried). e) ensuring the right to work. The metropolitan planning must not cause unemployment in the metropolitan area, just as, on the other hand, care must be taken to eliminate existing unemployment or underemployment. Guaranteeing the right to work means guaranteeing industrial peace, which is an essential prerequisite for po litical peace and thus for the lasting existence of the metropolitan economy. f) the security of values. The basis for a successful large -scale economy is a fixed and lasting standard of value. Only the awareness of value security creates a willingness to perform. Crisis elimination thus largely contributes to the promotion of metropolitan confidence.

2. The spatial awareness of the spatial guidance.

If almost all large -scale economic endeavors in Europe have failed so far, this fact was due in particular to the lack of a planned overall leadership of the large -scale area. Just as a living community can exist in the long run only on the basis of objective and morally authoritative leadership, a large -scale community also needs leadership, i.e. a large scale leader. "... The fact that the general orientation of the metropolitan area and its members towards the major economic powers 27

present in it takes place and must take place appears natural in the truest sense of the word, for in nature, too, the weaker is entwined around the strong. "1) Leadership in the metropolitan area economy is not "ruling" in the imperialist sense. "Ruled" is subordinates. The large scale economy, however, is a voluntary community in which each member has a say according to its we ight. The means of ruling is force, the means of leading, in contrast, is the insight of the led into the voluntary recognition of the leader. "A metropolitan economy which is to weather all storms is not built up by making the states composing the metropolitan area economically dependent on the leading state and by gagging them. The basis for a long existence is the trust 'to it. The peoples forming the metropolitan area are, so to speak, economic confederates of the leading state. "2) To lead, not only po wer is required, but also prerequisites of a factual and moral nature. Above all, the leader state must not only draw the advantages from its leadership position, but it must also bear the burdens and sacrifices of the greater space community to the same e xtent as the other space members. The leader state in a large -scale economy must basically have the following prerequisites: (a) Location. The leader state must be geographically the country of the center, if possible, in order to be in close spatial rela tionship with the sub members. It is thus the transit country in terms of transportation and the mediator economically between the peripheral peoples of the metropolitan economy. b) Size. In terms of population and economic potential, the leader state shou ld be the largest metropolitan state, if possible, so that it can most expediently realize the metropolitan will and assert it externally, i.e. vis-à-vis the other metropolitan areas of the world. If the leader state is the largest country both in terms of capacity and in terms of the high quality of its services as well as in terms of the diversity and level of its consumption needs, there is inevitably an elementary need for the neighboring areas to enter into a relationship with the leader state. The Fuehrer's state should therefore have the most highly developed 1) Ki e s e we tt er, "P lan vo ll e In d u s tri al is i eru n g in d er G roßr au m wi rt sch af t," Jah rb u ch 1 94 1 d er G e s el l sch af t fü r eu rop ä is ch e Wir t sch a f ts p l an u n g u n d Gro ßrau m w i rt sch af t, D r es d e n 19 41 . 2) Par ch man n , " G r oßr a u mp lan u n g in d e r F or st - u n d H olz w irt s ch a ft, " q u ot ed in B er lin er Bör s en -Z e itu n g N o . 2 8 9, Ju n e 24 , 1 94 1.

industry, if possible, because it thus causes a far -reaching dispersion of its economic interests. c) Power. The leader state should be the grea test power factor, so that it is able to protect the states united in the metropolitan area within the area and to the outside. Only a strong leader state can be the guarantor of a strong metropolitan area. This requirement naturally has an impact on the military-economic interests of the entire area. We will come back to this later. d) Leadership qualities. The leader state must possess leadership qualities of a moral, political and economic nature and must have sufficient creative substance within itself to be able to maintain them permanently. Ganzer says aptly on the last point in particular: "It is not necessary for a people gifted with rule to confine itself politically to the area of its national soil; if it possesses the creative power which legitimi zes it for the leadership of a comprehensive system, then an encroachment striving for this leadership is a natural phenomenon; empire -buildings in themselves are not a sign of degeneration and encroachment. But they immediately reveal themselves as constr uctions of presumption, when the higher creative health of the leading power is eaten by the germs of decadence "1).

IV. The condition of the room.

Having presented the ideal foundations of the large -scale economy, we now turn to the material problems of space. Here, the question arises as to the location of space, the structure of space, the binding of space and the potential of space.

1. The location of the room.

The spatial position can be characterized in two ways, firstly in terms of the interrelation of the subspaces, and secondly in terms of the geographical placement of the metropolitan area in space. 1) G an z er, " Di e Im p e ri e n u n d d a s R ei ch , " in " Da s Re i ch , " No. 2 6, Ju n e 2 9, 1 9 41 . 29

Thiele2) distinguishes between maritime (e.g. England and Japan) and continental (e.g. USA.) metropolitan areas and furthermore mixed forms (France, Italy). This definition is useful, because it is essential for the existence of the metropolitan economy if it represents a "neighborhood association". A contiguous landma ss is important, on the one hand, for the strategic security of the metropolitan area and, on the other hand, for the promotion of cooperation between the sub -members. We can see in the present war what a decisive disadvantage the British, i.e. maritime, s patial structure has due to the fragmentation of the subspaces.1) The European metropolitan economy would have to be counted among the continental metropolitan areas. This definition would also be applicable if Great Britain were included and if the Africa n supplementary space were taken into account, since the gravity of the metropolitan area, its potential substance, lies on the continent. The geographic location of a metropolitan area is a major determinant of its performance. The more balanced the geogr aphical zone distribution is, the more "sustainable" the metropolitan area is. "The core area of a lively "large scale economic area", which can cope with all the necessary tasks of economic independence, will therefore have to belong to the temperate zone , even though the possession of tropical areas with the products of their rich vegetation is certainly desirable; the example of the United States, however, suffices as proof that the direct inclusion of tropical areas need not be an indispensable precondi tion for the formation of a vital economic area. What is important, on the other hand, is a balanced division of the land into sufficient areas for cereal cultivation, grasslands and pastures, and sufficient forest zones, as well as for the cultivation of textile fiber plants (cotton); the economic fate of the large monocultures in the world crisis is a warning example of how fertile agricultural areas with enormous production capacities, but one -sidedness in terms of production economics, are particularly exposed to the vicissitudes of the world economic cycle. "1) The importance of spatial location for the strategic safeguarding of the large scale economy will not be discussed here.2) 2) C f. T h i el e, " Gr oßr au m wi rt sc h a ft i n Ge s ch ich te u n d Po li tik, " Dr e sd en - 19 38 , p p . 1 8 ff . 1) A s We rn er Da itz h a s rep ea te d ly n ot ed , th e B rit is h E mp i re c an n ot b e a tru e an d la sti n g lar ge - s ca le econ o my b e y on d i t s mat e ria l sp a tia l n atu re, i f on ly b ec au se it co mp l et e ly lac k s b iol og ica l u n ity . 1) Gü n t e r S ch mö ld er s, " Be gr i ff u n d W e s e n s me rk ma le d e s Gr oß wi rt sc h a f ts rau m e s," q u ot ed in th e sp ec ial i s su e " Gro ßd eu t sch lan d u n d E u ro p a in ein e r n eu e n W el t wir ts ch a ft " (" G re at er G er man y an d E u r op e in a N e w W or ld E co n o my ") of th e j ou rn a l "W el tw ir ts ch a ft, " i s su e 1, Jan u ary 19 4 1. 2) C f. T h i el e, op . c i t.

2. The spatial structure

The structure of the metropolitan area is of considerable importance for a prosperous cooperation of the members of the metropolitan area. If spatial awareness in Europe has been so poorly developed up to now, it is not lea st because Europe is one of the most rugged and fractured spaces on earth. More than half of its territory is made up of peninsulas. Great mountain ranges crisscross the space. In these countless nooks and crannies, just as many peoples and tribes have nat urally developed. Narrowness of space, however, increases the tendency to segregation, whereas spaciousness promotes unification. The USA. is a typical example of how wide spaces also promote wide thinking and feeling and facilitate large -scale economic planning. It will therefore have to be a particularly important goal of large -scale economic cooperation in Europe to promote the binding "European idea" beyond the narrow spatial and historical traditions and facts - of course while preserving national peculiarities and values.

3. The space binding The degree to which national economies are tied to the greater economy can be quite different. In accordance with our earlier statement that the cooperation of a state with the metropolitan area is not based on coercion, there are a variety of possibilities of binding. What is essential for the assessment of a binding is solely the state of practical cooperation. "Greater area treaties" are meaningless unless a thousandfold interdependence of economic bodies resu lts from an honest will to cooperate. Such a complex as the large-scale economy cannot be forced into the paragraphs of a treaty; spatial consciousness cannot be replaced by a signed piece of paper. We can make the following gradations of large -scale econo mic cooperation: a) Political unity of the sub -areas (e.g., Germany and the General Government). In such a case, of course, the metropolitan planning goals can be realized most extensively. b) Allied states (e.g., Germany and Italy).

If there is comp lete agreement on political and ideological goals, a good basis is also created for economic cooperation. c) Independent subregions (e.g. Germany and Sweden). Here, all possibilities for cooperation will be available, from preferential links to bilateral a greements to complementary production communities. The more the spatial awareness is developed, the closer the economic integration will be. d) Complementary areas. Complementary areas are those economies that do not geographically participate in a closed unit of the metropolitan economy and whose strategic security is not consistently provided to the same extent as in the central bloc. They therefore serve less to secure economic freedom than to raise the standard of living. In turn, they can be independen t (e.g., Arabia in relation to the European metropolitan economy) and politically bound (e.g., German colonies). e) World economy. The world economy will be understood as the order of external economic relations among the future metropolitan areas. The met ropolitan economy is anything but hostile to world trade. On the contrary, it provides the true basis for extensive and lasting world trade. For world trade to take place, the will to trade is first of all necessary. This, however, is again dependent on th e needs of the large areas. Now, since the needs of man are unlimited, the metropolitan economy will be able to take advantage of every import opportunity beyond the coverage of its needs in "security goods" - provided that it is also offered the opportuni ty to acquire the counter -values by " export. There is no greater error than to assume that an autarkic economic order must be associated with closing tendencies. On the contrary: "Organically developed national economies, namely those oriented to the goal s of the national whole, are in the long run better partners in international exchange than national economies which are unilaterally and inorganically interwoven in the international division of labor. "1) The goal of the autarkic economic order is to est ablish and

1) Pr ed öh l, "W e lt wi rt sc h aft vo m vö lki s ch en Sta n d p u n kt, " H a mb u r g 1 9 3 7, p a g e 9 .

maintain economic independence. Moreover, it will never resist man's urge to satisfy "supplementary needs" beyond the security space. In his pioneering remarks1) on the future European economy of a large area, Reich Economics Minister Funk said: "We would have to guarantee the economic freedom of the European area, i.e. ensure that, as far as possible, all the products were sufficiently available to make this economic area economically independent of other areas, and this was largely a question ' of the standard of living in the individual countries. For example, we would not need to import a ton of oil from overseas markets in the future if we rationed fuel consump tion accordingly. If, however, the use of the automobile and the manufacture of automobiles should be extended at will, there would be nothing to prevent the importation of this excess portion of oil from the world, because in emergencies consumption could be brought up to the level which we ourselves have available." The most favorable. The most favorable conditions for an extended supplementary trade, however, are created by the large -scale economy precisely because it is internally healthy and thus durab le and crisisproof. The sterile antithesis "self -sufficiency or world economy" is thus transformed into the principle: self -sufficiency and world economy!

4. The room size

The size of space is important, on the one hand, for the degree of self sufficien cy and, on the other hand, for the implementation of spatial planning. The problem of the lower limit of the spatial extent of a large -scale economy need not be discussed in detail here.2) Only loose indications can be given for the upper limit of the spat ial extent. The greater the spatial extent of a large scale economy, the better its carrying capacity will be. However, this need not be true in every case. The decisive factor for the self -sufficient weight of a large-scale economy is rather its spatial p otential, which is often greater in the case of small spaces than in the case of widely extended areas. On the other hand, the "space size" is of essential influence on the efforts of order within the large-scale economy. First of all, large -area planning is facilitated when the number of merged independent sub -areas is as small as possible. The more independent subspaces there are, the more difficult unified planning 1) Qu ot ed f ro m De u t sch e All g e m ein e Z e itu n g No . 3 57 of Ju ly 2 6, 1 9 40 . J u ly 1 9 40 2) We r ef er to ou r r e mar ks on th e völk i sc h e s Op t i mu m in th e s e ct ion "Au t arki eb e wu ß t se in , " p ag e 3 0.

becomes. But not only that; the productivity of the service area is reduced by the fact that each sub -area, due to its independent state and administrative apparatus, burdens the large -scale production with a not insignificant share of "overhead costs". But even the upward expansion of space has its limits. If an optimum, which is certainly difficult to define, is exceeded, it would be easy to slip back into the waters of an old -style world economy, in that the core of the order would lose its overview of the planning area and, in addition, the strategic safeguards would cause difficulties. However, this is not precluded by the fact that those areas which would lead to an oversizing of the metropolitan area enter into close trade relations with the metropolitan area as "supplementary areas". Now the question remains to be examined whether the condition of complementary character must necessarily be fulfilled by the m erger of spatial elements or by the connection of subspaces to the metropolitan area. This is probably not the case. The development of foreign trade in recent decades has shown that trade between countries of the same structure can be advantageous for bot h. In the economy of a large area, this point of view would become even more important if the ideas expressed in the theory of comparative costs were realized, i.e. if the sub -areas of the same or similar structure and the same or similar degree of develop ment were to operate predominantly in those areas which correspond to their special talents. In addition, it must be said that it would not be compatible with the idea of the community of habitats if an economy were to be "expelled" from the community of habitats because of its lack of complementary benefit for the entire area.

5. The potential of space

The space potential is composed of the following components: a) Material basis (α) Land use area (agricultural land, forest, etc.), (ß) Mineral resources (coal, iron, metals, etc.); b) power base (coal, water, wind, sun); c) transport base (The importance of this factor should not be underestimated. Insurmountable transport obstacles (swamps, high mountains), or 34

obstacles that can be overcome only with great difficulty, considerably hinder large-scale cooperation). d) Basis of work (mental and physical labor). These four factors overlap or are partly dependent on each other. For exa mple, the material basis can also be the power basis at the same time, the work basis can also be the power basis at the same time, and so on. The size and type or intensity of the interaction of these four factors determine the potential of "large -scale self-sufficiency". In accordance with the aim of this paper, which is to study the market organization of the large scale economy, we refrain from dealing with the potential bases of European or other large-scale economies, as was noted in the preface. Only some remarks on the factor "working basis" shall be made. We have deliberately chosen the term "labor base" instead of "population base" because the degree of self -sufficiency is not determined by the sum of people living in a space, but by the degree of labor intensity and labor valence.1) Beside the USA. so far the UdSSR, was always called "ideal" large scale economy. The USSR, however, was far from it, since it reached its technical stage of development only with the help of foreign mental and partly also physical labor and would probably never have reached it in the future without this help.2) To what extent, however, the limited presence of the factor "material" can be compensated by "labor", the German example proves. It is worthwhile to go into the p roblem of "intellectual self -sufficiency and fabric creation" in more detail in order to counter widespread misconceptions and thought processes, especially with regard to quality and cost issues, in the creation of new materials.

1) Alt h ou gh , for e xa mp l e , Ch in a h a s 45 0 mi ll io n an d In d ia 40 0 mi lli on in h ab itan t s, th e se are a s ar e at a ve ry w eak st ag e o f e con o m ic d e v e lop m en t. 2) In t h i s con t e xt, th e f o llo w in g p oi n t s a re al s o wo rth m en t ion in g : "W h at i s r eq u i r ed h er e, too, i s a c erta in co mp l e m en ta ry e f fe ct b et w ee n d i f fe r en t p e op l e s an d r ac e s, t h e g r eat e st p os s ib l e d i v er s ity o f ab ili ti e s an d n e ed s, an d a s ett le m en t st ru c tu r e wh i ch c o mb in e s a su f fi ci en t d en s ity of p e op l e to m ak e p o s s ib l e t h e u n i fi cat ion an d d i v i si on o f la b or an d th e for m ati on o f in d u str ial e n te rp r is e s w ith th e n e ce s sa ry h ar m on io u s d i st rib u tion of to wn an d cou n t ry a n d t h e n ec e s s ary roo m fo r ma n e u v e r fo r th e fu rt h e r d e v el o p m en t o f ec on o m ic li fe . A c ert ain co mp l e m en ta ry ef f ec t ca n b e exp e ct ed in th e co m b in at ion o f s e ve ra l cou n t ri e s in to a la rg e ec on o m i c a r ea mo st r e ad ily w h e r ev e r ar e as wi th a p op u l ati on ex c ee d in g th e ir ow n 'i n te rn al ' cap ac ity fo r a b so rp t ion co mb in e wit h cou n tr ie s wh o s e p op u la tion ca p ac ity h a s n ot y et b e en fu lly u ti li zed or wh ich mu st fi r st b e op en e d u p fo r col on iz ati on i n th e fi r st p la c e ." S ch möl d e r s op . cit .

Until now, the degree of economic efficiency of a production was always read off the price scale of the world market. Today, however, we are of the opinion that a cost and price differential must and can of necessity be space -related. An economic policy which primarily pursues the political, military and social interests of its own community of people or nations cannot and will not measure its measures and results against the performance of any overseas monocultures whose econom ies are built on a completely different basis. The autarky costs (difference between the world market price and the domestic price of autarky products) are to be regarded as an "insurance premium against capitulation" (Daitz). In the cost and price balance of the large-scale economy, this insurance premium must be just as self -evident as, say, the fire insurance premium in the yield calculation of the tenement house. Although we therefore refrain in principle from basing the assessment of our economic policy on the value yardsticks of the world market, developments have shown that we need not shy away from cost comparisons. If, in the past, the idea of self -sufficiency essentially always failed because of cost considerations, this was simply because the uniq ue revolution of new material technology as well as the possibilities of generous economic planning and the resulting increases in productivity of the economy were not foreseen at that time. The economic doctrine born of the principle of acquisition was understandably incapable of gauging the technical and economic results of a national organic common economy. The chemical industry has shown us1) how utopias can become reality in the technical and managerial fields. Chemistry has penetrated the secrets of t he world of substances and has produced the highest-quality raw materials, semi -finished products and finished products from the mass products available in almost all areas. This has not only been its task since 1933 or since the announcement of the Four-Year Plan. Long before the turn of the century, the tar dye industry, for example, had already emerged from the inherent dynamics of chemistry without a state mandate and without being forced to do so by the shortage of raw materials. The foundations of amm onia synthesis had already been laid before the World War. Plastics, such as celluloid, vulcanized fiber, casein based artificial horn, etc., were invented and produced on a large scale in the last decades of the 19th century. Chemistry thus "sinned" again st the law of the international division of labor already in the heyday of liberalism. It is significant, for example, that it was not until 1894 that tar dyes, i.e. artificial colorants, were approved for Prussia's military needs. Even then, the chemical industry was promoting national interests without the state itself always showing the necessary understanding for its aspirations. What an incentive it must have been for chemical research and industry when an autarky -conscious 1) C f. t h e au th o r ' s e s s ay : " Gro ßrau m au ta rki e, " Th e p r act ic al b u s in e s s ec on o mi s t No. 9, Se p t e mb e r 19 41 .

economic management, as was the case during the World War and to an even greater extent during the Four -Year Plan, took the initiative itself to develop domestic raw material s ources and gave industry every possible assistance in its endeavors! However, the chemical industry has not only masterfully solved the technical problems, but also the no less important business management problems. Projects that initially seemed to be im possible from a private -sector point of view were gradually brought into the zone of economic feasibility in a tough struggle for profitability. Products that decades ago cost RM 20, 100, or even 1000 per kilogram are now on the market for just a few tens of pennies. Thousands of examples of this can be found in the history of the chemical industry. The law of mass production has become particularly effective as a result of the capacity expansions that have been driven forward in recent years. At the beginn ing of 1937, Buna still cost about RM 5, whereas today it costs only about RM 2.30. The price of aluminum, once an almost magical quantity, has recently been reduced to RM 1.27. Artificial silk (viscose Ia 120 den. weft) still cost RM 12.50 in 1913, since 1937, however, RM 4.25. The rayon quality, which is processed to replace cotton, still cost RM 5.85 in 1926, today, however, about RM 1.45 per kg. Let us stay with the latter example to prove the "profitability" of autarky. The peace price for American cot ton was RM 0.75 to 0.80. The best Egyptian cotton even cost RM 1. However, it must be taken into account that the production of rayon started on a large scale only a few years ago. If we compare this with the development of other branches of production, we can estimate the price reductions that will be recorded in the rayon sector in five, ten or even twenty years, firstly as a result of technical progress, and secondly as a result of the constant expansion of sales both vertically (increase in consumption) and horizontally (transfer of more and more countries or spinners to rayon processing). But even if we assume that the price of rayon could not be reduced below RM 1.00 or 1.20 in the future, the processing of cotton will still not be "more profitable". T his claim, which sounds strange at first glance, results from a fact which is unfortunately paid far too little attention to, i.e. the problem of the "foreign exchange effect". It is, of course, wrong to compare the German rayon price of RM1.45 with the pe ace price of USA cotton of RM0.80 in purely numerical terms. Rather, it must be made clear how the German economy obtained the foreign exchange amount of RM0.80 for the purchase of cotton. However, this is where the unfortunate problem of the disproportion between the German production costs and the export revenues achievable since the world economic crisis comes in. As a result of currency devaluations, prohibitive tariffs, subsidies of all kinds and the destructive competition from foreign industry made p ossible by them, it has not been

possible to cover even remotely the cost price of a large part of German exports. In many cases, the proceeds were not even half of the generation costs. (The loss was thus often above the possible extent of a devaluati on of the Reichsmark, as was repeatedly desired by some economists in the pre -war years). Applied to our example, however, this means that the amount of RM 0.80 corresponds to a much higher performance equivalent, measured by German standards. If we now ha ve to spend not RM 0.80 but RM 1.00 or even 1.20 of German labor to obtain foreign currency for a kilogram of cotton, it makes no economic sense to first produce and export an exportable product at a loss in order to be able to buy cotton for the equivalen t value. It would be much more appropriate to produce the raw material rayon at a loss from the outset and to have the loss borne by some form of subsidy, such as government funds, a "self -help campaign by German industry" or by charging the general public a higher price. This problem of "inward export promotion" has received so little attention primarily because holistic thinking in all matters of foreign trade is still in its infancy. There have been discussions of price and cost policy with respect to ex ports, imports, or autarky products, but the interrelationships between these three factors have been little recognized in their problematic nature. After this practical example has been presented, the demand for a national economic approach raised at the beginning becomes even clearer: from a liberalist world economic point of view, rayon production is inferior to cotton production in terms of costs, i.e. it is unprofitable; however, from the point of view of the overall or foreign economic production and circulation process, it becomes profitable. It could be objected that this analysis is based on a fixed historical value, i.e., the pre war price conditions, and that the conditions after the war could be different. First of all, as far as wide -market crude prices are concerned, these showed a general upward trend during the war. For the post -war period, it can be argued that the ever tighter cartelization and the ever stronger influence of governments on production and sales make large price drops almost inconceivable.1) On the other hand, increasing overseas competition in the finished goods sector is generally expected in the postwar period. The "foreign

1) In t h i s con s id erat ion , le t u s re con s id er th e c o n d iti on s wh ich w ou ld ex is t i f th e wo rld h ad d e v elo p ed in th e d ir ec t ion o f an u n con d it ion a l ma xi mu m in t er n at ion a l d i vi s ion of lab or. Th e mo n oc u ltu r es wou ld p rob ab ly h a v e exp lo it ed th eir mon o p oly p o s itio n w ith ti m e in su ch a w ay th a t th e p ri ce s w ou ld h av e sh o wn a l e ve l as h i gh o r e ven h i gh er th an th os e of th e au tark y p rod u ct s (p r o vi d ed , h o w e v er, th at p u r ch a sin g p o w er an d wi ll to b u y wou l d h a v e fo llo w ed th e d em an d s o f th e su p p ly mo n op o ly) .

exchange effect" will therefore become even smaller in the future - the autarky calculation thus more favorable. Moreo ver, in the event of any quantitative restriction of German exports due to increasing overseas cut -off measures, those export goods which have hitherto been used for the purchase of raw materials would be exchangeable for all those imported goods from overseas which, on the one hand, we are not in a position to produce, but which, on the other hand, we would not be able to buy if we were still dependent on the purchase of "exchangeable" raw materials. In a total consideration of the autarky problem, a numbe r of other important problems must be taken into account. As a rule, it is not the simplest and most uncomplicated products that are absorbed by the world market, but rather, as a result of the increasing independence of foreign economies, only high -value industrial goods have to be exported in return for raw materials, i.e. we exchange, for example, optical instruments and machine tools for imported goods whose production process is carried out by nature, at most supported by the cultivation or extraction work of natives. If we produce these raw materials ourselves in our own region, we have the opportunity to use the high-quality industrial goods to a greater extent for the benefit of our own national economy. Thus, the slogan "Export or die!" will no long er apply. In other words, the German economy will no longer sell the top achievements of German industry to foreign countries under economic pressure in order to satisfy their most primitive needs. Quality issues will continue to play an important role. The natural raw materials are formed unilaterally according to the purpose nature has given them. But how versatile the raw material can be made only by its synthetic production! We see this already today with the plastics, the synthetic fibers, the light me tal alloys and many other raw materials and materials. It would certainly not be possible for American industry to achieve a price for rayon on the U.S. market today that is more than 50% higher than the price for cotton if this product did not have superi or properties to cotton in its various special types. From the point of view of the new economic and social order, there are also important new prospects. Incorporating raw material production into the industrial production sector of an economy will permit more generous economic planning and far greater steadiness in meeting demand. When raw materials are sourced from overseas, this continuity of demand is endangered both in terms of the producer's production conditions (bad harvests, strikes, danger of exh austion) and in terms of his ability to deliver (transport difficulties, price movements, etc.). Furthermore, the construction of production facilities for the virgin materials industry supports regional planning to a particular extent (settlement of under populated areas, industrialization of agriculturally overpopulated areas, implementation of the latest findings of company social policy in new buildings, etc.). It should also be mentioned that the creation of 39

new materials on a scientific basis is one of the most important impulses for the cultural development of a nation. It turns out that the autarkic economic order, from whatever point of view one looks at its effects - whether from the point of view of state policy or social policy, whether from th e point of view of economics or business management - forms the best basis for a national -organic organization of national existence, and that large -scale autarky, when sensibly handled and viewed from a total point of view, is not a "utopian fantasy", but can stand up to any comparison with the achievements of the liberal division of labor in the world economy, both from the point of view of national objectives and from that of a sober calculator.

V. Spatial planning.

Spatial planning includes all measu res for the development, promotion and maintenance of the productive forces of the large -scale economy for the benefit of all spatial elements in accordance with their performance. Spatial planning covers the following areas: 1. Material planning (agricul tural products and industrial raw materials), 2. production (location) planning, 3. sales planning, 4. transport planning, 5. settlement planning. We deal with production and sales planning in the main part of our work. Traffic and settlement planning are outside the scope of our work as special fields, but also with regard to material planning we limit ourselves only to some basic remarks. ". The metropolitan area should be self -sufficient with respect to its material supply to the extent that the "securit y needs" are met under the most unfavorable foreign policy constellation. The determination of security needs necessitates the establishment of supply balances for each major commodity. The following classification of requirements must be made: a) vital need, b) essential need,

c) dispensable need, d) luxury need. It is essential that the requirements for a and b can be met in the metropolitan area, while the requirements for c and d can also be procured in supplemental areas. The supplementary require ments can and should be able to be satisfied in peacetime in any desired amount. The term "vital" is therefore absolute in the direction of the minimum, but relative toward the maximum in the sense that for a highly developed peacetime economy even the dis pensable or even the luxury requirement can be called vital. In a defense economy1) there must be a guarantee that for every important raw material there is a control scheme taking into account the above -mentioned four gradations so that, if necessary, smooth management can take place without delay. During this war, such a management procedure has largely become established in the German Reichsstellen and Wehrmachtsstellen. Precautions must be taken to ensure that, at the end of the war, the valuable wealth of experience accumulated there is not thrown overboard, even if a sudden surplus of previously managed articles should arise2). Even if effective management can be discontinued, potential management must continue in the form of ongoing monitoring of production and demand. In many cases, a more or less tight effective management will also have to be maintained, both with regard to the development of raw material bases and the management of stocks, sales and consumption. When planning the extraction of raw materials, the risk of depletion of deposits must be taken into account above all. Far -sighted raw material planning must therefore never be short -term, but must always be planned for years and decades1). It could be argued that an autarky strategy is supe rfluous to the extent that raw material storage is carried out. Apart from the costs of storage and the danger of spoilage, however, this procedure would not be compatible with the "self-sufficiency consciousness". It is precisely through the unrestricted disposal of the "security goods" that the metropolitan area wants to develop 1) In a s el f - su ff ic i en t e con o my , th er e i s n o d i f fe r en c e b et w e en 'd ef e n s e ec on o my ' an d 'p eac e e con omy ', i. e . it is al way s d ef en s e ec on o my. 2) Wh en th e n u me rou s man ag e m en t a n d st e eri n g b od i e s we r e s et u p aft er th e n a tion a l u p h ea v al, i t wa s n o te d wi th r eg re t, fo r e xa mp l e , th a t af te r th e Fi r st Wo rld Wa r th e fi l e s on d om e st ic, e xp or t an d i m p ort man a g e me n t d u r in g th e w ar y ear s, wh ich w ou ld h a v e p r o vid ed a good w ork in g b a si s fo r th e n e w m ea su r es to b e ta ken , w e re fo r th e m ost p art d e s troy ed in th e b el i e f in a n e w et ern al p ro sp er ity o f th e wo rld e con o my . 1) C e llu lo s e, fo r ex am p l e, i s cu r re n tly p r od u c e d f ro m w ood or p u lp . I n ord e r to a vo id a re st ri ct ion of th e fo re s t sta n d , wh ich i s u n d e s ir a b le in man y r e sp e ct s, th e p rod u cti on fr o m mo re ab u n d an t ma te ri al s, e. g. c oal an d li m e, w ou ld h a v e to b e p ar ti cu l arly in t en si fi ed i n th e lon g t er m .

into a "rest potential" in the world economy, which on the one hand protects against exploitation and o n the other is the basis of world peace. The stockpiling principle is therefore considered only for those substances which the metropolitan area could never create itself or which do not constitute security goods.

C. The "law of space" as the law of life of peoples. As we have already explained, the tendency toward the formation of large areas is not limited to the European continent. Out of the chaos of the liberal world economy, cores of order have developed in all parts of th e world, which group natural habitats around themselves. The external cause, the degree of intensity and the image of order are quite different, but the tendency is the same everywhere. Although we have tried to prove that purely economic considerations ha ve awakened and fostered the idea of large areas, the ordering of extra -economic relations brings about such fundamental upheavals in the totality of the living conditions of all peoples that one must ask oneself whether, in the final analysis, deeper moti ves than purely material ones are not decisive for the formation of large areas: for instance, the striving for better forms of human existence than the liberal order of life could offer. It is not the aim of this work to make such observations. Reference is made to the work of Werner Daitz, who has been demonstrating for many years that since 1919 the world has been increasingly subdivided into large areas, which represent not only economic foundations of purpose, but also biologically bound, i.e. natural living spaces with their own way of life. Daitz proves convincingly that no people can escape from this natural order of its habitat, unless at the price of transformation or degeneration. Daitz characterizes the bond between the subspaces of these centers of order as well as their order of life with the following vivid comparison: "If the sun attracts the planets, this does not mean their rape, because the sun does not dissolve the planets into solar masses, but lets them exist in their natural wholeness, with which now again the planets also attract the sun, each according to its natural weight. This system of unconstrained order and invisible guidance will also be the law of order of the new Europe and the other habitats: Acting without acting. There is y et another fundamental law of the new Europe: Just as no planet can remove itself from the solar system without destroying itself and the whole, just as hard rules over the European community of nations the law that no people can remove itself from it or a ct against its living order without destroying itself and the whole. Communities of peoples and nations are subject to the same great law of life. None of their members can act with impunity against the whole. "1) Werner Daitz differentiates between six li ving space agglomerations in the world: 1) W ern er Da itz, Pr e fa c e t o th e p u b li cat ion " Da s S elb stb e st i m mu n g s r ec h t d er L eb en sräu m e, " B erl i n 19 4 1.

"1. The East Asian habitat with a population of about 560 million; 2. the Indian-Malay habitat with a populati on of about 520 million; 3. the European habitat with a population of about 530 million; 4. the African habitat with about 160 million; 5. the North American habitat with approx. 185 million and 6. the South American habitat, which is clearly distinguishab le from it, with approx. 95 million. "2) Next to the European metropolitan area, the East Asian one has so far developed the largest spatial initiative. The East Asian metropolitan area, that "East Asian zone of common prosperity", with the core countries Japan, Manchukuo and China, has many features in common with the European one. Daitz makes a sharp distinction between the North American and South American space blocs. In fact, many important prerequisites of an all -American space economy are missing. Et hnically, it is the extensive independence of South America,1) economically, it is the lack of a complementary character between the North American and South American continents. Germany was and .will continue to be the spiritual initiator of the Greater Area Idea! "If we pave and go this way, we fulfill thereby a national duty and beyond that a mission towards the entire civilized world. "2)

2) From the preface by Werner Daitz to "Europe's Economic Freedom" by Gerhard Gebhardt. Publication 3 of the series "The New Europe" of the Society for European Economic Planning and Large-scale economy, Essen 1941. 1) In contrast to this, the African area, for example, would represent a natural complement to the European metropolitan area. The African continent lacks a closed geographical and cultural basis and the state -forming power in a higher sense. The previous Negro states have not gotten over short -lived tyrannies without a state character. Moreover, the Negroes lack any organizational talent. For this reason, t hey will have to depend on a European leadership for the foreseeable future, 2) Posse, "Großraum -Wirtschaft in deutscher Handelspolitik" in "Die Bank", issue 1, January 1935, page 17.

Second Part

The German market order as the basis for the large-scale market order

Will the European economy now be able to master the large -scale tasks we have developed in its principles? Will it be able to develop systems of order and instruments of large -scale economy which will bring us as close as possible to the goal of an ideal large -scale economy? Will there not be a danger that, in spite of the clearest theoretical knowledge of the laws of large -scale economy and in spite of the best will of the economy, unforeseeable difficulties will stand in the way of practical realization? It was once said that the European large -scale economy had already successfully completed its "large -scale experiment" in the form of the German economic order (Hunke). In fact, the German methods of economic management have achieved unique successes. In a few years, the leading economic power in Europe was created out of the completely disrupted liberal economy, which was at the mercy of the dictatorship of the world market. The superior German war economy is the most vis ible proof of the degree of efficiency and supply autonomy achieved. Despite the undisputed successes of our economic management, however, it is clear that the outward form of the German economic order, the economic organization, does not yet have the shape that corresponds to the National Socialist principles of economic activity. All those who are active in the economy, whether they are the organizers or the organized, are probably unanimous in the opinion that the forms of organization and the principles of organization which have been developed in recent years are not suitable in the long run either for extracting the best useful effect from the economy or for giving those who are active in the economy that economic freedom which is absolutely necessary in order to maintain and promote their initiative in the long run. The disadvantages of the German economic organization are exhaustively characterized by the term "overorganization." Overorganization means that the state or its organs apply organizational principles and forms of organization that are "oversized" in relation to the practical need and requirement for guidance. This overdimensioning may consist, on the one hand, in the fact that economic processes are organized which could very well be determined by the economy itself, and, on the other hand, in the fact that very often several organizational bodies are responsible for the same processes at the same time. The causes of this overorganization are essentially the following: 1. causes that are ro oted in the organizing people. The previous forms and principles of organization are, by their very nature, only an expression of the groping and searching for definitive forms of community work. Such a difficult problem as the organization of the economy, which touches almost all spheres of human existence, cannot be solved overnight. It is also psychologically understandable 46

that often, as a counterpole to the permissiveness of the liberal economy, the organizers, in a misinterpretation of the economic principles of National Socialism, fell into a kind of organizational frenzy. This tendency is further exacerbated by conscientiousness, a very praiseworthy quality of the German man, which, however, becomes an evil in economic administration when the orga nizer personally takes care of every screw of the organizing machine instead of limiting himself to the control of the machine. In addition, when the economic organizations were being set up, the forces that were ideologically and factually suited to shape the new German economy were not always available. When idealism and superior expertise are lacking, however, it is an all too natural consequence that instead of sensible guidance on an objective, authoritarian basis, an economy of registration and questionnaires is practiced. This state of affairs becomes downright intolerable when the organizing people turn the organization into a kind of end in itself and an existence in its own right, and when, on top of that, a kind of competition among bureaucrats se ts in that almost eclipses the competitive economy of the liberal type in terms of egoistic unaccountability. 2. causes rooted in the organized people. When the first steps were taken to permeate the German economy with National Socialist ideas, the econom y was still completely enmeshed in the Liberalist mindset. Therefore, state intervention had to take place to the extent that the economy was still swimming in the waters of the past epoch. Thus, to the extent that the economic processes were not yet guided by the public-spiritedness of the business community, the state had to act not only in the area of "directional initiative "1) - its very own field in a sensibly managed economy - but also in the area of "implementation initiative "1) , which should actu ally be reserved for the economy itself. 3. causes that are rooted in the matter. The economy of recent years has been an economy of scarcity. This economy of shortages was intensified by the preparation and implementation of the war economy, which by its very nature must always be associated with tight forms of organization. If every kilogram of raw material has to pass through three, five or ten delivery, procurement, processing, utilization and other approvals before it can 1) E x p r e s sio n s b a se d on Lan d f ri ed , " Di e g e wa n d e lt e Fu n k tio n d e r U n t ern eh m er -In iti ati v e, " "D e r n eu e Tag ," Pr agu e, N o. 87, Ma rc h 2 8, 19 41 .

be processed or before it reaches its final destination, the result is inevitably a bloating of the administrative apparatus that is no longer commensurate with the productive sphere of the economy. If the loosening and reorganization of the German economic organization is already a compelling demand for the future, it is virtually a fundamental prerequisite for the European large -scale economy. The larger an economic entity is, the more difficult its organization is and the more unfavorable the effects of wrong or oversized forms of organization. Just imagine the present forms and principles of organization applied to all the sub-regions of the European metropolitan economy, and then imagine the inter-spatial interaction of the organizations! One will then realize that it would be an absurdity to want to build up the European metropolitan economy with the present forms of organization. Winschuh aptly says: "It would be tragic if the European economy were to come out of the rain of capitalism into the frying pan of bureaucratism and socialization; the great economic revolution would thus cheat itself of its meaning. The great task which will have to be solved by the next generation of European economic officials and entrepreneurs is therefore to find the best synthesis, as unbureaucratic as possible, between public. The great task to be solved by the next generation of European economic officials and entrepreneurs is therefore to find the best synthesis, as unbureaucratic as possible, between public management of the economy and the entrepreneurial initiative indispensable for the full development of Europe's productive forces. "1) It is now impossibl e; to deal with the methods of metropolitan economic policy without elaborating the principles of a meaningful national economic policy. The metropolitan economic policy, the epitome of all measures working towards the realization of the metropolitan goals, represents a spatial extension of the national economic policy. Just as the metropolitan area is composed of individual national economies, the metropolitan economic policy is also the interaction of the national economic policies of the individual sub -areas. Therefore, we cannot avoid thinking first about the future economic order as such. It needs no explanation that the German problem of economic order must be the starting point of all considerations. What character must the principles of organization have and what form must the forms of organization take in the future economic order, so that that synthesis of freedom and commitment is achieved which characterizes the German economic style? (Hunke.) If we start from the vehicle of economic organization, we can basically distinguish two principles of 1) J os e f Win s ch u h : „ Mä n n er , Trad it ion en , Si gn a le“ , B e rl in 1 9 40, S ei te 3 59 .

organizational influence on the economic process: the private economic and the state. The private organization finds its expressi on in the entrepreneurial associations, such as cartels and corporations; the state one in the various state organizational institutions or those brought into being by state initiative or supported by state authority. With this statement we touch the core problem of the future economic order. The question to be answered is how the zone boundary between the state and its organizations and between the economic individuals and the organizational forms realized by them should be, and further, how the interaction between the freedom of the individuals and the totality represented by the state will be, so that the highest national and economic welfare will be achieved.

A. The road to total market order

In order to answer this question, we must briefly outline the development of market organization and, in particular, highlight the interrelationships between state and private market organization. For reasons to be discussed in more detail later, we will limit ourselves only to the treatment of the antitrust problem. First, some clarifications of terms are necessary: By market order we mean the organized influencing of supply and/or demand to be carried out according to certain principles. This definition does not include the market form of th e "free play of forces", since here the market is not influenced in an "organized" way. In contrast, the liberal cartel already falls under this definition. Since the definition says nothing about the bearer of the influence, the state (as well as the organized consumer side: "demand cartels "1)) can also influence supply and demand according to this definition. This influence can take a wide variety of forms and levels. Market regulation can be limited to influencing quantities and prices. However, it can also extend to the foundations of the market forming factors, i.e. . Production on the one hand (e.g. investment order, specialization of production, qualitative determination of production, etc.) and consumption on the other hand (e.g. the manifold possib ilities of consumption control). Furthermore, market organization can be limited to the definition of general market organization principles (e.g., "market organization principles" of the Reichsgruppe Industrie) by the state or its organs and leave the reg ulatory influence on the course of the market to industry itself; however, the state can also intervene directly in all phases of market activity itself. We make no fundamental distinction between market organization and market regulation. For us, market o rder is the generic term - it contains both material and non -material values - while market regulation extends to concrete -material individual measures of market order. The reason for the abolition of the rigid distinction between the concepts of market organization and market regulation, which still exists in many cases today, will become clear from the later remarks. It should also be mentioned that "economic order" is a concept that is superimposed on market order. The economic order represents the overa ll system of economic order, i.e. the totality of the principles according to which the economic process is ordered,

1) Th eor e ti cal ly , a sy st e m o f m ark et o rg an iz ati o n sta rti n g ex clu s i ve ly f r om th e c on su m er si d e wou ld b e q u it e co n ce i vab l e. Fo r p ra ct ica l r ea son s, h o w e v er, o n e wil l al way s t ry to in f lu en c e th e ma rk et f ro m th e p ro d u c tion s id e , s in c e, on th e on e h an d , t h e or gan iza tion o f con su m er s i s to o co mp l i cat ed b e cau s e o f th e ir oft en v e ry l ar ge n u mb er an d , on th e o th er h an d , th e e f fe ct i ve n e s s of t h e d e m an d car te l on th e p rod u ct ion ord er i s on ly li m it ed .

thus extending not only to production and sales, but also to the problems of money, labor, income, traffic, etc.1). The spirit of the respective existing economic order determines the goal and method of market regulation. In the liberal economy, the market order served only as a corrective to a fundamentally self -determining economy. In the future regulatory economy, it will be the expression of a "holistic" economic organization governed by the new politi cal spirit of the national totality. The above-mentioned, strongly generalizing definition of market order will have to be specified later in the detailed description of the future "total market order" to characterize its essential features. These definitions were necessary for an understanding of our market order thought processes. We now give a brief outline of the history of the development of the cartel. In the age of liberalism, the principle of acquisition was the shaping force in the economy. The "fr ee play of forces" was the external form. Through the unhindered interaction of supply and demand, the greatest possible benefit for production and consumption, i.e. for the economy as a whole, was to be achieved. Now it is one of the most astonishing facts of economic history that for decades the doctrine of classical national economics, which seeks to bring precisely this "free play of forces" into a logical system, was accepted by the whole world as a sacred law, while the real life of the economy had lo ng since developed quite differently - namely in the sense of an increasing organization of the market mechanism and thus a constantly growing "stiffening" of the free play of forces. In this way, however, the liberal entrepreneurs themselves had committed a serious "violation" of the economic conception of the time. The cartels, corporations or whatever else the entrepreneurial communities may be called, are not institutions of the state, but of the private economy: themselves. -The entrepreneurs, the men o f free initiative, have put on the shackles of organization! But it follows from this that the liberal economic constitution, i.e. the completely free play of forces, cannot be a permanent institution, for the free entrepreneur, who was after all the proto type of liberalism, went himself to create the first basis of a " planned economy" . Yes, he expanded this planned economy and went over to ever tighter forms of organization, even at a time when not only theory but also the state were still caught up in the iron economic law of the free play of forces.

1) E con o mi c p l an n in g, on th e o th er h an d , i s u n d e r stoo d a s t h e d e fin it ion o f c ert ain ec on o mi c go al s, wh i le ec on o mi c m an a ge m en t is th e e p it o me o f th e m eth od s b y wh i ch ce rta in ec on o mi c goa ls ar e a ch ie v ed . ( C f. Pr ei s er, W e s en u n d M eth od en d e r Wir t sch a ft s l en ku n g, F in an zar ch i v Bd . 8, H ef t 2, p . 22 5 ). Th er e ar e c lo s e l in k s b e t we en th e s e two co n c ep t s an d th at o f mar k et r e gu l ati on , wh i ch wi ll n ot b e d i scu s s ed fu r th er h er e .

Causes and aims of the planned entrepre neurial economies are indifferent in this consideration for the time being. Our observation should only force us to realize that an organization of the economy in the form of a market order is an unavoidable necessity; another problem is what spirit has pr evailed in this market order, or should have prevailed according to today's view.

1. The liberal cartel

The emergence of the cartel idea and thus of the first modern form of market organization is logical and natural.1) With the advent of freedom of trad e, the departure from customer production to production for the market, free competition arose. Instead of planned production for an existing customer base, production for a less fixed, often strongly changing clientele took place. With the development of technology and the emergence of new competitors, competition intensified. By lowering prices, each producer sought to maintain his lead in order to secure current production and thus keep the invested capital profitable. The competitive economy inevitably brought unrest, unsteadiness and lack of planning into industrial production, which was further aggravated by the general wave movements of the economy, the economic cycles, with their often devastating effects. The realization of the disastrous consequences of ruinous competition was the ground on which the cartel idea awoke in entrepreneurship. Entrepreneurs began to reimpose on themselves the ties that they had previously broken with the breaking of the guild constitution. However, as already mentioned, this did not bring about any change in the intellectual attitude of the entrepreneurs. They violated liberal economic principles only in form; in substance, the cartel was merely an instrument of private -sector interest protection. If the "market" allowed it, the entrepreneurs were quite inclined to exploit their monopoly position in a ruthless manner to the detriment of the customers. From the point of view of market organization, it is pointless to ask whether cartelization originated more in a need for p rotection or in "price exuberance. The only important point is that the entrepreneurs sought to achieve a certain market objective by means of a market organization. If competition with its consequences is the external cause of cartelization, the root of the cartelization problem lies in the disharmony between supply and

1) Mü l l en si e f en sp eak s of a " car t el mo v e m en t t h at h a s gro wn or gan ica l ly ou t of in d u s try " (Ka rt el l e a ls Pr od u kt ion s förd e re r, B erl in 19 2 6, p ag e 7 ).

demand. This disharmony is mainly caus ed by either overproduction or underconsumption, and both possibilities can occur together. Underconsumption occurred, for example, when there was some decline in rail demand in the 1980s, after the completion of construction of the main railroads. Overpro duction is essentially explained by the progress of technology. If, by improving his production process, an entrepreneur can produce a hundred items a day instead of ten, this is a completely new problem for the consumption side factually (purchasing power ) and psychologically (will to buy), to which it cannot react overnight.

2. The cartel under demand protection by the state

Since it was not possible to restore market equilibrium in the long run without serious damage to either the supply or the demand side, the state inevitably had to intervene in the market game, albeit after much hesitation. This was initially done with the "Ordinance against the Abuse of Economic Positions of Power," the so-called Cartel Ordinance, issued in 1923. The Cartel Decree granted the state the right to intervene against cartels, in particular to dissolve them, if they endangered the overall welfare. Thus, the Cartel Decree is clearly a means of "demand protection." Although the external cause of the Cartel Decree was inflati on, with the accusation of price gouging leveled against the cartels in particular at the time, we are aware that such state intervention would have had to take place sooner or later even without this cause, because the economy was obviously not in a posit ion to ensure a healthy balance in the economic process on its own in the long run. It is significant, however, that the state at the time regarded this intervention only as an "emergency measure. This is clear from the fact that the decision on whether there was an abuse of economic power was entrusted to an independent antitrust court. However, it should also be noted that the "police state" of the time, which was supposed to be the guardian of free economic activity, had already tacitly accepted the fact that the "cartel" was an indispensable part of economic life.

3. The cartel under supply protection by the state

While ]the 1923 Cartel Decree served to protect the demand side, the 1933 Coercive Cartel Act brought the counterpart, namely the protection of the supply side. The Coercive Cartel Act gives the Reich Ministry of Economics the 53

power to establish new cartels and, in addition, grants the Reich Ministry of Economics the right, in the form of prohibitions on the establishment and expansion of cartels, to protect the cartels or the industries they represent from an increase in competition and thus from the destruction of economic assets. While the reason for the Cartel Decree was the price driving tendencies of inflation, the reason for the Coerc ive Cartel Act was the price decline caused by the economic crisis. The development that led to the 1923 law can be characterized as a shift in market equilibrium in favor of production, assuming the emergence and development of entrepreneurial solidarity. The consumer, whose strong position had originally been the source of entrepreneurial solidarity, was put on the defensive. He therefore had to be protected if necessary, which was done by the Cartel Decree of 1923. With the onset of overproduction in the economic crisis and with the onset of stagnation of the dynamic forces that until then had always independently brought the economy a new upward movement, the producer was put on the defensive. He needed protection against the strong mutual competition on the one hand and against the price-depressing decline in sales on the other.

4. The development towards a total cartel

One might think that with the state protection and the resulting influence on supply and demand through the anti -trust laws of 1923 an d 1933, all market regulation possibilities had been exhausted. However, this is by no means the case. Although the antitrust laws create the legal basis for government intervention, they do not constitute a closed system of market regulation. The legal powers were used only in emergencies; the antitrust laws had not yet created a consciously regulatory function. The where, what, how and how much of production was still left to the free discretion of the entrepreneurs. However, total control of power by the state became more and more urgent when, on the one hand, the ideological side demanded order in economic life and, on the other hand, great achievements of a public service nature had to be demanded of the German economy. The comprehensive tasks of the fo uryear plans and rearmament could no longer be accomplished with an economy over which the state had influence only in the form of granting "market crutches. The economic policy goals required not only corrections, but far reaching changes. Thus the probl em of educating the economy in the National Socialist conception of the economy began on the ideational side and the planning of raw materials and production on the material side. Here, however, 54

neither the liberal cartel nor the powers of the state giv en by the laws of 1923 and 1933 could guarantee the desired success. Although the cartel represented a proven form of organization, the spirit that prevailed within it was not conducive to becoming the bearer of a new economic order. On the other hand, the cartel could not have taken on the state's new market ordering tasks because the necessary lines of communication between it and the state leadership (as they exist in the form of today's economic organizations) did not exist. A final point to be mentione d is that only about 60 % of industrial products were cartelized. In the remaining sector, either cartelization had not proved necessary, or cartelization could not be realized because of the lack of "cartelizability" of the goods. However, the reshaping of intellectual and material economic forces was bound to extend to the entire economy. The state therefore had to take other paths. With the Economic Development Act of February 27, 1934, it created the self -governing organization of the economy, to which it assigned primarily educational tasks. In the course of the following months and years, a number of other organizations were then created which, as "contract institutes" of the state, had to initiate or supervise the material planning of the economy. The se included, in particular, the monitoring agencies (later Reichsstellen), which initially dealt with import issues, but later increasingly exerted an influence on domestic goods management and thus on the organization of production, as well as the inspection agencies, which were responsible for monitoring exports, the price commissioner and the other four -year plan offices. During the war, the state economic offices were established as regional institutes of state economic administration. The activities of these organizations are too well known to be discussed in detail here. As the tasks of these state organizations were expanded and intensified, the cartels were increasingly hampered in their independent activities. The domestic quota became the imperial quota, and the export or import quota became the trade policy or foreign exchange quota. Cartel price policy was narrowed by the Price Fixing Ordinance and by the price freeze, and so on. The German parts of international cartels were more or less included in a compulsory export cartel through the activities of the examination agencies. In short, the cartels were "eroded. When the well-known economic efficiency decree of the Reich Ministry of Economics of November 12, 1936, introduced the supervision of the economic groups over the cartels and thus made the starting point for an organic market regulation, all essential levers of economic steering had already slid over to the other organizations. It was therefore hardly necessary to point out that the groups had to perform only advisory and no market -regulating activities, because almost all market -regulating functions had already been taken over 55

by the "order institutes. If the economic groups actually performed such functions - e.g., management since the beginning of the war - this was usually done only on behalf of other organizational bodies. The same decree of November 12, 1936, however, assigned other tasks to the economic groups that threatened to deal the cartels a virtual death blow. The decree stated: "The task of all groups and chambers is to educate their members to the greatest possible economic efficiency and highest performance for the benefit of the people and the state. To this end, they should carry out the necessary joint work, especially i n the technical and business management fields (standardization, accounting and calculation guidelines, company comparisons, etc.) as well as in the fields of statistics and market analysis. As a result of this work, some ties (i.e., cartels. The author), which are still necessary at present, will later become superfluous." The groups should thus largely replace the specifically market -"regulating" activity of the car tels by general market -"regulating" activity. The Gr oup work was to initiate a wave of loos ening among the cartels by creating general market-ordering guidelines. We will return to this complex of questions later. In this context, we shall merely state that the practice developed anything but in the sense of a loosening up. As described above, b ehind the backdrop of the loosening up, the sectoral organizations expanded more and more. The state seemed to become an "entrepreneur," while the entrepreneur had to perform more and more functions similar to those of a civil servant. The free zones (or those that could have been) of economic life threatened to become more and more stifled. The cartel, however, the organization of the entrepreneurial economy, seemed to hang completely in a vacuum. Thus, today we have arrived at an economic order in which t he state is not limited to the function of top management, as should be its task, but in which there is a conglomerate of state organizations which show the characteristics of overdimensioning both in depth and in breadth, and especially in their interaction, and the remark once made jokingly, according to which the German man has only proved his genius for organization by the fact that "everything works out" in spite of the organizations, cannot really be taken seriously enough. Now, when we think about th e future economic order and about the organization of the economy, we have to recall the most primitive principles of 3 organization. The fundamental demand made on the economic organization fundamental demand made on economic organization is: a given econ omic goal is to be achieved with the least possible expenditure of organizational means. If one presupposes that economic steering in the modern sense does not stop at "market regulation, but penetrates as far as production and as far

as raw materials, then at first sight an insurmountable difficulty seems to lie in the fact that, in the total fulfillment of its aims, the organization necessarily claims a comprehensive apparatus, which, however, stands in contrast to the demand for limitation to mere "s teering functions. " This, however, has been the practice of recent years, leading to the condition of over -organization with its effects described at the outset. On the other hand, however, the desired planning success would not occur if the state organiz ation were to limit itself only to directing measures, because the lack of operational proximity would make knowledge of the thousandfold economic processes in each branch of industry impossible and thus also make it difficult to direct the economy properly and in a manner that takes account of the respective needs. The temporarily neglected cartel instrument now seems to offer a suitable way out of this dilemma. This "planned economy on the smallest scale" is an excellent regulatory structure based on new principles. It is close to the enterprises and agile, because it lives between the enterprises and because it is administered by the economy itself. If it was said above that the state had to make use of new organizational instruments in building up the ec onomy at the time, the reservations of the time have probably become irrelevant in the meantime, for on the one hand the lines of connection between the state and the cartel have been extended in the meantime (although, as has been said, this structure can still be described as overloaded at present), and on the other hand the spirit and. On the other hand, the spirit and technology of the cartel have developed in such a way that its use as an instrument of state economic management seems entirely appropria te. Thus the cartel, which temporarily seemed to be crushed by its powerful rival, the authority, has gradually been able to prove its raison d'être again. In three important areas, the cartel instrument has been used more and more in recent years. During the various territorial annexations to the German Reich, the cartel became an indispensable tool for economic harmonization. It was also used as a useful instrument of war management, either by allocating raw materials to its members on behalf of the Reich , or by distributing the cartel's products. The management cartel proved its usefulness in the same way as the connection cartel. It has relieved the management bodies and thus contributed to the simplification and improvement of the administrative apparatus.1) But that's not all: the biggest task for the new cartel comes with the beginning of the planned rationalization of the German economy. We have already mentioned the tasks in the field of performance improvement assigned to the cartel by the Reich Min istry of Economics decree of November 1936. 1) In ad d iti on to n u m e ro u s p ri va te - s ec tor ca rt el s , wh ich h a v e b e en in vo l v ed i n m an a ge m en t si n c e th e b e gin n in g o f t h e w ar, in man y ca s e s " d i str ib u t ion ca rt el s " w o u ld b e e s tab l i sh ed sp ec i fi cal ly on th e b a si s of th e Co er ci v e Ca rt el A ct, e. g. th e d i str ib u t ion ag en cy fo r b u i ld in g b ri ck s an d ti l es , a s w el l as s e v er al ma rk et re gu l ation s in t h e c er am i c an d gl a ss in d u s tri e s .

It has now been shown that the economic groups and their subordinate bodies may well be able to define the general framework in the area of performance improvement (e.g. accounting guidelines), but that they have to fail when it comes to small-scale work in the industry, especially in the technical area. This is where the lack of closeness to the com pany becomes noticeable. The "performance cartel", on the other hand, is able to fulfill this task. It does not have to deal with 10, 100 or 1000 products like the professional organization, but can direct all its work to its own area of interest. The well-known founding of the "Markt - und Leistungsgemeinschaft der Hohlglasindustrie" (Market and Performance Association of the Hollow Glass Industry), the "Deutscher Zementverband" (German Cement Association) and the "Reichsvereinigung Kohle" (Reich Coal Assoc iation) are prime examples of the new cartel direction. The performance cartel opens up completely new perspectives for sectoral adjustment, production and sales organization, "equalization of differentials" between producers, etc., and thus fulfills the requirements of the highest striving for efficiency in industry. The cartel has found its way from the market sphere d. into the core of the production sphere. What a change when it was recently said about the German Cement Association that investment contr ol is one of the most important tasks of this association. The entrepreneurial community is not formed and does not start its activities only when the market has become "sick", but is constructively concerned with the ordering of all market -forming factors from the outset. This new development found legal expression in the "Ordinance on Joint Works in the Industrial Economy" of September 1939. The capitalist cartel is dead . What has emerged is an organizational framework which, inspired by a new spirit, seems to become the pivot of the future economic order. With this, however, the system of a new (and yet so old) organizational principle shines out of the hardly transparent organizational undergrowth of recent years, namely the professional principle. The c ause of the repeatedly described over organization lies essentially in the violation of the principle of professional market organization.1) This assertion requires further explanation. 1) Th i s v iol ati on can b e exp la in e d as fo llo w s : A s th e stat e b eg an to i n f lu en c e th e cou r s e o f th e e con o my , th e gen era l ad mon iti on w en t ou t : "No r ad i cal i n t er v en t ion s in th e co mp l ic at ed ma ch in ery o f th e eco n o my. Wh e th e r o r n ot th i s wa s j u st i fi ed u n d er th e cir cu m sta n c e s of th e tra n s iti on al eco n o my at th e ti m e i s a moot p o in t, b u t th i s ad m on it ion wa s t ak en t o h ear t. Th e con s eq u en ce w a s th a t n o co n s tru ct iv e o ve ra ll p lan o f e con o m ic man ag e m en t wa s e v e r d ra wn u p , b u t rath e r t h at "f ir e s w er e e xtin gu is h ed wh er e th ey b u rn ed th e mo st " ( K eh rl) . It sh ou ld a l so b e n ote d th at, in vi e w o f th e b r e ath ta kin g ec on o mi c d e v e lop m en t an d th e ab u n d an c e of n e w t a sk s s in c e th e n a tio n al u p h e a val, th er e wa s o ft en n o t en ou gh ti m e t o r eo rg an iz e an d e x p an d th e f or m er au th o ri ti es an d o ff i ce s in acc ord a n c e w ith th e ir n e w f ie ld o f a ct i vit y; su i tab l e an d e n e rg et ic m e n th er e fo re h ad t o b e ap p oin t ed as " sp e ci al ta sk ma n ag e rs " . A ft e r th e w ar, th i s mor e i m p ro vi s ed ec on o mi c man ag e m en t wi ll h a v e to an d can ma ke w ay f or an o rg an i c an d rat io n al o rgan iza tio n al ap p ara tu s.

We have to distinguish three basic principles of organized market influence: 1. the professional principle of organization, 2. the functional organization principle, 3. the regional organization principle. In a managed economy, all three principles are indispensable. Only the very important question ar ises, which principle is to be given priority. The technical principle of organization states that the product is the top and starting point of the organizational influence on the market. Whether it is a question of raw material issues, production, price o r foreign trade policy in the product in question, all economic policy measures are determined or influenced centrally for the product in question, i.e. by an organizational entity. The factual organization principle, on the other hand, states that the eco nomy is influenced from the factual areas, e.g. by raw material, production or price policy. For example, the Reichsstellen have a decisive influence on production and sales through the management of raw materials. The four -year plan offices intervene in the market structure from the production or capacity side. The price commissioner has a decisive influence on the development of the production and sales conditions of a commodity in pursuit of his task of keeping the German price level stable or forming ne w prices. Furthermore, and of particular interest to our work, import and export policies must be mentioned. Measures taken by the state import and export agencies - which can also be described as subject -area organizations - can have a very significant influence on the production and market situation of a product. Finally, the regional organization principle states that any market influence be it technical or subject -related - is regional, i.e., regional raw material policy, production policy, etc. In Ge rmany, at least until the war, the regional principle has thankfully taken a back seat to the centralist principle.1)

1) At t h i s p o in t, a p o s si b le ob j e cti on a gain s t th e c en tra liz ed p lan n in g a n d con tro l sh ou ld b e m et . On e o ft en h ea rs th at th e Bol sh e v ik ec o n om ic sy s te m f ai led , in p arti cu lar, b e cau s e it h ad a c en t ra l p lan n in g sy st e m i n wh ich t h e re gion al o f fi c es w er e c o m p le te ly d ep en d en t. Th e r ep ly t o th i s i s : 1. th e c en t ral p lan s ar e mad e h er e b y gr ea te r e xp ert s an d con n oi s s eu r s th an in M o sco w, a n d 2. th er e ar e n o d ic tato r s in B er lin wh o s e in st ru ct ion s ar e f ol lo w ed sl a vi sh ly an d with ou t an y in i tia ti v e o n th ei r p art . On th e con t rary , th e c on c en t rati on i s to tak e p lac e p r ec i s ely in o rd e r t o mak e p o s sib l e a h ea lth y d e c en t ral izat ion co rr e sp on d in g to th e o ve ra ll g oa l s.

However, we must already point out at this point that it will be of great importance in the large -scale economy, in which sub -areas are united which have a far more "regional" character than, for example, the German state economic districts. However, overall European planning would be jeopardized if too much weight were placed on the regional organizational principle as opposed to the supranational one. In the industrial economy, for example, we now have managers of raw materials, production, pri ces, imports, exports, territories and special tasks, and each of them dutifully claims to shape the economy from its own territory, although one of them naturally likes to encroach on the territory of the other because "knowledge of the overall situation is necessary for an objective decision." Practical examples of the "interaction" of the various organizational principles are not to be cited - the economy knows them. How pleasant it is, on the other hand, to know that the management of a product is unite d in one hand!1) The primacy of the professional principle of organization must be re established, or the management of the economy has misjudged its task. Winschuh aptly says: "Even in the headquarters, in Berlin, we need a "house of business", thinking l ess of the large, representative building than of the unity of appearance, the community spirit of cooperation. The impact of the economy and the validity of its organization will certainly increase if each branch does not need to negotiate with the minist ries on general issues, but instead achieves a unified effort in common matters, such as tax policy. If it is not possible to build a stately and substantial house for industry, to entrust its top organization with the actual management and representation vis-à-vis all government agencies, it will not succeed, but will one day experience that it has missed the boat on many important issues "1). Thus the technical organization principle must take over the leadership again. Only the "product manager" can dir ect his product appropriately, because he knows the technical problems of his product best. However, his expertise will increase in relative terms to the extent that the technical organizations are limited only to the disposal of major directives and gener al supervision, i.e. to the extent that their administrative apparatus is reduced in absolute terms.

1) Th er e wi ll b e m or e th an a f e w w h o w il l ob je ct h er e th a t c en tral iz ed eco n o mi c man ag e m en t i s d i sad v an tag e ou s in s of ar a s i t i s p r ec i se ly t h e " co mp et iti on b et w e en au th or it ie s " th at mu s t b e ma in ta in ed b e cau s e it g en e rat e s fru it fu l " te n s ion s " on wh i ch a d yn am ic e con o my i s ab so lu t ely d e p en d e n t. Th i s ob j ect ion n e c e s sar ily h as s o me m e rit . In ou r vi e w, h ow e v er , th o s e t en si on s ar e su f fi ci e n t wh ic h ar i se b e t we en en t re p r en eu r s an d en t rep r en eu r s, en tr ep r e n eu r s an d sp e cia li ze d a u th or iti e s, an d fin al ly b et w e en sp e ci ali z ed au th or it ie s an d th e su b st an ti v e au th or iti e s - w h i ch ar e, h o w e ve r, re st ri ct ed in th ei r fu n cti on s. (S e e t h e co m m en t s o n p a ge 8 5. ) 1) J os e f Win s ch u h , " Da s Hau s d er Wi rt sc h a ft, " " DA Z" No. 3 09, Ju n e 2 9, 19 41 .

The extent to which the technical top hears the factual and regional top in its decisions and the extent to which it has to account for its actions is a question of fact which has to be answered diffe rently from case to case.2) Once the realization has been established that the professional organizational principle must once again take the lead, the problem of cooperation between the organizations will solve itself. It is gratifying to see that this re alization is also finding its way more and more into administration. For example, Hans Kehrl, the general advisor in the Reich Ministry of Economics, said in a much -noticed lecture: "The form of state control - we can say this without hesitation - is imperfect. In view of the rapid pace of development and the daily changes in circumstances, it is almost no more than a kind of technical emergency aid or fire extinguishing where there is the greatest fire. The attempt to master things with administrative and personnel methods and ideas which do not correspond to the extent of the problems and the speed of their shaping cannot and will not be continued. In order to achieve rapid effects, we have become accustomed to a division of tasks ("factual organization principle", the author) with great powers to the individual, and these are then carried out, to put it in military terms, without regard for losses. The more the principle is applied, the more we come to an atomization of administration, indeed of the whole of life, in which almost every individual is some commissioner or agent in a larger or smaller circle for the whole empire or a military district or a city or a village ("regional principle of organization", the author) and where each one is obsessed with his mission and its execution without regard to losses left and right - there no whole (which in our view is guaranteed by the "professional principle of organization", the author) will be able to be formed, and there no harmony will be able to be formed. "1) The cartel is called upon to become the bearer of this harmonious holistic economic organization of the future. Schmoller thus spoke prophetic words when he once said that he saw in cartelization the beginning of a completely new order, in the overall interest, of economic life. The relationship and interaction between freedom and commitment, between the individual and the community, seem indeed to have found a form in the "total cartel" which we have developed in the following pages and which correspon ds most closely to the German economic ethos.

2) C f. th e s ect ion on "Pr ic e r e gu l ati on " . 1) Han s K eh rl, " Wan d l u n g en d er W ir ts ch a ft i n u n d n ach d e m Kr i eg e, " p rin t ed in th e "W irt s ch a ft sb latt d er In d u st ri e - u n d H an d el sk a m m er zu B er lin , " 3 9th y ear , i s su e 1 7, A p r il 26, 1 94 1, p a g e 35 7.

B. The total market order

1. The total cartel

The chairman of the Cartel Law Committee in the Academy of German Law stated on the occasion of a working session of this committee in May 1941 that the old legal bases of carteli sm were now practically obsolete. However, it seems to us that just as important as a change in the legal concepts in the cartel field is a fundamental change in the economic definition of the cartel. The cartel as a "bearer of the bound economic order" ca n no longer be grasped with the traditional "classical" definitions. We will attempt here to describe the system of the "total cartel" as it presents itself to us at the dawn of the new era of economic governance. We must emphasize from the outset that we are not pursuing the tendency to create the basis for a "total planned economy", but that we want to use the term "totality" only to introduce the aspect of the "organic" into the consideration of the market. Rather, the recognition of organic market inter relationships is intended to point the way to genuine market freedom. We will return to this line of thought later. Our definition of total industry cartel is: The total cartel is the organization of producers of a product, which is entrusted with the prom otion and regulation of production and sales of this product and its organic integration into the overall economy, while maintaining economic efficiency and the interests of the public welfare.1) This definition requires further explanation. a) The total cartel represents an organization. In the National Socialist view, however, an organization can never be an end in itself, but only a means to an end, and in this case for the purpose of market organization. There has been a deliberate departure from the formulation that had been common for decades, "Cartels are contracts between enterprises that remain independent ... etc.", because the private-sector "contract" with "rights and obligations arising from this contract" will henceforth take a back seat to the primary objective of "market organization". This is in no way intended to imply that the

1) " Tota l " d o es n ot p r i ma ril y m ean th at th is c art el h a s a to tal mo n op oly (a lth ou gh th i s i s al so a c on s eq u en c e o f to tal ca rt el izat ion . Cf . n ot e o n p a g e 20 1), b u t it i s p ri ma rily in te n d ed to exp r e s s th e id ea of o rd e rin g a ll m ark et co mp on en t s. C f. t h e lat e r r e ma rk s.

private-sector contract will be deprived of its significance in the future. Rather, it is intended to express that the form of the private contract is only a form of market commitment. In the total market order, there are all conceivable gradations from the "coercive cartel" to the "oral cartel "2) . The latter, in particular, can become important in an economy whose essential characteristic is "bound free dom. The aspect of duration must also be mentioned here. The "contract" is generally concluded for a more or less long period of time. The total market order in our sense, however, is a timeless logical system of an order of an industry oriented to the con stant promotion and maintenance of the highest economic efficiency. The term "manufacturer" has been deliberately chosen instead of "entrepreneur", as has always been customary in previous cartel definitions. Only those entrepreneurs should be able to dete rmine the fate of a product who actually manufacture it. It is not acceptable for pure capital influences to have a decisive impact on the policy of the industrial cartel. Entrepreneurs who are not manufacturers (e.g. under production takeover agreements) can at most belong to the cartel in trailer agreements. b) The definition speaks of an organization of "the" producers. This implies that all producers must belong to the cartel if this is necessary for a specific market organization purpose. The idea of t otal coverage of producers is becoming more and more prevalent in practice, especially since the expansion of the "performance cartel." Müllensiefen, for example, said of the German Cement Association that it was only possible for the totality of the Germa n cement industry to solve certain important general economic tasks.1) The outsider problem will be dealt with occasionally in the treatment of large -scale cartel policy. c) The term "product" has been deliberately included in the cartel definition. The pr oduct is the smallest organizational unit in the sense of the technical organization principle. The term "product" should be understood in the broadest possible sense; e.g., from a market point of view, the product iodine is only an incomplete unit, becaus e it is closely interlinked with iodine salts in terms of production and sales. The inclusion of the term "product" in the definition of a cartel also 2) It i s th er e for e n e ce s sa ry to co mp le te ly fr e e on e s el f fr o m th e p r e vi ou s for ma l l e ga l con cep t o f a cart e l. For exa m p l e, a cc ord in g t o c u rr en t le ga l p ra ct ic e, t h er e i s n o su c h th in g as an "or al " cart e l. 1) " Fu n kt ion s wan d e l d e r Ka rt el l e," r e vi e w o f a le ctu r e b y. Dr . H. Mü l len s i ef en , Kö ln er Ze itu n g, Ju n e 20, 1 94 1.

provides a starting point for influencing p roduction and sales on the market of those manufacturers who produce their product at different sites, i.e. the group companies. While according to the definition "association between independent entrepreneurs" the group is to be regarded as a single "inde pendent" entrepreneur - even if it produces a certain product at five different locations - our definition now also organically integrates the individual group production sites into the market organization edifice. This point of view is of fundamental impo rtance. The economic goals of grouping (we leave aside here the non-economic goals, such as profit accommodation and hunger for power, since they must not, of course, interfere with the goals of a total market order) consist in the rationalization of the p roduction and sales process, which in the past economic epoch could be carried out effectively only if the individual production sites or sales opportunities were located in the market area of the "cartel leadership," i.e., of the group company. However, t he future conception of joint work in the economy certainly permits the material influence of production and sales without the individual production plants being bound by capital.1) The economic goals of the corporate group and the total cartel are thus th e same. In the future, therefore, there could well be a loosening of the group in favor of the looser and more flexible form of cartel production communities. In addition to the economic aspects, socio -political considerations also speak in favor of this line of thought - the "de-nesting" of corporations would provide medium-sized and smaller companies with an increasing field of activity. In any case, in the future, grouping must not be a way for entrepreneurs to escape the total market order. A wave of co rporate consolidation, such as the one that occurred after many cartels were broken up by the Cartel Act in 1923, will therefore be obsolete in the future. For international corporations, this problem is of particular importance, as we shall see later.

1) Mü ll en s ie f en ap t ly s u m ma riz e s th e ad van t a ge s o f p rod u ct ion -p o li ti cal c oop er ati on of th e car t el s a s op p o s ed to g rou p in g a s f ol lo w s: "O rga n i c c on n ect ion of th e p lan t s on th e on e h an d , p r es e r vat i on o f th ei r in d i vi d u ali ty on th e oth er ". (K art e ll e a l s Prod u kt i on sf örd er er , B er lin 1 93 6, p ag e 4 0. ) - In t h e to tal ca rt el, th e "h igh er for m o f con cen tra tion o f t h e e n t rep re n e u r s " (a s corp ora te gr ou p in g lik e s to b e c all ed ) i s n o lon g er b rou g h t ab ou t b y f in an c ial ti e s, b u t b y th e w il l t o w ork to ge th e r.

d) From the task assigned to the cartel of promoting production and sales it is clear that the total cartel must not be content with mere market regulation, i.e., for example, it must not only set prices that are adequate for the entrepreneur, but must also embody the idea of performance (improvement and cheapening of production and sales). e) The reference to organic integration into the overall economy means that the conditions and requirements of the upstream and downstream branches of the economy must be taken into account. It is therefore a question here of agreements between the upstream suppliers with regard to the purchase of input materials as well as sales agreements on the finished product (price fixing of the second, also third and further hand). By regulatin g the cross-relationships (so -called "market communities"), a meaningful cartel collective must be created. Jülich has called this collective a "cartel group".1) This term seems valuable to us because it indicates the "group maturity" of the total cartel f orm, although a group in the legal and financial sense does not exist. f) The requirement to maintain economic efficiency relates to both the formal and the material side of cartel activity. The economic efficiency of the form means that the latently exist ing total form of organization is only used in practice to the extent that this is absolutely necessary for influencing in the desired or necessary sense. This means, for example, that price regulation within the total cartel is only carried out if this is necessary in the overall interest. This also includes the requirement that the total cartel apparatus should operate as unbureaucratically as possible in a cost -saving manner. Material economy refers to the demand for constant production improvement and cheapening. g) The preservation of the common good is given if the interests of the economy as a whole are safeguarded in all cartel policy measures. In particular, the total cartel must always take into account the needs of consumers. h) Finally, the wordi ng "the cartel is ... entrusted to the cartel" indicates that the cartel does not carry out its functions according to individualistic discretion, but to a certain extent "on the higher orders" of the state or its organs. The state gives the "directional i nitiative", while it is the task of the cartel's organization to adhere to the given direction and, in doing so, to develop quite "implementing initiative" in its business policy.

1) D r. Han s Jü li ch , " Di e d eu t s ch en In d u st ri eka rt el l e u n d ih r e zu kü n fti g e n A u f gab en , " B erl in 19 41 .

A system is now to be established which includes all possibilities of total cartelization, i.e., all forms of cartels. In line with our later remarks on the new German market organization, we make no distinction between private sector and state market organization measures:

A. Production order

B. Paragraph order

a) Space (production site) order, b) capacity order, c) technical production order, d) economic production order

a) Spatial (sales area) order, b) quantity order, c) technical sales order, d) price order.

Examples from previous antitrust practice and state market regulation are given below:

Ad A/a: Spatial (location) order. This includes all measures taken by cartel members to determine the location of production or to relocate or abandon it. In the liberal economy, this ordering function had practically no significance, since the cartels only came into being when the - often unfortunately wrongly placed - foundations of the market were already in place. In the futu re, however, it will have decisive weight. In addition to purely economic aspects, the location order must also take into account national and ethnic requirements. The resulting objectives, however, will have to remain the exclusive responsibility of the s tate. (Reichsstelle für Raumordnung!) Re A/b: Capacity order. The capacity order deals with the determination _ of the potential generation volume. This would include the so -called reduction cartels and also the prohibition of expansion under the Coercive Cartel Act. Permanent shutdowns - by government or private initiative - would also constitute a measure of capacity regulation. To A/c: Technical production order.1) This includes performance.

all

antitrust

measures

aimed

improving

technical

1) C f. th e p u b l ic ati on wh ic h i s sti ll cu rr en t tod ay: Mü ll en s ie f en , H., " Ka rt el le al s Prod u kti on sf örd er er ," B er lin 1 92ß , wh i ch gi v e s an e xh au st i v e o v er v i e w of th e p o s sib il it ie s of coop e rat ion in p r od u cti on p o li cy on p a ge s 2 5 an d 9 2.

It is the broad field of exchang e of experience, which extends to patent exchange (patent cartels), exchange of engineers and special workers, maintenance of joint design offices and laboratories, consulting and research as well as measures for material saving, waste utilization, etc.. H owever, this also includes the important field of standardization, typification and norming. Closely related to this is the "specialization cartel," i.e., agreements that provide for a division of the production program among the individual cartel members. The following government measures should be mentioned: production orders (in connection with A/b) and manufacturing instructions from the Reichsstellen. Re A/d: Production management system. This refers to all measures relating to economic rationalization , e.g. joint purchasing of raw materials (purchasing cartels), cooperation in the entire field of business management (e.g. costing cooperatives), accounting and costing regulations of state agencies. B/a: Spatial (territorial) order. This includes territo rial or rayonization cartels. The following forms of territorial cartels can be distinguished: 1. national cartels a) without territorial restriction, b) with territorial restriction or division, aa) Mixed-territory cartels (customer protection cartels), bb) regional market sharing cartels (rayonization cartels), α) Market sharing with limitation for the domestic market, ß) market sharing with limitation for the foreign market (export cartels). 2. large-scale cartels: Here, the same breakdown results by an alogy. 3. intercontinental1) cartels: Here, too, the same breakdown results.

1) Th e t er m " in t er con t i n en t al " ob v iou sly r ef e rs to tra f fi c b et w e en c on t in e n t s, i .e ., maj or are a s. I n t er sta te tra f fi c in E u r op e w ou ld b e in trac on t in e n ta l. Th is r e f er en ce sh ou l d b e mad e wi th r eg ard to t h e oft en in co rr ec t ap p li cat ion o f th e t er m s in th e l it erat u r e on l arg e are a s ( e .g . Sy ru p , "I n te r eu rop äi s ch er Arb ei ts au stau s ch ", Re ic h s arb eit sb lat t, i s su e 20 /1 94 1 ).

The following governmental measures are worth mentioning: Area p rotection ordinances, export and import bans and the like. B/b: Order of quantities. This includes "quota cartels" that set a specific sales volume and distribute it among cartel members on a key basis, and further includes "quota cartels" that allocate sales among their members according to specific ratios without a specific total quota having been set beforehand. Government measures: General sales regulations or individual delivery permits, export and import quotas. B/c: Technical sales regulations. This includes all cartel agreements aimed at improving sales techniques, such as securing joint storage space (storage pools), improving shipping and handling conditions, using joint agents, joint distribution (syndicate), joint market research and customer adv ice, improving supply techniques, and the like. Government measures: Regulations on advertising, use of agents; quality and designation regulations (in conjunction with B/d). B/d: Price regulation. This includes all measures that affect the individual pric e components of the cartel price or directly affect the final price of the cartel product. The final price may be a target, minimum or maximum price (price cartels). In particular, condition cartels, which regulate the terms of delivery and payment, extend to individual price components. State measures: The price commissioner's ordinance.

2. The nature of the total market order.

With the definition of the term cartel discussed here and with the systematics of the cartel forms, all starting points for a to tal market order are created. From the determination of the location to the last sales channel, all economic processes influencing production and the market are brought into a total system. We have deliberately departed from the traditional method of systematizing the cartel forms according to the "degree of commitment". Instead, we have taken a constructive approach and developed a system that organically covers the individual product or the individual branch of industry in its entirety. The previous class ifications of cartel forms can be explained historically by the growth of cartel ties from the loosest to the tightest agreements. Thus, the literature usually starts with the gentlemen's 68

agreement, followed by the condition cartels, then the contingent cartels, then the price cartels, until finally one arrives at the syndicate as the tightest form of cartelization. If we compare this system with ours, we find that the latter moves in a confused sequence on the one hand on the production side and on the other hand on the sales side. We, on the other hand, have made a clear classification of all factors determining production and sales. This systematization is very useful in a total market order; for the essence of the total market order is to pre -order production in such a way that the sales order follows logically from it. Thus, the location order is the basis for the area (sales) order, the capacity order is the basis for the order of the supply quantity, the business management order, i.e. in particular the cost order, is essentially co-determining for the price order, etc. In practice, however, none of these order elements will lead an independent existence. Rather, there will be a reciprocal interaction of all eight elements in the overall market order of a product. With this systematic and holistic compilation of the market regulation factors, however, by no means, as already emphasized at the beginning, a total regulation of the production and the market by the state and/or its organs is to be spoken the word! It is not to be propagated a total close -meshed market regulation of the commercial economy approximately after the model of the guild order. Especially in the new Europe, entrepreneurship will have to develop dynamic forces for many tasks - just think of Ostpolitik! - Especially in the new Europe, entrepreneurship will have to develop dynamic forces for many tasks - just think of the Eastern policy - which must not be inhibited by inappropriate market regulation measures.1) The purpose of this to tal approach is rather to bring order into the entire market structure. In principle, entrepreneurs will be reserved the right to determine the degree of regulation of their market themselves, with due regard for economic efficiency and the common good. Th ey will be best able to overlook whether one or the other system of order must be practically realized in their branch of industry. They will also be able to determine for themselves the extent (from oral cartels to syndicates) and the duration of any tie. For the state, all that is necessary is the certainty that for every important expression of life in the economy there is a regulatory function and, in addition, a regulatory system that can come into action if an understanding among entrepreneurs cannot be reached, if the entrepreneurs are unable to cope with the market regulatory functions on their own, or if the common good is endangered.

1) A lth ou gh sen s ib ly ma n ag ed , tot ally r e gu l at ed ca rt el s n eed n o t a l way s b e an ob st ac le to p rog r es s . P rac ti cal e xp er ie n c e h a s s u f f ic ien tly re fu t ed th e o ft en t en d en t iou s cla i m th a t p rog r es s i s i mp e d ed b y tigh t c art e l stru ctu r es .

It is the great art of the state and its organs to achieve the optimum market effect by means of the least possible steering functions and t o intervene in the course of the economy in a regulating manner only when it is absolutely necessary in the overall interest or in the interest of the cartel members. In principle, therefore, the total market order should primarily have a potential character, i.e. the regulatory instruments of the state, which are always latent, should - without having to take action in each individual case - already have the effect of ensuring that the market is in an orderly state. This also answers the question of the re lationship between freedom and obligation, the core problem of the future economic constitution. It is not the case that certain zones of commitment and freedom are determined from the outset, as it were, as a state postulate, but rather that in the future the following sentence must apply: through commitment to freedom! The more sensibly the ideal and material foundations of the market are formed, the greater the degree of freedom of movement that can be granted to entrepreneurs in the practical operation of the market. Thus, the "bound market freedom" is to be regarded as the most ideal market order.

3. The organization of the total market order.

Having dealt with the system and essence of . After we have dealt with the system and essence of market organ ization, we come to the organs of practical market organization policy. Following the previous lines of thought, we can distinguish three zones of economic order: 1. State. a) General economic policy guidelines, b) economic regulation. 2. economic grou ps: a) Professional economic policy guidelines, supervision and advice, b) market regulation supervision. 3. cartels: (a) free zones, b) regulated zones.

Re 1. state. (a) General economic policy must extend both to influencing economic attitudes and t o establishing general practical guidelines for the conduct of the economy. The more sensible and expedient general instructions the state issues to the economy, the less it will need to intervene directly in economic regulation. b) In many cases, however, the state will have no choice but to intervene directly in the economic process. This is particularly necessary in the case of problems that cannot be solved by the economy itself or by its professional umbrella organizations. For example, the tasks of producing new materials and establishing the basis for trade with foreign countries. The regulatory activities of the state also include the coordination of the interests of the individual economic groups. Finally, it should be noted that in many cases the s tate must act as an administrator because it directly takes a very large share of the social product (e.g., defense economy, social policy). Re 2. economic groups. The tasks of the current self -governing bodies of the industrial sector would have to be exp anded to the effect that they would also be assigned market regulation functions for their respective economic sectors. As is well known, the authority to regulate the market has so far been fundamentally prohibited to the economic groups under the current law. This problem needs to be addressed in more detail. As is well known, the economic efficiency decree issued by the Reich Minister of Economics in November 1936 stipulated that the groups were to be clearly above the cartels, but that they were only pe rmitted to exert direct influence on cartel policy to the extent that this involved support, advice and recommendations. This decision was made in order to avoid the cartelization of the economy, which was seen as an inevitable consequence of market regula tion activity by the groups. Moreover, another difficulty would have been that the heads of the groups or their sub-organizations are at the same time entrepreneurs and that they could therefore be entrusted with tasks of a general economic nature, but that they would hardly be capable of making an objective decision on pronounced market regulation issues in which they have a highly personal interest. In this discussion, we must refer to our earlier remarks in which it was said that the problem of market re gulation by the groups had hardly become acute because the decisions regulating the market had bee 71

transferred to other, namely official, organizations through an ever greater expansion of the subject -area principle of organization. In pursuit of our demand for concentration of market regulation activities according to the professional principle, however, the problem of group/cartel would again become highly topical. The question would arise whether market supervision should be carried out by newly estab lished market regulation authorities, which would have to work alongside the economic groups, or whether the economic groups should be entrusted with this task after appropriate reorganization. In our opinion, it is inevitable to take the latter path. We s aw that in the future market constitution there are no longer any rigid boundaries between regulation and the merely general regulatory activity, which extends to the drawing up of market regulation guidelines, recommendations, etc. The boundaries between the two directions, both on the side of the tightest regulation and on the side of the loosest order, are constantly in flux. A market that today can still be guided by recommendations must tomorrow be tightly regulated (by which are meant not only quantit y regulations but also interventions in the innermost operational structure) and vice versa. Depending on the equilibrium situation of the markets, price pressure or price buoyancy, supply right (quota claim) or supply obligation (quota fulfillment), etc. will result. Market regulation policy must constantly adapt to these "alternating situations" of the markets by changing its methods. It would now lead to factual and organizational inconveniences if the supervision of an industry sector in the market regu lation area were to be constantly tossed back and forth between two different professional organizations. Moreover, it is difficult to define with any practical clarity the area of "recommending" activity as granted to industry groups alone under the present legal situation. Depending on the personal and factual authority of the groups, recommending would include everything from "good advice" to covert coercion. One thinks involuntarily of the famous word of Talleyrand, according to which non -intervention meant about the same as intervention! One could now object that the economic groups should limit themselves to the area of general market organization, e.g. the establishment of general market organization principles, accounting and calculation guidelines, simplification of delivery and payment conditions, etc., and refrain from individual support of products or branches of industry. However, this must be countered with the serious objection that useful principles can only be developed from one's own practical work. For example, the preparation of costing guidelines can only be carried out by the body which has to examine costings on a practically continuous basis (e.g. in connection with price audits). However, this can only be the body that carries out prac tical market supervision. This body not only obtains greater expertise in its activities, but also, in connection with its supervisory power, has a much more far -reaching weight of authority, which 72

is of importance not to be underestimated in the elabor ation of market regulation principles and the related obtaining of information. Now the problem of self -governance and the related idea of too much influence on market regulation policy by unjustified self -interest on the part of the industry would still h ave to be discussed. A preliminary question needs to be clarified here: What is economic self -government anyway? The term economic self-government can have two meanings. On the one hand, it can be understood to mean a sovereign administration that has comp lete freedom of action in its sphere and whose activities can be influenced by the state or its agents only if they violate "legality." This would be the individualistic concept of self-government. This can have no raison d'être in the National Socialist economic order. The new economic order starts from the basic requirement that just as the individual, so also the professional classes or groups are obligated to the community. In the natural organism of this community, each individual member has to fulfill certain functions. The more the member fulfills these functions on its own in the sense of the community's objectives, the greater its independence can be, the more the state can dispense with instructions or even detailed regulations; or in other words, the more room "economic self-administration" gains over "state administration on behalf of the state". If we look at the problem of modern economic governance in this way, we must ultimately conclude that there are deep functional interrelationships between the commissioned affairs and the self -governing affairs in the economy. In a harmonious economic organism, therefore, the self -governing functions and the official functions for the respective field should be united in one hand. The greater the sense of responsibility and ability of a member or a community of members of the economy, the greater can be the scope of its self-administration; the less ability can be attributed to the bodies of self administration or the greater are certain firmly defined stat e requirements for the economy (e.g. in wartime), the more economic administration becomes a commissioned matter of the state. Hereby we make the same observation for the administration of the economy as we made above for the ordering of a market. Dependin g on the need for order on the one hand and the possibility of self-control on the other, we find a constant alternation between commissioned administration and self -administration, whereby complete (but potentially bound) self -administration would again r epresent the desirable goal. We find this abolition of the rigid lines of connection between the sphere of the state and the private sphere not only in the sector of the economy described here, but in all areas of our life in general. In law, there is no l onger a sharp division between public and private law; property is committed to the totality, as is labor, etc., whereby again and again the ideal case is that of each person being enabled, as far as is at all possible, to have full disposal of 73

his property or labor. But the more difficult are the conditions under which the community lives, the more the rights of the individual must be restricted. Just as the individual should be allowed the greatest possible freedom in the opposite case.1) If we look at the practical work of the economic groups, we see that they already had the dual status of commissioned and self -governing bodies. If commissioned matters still predominate, we shall not discuss here whether this is due more to the circumstances of the t ime than to any lack of initiative on the part of the economic groups. To return to the starting point of our considerations, we must ask ourselves whether the economic groups, which have already largely dealt with contract matters, could not also be entrusted with contract matters of a market -regulating nature. Yes, we must ask ourselves whether, in the future, market organization is not the most important matter of self -government. Anyone who wishes to simplify the organization of the economy and to activ ate free initiative will have to answer in the affirmative. An objection to the effect that industry's influence, guided by unjustified self -interest, on the economic self -governing bodies of current legal construction should be greater than on, for exampl e, newly established central market regulation authorities, can hardly be justified. A negative or self-interest-driven influence of the industry can only assert itself to the extent that the people entrusted with market supervision exhibit character flaws. However, such deficiencies can occur both in an authority and in a self governing body. It is assumed, however, that both types of organizations are provided by the state with the same guidelines for their activities, i.e. that the self-governing organiz ation does not have greater freedom of decision than a public authority and thus the scope for influencing the people working in the self-governing body would inevitably be greater. Although we support the idea that the organization of the industrial econo my should carry out its market regulation tasks in self -administration, we are aware of the fact that the management of an economic group could never become a purely self -administrative body. We have to assume that today's economic groups - seen from a purely formal point of view - only have the character of self -governing bodies in that they have a leader and advisory board members who come directly from the practical economy. Even if it can be assumed that the leader and the advisory board are capable of infusing the broad line of the group's work with entrepreneurial blood, the management in its day-to-day small-scale work will nevertheless have to be regarded more or less as an institute of authority. One can speak of a true "self -

1) Th e s e l in es of th o u gh t p a rti cu lar ly co n f ir m th e sta te m en t r ep ea ted ly mad e b y th e G er man e con o m ic le ad e rsh ip th at th er e i s n o d og ma in th e Nat ion a l S oci ali s t e con o my, ex c ep t t h e on e th a t th e re i s n o d oc tr in e in th e fi el d o f ec on o my.

administration" only if one manages on e's own business or at least such business in which one is directly or indirectly "interested". In this sense, however, the individual administrator of the economic group who fulfills market regulation functions is ultimately more akin to an independent ci vil servant than to an. Entrepreneur or the employee commissioned by him. We must therefore be clear that true self -government in the area of market regulation can only be realized in the business communities themselves, i.e. in the cartels. It will be up to the twenty, fifty or one hundred officials of the economic groups not to wait for the suggestions of a single man who is very busy in his own business and who is not always omniscient, namely the head of the economic group, but to think "entrepreneurial ly" themselves in all their actions, to empathize with the entrepreneurial psyche in such a way1) and, above all, to form the lines of communication with the enterprises they supervise so closely that they are the appointed mediators between the will of the state on the one hand and the self -governing entrepreneurs on the other, or that they are, as it was once expressed, they stand at the "intersection of the state and the economy "2). We summarize the market regulation tasks of the future economic groups as professional market regulation peaks in the following areas:

1. to pass on the general economic policy guidelines laid down by the State in the form of the competent ministries, and to educate its members in the new economic concept and order. 2. to keep the State informed of technical problems, and to support and advise the State in all economic policy measures. To pass on suggestions in all areas to the state economic management. 3. to deal with market -organizing work of a general nature as laid down in the Economic Efficiency Decree of the Reich Ministry of Economics of November 1936 (e.g. accounting and calculation guidelines) and other general issues relating to market organization (e.g. drawing up generally binding conditions in such a way that spe cial condition cartels become superfluous). 4. market regulation. All market regulation measures in the specialist area of the economic group must be concentrated in one responsible hand. Only concentrated market supervision can guarantee the optimum of market regulation. But it is also the only way to guarantee the highest degree of decentralization, i.e. the transfer of market regulation tasks 1) W e r e f er t o ou r r e ma rk s in th e s ect ion " Man in th e n e w ma rk et o rd er . 2) Bar th , E b e rh a rd , " W e s en u n d Au f gab en d er O rgan i sat ion d er ge w er b l ich en W irt s ch a ft, " Ham b u r g 1 9 39, p ag e 11 .

to the business community itself. It is a question of practice to what extent the relevant authorities, e.g. price commissioners, imperial offices and the like, are involved in decidin g on market-regulating measures. It will also result from practice to what extent these organizations can be restricted with the technical summary of market regulation. Perhaps they can even be eliminated by transferring them to the governmental market -regulation apex (see lb; page 99, cf. further page 84/85). The market regulation instrument of the economic group must, by its very nature, be built up taking into account all the experience gained by the previous sectoral bodies. Re 3. cartels. The cartel is the final organizational instance and the foundation of the market order. It is the private sphere of life of entrepreneurship, but at the same time it is the organ of the "committed private sector". The administrative head of the cartel is the link to th e economic group or its subdivisions. For technical or spatial reasons, several cartels representing the same or similar products, but without the conditions for a completely closed homogeneous cartel, may sometimes have to be grouped together in an "umbre lla cartel", which in turn is subordinate to the competent economic group. The number of cartels formed within the framework of an economic group or specialist group or specialist subgroup depends, on the one hand, on the technical circumstances and, on the other hand, on the market regulation work caused by the cartels concerned. By no means does the latter always depend on the volume and value of the cartel. Often, it is precisely production branches of minor importance that entail greater market regulati on work than large uniform production volumes. It must be a mandatory obligation for the market regulation supervisory authority to free itself from any small -scale administrative work that is not absolutely necessary. Extensification of market supervision and intensification of cartel work is the watchword. All too easily, administration follows the "law of expansion." It must therefore constantly examine the necessity and expediency of its existence and functions. The cartel, as a private -sector institution and a cost and risk factor in industrial calculation, offers a far greater guarantee for the rationalization of administrative work than an official or semi-official body. The latter pay for mistakes with a loss of profit, the latter cover themselves by corrective administrative acts. Therefore, the cartel bureaucracy must not be overthought by an administrative bureaucracy. The functions of the cartel and the cooperation between the cartel and the superior market regulator will not be discussed in detai l here. We deal with these issues under the section ”The Large-Scale Economic Order."

The fear could be expressed that such a market organization would inevitably lead to a cartelization of industries not yet tied to the market, since there are only about 2200 industrial cartels in Germany, whereas the industry deals with hundreds of thousands of products. To this it must be said that it is foolish to try to read off the importance of cartelization from the number of cartels. Unfortunately, this mistake is also made by experts. One reads over and over again in considerations of the history of the cartel problem: In 1887 there were 70 cartels, in 1890 117, in 1905 385, in 1922 1000, in 1925 1500 to 2000, and so on. Certainly, this series of figures indica tes the strong increase in cartelization. However, it says nothing about the respective weight of cartelization within the overall economy. The significance of cartelization is not determined by the number of cartels, but by their volume (number of products covered, sales volume, type of ties, especially cross ties). However, this approach reveals that there are cartels covering only a single product on the one hand, and cartels with several hundred products on the other (all of which are, of course, relate d to the market to a certain extent), and that there are cartels with a volume of a few tens of thousands of Reichsmarks and others with a turnover of many millions. If one takes the cartel volume as a basis, it would appear that today at least 70% of Germ an industrial production is subject to some kind of market linkage, and that in particular almost all basic materials and almost all important semi -finished and finished products are cartelized.1) The "cartel-free" industrial sphere has so far still been a ble to maintain a level of 30 to 40% because these are mostly non -"cartel-eligible" products. The lack of cartel capability is due to the low comparability of these goods. However, comparability is the prerequisite for the functioning of market regulations or the causal reason for regulating competition in the first place. But it is precisely this comparability which will be brought about by future cartelization tasks (rationalization, typification, standardization), so that cartelization in the previous ma rket-political sense will be, as it were, an inevitable consequence of the production order.

1) It i s p sy ch ol og ic al ly i n te re s tin g th at th e b ro a d p u b li c o f eco n o mi c li f e i s n ot at al l a war e of th e gr ea t i mp or tan ce o f t h e cart e l p rob l em i n th e con t ext o f th e e c on o my as a wh o le . Th e r ea son i s p rob ab ly th at th e i n d u str ia l a s so cia tion s ar e n ot in t er e s ted in mak in g a lot of n o i s e ab ou t th e m se l v e s a s l on g a s th e ca rt el st il l h a s th e " sti g ma o f e vi l " att ach ed t o it . On th e oth e r h a n d , t h e ec on o mi c l ead er sh ip d o e s n ot lik e to ad mi t t h at th e con ce n tra tio n of th e ec on o my h a s as s u m ed su ch p rop ort ion s . T h i s r eti c en c e w il l n o l on g er b e n ec e s sa ry an d ap p r op r iat e wh en t h e cart e l s, in t er m s o f f or m an d con ten t, wi ll b e o rga n iza tio n s th a t p ro vid e th e sa m e b en e fit s for c on su m er s an d th e st at e a s th ey d o f or in d u st ry it se l f. Mor eo v e r, it s h ou ld b e n ote d t h at, a cco rd in g to ou r d e sc rip tion o f th e n atu r e o f th e to tal cart e l, t h e co n c ep t o f a cart e l a l so co v er s m ark e t or gan izat ion p ro c e s se s to wh ich it w ou ld n ot p r ev iou s ly h a ve b e e n ap p li ed an d w h i ch h a v e h ith er to b e en d ea lt w ith b y a myr iad o f au th or it ie s, of f ic e s, co m mi tt ee s, " wo rki n g gro u p s, co m mi s s ion s, sp e c ial rep r e se n tat i ve s an d th e l ik e.

This consideration reveals the close connection between production order and market order, i.e. if a meaningful production order is established in the economy, market order tasks will inevitably arise as well. The close connection between rationalization and the market also emerges from the fact that the German price commissioner is most st rongly committed to standardization, typification and norming. This effort is causally based on the intention to create the conditions for a price reduction.1) In close causal connection with this, however, is the promotion of the production of comparable goods in order to facilitate price control and price comparison, in short, to improve the effectiveness of the great coercive price cartel "price commissioner".2 ) In the course of future industrial cooperation in the field of production technology, the remaining non-tied products are not likely to be significant from a market policy point of view. For example, some high -value products, such as those in the field of precision mechanics and optics, will continue to have such an individual character that produ ction cooperation or even competition regulation will not be necessary. Furthermore, there will be a number of branches of production which are of such minor importance in terms of both economic demand and volume that they are of no significance in terms o f market policy. However, for the majority of the production sphere, especially the basic industries, cooperation according to the principles of total cartelization will be inevitable. The cartel sector will thus determine the face of the industrial market order.1) 1) " Th e typ i fi cat ion an d st an d ar d iza tio n o f g oo d s i s p ar ti cu la rly i mp o rt an t f or t h e h e ad o f th e p r ic e au th or ity , b e cau s e it e sp ec ial ly en a b le s h i m to sol v e h i s p oli ti cal t a sk s of su p p lyin g all str ata of t h e p eo p l e w ith t h e c on su m er go od s th at a r e fi n an c ial ly b ea rab l e for th e m at r ea son ab l e p r i ce s ." R en t rop - Kay s er, Pr e is p ol it ik u n d Pr ei sü b e r wach u n g in E u rop a, Mu n ich an d B er lin 19 4 1, p a g e 3 7. 2) No w i n war ti m e, sh o rtag e s ar e a l so d ri v in g mo re an d m or e fro m f i xed p r ic e s t o fi xed q u ali ty. In or d e r to p r e v en t p r ic e p o li cy fr o m b e in g c ir cu m v en t ed b y p ro d u c er s ' e f for ts t o s wi tch f ro m ch e ap t o ex p en si v e go od s, for e xa m p le , th e p ri ce co m m i s sio n er an d t h e R ei ch Min i stry of E c on o mi c s mu st al so r egu lat e p rod u cti on . 1) It w il l b e o f in t e re s t t o th e r e ad e r t h at Gu s ta v Ru h lan d ca m e t o si m il ar l in e s o f th ou gh t as th ey h a v e b ee n d e v e l op ed h er e a lr ead y b e for e th e F ir st W orl d War . H e s ay s, f or exa mp l e, in h i s " Sy st e m o f Pol iti c al E c on o my " (B e rli n an d Le ip z ig 1 93 3) on p a g e 3 45 /3 46 : ". .. N o w it is th e si gn o f th e or ga n i c n e c e ss ity of th e c a p ita li st ep och of d e v e l op m en t th at it h a s p rod u ce d fo r m s of o rg an izat ion wh i ch p o in t th e r igh t p ath s o f d e v e lop m e n t to th e n e w era . On e o f th e fu n d a m en ta l for m s o f a s so ci ati on i s t h e syn d ic at e. T h e syn d i c ate e li m in at e s th e h ap h aza rd fr e e co mp et i tion b y a p l an n ed o rd er for a ll af f il iat ed in d iv id u al e con o m ie s . Th e syn d ic at e s ep ar at e s th e m er ch an t an d sp e cu lat or a gai n fro m th e p r od u ce r an d t ech n i cian an d a llo w s th e p rod u c er o f good s a ca l me r li f e, wh i l e a t t h e sa m e t i m e t h e or gan i zat ion o f sa le s e li min at e s al l ex ce s si v e gran tin g o f c red it, all n o n s en s ic al o v er - of f er s an d m ak e s al l u n h ea lth y sp ecu lat ion d i sa p p e ar in fa vo r o f a st e ad y a ve ra ge p ric e p o li cy. Th e se orga n iz ati on al p rin ci p l e s, t ail or ed t o th e mod er n con d iti on s o f th e t im e , in d i cat e th e ri gh t way to s ol v e t h e ol d p rob l e m of tr ad e r e gu la tion s. Th e gu i ld o f th e fu t u r e i s c al le d a " syn d i ca te .

4. Man and the new market order. These considerations cannot be concluded without a brief appraisal of man in his relations to the new order of economic life. In accordance with the systematics of the organization of the market (state, economic groups, cartels), we can also distinguish three types of economic man, namely the civil servant, the economist and the entrepreneur. The civil servant a nd the entrepreneur are traditional phenomena of economic life, although their nature and functions have changed considerably. With the increasing organization of economic life, a new type of economic person has emerged who, significantly, has not yet been defined, which is related to the novelty of his activity in the economy. From the "syndic" or "scientific assistant" of the liberalist associations to the completely inadequate designation "consultant" in today's economic organization, a new, clear term m ust be found for this economic type. The term "economist" seems to us to be quite useful. We are thinking not so much of the academic profession of the "Diplom - Volkswirt" as of the economist whose activity corresponds to the literal meaning of the term "Volkswirt". We shall refrain here from defining the functions of the entrepreneur, the economist and the civil servant in the future economic order1. In any case, definitions would be very difficult, for just as the boundaries between the private and the pu blic economy have become blurred, just as the entrepreneurial element has entered the sphere of the state, and just as the entrepreneurial function has public service features, so naturally no sharp demarcation is possible in the characterization of these three types of economy. Nevertheless, each of the three categories of economists can be characterized by certain predominant features, just as they are assigned a specific area of responsibility within the national economy with respect to their functions. a) The entrepreneur. The nature and tasks of the entrepreneur are different today than in the past. Every era shapes its people and its tasks. The Hanseatic merchant shows a different type than that of the time of overseas discoveries or mercantilism or that of the Gründerzeit. The task of today's businessman is to anchor economically the political -social will of a racially bound national community. Just as the political goals are determined by the state as the representative of the national community, the "directional initiative" in the economy also emanates from the state. The space for pioneering activities of the old type is limited in entrepreneurship. But this by no means makes the entrepreneur a mere "administrator. Downward freedom" still provides an infinitely large scope for creative activity (e.g. production of new materials, rationalization,

social policy). But even the "freedom upward" is taken away from the entrepreneur only to a limited extent. With the rich experience in his field of expertise, the directional initiative of the state and its organs can and must be largely influenced by the entrepreneur himself. In fact, a sensible economic management will never tackle major tasks without having heard the pros and cons of the entrepreneur. The ideal case would even be that the economic management would only have to carry out the "public economic corrections" of a committed entrepreneurial initiative. In a fair assessment of his position in the future economic constitution, the entrepreneur must come to the conclusion that he is hardly more constrained in his activity than was the case in the "free economy" of the late capitalist epoch. As has already been pointed out in the presentation of the history of the cartel, the entrepreneur has impos ed the greatest fetters on himself over time. The absolute rule of the entrepreneur with respect to the organization of his sales territory, his prices," often also his production, was already constantly declining at the time of the "private economy." He e ven had to put up with the auditing of his books and his business by cartel auditors. With increasing syndication, he was often deprived of direct contact with customers. If the entrepreneur is even an "official" of a corporation, he will certainly have hardly less to complain about the corporate bureaucracy than about the state bureaucracy. In the future, therefore, the entrepreneur should be fair enough to evaluate bureaucratic measures positively or negatively according to their objective necessity and n ot regard them from the outset as an abhorrent evil simply because they emanate from the state or its organs. b) The economist. The economist is neither an entrepreneur nor a civil servant. His type contains characteristics from both statuses. On the one h and, he possesses the personal integrity and objectivity of the civil servant, but on the other hand, he also has the creative initiative and drive of the entrepreneur. Shying away from responsibility must be far from his mind; choosing the path of least r esistance on principle should remain the 'most outstanding characteristic of the former syndic. The economist must set the following thesis as his highest guideline: Act in such a way and represent your measures in such a way that the economist under your care becomes deeply convinced of the economic necessity of your actions! The economist must enjoy authority not "by virtue of his office" but by virtue of his economic reason! This presupposes that he must unite in the highest degree skill and idealism in himself/ He must be able to distinguish the essential from the unessential and limit himself in his actions to what is recognized as essential. Any dilettantism and any lack of mastery of the formal and material foundations of the economic process can lead to serious damage, especially in his activity as a market regulation supervisor. 80

"The National Socialist state recognizes with all clarity that with market regulation it is taking the most dangerous lever of economic policy into its hand. Nor do they know the great interrelationships of economic life! These people can do the greatest harm and cause serious disruptions of the economic process.”1) The economist must not be a rigid dogmatist, but must show extreme flexibility in his supervisory activity. W hile he has to establish a tight organization in the morning, he has to lay the foundations for the loosening of a market organization in the afternoon. While in the morning he draws the attention of the meeting participants to their duties in a strict off icial tone of communication, in the afternoon he must prove himself to be a nimble negotiator in another meeting. An economist will not be successful without mastering the art of handling and leading people. According to his training, the economist must po ssess technical, economic, business and legal knowledge, whereby one or the other branch of knowledge must be more strongly developed, depending on the nature of his activity. Under no circumstances can the economist be content with the traditional legal training of the legal advisor. The business economist will be of great importance in view of the fact that the economic -constructive thinking will be in the foreground for the entire market organization. The economic management and organization requires suc h specific abilities and skills that one should even establish a special "teaching of economic management" within the framework of economics. Since the economist is to a high degree a "political man", a thorough political training will be indispensable for him. Also, a longer period of practice in industry (e.g., as an assistant manager) will have to be included in his training. In order to bring the most valuable forces to the profession of economist, the material conditions for this profession must undergo a fundamental change. People from whom the development of "directional initiative" is required cannot in the long run be placed in a significantly worse position than those from whom the implementation initiative is reserved. This will be a core problem in the creation and maintenance of a superior class of economists and will apply even more to the profession of "large -scale" economists. c) The official. The figure of the civil servant in the National Socialist state has been sufficiently characterized. Therefore, only his most salient characteristics shall be briefly outlined. Haßmann describes them aptly: "The state is represented by the civil servant, whose task of judging every question from the point of view of the good of the whole obliges him to an objective 1) Le h n i ch , "D a s P rob l e m d er Ma rkt re g elu n g i n d e r n at ion a l soz ial i st i s ch e n W irt s ch a ft, " Fran kfu rt /Ma in 19 3 6, p ag e 1 0.

tendency. The detached position which he must maintain in relation to each individual case that arises gives him a physiognom y peculiar only to him; a physiognomy which is characterized by disciplined personal detachment and at the same time the highest level of objective interest. That is why his appearance is only conceivable on the basis of a moral professional ethos which resists all temptations. The consciousness that his decision directly serves the state must fill him with full strength and elevate him above material considerations.1)

1) Haß man n , " St aat lic h e Brau n s ch w ei g 19 41 , p a g e 39.

Wi rt s ch a ft s fü h r u n g

und

Wi rt sc h a ft s s elb st v e rw alt u n g, "

Third Part

The wholesale market order

The detailed treatment of the German market order problem was necessary in order to lay the foundations for the European market order system. In the course of further remarks, we will see that the European market order is nothing other than the logical continuation of the German market order. All the problems that arise here are also encountered in the large -scale economy. The variations which result fr om the fact that several "national" market organizations interact in the greater area are only of secondary importance compared to the fundamental problems. It goes without saying that the principles of the German market order can be applied to the industr ial economy of the members of the metropolitan area, but that the respective scope of the organizations and the intensity of the regulatory processes must be geared exclusively to the special market needs of each individual national economy. The goal of co ntinental reorganization in the economic field is not the "organization of Europe", but the promotion of the productive forces of its area and the interdependence of national economies based on the division of labor to the advantage of all peoples.

Before dealing with the policy of the Greater Region, we will briefly review the development of Germany's external economic relations, i.e., Germany's foreign trade policy, and then, by establishing the lines of connection between national market organization po licy and foreign trade policy, we will develop the Greater Region economic policy in a logical manner.

A. The road to large-scale market regulation.

1. From free trade to managed foreign trade.

Free trade knew state influence on foreign trade re lations only to the extent that it created the conditions for the smoothest possible operation of individual economies, i.e. economic entities, in foreign trade. Thus, trade policy essentially established only the legal basis for the establishment and exercise of trade and commerce. Economic activity, however, was left to the free play of forces. Similar to what we saw in the development of the market order, free trade was not a permanent state. The state soon had to intervene in foreign trade movements wit h its protective tariff policy.1) The policy of protective tariffs does, of course, reflect the primacy of the national economy, but not in the sense of a deliberate and planned control of overall foreign trade, but always from the point of view of the ind ividual industry. The protective tariff was determined in each case on the basis of the particular situation of a branch of production or industry, i.e. the individual plight of the economic subjects was taken into account. After a temporary period of tigh t regulation of foreign trade during World War I, efforts were made in the years 1924 to 1930 to return to the earlier methods of foreign trade policy, which, despite their fundamentally protective character, were to be regarded as permissive and individua listic.1) However, the increasing politicization of the world economy led, of necessity, to an increasing number of cordoning -off measures by the familiar means, such as prohibitive tariffs, quotas, subsidies and the like.2) While the methods practiced up to the beginning of the 1930s can be described as inorganic from the standpoint of the economy as a whole, in that they represented mere "crutches" of a world economy still fundamentally oriented toward the division of labor, the world economic crisis was the essential impetus for the transition to a national -organic foreign trade policy.3) This development did not take place uniformly. Some countries moved more 1) W e d e lib er at ely l ea v e p ri va te - s e cto r m ea su r e s o u t o f ac cou n t in t h i s con te xt ; th ey wil l b e d ea lt wi th la te r u n d er th e s e ct ion "La rg e - s cal e ma rk et o rga n iza ti on b y la rg e - sc al e cart e l s" . 1) C f. th e p a ral l el d e v el op m en t in m ark et or gan izat ion . 2) Th alh e im r e fe r s to th at y ear ; a s th e "f l ee tin g ep i sod e of th e wo rld e con o my of a s -i f ". 3) E xp r e s sion a cc ord in g to S ch r ei b e r, Ma n f r e d , " Gru n d zü g e ein er n ation alo rg an i s ch en Au ß en h an d e l sp o lit ik, " J en a 19 3 5.

quickly and decisively to autonomous foreign trade management, others more or less hesitantly, depending on objective needs and ideological demands. As a textbook example of conscious national -organic foreign trade planning, we would like to outline the main features of German foreign trade policy since 1933/35. The national-organic foreign trade principle states that foreign trade primarily serves to supplement the national supply of goods. This supply of goods by means of foreign trade is carried out in such a way that imports are not made inorganically - as is the case when the principle of acquisition is applied - but according to the urgency of their need, and that the quid pro quo for imports (i.e. exports) is made with the most appropriate use of national economic power. The focus in dealing with import issues was no longer on the individual protection of an industry, but on the interests of the econ omy as a whole, i.e., the problem of procuring raw materials. The corresponding measures on the export side were also expressed in the subordination of export activities to overall economic objectives. Foreign trade policy thus refrained from supporting and promoting the individualistic principle of acquisition through state measures in order to serve the overall good in this way; conversely, it placed the principle of meeting needs, i.e., the priority of the overall good, in the foreground and, within this framework, determined the possibilities for activity as well as the protection of the individual. Foreign exchange management became the instrument of foreign trade planning. The compulsory licensing of all foreign exchange activities led to total control of imports. The monitoring of exports, as a necessary correlate to import monitoring, was transferred to the audit offices. In detail, import and export activities were conducted according to the following principles: a) The import in the managed foreign trade. The most urgent thing was to be introduced first. This principle was by no means self-evident. It should be recalled that the main purpose of foreign exchange management was to protect the currency, i.e. it did not yet trigger demand planning. In th e first phase of development of foreign exchange management, therefore, foreign exchange was allocated in proportion to imports made earlier (i.e. as a purely aggregate quota) without regard to the degree of urgency of the imported goods. It was only gradu ally that the principle of controlling imports according to the degree of urgency emerged. Thus, for a given export volume (and export volumes were always far scarcer than the most urgent domestic needs at the onset of the German domestic

boom), those products that were most necessary to the national economy (i.e., food and raw materials as opposed to manufactured goods or even luxury goods) were imported first and foremost. In addition, to eliminate "export pressure" and to establish the greatest poss ible supply autonomy, autarky production was strongly encouraged. Furthermore, imports were to be made primarily from complementary economies in neighboring areas, even if they had to be purchased more expensively than overseas. For the rest, however, the principle was to import as cheaply as possible so that the greatest possible volume could be imported for a given export volume. b) The export in the managed foreign trade α) Sales markets. The national-organic export planning endeavored1) to deliver only to those markets that provided the highest foreign exchange value. The foreign exchange value is not a purely numerical figure, but is expressed in the quantity of goods that Germany was able to re -import for this foreign exchange. In this sense, the highe st foreign exchange value was in the case of so-called effective or free foreign exchange, with which everything could be procured everywhere. If, on the other hand, the foreign exchange was tied (clearing or payment agreements), the value of the foreign e xchange was already quite differentiated. If, for example, ores could be traded in one exporting country and raisins in another, the country from which the ores could be imported was naturally more important than the raisin -producing country, provided that there was a shortage of ore. ß) Export goods. The national-organic export policy aimed at exporting, as far as possible, those goods that yielded the greatest possible return in relation to their economic and managerial cost. In terms of the materials use d, for example, preference was to be given to products that contained no or only slightly scarce ra w materials. In particular, the proportion of foreign raw materials should naturally be as low as possible. Corresponding economic considerations also extended to the labor factor. For example, in the years when unemployment still prevailed, preference was given to exporting products that were as labor intensive as possible. As the labor situation became more and more strained, this point of view receded more and more into the background. The question 1) Th i s ar ea i s d ealt w i th in d eta il in th e au th or' s e s say " Mark tord n u n g i m E x p ort ," D er p rakt i sch e B etr i eb s wir t, N o. 2, Fe b ru a ry 19 38, p ag e 9 5.

of directing export goods according to their intended use also plays a role here. Naturally, the export of consumer goods was preferred to that of production goods, in order to prevent the export of capital goods from impairing the export volume in the long run. γ) export establishments. Preference was given to exporting companies that were able to produce their export goods at the lowest cost. This resulted in a shift of export activity to the most favorable production capacities. This principle was particularly important when exports were subsidized and financial resources were saved by shifting export activity to the lowest -cost plants. However, the planning of export operations was simultaneously associated with an industry shakeout. Unprofessional and unreliab le exporters were gradually eliminated in favor of the experienced and reliable ones. This principle is of particular importance, considering that the foreign trade merchant is the "visiting card" of his national economy and thus of his nation. δ) Export prices The higher the export price, the higher the volume that could be imported. A national-organic export economy must therefore devote special attention to export price policy and apply methods that ensure the most favorable price level possible in exports. Thus, the basic features of import and export control in national -organic foreign trade policy have been pointed out. We have limited ourselves to a schematic presentation in order, on the one hand, to make the essence of the new foreign trade policy as clear as possible and, on the other hand, to make the lines of connection with the policy of the Greater Economy more readily apparent.

2. National-organic foreign trade policy and large -scale economic policy.

What connections can now be ide ntified between national -organic trade policy and large-scale economic policy? National-organic foreign trade policy presupposes a domestic market order, because it is only from this that the principles of a national -organic foreign trade policy are develo ped. The domestic market order is characterized by the principle of demand satisfaction (in contrast to the principle of acquisition) and by the pursuit of self -sufficiency and a far -reaching national division of 88

labor (in contrast to the global divisi on of labor). This shows that national organic trade policy and large -scale economic policy pursue the same goals in their fundamental aspirations. There is only a difference of degree. Autarky cannot be achieved in the national economy, but it can be achi eved to a large extent in the large -scale economy. Furthermore, the national division of labor is extended by the large -scale division of labor, which considerably increases productivity. The national-organic trade policy proceeds from the exchange princip le. Foreign trade is not determined by polygonal world economic interdependencies (the inorganic interaction of capital, credit and commodity transactions from the point of view of a national -organic economic policy), but by the principle of "commodity aga inst commodity". We explicitly do not use the term "reciprocity principle", because this presupposes exchange between only two partners at a time, whereas in the large -scale economy multilateral exchange is aimed at. However, the basic feature of the princ iple of exchange, namely that ultimately "goods are exchanged for goods" and "performance is exchanged for performance," is also prevalent in multilateral trade, albeit with the allowance of "exchange detours" tied to space. Foreign trade activity is thus based on the sphere of goods and not on the sphere of money. We see, then, that the principle of exchange, in conjunction with the principle of priority of neighboring traffic, is promoted in equal measure in the national organic trade policy and in the la rge-scale economic policy. However, here again there is a gradual difference insofar as the national -organic trade policy remains essentially stuck in the "trade relations, while, moreover, the large scale economic policy strives for a mobilization of the complementary production forces of the participating national economies and thus allows the relations to pass from the sphere of trade into that of production, i.e., into the "interspatial division of labor." The price policy principle of the national -organic foreign trade policy is to import as cheaply as possible and to export as expensively as possible. However, this applies only with certain reservations. The price principle is deliberately violated if it is contradicted by the spatial principle. Thus, price concessions are made on both sides (import and export) if this promotes the expansion of neighboring traffic. In this way, the national -organic trade policy again works in the sense of the large -area economic policy, because we saw that the large-area economy can and must have an independent price structure vis-à-vis the world market.

3. the large-scale market organization and its organizational foundations

This would indicate the essential interrelations between national -organic trade policy and large-scale economic policy. Before we now discuss the methods of large-scale economic policy in detail, we want to shed light on the purely organizational problems. If we look at German foreign trade policy since the Great Depression and relate it to a meaningful large-scale economic policy, we find that the regional principle was the supreme organizational principle, that the factual principle followed, and that only then did the technical concerns come into play. The regional principle was, of course, predominant insofar as the idea of large scale economic cooperation in foreign trade was only weakly developed and thus each country oriented its measures nationally - i.e. regionally, if viewed from the standpoint of the large -scale economy - without regard to large-scale economic expediency. We will see that large -scale economic policy must work in precisely the opposite order in order to fulfill the demands made on it. The most essential goal of metropolitan economic policy is to promote the productive e conomic forces within the metropolitan area and to bring about the most expedient interspatial division of labor. However, this goal can be achieved only if there is an organization that has an overall view of a particular product or class of products. The refore, the basic demand on the future large scale economic policy - just as we saw it with the national market organization policy - must also be: Priority of the specialized organizational principle! The prevalence of the regional and factual principle o f organization in trade policy to date is easily explained. Since the Great Depression, each country has been anxious to get its own balance of payments in order, to stimulate its own industry, to pursue its own pricing policy, and so on. The result is a "holistic", but national, regional and thus narrow planning, which does not need to correspond to the current large -scale concerns, and is often even diametrically opposed to them. If, for example, Germany had a need for imports from a certain country that far exceeded the normal export possibilities to that country, then under the system of the national -organic foreign trade principle, exports to that country had to be forced by all means. However, this could lead to products being exported which, from the point of view of a reasonable large -scale division of labor, would not have been sold to the country in question to this extent. Furthermore, the principles of overall planning could be violated, for example, if exports had to be curtailed because the trade situation prevented the import of sufficient quantities of raw materials that were available in abundance in another country. The inevitable 90

consequence was that another competitor, mostly from outside the region, entered the business, even though Ger many could have had the best production conditions for manufacturing this product. These examples show that the organizational principle of the past years in foreign trade had to be a regional one because of the given conditions. The overall economy and th e totality of the foreign trade situation determined the trade policy measures. Within the framework of import and export policy, the product had to be oriented to the overall conditions, even at the risk of violating the principles of healthy inter-regional division of labor from the standpoint of overall planning in a large area. The factual organization principle also triggers a number of disadvantages in the national-organic trade policy. The initial aim of national -organic trade policy was to free the national economy from the chaos of global economic interdependence. However, this process took place gradually, since, as mentioned above, the need for steering emerged only gradually, and experience had to be gained first for the steering methods. Just as the regional principle put the interests of its own national economy first, this inevitably led to the need to give the subject areas priority over the specialist areas in organizational support. The following examples, taken at random, show how the "growth" of individual problems has resulted in organizational measures which, viewed from the standpoint of constructive large -scale planning, are piecemeal and would thus violate the principles of a sensible control of the interspatial division of labor, apar t from the fact that they also bear witness to the overdimensioning of the foreign trade organization. a) Tariff and quota policy. In this area, the economic groups supervise the import and export companies and make proposals to the Reich Ministry of Econo mics for changes in tariffs and quotas or comment on tariff and quota requests from Germany and abroad. On the other hand, the examination offices have the general task of directing and promoting exports. It goes without saying that, within the framework o f a total economy, "export control" and "customs policy" must be handled by a single body in accordance with the market organization requirements of a particular product in the economy. The same applies to the import side... We will return to the reasons f or this need for concentration in detail later. b) Establishment of foreign branches by German companies. The foreign exchange offices handle such projects from the point of view of foreign exchange, while the examination offices examine the advisability of setting up such operations from the point of view of

exports. In the large -scale economy, there is no need for duplication of work, since the foreign exchange problem recedes into the background. The foreign exchange offices, if they were to remain i nvolved at all, could therefore confine themselves to a purely registration function. c) transfer of proceedings to foreign countries. The economic groups examine whether licensing is in the German export interest. However, this problem area also has a str ong impact on the inspection agencies which supervise the export of the product in question. In a European overall planning, the assessment of such questions must naturally be in one hand. d) International Cartels. Supervision of international cartels is t he responsibility of the economic groups. However, since international cartels have the greatest impact on Germany's export policy, the audit offices also have a special interest in this area from the export point of view. In a large -scale planning, it is not acceptable for duplicate processing to take place. e) Merchandise Management. Merchandise management as a "functional" organization is perfectly justifiable in the case of severe shortages or a supply situation that requires tight control of raw materi al consumption according to the urgency of the intended use. However, as the raw material situation improves or the shortages are eliminated, it is no longer justifiable for merchandise management to lead an independent existence. It must of necessity become part of the "market order" which centrally controls all economic processes of the "product". f) Market research and market observation. However, the organizational duplication of work in the field of market research and market observation is obvious. A wide variety of official, semi-official and private bodies are often concerned with the same tasks, and the results cannot always be described as usable. For example, comprehensive surveys were written for certain countries and products, and it later turne d out that there was no macroeconomic interest in exporting the products in question or in supplying the market in question. In a large -scale economy, of course, it can only make sense to entrust market research and market monitoring to the entrepreneurs or the relevant professional organizations.

These examples could be multiplied at will. They forcefully demonstrate to us the importance of organizational restructuring in the market organization of the large-scale economy. A simplification of the orga nization is urgently needed even before the non -German areas are included in total planning, for the organizational overlaps would only become intolerable if the same institutions as exist at present in Germany were transferred in the same form to other countries. The first signs of such organizational difficulties are already making themselves insistently felt in the occupied territories. It is said to have happened that three representatives of German authorities were present at the same time in a Western capital to negotiate with the competent authorities on one and the same product, one from the raw material side, the other from the cartel side, and the third from the export side. It must therefore be emphatically stated once again that even in the large scale economy the product must be the central point on which all organizational activity is concentrated. There is no longer any autonomous export policy1) , import policy, price policy, management policy, etc.; all these functional or regional institutes merge into the total large -scale planning, which is determined by the product. From this central planning system only the factual organizations radiate in the second line. According to which organizational principles does the planning of the product take place in the European metropolitan area? We recall the system (state, economic groups, cartels) which we established for the domestic German market organization. The same principle will have to apply to the economic organization in the large -scale economy, because the large -scale economic policy is necessarily the counterpart of a national market organization policy. a) States. α) The prime task of the governments, represented by the competent ministries, is to draw up the European self -sufficiency plan and to coordinate it between the states. The governments must constantly check whether the European economic potential is capable of meeting the "security needs". The necessary development of basic industries, however, will be left largely to the economy itse lf. Governments must continue to define the broad lines of economic cooperation. For example, one such agreement states: "In shaping trade relations between the two countries, the two governments will take care to ensure that the German market for Romanian products remains a

1) H ow e v er , th i s p o li cy wi ll con t in u e to b e o f u n d im in is h ed i mp or tan ce i n th e fu tu re, s in c e, in con j u n c tion wi th th e se ttl e m en t p o li cy ( s e e p a ge 21 2), it m u s t r e gu la te th e o v er al l re lat ion s b et w e en th e i n d i vid u al su b r eg ion s - n atu ra ll y in coo rd in ati o n w ith th e c en tr al ec on o mi c p oli cy .

secure outlet with reasonable prices independent of economic crises, and that the importance of the Romanian market for trade with Germany continues to grow. "1) ß) Governments must also lay the found ations for cooperation between business organizations and business associations. An important step toward involving economic self -government in government committee negotiations is the creation of the so -called "industry committees". The industrial committ ees of the respective negotiating parties are to discuss together the possibilities for intensification of their economies and to make appropriate proposals to both governments and industry. As valuable as the establishment of these industrial committees i s, there is a danger that such bilateral planning work will pay too little attention to the problems of the entire metropolitan area. γ) One of the most important tasks, which is reserved exclusively for the states, is the creation of healthy and fixed mon etary relations, without which large-scale economic cooperation is unthinkable in the long run. If we consider the extent of cooperation between countries, the traditional expression "trade policy" is no longer appropriate. Trade policy is being replaced b y macroeconomic policy. The large -area economic policy not only regulates trade in the large area, but also harmonizes the internal structure of the national economies - while preserving the lifestyle of the peoples - in order to create the most favorable conditions for an intensification of the mutual exchange of goods. b) Economic groups. Analogous to the German economic groups, as we have dealt with them under the section "Market Organization", the other European states must also proceed to the establish ment of such organizations. The activities of these groups need not be discussed in detail here, since they have already been dealt with in the presentation of the German market organization and will be described in more detail in the section on "Large-scale Cartels. (c) Large-scale cartels. The international cartels will take over the functions for the European area which the 'future "total cartel" will have to perform for the German market. The old -style international cartel, however, will be transformed into the "large-scale cartel," whose structure and activities we will now discuss in detail. 1) Fr o m th e Prot oc ol o n G er m an -Ro m an ia n Co op e rat ion in th e I mp l e m en ta tion o f a T en Y ear Pl an for th e De v e lo p m en t of th e Ro man ian E con o my of D e ce mb e r 4 , 19 4 0.

B. Large-scale market regulation by large-scale cartels.

V[alleged men of the German economy have repeatedly emphasized that the shaping of the European large -scale economy must be carried out primarily by the entrepreneur or by the organization of the entr epreneur. Thus, for example, Secretary of State Dr. Landfried says:1) "In a few decades, European customs barriers and currency walls may seem as incomprehensible to our descendants as the economic disunity of our fatherland seemed to us Germans in the first half of the last century before the founding of the German Customs Union. At the present time, however, it seems to me much more important that first the economic people, the companies, groups and economic organizations find their way to honest, trustin g cooperation, then the necessary governmental regulations for the elimination of all obstacles impeding cooperation will inevitably follow!" Ministerial Director Dr. Schlotterer expresses himself in the same sense:2) "The combination of the different national economies of Europe must therefore reach much deeper than a state economic regulation can ever do. It must include the cooperation between the economic people, economic groups, companies and economic organizations, i.e. areas which the state cannot co ver and deal with in each individual life activity. There is even an interest, in the coming economic reorganization, in limiting the area of state regimentation in the economy and instead leaving to the economy itself (independently according to state general guidelines) the dealing with everyday problems." Elsewhere Schlotterer says: "... Numerous countries are today in the process of creating economic organizations on the German model and partly with German assistance, which can grow up to be the bearers of the future self administration of the country. The purpose should not be to replace the state bureaucracy with an association bureaucracy and to suffocate the economy in an organizational undergrowth, but to create forms of organization that are close to life and as simple as possible, in which practical economists speak and regulate economic affairs as unbureaucratically as possible." In a lecture on the subject of "Bureaucratic or Entrepreneurial Economy?", President Kehrl said that the state needed t he productive cooperation of entrepreneurs, especially in view of the enormous tasks involved in the economic construction of Europe. Economic self -administration was the most economical way for the state to put its basic economic ideas into practice.1) 1) " O v er co min g An glo - S axon E con o mi c L ib era li s m th rou gh th e I d e a o f Ord er " b y Fri ed ri ch Lan d fri ed in " Fou r - Y ea r Plan , " May 20 , 1 9 41. 2) "E con o m ic S el f - Go v er n m en t " b y Dr . Sch lott e r er, " D eu t sc h e A ll ge m e in e Z e itu n g" o f Ap ri l 13, 1 94 1, No . 17 5/ 17 6. 1) Qu ot ati on f ro m Fr an k fu r te r Z e itu n g, No . 4 5 6/ 7, Sep te m b e r 7 , 1 94 1.

The Chief Executive of the Electrical Industry Business Group particularly appreciates the importance of the cartel in future European planning:2) "The international cartels as an important instrume nt in the future shaping of the European large-scale economy will also be increasingly used in the electrical industry. First of all, it will be necessary to consider the reestablishment of quotas in reparation for the damage caused by the Versailles Dicta te. By fixing prices and delivery conditions, it will be necessary to eliminate undercutting policies by foreign competitors which damage German exports. By aligning prices and delivery conditions, national industries will enable German imperial firms to compete even where this has not been possible up to now for such reasons. Likewise, the affiliation of disruptive outsiders with existing international cartels should be considered. Typification and standardization agreements will complete the preliminary p icture of such future cartel tasks." Winschuh says in his book "Der Unternehmer im neuen Europa" (The Entrepreneur in the New Europe):1) "Both the cartel experience and the experience in market organization of the Reichsnährstand will be of great benefit to us in the development of the European economic order, and the educated cartel businessman, who is also trained in negotiation, will be able to play just as great a role in the establishment of the necessary interlocking and balancing as, for example, the trained organizer of the Reichsnährstand." The magazine "Der deutsche Volkswirt" says:2) "Economic cooperation, moreover, will not be expressed only by state treaties, but this framework will have to be filled out by the comradely cooperation of the entre preneurs and their organizations. With the help of international cartels it will be possible to spare justified national peculiarities down to the smallest subtleties and, on the other hand, to prepare for the gradual strengthening of backward industries and plants." In a consideration of the "Frankfurter Zeitung" about the "space of the entrepreneur" it says among other things:3)

2) D r. H e in r ich O st e r m an n , "D i e E l ek tro in d u st ri e i m Au s lan d s ma rkt, " in " Di e D eu t sc h e Vol k sw ir ts ch a ft ," 1 94 0, N o. 30 (O ct ob e r 3 i s su e ) , p ag e 97 4. 1) Dr . Jo s e f W in sch u h , " De r Un t ern eh m er I m n e u en E u rop a ," B er lin 1 94 1, p a g e 3 8. 2) "E u ro p e an d i vi s ion of la b or " in "D e r D eu t s ch e Vol k s wir t" , p ag e 18 63 ' No . 51, o f . Se p t e mb e r 20, 1 94 0. 3) " D er Rau m d e s Un t er n eh m er s, " "F ran k fu rt er Ze itu n g" No. 2 72 to 27 3 , May 3 0, 1 9 41.

"The governments settle everything among themselves, and there is less and less room for the entrepreneurial spirit of the economy. Wrong I The space for the German entrepreneur, for the German expert, is about to become as wide as ever again, perhaps not so much in imports and exports themselves, although there, too, one must not confuse wartime economic practice with preconceived plans or the "march of time". But foreign economic relations everywhere have long since pro gressed beyond the "exchange of goods" to its preconditions. Even in governmental committee negotiations, the economists are coming more and more into the majority over the ministerial representatives. The forms and areas of application of private initiati ve are changing. Its necessity and its chances are certainly not less than ever before. To bring about the new division of labor on the continent, to fill the much talked about "new economic order" with content, with life, who is primarily charged with this? The entrepreneur, who is aware of his responsibility both internally and externally, who knows how to think and plan in large contexts and dimensions." Prinzing concludes a treatise on the use of international cartels in the reorganization of European e conomic relations as follows:1) "From these points of view it follows that the international cartel can sensibly be included in the inter-European exchange of goods as a purely technical instrument of economic shaping; and no longer as a political means of struggle. Precisely because the exaggerated claim of the shaping task of the international cartels has been limited to a reasonable degree, there is a legitimate prospect that it can become a permanent shaping element of the European economy." Dr. H. Müllensiefen, the former head of the Cartel Supervision Department of the Reich Industry Group, discusses the possibilities of the future use of cartels for European planning in an essay entitled "International Cartels and the European Economy "1) and conclude s his observations with the sentence: "Industry will regard it as its most obligatory task to use private initiative and its experience in the field of international economic cooperation in order to make its contribution to the reorganization of the Europe an economic area for the benefit of all concerned. These statements of opinion could be 'extended at will.2) Regardless of the

1) "In t er n at ion a le Kar t e ll e" b y Dr. A. Pr in z in g , " De r Wi rt s ch a ft s -R in g ," i s su e 9, vo lu me 14, Fe b ru a ry 28, 1 94 1, p a g e 20 8. 1) " D er De u t sch e Vo lk s wi rt, " n o . 36, Ju n e 7, 1 9 40, p ag e 1 23 1. 2) A ft er th e c om p l et ion of th i s wor k, cou n tl e s s o th e r p ron ou n c e m en t s o n th i s su b j e ct h a v e ap p e ar ed . R e fe r en c e i s mad e in p a rti cu lar to th e v ery re m ark ab l e e s say b y C . Un g e wi tt er, "In d u s tri e - Or gan i s at i on in E u r op a, " E u rop a - Kab e l No. 1 9, o f Oc tob er 1 0, 19 41 .' '

opinion expressed on the problem, whether by ministerial officials, business organizations, entrepreneurs or the trade press, the point of view that the entrepreneur and his organization offer the best guarantee for a meaningful integration and shaping of the European economy is expressed everywhere.

I. The development into a large-scale cartel.

If the basic idea of our remarks on the ideal German market organization is to place the activity o f the committed entrepreneur again in the foreground of economic life, this applies to an even greater extent to the economic organization of a metropolitan area. In dealing with the fundamentals of the metropolitan economy, reference was made to the still lacking homogeneity of the European continent. In a metropolitan area comprising such different national temperaments, "bureaucratic" measures are therefore even less appropriate than in one's own country. If the essence of the German people is, in its innermost nature, permeated by the character of order, and this trait has been consciously promoted in recent years, in many other European peoples this consciousness of order is by far not yet so pronounced. One need only compare the results and effects of the German with, for example, the Southeast European state management of raw materials and foodstuffs during the war to realize the importance of this aspect. If experience has already been gained in the field of the German economy of how detrimental an overemphasis on state economic administration can be, there is no need to realize state bureaucracy in the large -scale economy in order to provide proof of its unfavorable effects. Apart from this, it must be borne in mind that many economies of the European continent are still too undeveloped to provide the organic conditions for a managed economy. The cartel as an "organization of entrepreneurs" should therefore be the appropriate basis of the "large -scale economic policy". It is the given instrument to bri dge the intellectual and economic heterogeneity in the European area. The international cartel, the forerunner of the metropolitan cartel, has already proved its worth in this sense. This assertion is not so much meant to be a valuation of international cartel policy to date, but to refer to its technique. The technique of international cartel policy, however, has been so versatile, "the cartels themselves have proved so agile in recent years, that it is fair to say. There are no tasks that one is not able to solve with them. "1)

1 ) " D er Kau f man n mit d e m Ö lz w ei g " in " D er d eu ts ch e V olk s w irt " of J an u ary 1 1, 19 3 9.

Of particular importance is the observation that, over the years and decades, personal friendships have developed among the international carte l partners that are far more likely to be community -building than the most advantageous government treaties and administrative acts can be. This valuable treasure of personal relationships can now be put at the service of metropolitan planning. In particular, it must be remembered here that after the World War, the understanding of many entrepreneurs of the former enemy states was already a reality, even before the governments took steps toward trade policy rapprochement. Indeed, in many cases the business associations even paved the way for government trade policy. For the Greater Region, the old practical experience is particularly true: If two people say the same thing, it is by no means the same thing, i.e., the entrepreneur in Romania or Norway, for example, will be more inclined to see the expediency of a market organization proposal at the negotiating table with his international partners than if the same plan were presented or "suggested" to him "from above. From a psychological and factual standpoint , therefore, it is of far greater importance in the metropolitan area that the industry be largely self -governing. The idea of using the international cartel to overcome the small -scale economy in Europe is by no means new. Already after the World War the slogan "The international cartels prepare the large -scale economy" was coined. The European economy was to overcome the after -effects of the war by expanding the cartel organizations and to be brought to a new flowering. Numerous memoranda were submitted t o the League of Nations at that time. It was even proposed that an international cartel office be set up at the League of Nations, which would function as a supranational organization and be endowed with coercive power. How seriously the idea of a "Europea n cartel" was already being considered at that time can be seen from a statement by the Frenchman Loücheur:1) "I see the day coming when every industry in the world will be organized in such a way, where each will have a kind of chairman who, with his tact, will know how to create the necessary harmonious atmosphere and destroy economic animosity." However, it was not yet possible at that time to implement such plans in reality. The proposals were bound to fail because of political and ideological precondit ions. In the battle over the "European cartel," some took the view that the European cartel associations should govern themselves because any state influence could only hinder sensible economic development, while others considered the influence of state le aders on the cartels to be unavoidably necessary, although there was no agreement on the form in which the individual governments should exert their influence. What was far more serious in this clash of opinions, however, was the fact that

1) Lou ch eu r , " F ü r d e n e u rop ä i sch en W irt s ch a ft s v erb an d , " in D eu t s ch e Be rg w e rk sz eit u n g, Au gu s t 2 8, 19 26 .

in all the plans anything but purely economic goals were decisive with regard to reasonable intracontinental cooperation. The representatives of the private cartels sought rather to give their capital interests a dominant influence, while for the representatives of the state cartels often only purely political backgrounds were decisive. France and its Versailles friends, for example, sought international cartelizatio n only to protect and promote their own industries, without regard to whether they had a right to exist from a continental point of view. This conflict of views will be superfluous in the future large-scale economy, for on the one hand there will no longer be any discussion about whether the state is above the economy or the economy above the state, and on the other hand an expedient European division of labor based on a fair evaluation of performance will be able to take place without political inhibitions . Indeed, today's policies are creating the conditions for each economic area to be given a position in the European economic community that is commensurate with the natural weight of its achievements. Once the political and ideological foundations have be en laid, the idea of a "European cartel" can be put into practice. The economic policy of the Greater Europe can already draw to a large extent on what already exists. Germany was involved in about 250 international cartels before the outbreak of war. But just as the number of cartels on the domestic market does not give any indication of their importance in terms of volume, the same is true of international cartels. Just as in the domestic market, almost all important products in international trade are su bject to some kind of market agreement. To illustrate the great importance of international cartels, it may be mentioned that in the chemical industry, a particularly heavily cartelized branch of industry, about 60% of exports are made within the framework of international cartels. From the cartelized zones of all branches of industry, a market order radiates on the one hand through the numerous cross connections to other production stages, and on the other hand they have a market-ordering effect, as it wer e in a catalytic sense, even on completely free zones. If international cartels have not been so prominent in the last pre -war years, this fact is essentially due to the fact that private -sector agreements are largely overshadowed by state activity in fore ign trade ' (supply and purchase agreements, import and export controls). In view of the already existing extent of international cartelization, the promotion of the idea of a large-scale cartel does not mean a violent constructivism, as it would inevitably be created by "large -scale authorities", but it represents the reconstruction and expansion of something that already exists. Just as we saw in the treatment of the German market order, however, the idea of the large scale cartel is by no means intended to entail a total bureaucracy of associations. Analogous to the domestic cartel, not every large -scale cartel

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needs to operate within the framework of a tight price and quota agreement. The degree of cartelization depends solely on the respective need for market organization. This, in turn, is determined by the possible need to influence production activity as a whole, or by the need to eliminate unhealthy competition. In this case, however, there will be wide cartel -free zones in the metropolitan area because, in view of the size of the area, production and sales are often geographically localized and thus self -sufficient in terms of market policy.

1. The international cartels

In the free world economy, international cartels had essentially the same character as national ones. At most, special problems could arise if different growth conditions prevailed in the various markets, resulting in tensions on the supply or demand side. In the long term, however, such tensions did not have a particularly unfa vorable effect, both structurally and cyclically, as a result of the extensive interdependence of the world economy. It was only when the responsiveness of the individual economies diminished more and more that this problem could have more serious conseque nces for international cartel policy. As a rule, however, the cartels countered any difficulties by entering into territorial agreements. These are thus basically nothing more than a natural reaction of industry to damage caused or possible damage caused b y the unrestrained international division of labor. However, it cannot be ignored that a rigid territorial order also entailed manifold economic disadvantages. We will deal with this problem in more detail later when we discuss the large -area market organization. By the time of the World War, the cartels had already acquired a significant weight in the world economy, but the principle of free competition must still be considered dominant. It was not until the aftermath of the world war that international cartels gained a dominant position in world trade. Initially, for reasons of supply policy, all important raw materials were cartelized during the world war. After a temporary easing of the cartel situation in the industrial sector in the first years after t he world war due to the great hunger for goods, comprehensive market agreements soon proved to be unavoidably necessary. In the industrialized countries and the warring countries, capacities had been greatly expanded for reasons of war economy, while the f ormer agricultural countries had switched to their own production for lack of sufficient supplies from the warring countries. After the end of the war, these structural shifts naturally had to result in a strong oversupply and thus in price wars. To protec t

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itself from ruin, industry consequently resorted to cartelization. The separation of uniform economic areas brought about by the peace dictates reinforced the cartelization tendencies. One need only recall the establishment of the potash cartel and the international cartelization of pig iron production after the separation of Lorraine from the Reich. Another major cartel wave was triggered by the various currency devaluations since the early 1930s. To counter competition from the devaluation countrie s (and from those countries supplied with raw materials by the devaluation countries), German entrepreneurs sought to secure their former market share through cartel arrangements wherever possible. While the policy of international cartels in the liberal e ra of foreign trade was primarily of a private -sector nature (although private -sector measures did not always have to violate the public interest), cartel measures in the national organic foreign trade policy had to subordinate themselves to the national interest. With the beginning of the national -organic foreign trade era, therefore, a valuation of cartel activities in relation to national interests had to begin. In general, it can be argued that the positive effects of international cartelization (here, only the industrial cartels in which Germany participated are considered, not the large international commodity cartels) outweighed the negative effects. Territorial agreements generally kept foreign competitors out of the domestic market, which was partic ularly important at the time for labor market policy reasons. The price agreements secured a considerable amount of foreign currency, which was particularly important after the currency devaluations. The importance of this point of view can be seen from the fact that, for example, the value of exports from the German chemical industry (which, as already explained, is particularly internationally cartelized) fell to only 46.4% in 1934/35 compared with 1929, while total German exports fell to 31.7% in the sam e period. This relative crisis resistance of German chemical exports is essentially attributed to the favorable effect of cartelization. The negative effects of international cartelization could result from the fact that the increasing spatial orientation within the framework of ' national-organic trade policy was hindered by the more or less rigid cartel agreements. Furthermore, serious disadvantages for the national economy could result from the fact that foreign industry could become the beneficiary of autonomous national economic policy within the framework of overall quota agreements.1)

1) A good ov e r vi e w o f t h e ad van tag e s an d d i sa d van ta ge s o f in te rn at io n al ca rt el iza tion i s gi v en b y Mü l l en si e fe n in Wir t sch af ts - Ka rt eih a n d b u ch , F ork e l - V er la g, Stu tt ga rt, se ct ion : Kar te ll e, in t ern ati on a le,

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In this context, we refrain from discussing the problem of international cartelization in more detail, since, on the one hand, this area has been dealt with in detail in the literature2) , and, on the other hand, th e systematic presentation of the large -scale cartel appreciates the policy of the earlier international cartels.

2. The supervision of international cartels.

Until August 1940, there was no actual German supervision of international cartels or of the car tel policy of German parts of international cartels on the foreign market. Of course, the cartels were bound by the substantive provisions of German foreign trade. For example, the cartels had to observe the provisions of the Foreign Exchange Act in their business policy; furthermore, the examination offices had a substantial influence on the policy of international cartels in the context of their export promotion and monitoring. Finally, the Reichsstellen were able to intervene in cartel activities from th e import side. However, there was no body that centrally supervised and guided the cartels in their legal policy, i.e., there was no centralized cartel supervision. The cartel supervision of the economic groups did extend to the German part or the German member companies of international cartels, but only insofar as the cartel effects on the German market were thereby subjected to supervision. With regard to the international sector, cartel supervision could at best have been described as protective supervi sion, insofar as national cartel supervision was to be exercised in such a way that international agreements were not jeopardized by measures extending to the German part. Thus, the cartel commentary by Müllensiefen -Dörinkel states: "The fulfillment of the new obligations of the international cartels vis -à-vis cartel supervision and the assertion of supervisory rights by the groups must not lead to an aggravation of the position of the German firms vis -à-vis the foreign members of the international cartels. On the contrary, they must be given every justified support. "1)

2) R ef e ren c e i s ma d e in p arti cu lar to L in k e, H e l mu t, "N ati on al w irt s ch a f t u n d in te rn at ion a l e Kar te ll e, " Wü r zb u r g, 1 93 8; F l ec ken , H e rm an n , " Di e Zu sa m m en h än g e z w i sch en Han d el s v ert rä gen u n d i n t e rn at ion a l en K art e ll e n ," E m sd ett en , 1 93 6 ; P i en s, H e in z, " We s en u n d B ed eu tu n g d er in t e rn ati on a le n Kart e ll ie ru n g," B e rl in , 19 3 6, an d th e lit e ratu re c it ed th e re in . 1) Mü ll en si e f en -D örin k e l, "Ka rt el lr e ch t, " Be rl in , 19 38 , X IV, 6 3.

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It is thus assumed - which was probably true in most cases in the last pre -war years - that the existence and activity of the international cartels was in the German export interest by preventing a destructive pricing policy. In August 1940, the groups' cartel supervision was exte nded to the international cartels. However, it represents essentially only an obligation to inform the German members of international cartels. of intended cartel changes of a substantial nature, of new formations and the like. "Der deutsche Volkswirt" writes about this, among other things: "The incipient reorganization of the European economy will give international cartels cause to take account of the new conditions by changing their organization or contracts. Furthermore, new agreements on goods or marke ts not yet covered by international regulation are likely to emerge. On the other hand, the possibility and advisability of cartel dissolutions may also arise. The necessity of harmonizing international agreements with national economic requirements necess itates timely information of the economic leadership and the Reich and economic groups about the intentions of the German participants.1) Such information not only serves national economic interests, but is also in the well -understood interest of the econo mic circles in question themselves. "2) In order to meet the requirements of sensible large -scale planning, international cartel supervision must be substantially expanded and intensified in the future. State supervision of cartels and thus of the European market order must become a permanent institution in the continental economic bloc. The possible organization of future cartel supervision is discussed below.

1) Bl oc ked b y th e au th o r. 2) " D er d eu t s ch e Vol ks w irt, " N o. 51, S ep t e mb er 20, 1 94 0, p a g e 18 65 .

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II The Greater Cartel and its Organizational Framework.

We recall the market order sequence of state - economic group - cartel, which we have also established for the metropolitan area. In this context, we shall refrain from dealing with the state's tasks in the field of trade and monetary policy in the metropolitan area, but rather deal with the problem of European market organization from the cartel side, and then go into more detail on the problems of state economic policy as they inevitabl y arise from the market organization principles of the total metropolitan area cartel. Directly superordinate to the large -scale cartel would be the economic group whose market-regulating tasks we want to see combined in a "cartel unit. The existing cartel units of the economic groups would therefore have to be expanded in line with their new functions. On the basis of the tasks assigned to it, this would correspond on the one hand to the former "Cartel Supervision" department of the Reich Industry Group, a nd on the other hand to the cartel department or the specialized departments of the Reich Ministry of Economics.1) From a practical point of view, the question would have to be clarified as to what kind of division of tasks between these two bodies would be necessary in order to avoid duplication of work. It would be appropriate for the Reich Ministry of Economics to supervise the cartel offices, while the task of the Central Cartel Office of the Reich Industry Group would be to deal with fundamental market organization, legal and intergovernmental cartel issues. However, the Reichsgruppe would also have to be kept informed of all factual problems, as this is the only way to ensure effective work by this body. When the tasks of the "Central Cartel Office" ar e discussed below, the factual and organizational problems are dealt with in a coherent manner, i.e. not subdivided according to the two aforementioned instances. It is inevitable that cartel supervision according to the German model will also be introduced in the non-German economic areas of the Greater European Area. The scope and face of the organization in other countries will, of course, vary according to the degree of industrialization. The following structure and description of the functioning of the cartel organization is based on German conditions.

1) In ou r op in ion , th e in vol v e m en t o f th e R ei ch C h a mb er o f Co m m er ce sh ou ld n ot b e ju s ti fi ab l e fo r r ea son s o f o rga n iz ati on al s i mp l i fi cat ion .

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1. The central cartel office

a) The Central Cartel Offi ce is the supreme market regulation authority; it must therefore α) to make the final decisions in matters of specialized antitrust supervision; ß) to maintain close contact with the highest authorities (economic and trade policy, price policy, raw materials policy, etc.) and to coordinate their decisions in the field a nd their instructions of a fundamental nature to the lower authorities with the authorities in the field. b) The Central Cartel Office shall maintain liaison with any central cartel offices of the other European countries, on the one hand in dealing with important questions of principle and, on the other hand, in deciding on questions of subject matter on which the large -scale cartel or the individual national cartel offices cannot agree. c) Accordingly, the Central Cartel Office shall be the appeal authori ty on the decisions of the cartel offices. Furthermore, the cartel bodies shall complain about any measures, violations and the like of foreign cartels or cartel bodies through their competent central cartel body. d) Antitrust law, which currently varies w idely from country to country, should be redesigned and, if possible, standardized for the entire metropolitan area. e) General principles of market regulation for the European metropolitan area should be worked out. With regard to market organization and cartel techniques, similar basic rules must be drawn up to those which have been or will be drawn up for accounting in accordance with the well -known business management decrees of the Reich Ministry of Economics. f) In the field of business administration , too, cooperation with other countries must be established in order to prepare the ground for a healthy market organization (company comparisons). g) A model organization plan for a large -scale cartel and simple and clear model articles of association sho uld be drawn up. A purposefully structured cartel agreement is indispensable for effective cartel supervision. Due to the historical development and the often innumerable changes in the contractual provisions, many cartel agreements have become a "book wit h seven seals". In the future, an appropriately structured basic contract must be concluded, to which supplementary contracts will be concluded on the details that are subject to ongoing changes. 106

h) Uniform and appropriate classification schemes must a lso be established for the production and sales statistics of the cartels. Sales statistics must be structured in such a way that sales can be managed at any time according to the urgency of consumption. i) A central cartel register must be set up which in cludes not only the German but also the international participants in the large -scale cartels. The cartel register must contain not only the nature of the agreements, but also information on the procurement of raw materials, operating sites, production conditions and the like. To a certain extent, the register must be the mirror image of a large-scale cartel. j) The Central Cartel Office would have to arrange for the publication of a journal entitled "Das Großraumkartell" (The Large -Scale Cartel), in which all fundamental questions of the European market organization, regulations and the like would have to be dealt with from a high level.

2. The cartel bodies

a) The cartel authorities shall be the supervisory body for the individual cartels which are subje ct to their supervision. They may exercise their supervision directly or delegate it to subsidiary cartel offices (specialized groups), which shall be accountable to the cartel office for their policies. b) The cartel units shall be responsible to the Cent ral Cartel Office for their actions. They shall take decisions of fundamental importance only in agreement with the Central Cartel Office. The extent to which communication between the cartel offices and the subject -area organizational bodies may be taken into consideration shall be determined by practical work. The cartel units for their area of responsibility shall be consulted on all decisions relating to the subject matter (e.g. commercial contracts). c) Compensation should be paid to the cartels for da mages resulting from 'measures taken by the cartel bodies which are clearly the fault of the cartel bodies. The higher the level in the hierarchy of the economic organization, the greater the sense of responsibility should be, including concrete liability for wrongdoing. d) The Cartel Office also serves as an intermediary for requests of all kinds from the cartel members which do not relate directly to market regulation tasks (e.g. tax and tariff issues). On the one hand, the Cartel Office is best able to comment on such requests on the basis of its expertise; on the other hand,

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it is expedient that the Cartel Office remain informed about all ongoing problems of its cartels. The extent to which the other units of the economic group are involved in this support activity depends on the circumstances in each case. e) The cartel offices shall cooperate closely with the corresponding cartel offices of the other European sub -regions in order to ensure a policy in their market regulation sector which is in line with the interests of the greater area. Involvement of the central cartel body or governments should only occur in urgent cases. f) In line with our demand that the corporations be fully involved in market regulation, the supervision of the cartel authori ties also extends to the market policy of the corporations. If, as has been pointed out, a loosening of corporate groups can certainly take place in the German economy, international (i.e., intracontinental) grouping will be of great importance insofar as many industrial projects in the various European sub -regions can only be carried out with German assistance.1) However, it is unacceptable that these non-German establishments are "outlawed" in terms of market regulation. The disadvantages of the lack of G erman control over foreign subsidiaries have become apparent many times in recent years. g) The measures taken by the cartel bodies shall not be dictatorial, but shall be taken after thorough consultation with the. respective industry. The cartel body must prefer advisory supervision to regulatory control. If possible, it must not make any "decisions", but rather cartel policy must result from the ongoing trusting cooperation between the cartel office and the cartels. "Decisions," possibly coercive ones, ca n easily undermine entrepreneurial initiative. If, in addition, they are improper, they can significantly endanger cartel morale. Thus, even more difficult problems of cartel policy, such as the establishment of production facilities, expansions, closures, plant acquisitions and relocations, must be decided, if possible, not by "administrative acts" but by "written confirmations of verbally reached agreements. h) Although cooperation on the basis of trust is the rule, certain basic obligations of the cartel s must be laid down by order and, if necessary, enforced by penal provisions. Furthermore, changes to contracts of a substantial nature (the term "substantial" must be defined in more detail on a case-by-case basis), terminations and new contracts must be subject to approval. Furthermore, the cartel must be subject to the obligation to provide information in its entirety.

1) Ho w e v er, th e s e mu st n ot b e ex p lo ita tion p ar ti cip a tion s o f a li b er al n atu re , b u t ex clu s i v ely "d e v e lop m e n t p art ic ip at ion s ". Not own e rs h ip an d p ro fit a r e th e e s s en t ial , b u t in d u str ia liz ati on a id .

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i) Invitations to all cartel meetings must be sent to the cartel office. Participation in these meetings by the Cartel Office should, however, only take place in exceptional cases, since it is expedient (especially in the case of international meetings) for psychological reasons to keep the entrepreneurs "among themselves" as far as possible. This would also correspond to the true concept of "self-government" of the economy. This would in no wa y deprive the Cartel Office of the possibility of influencing the broad guidelines of cartel policy, for, as already stated, all essential cartel measures are to be taken only after consultation with the Cartel Office. For the rest, however, the cartel supervisory body is by no means intended to steer the economy only from the green table. On the contrary, it is in the interest of both economic management and the economy itself that the supervisory body should constantly go into the midst of the economy in order to be able to receive and give suggestions from direct observation. The more the "bureaucrat" draws his knowledge from life rather than from files, the more agile he will become.

3. The Greater Cartel

a) In view of the great change in form and cont ent which the cartel will subsequently undergo, one may wonder whether the word "cartel" (from charter = contract) might not be replaced by another, such as production community", "producers' association", "producers' group" or similar. However, despite th e fundamental restructuring of the cartel system, we consider it expedient to retain the term "cartel", firstly because it is a very succinct word formation, which is also in general use abroad, and secondly because the aspect of the private, i.e. entrepre neurial self -government, is traditionally closely linked with the term cartel. b) The national producers of the individual industrialized countries must join together in national cartel groups so that, on the one hand, a uniform market organization is achi eved in the European sub -regions and, on the other hand, each country can occupy the position in the metropolitan cartel corresponding to the natural weight of its industry. c) It follows from this that the claim to leadership in the cartel is not based on a claim to political power but on objective economic supremacy. As a result of Germany's outstanding industrial potential, the cartel leadership will in most cases lie with Germany. The German claim to leadership, however, means at the same time a moral o bligation. The claim to leadership of the German cartel group should not mean preferential treatment of its own members and abuse of German political power. For example, there must be no toleration of German and harsh persecution of foreign contraventions. 109

The seat of the cartels as well as of the arbitration courts shall, if possible, be in the country which holds the leadership in the large -scale cartel. d) Within each national group of a large -scale cartel, a responsible managing director (head) shal l be appointed, who shall be accountable to the Cartel Office for the decisions of his cartel and for the proper implementation of the orders of the Cartel Office. The head is advised by an advisory board. (Cf. the legal construction of some recent German compulsory cartels). e) Each cartel must be given a clear and unambiguous designation which is to be stated at the head of each cartel agreement. Just as it is desirable, for example, that the inconsistency in the general heading of the balance sheet be eliminated (today we still read a wide variety of headings, such as balance sheet, annual financial statement, statement of assets and liabilities, statement of financial position), the cartel must also have a clear "calling card". Today, we find designation s such as "Convention of the producers of ...", "Agreement on "Agreements concerning ...", or there is the heading is missing altogether, and the contract begins: "Between the companies ... the following contract was concluded -today ... ", whereby the cont ract product is only on the second or third page of the text. Therefore, in the future, each contract must contain the concise heading ,,X -cartel" or "Continental X cartel". This must also be the name by which the cartel is referred to in the business world. f) The cartels shall be based on a German contract text as the original text. Of course, only German expressions have a place in the German contract text '(gentlement agreement = "agreement", "recommendation", "understanding on word of honor" - depending on the situation of the case), inside price = inside price, pool = compensation, outsider = outsider, self -contained market = self-sufficient market etc.). It is not justifiable to use English terms in the "motherland of cartels", even more so if the sub ject matter has developed from specifically German circumstances or the cartels in question have never had English members. g) Uniform standards, dimensions, quality specifications, testing regulations, etc. must be used as a basis in the European metropol itan area. This demand must be made in particular for reasons of labor saving. For example, it is not understandable why a German supplier first converts his goods into the English weight system and the European customer converts them back into the metric system at his plant. Insofar as packaging material, e.g. drums and also processing and packaging machines are set up for the English system, a conversion must be brought about in accordance with the raw material

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situation. Temporary inconveniences mu st be accepted by the countries concerned as "major sacrifices".1) h) Price agreements shall be based on the German Reichsmark. However, this applies only to the first stage of entry, e.g. wholesale or direct consumer, in a country. Detailed prices shall, of course, be calculated in the domestic currency. The price form must be as clear and simple as possible. As a result of the difficult competitive conditions of the pre -war years, a long chain of discounts, allowances, annual premiums, constantly increasi ng delivery and payment terms and the like made the price picture very confusing. In an orderly, large-scale economy, this price confusion will have to and can give way to price clarity. i) The cartels must carry out a market adjustment in political and mo ral terms, which extends in particular to the sales organization. k) Extensive cartel publicity must be introduced. Just as every joint -stock company is now required to submit an annual report, market organizations must also submit reports on their activit ies to the public from time to time. Up to now, only a few "showpieces" have ever been presented to the public. These publications ' then attracted the attention of the entire press and, in particular, the scientific community. Thus, conclusions were often drawn from individual areas that did not always take into account the overall problem of international cartelization. Once the darkness of secrecy has been lifted from the cartels, the often unjustified mistrust of the public and especially of the customers will disappear. l) Any outsiders must be affiliated with the existing cartels wherever possible, taking into account the reasons which have so far kept the outsiders from joining when the cartel is reorganized, taking into account overall economic concerns. This will in no way create "monopolies" in the capitalist sense, since cartel supervision will ensure that cartel policy operates according to public economic principles. The total cartel is not established for monopoly reasons, but to ensure planning success. In the future, however, the outsider will no longer have any possibility of existence, since he will no longer find the market-related starting points for this (e.g., excessive cartel prices that stimulate outsider activity). The industry represe nts a closed community. Therefore, the outsider principle of "profit without sacrifice" no longer applies." For cartel policy, therefore, the principle must apply that what the outsider has previously achieved in positive terms for the economy as a whole 1) G er man y , o f cou r s e, al so h a s to m ak e su ch sa cr if ic e s. In th i s con n ec tio n , r e fe r en c e sh ou ld b e mad e, for exa mp l e, t o t h e m ea su r e s t aken t o con v er t G er man p r in t ed m att er to n or mal typ e. " Sh ou ld w e n o w, in a t i me w h i ch h a s c all ed u s to b e th e ch a mp i on o f t h e E u rop ean co n tin en t, con tin u e to ma k e i t u s e le s s l y d i f fi cu l t fo r th e oth e r n ation s o f E u rop e to gain a cc e s s to ou r wr itt en id ea s ? " Fro m th e a rti cl e "Nu r n och d eu t s c h e Nor ma l sch ri ft, " VB No. 2 60, S ep t e mb er 17, 1 94 1.

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(breaking up unjustified monopolie s) must be carried out from the outset in the form of an expedient market order. But what he has done negatively (inferior quality, ruthless price undercutting) can be eliminated without hesitation. The term "outsider" does not, of course, include industri al enterprises which are self-sufficient in terms of market policy and which need not be included in planning (we refer here to the introduction to "this" section, page 143). m) Cooperation with the export and import trade must be clearly defined in order to avoid the friction that was so frequent in the years before the war. n) The cartels' liaison officers (cartel offices), who carry out statistical reporting, audits, legal consultations, etc., must be sanctioned by the Cartel Office sanctioned. o) The large-scale cartel as an organizational institution has permanent value. Organizational forms and organizational principles must be permanent. The cartel arrangements, on the other hand, are made on a case -by-case basis according to practical market organiza tion needs. Under no circumstances may excessive agreements jeopardize the natural development of the industry concerned. If necessary, the cartel office must decide whether to make use of the available market regulation possibilities or whether "hints" to the cartel members are sufficient to bring about the desired market objective.

III. Large-scale cartel policy

Following the presentation of the organizational foundations of the large scale cartel, we will now deal in detail with the organization of pro duction and sales in the European metropolitan region. Instead, we can limit ourselves to a treatment of the most essential features of a sensible large -scale cartel policy. In order to round off the subject, we also deal with areas (e.g. labor input) that lie outside the scope of cartel policy from case to case. According to the cartel system we have established, large -scale cartel policy is divided into two main areas, namely the production order and the sales order. The production order is the basis of t he entire market policy. In earlier cartel negotiations, production matters were usually "taboo" because it was not compatible with the "master of the house" standpoint of the entrepreneurs that they openly discussed all problems of the production sphere. If the sphere of production was indeed up for discussion, they talked 112

at most about quotas and contingents, but as a rule anxiously avoided dealing with the problem of capacity regulation, rationalization, specialization, and so on. In the future, howe ver, the production sphere must become the focus of all cartel negotiations. Large-scale cartel policy must tackle the market "from the bottom up," i.e., from production, in order to arrive at a meaningful market order. Just as the construction of a house starts with the foundations and not with the roof, the European market order must be constructed from the bottom up. The main reason for the failure of economic policy in the post war period is ultimately that it only "poked around" on the outer periphery of the economy instead of penetrating to the core of the market economy and restoring it to health. The better the production foundation in the European area is ordered, the more freedom can be granted to the subsequent stages of the economic process! Cond itions and price regulations are only of secondary importance compared to the planning of the type and extent of production capacities and their sales direction. In today's terms, it seems incomprehensible that a cumbersome approval procedure is used for e ntering into price commitments, while the determination of production capacity is left to the free discretion of the entrepreneurs. How often, until recent years, it was not economic considerations but capital interests or even entrepreneurial whims that were decisive for the establishment and rebuilding of production facilities! It is therefore untenable in the future to put the cart before the horse of state antitrust policy by dealing essentially only with the market sphere instead of primarily with the production sphere.

1. The production order

For the construction and expansion of production facilities in the metropolitan area, the ranking we established for commodity planning applies analogously (vital, defense, dispensable, and luxury needs). The al location of capital equipment and labor for new construction and expansion projects must conform to this scale of urgency. The large-scale production order must be governed by the principle of intergovernmental division of labor. Only if this principle is consistently followed can the best possible productivity be achieved in the large -scale area. However, there is a limit to the inter -area division of labor. We recall the remarks on the relationship between autarky and the international division of labor, which resulted in the statement that the maximum international 1) Th e p ol it ica l co n s id er ation s wou ld n ot p lay a rol e in th e t ran s fe r o f th is t rai n of th ou g h t to th e m etr op o lit an ar e a - in con t ra st to t h e li b era l wo rld e con o my .

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division of labor woul d lead to "monocultures", which were undesirable from a national point of view1) . But it would not be at all justifiable, even in a large-scale economy, with regard to a harmonious organization of theindividual national economies and thus of the condition s of existence of the peoples, if exaggerated monocultures were bred, for example, in the sense that one country confines itself exclusively to the cultivation of wheat, while another country, which has, for example, extensive forests, pursues exclusively the industry of wood processing.2) But even if this limit is always kept in mind, there are still infinite possibilities of expedient division of tasks between the individual European economies. Therefore, one must by no means make the mistake of disregar ding the demand for international division of labor altogether out of the recognition of a "national economic harmony". This danger exists all too easily. Unfortunately, it is often the case in the European metropolitan area that the problem of "self -sufficiency" is approached too much from a national than from a large -scale point of view, due to national self-indulgence, a lack of thinking in terms of the metropolitan area, or even a lack of trust in the metropolitan area. It is then all too easy for "core autarkies" of the individual sub -regions to emerge, which virtually run counter to the goal of a large -scale economy.

(a) Site and Capacity Regulations.

There are three basic requirements for the location of production sites in the sub-regions of the Eu ropean metropolitan area: 1) The political considerations would play no role in the transfer of this train of thought to the metropolitan area - in contrast to the liberal world economy. 2) Quite apart against it. e.g. from a healthy monocultures, account.

from the fact that purely economic reasons also speak beneficial effects on the productivity of a country result industrial agricultural mixture. In the case of agricultural the danger of crop failure must also be taken into

1. Sufficient domestic raw mat erial base, 2. Qualified labor force, 3. Sufficient sales market. 2) Qu it e ap a rt f ro m th e fa ct th at p u r ely e co n om ic r ea s on s al so sp eak a gai n st it . Fo r exa m p l e, a h e alt h y in d u st ri al a gr ic u ltu ral m ix h a s b en e f ic ial e f f ec ts on a cou n try ' s p rod u cti v ity . In th e ca s e of ag ri cu l tu ra l mon o cu l tu r es , th e d an g e r of cro p fai lu r e mu st a ls o b e t ak en in to a c cou n t .

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This fundamental principle of reasonable economic organization was all too much violated in the Europe of Versailles. Out of the spirit of European disunity and a desire for autarky which ignored any economic calculation, the so-called industrial "hothouse plants" or "parade plants" were created, those industrial foundations of the post -war years which, protected only by excessively high customs duties, gover nment orders, subsidies, overpricing, etc., were able to produce inadequate products with difficulty and hardship. Moreover, the burdens of these industries were often placed on agriculture, which was already in a difficult situation. Such production facil ities had a particularly unfavorable effect, however, when protective tariffs became "aggressive tariffs" and the markets were thus disrupted by "political" prices contrary to all economic reason. Likewise, those productions should be mentioned here which were only able to produce reasonably cheaply as a result of destructive competition among upstream suppliers and thus through unjustifiably low prices. Of course, there must be no intention to develop Germany as an industrial country and to more or less re actarize the other countries, because even if the three conditions mentioned above do not always apply, many industries are so closely connected with the economic structure of the countries concerned that shutdowns would cause severe upheavals in the econo mic and social structure of the country in question. Although cost considerations are of great importance, it must not be overlooked that the location problem in the future Europe is no less a question of national regional planning. In addition, it must be emphasized that site planning according to the cost optimum is often correct in theory, but can turn out to be a miscalculation in practice, since on the one hand the parameters of the site calculation can change (e.g., shifts in sales, changes in the raw material base), and on the other hand any shutdown costs can bring disadvantages which cannot be compensated for in the long run by ideal cost site planning. Shutdowns may only be justifiable in particularly extreme cases, but otherwise an appropriate reb uild will also meet the requirements of reasonable production planning. In any case, a positive program must be drawn up before a shutdown so that unfavorable repercussions on labor input and supply can be avoided. In the future, unused capacities should n o longer exist, if possible, because they represent dead capital and dead labor. Therefore, indiscriminate (from the point of view of the national economy) production shutdowns under cartel agreements, as they have often been carried out in the past for pr ivate-sector reasons, must no longer be tolerated. Such shutdowns are completely unjustifiable if they are associated with high compensation sums that do not burden anyone other than the consumer.

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Since we will have a largely demand -supply economy in Europe, generation capacity will be matched to demand. Since the latter is almost unlimited, the main emphasis of large -scale economic policy will be on the sensible coordination of the industrial structure. The difficulty of this task must by no means be underestimated. The former guide of investment activity, the "market" with its exceedingly finicky components, cannot simply be replaced by "plans." Activation of entrepreneurial initiative on the supply side and in depth consumption research on the demand side will be the indispensable pillars of the guided investment policy. In the manufacture of war -essential products, Germany will basically have to be given the lead in production, in accordance with its political leadership in the continental area. On r ational consideration, the small states will come to the conclusion that for them to maintain their own armaments production would mean a misdirection of labor and capital. "The present war has proved sufficiently that a few artificially set up armament pl ants without a broad heavy industrial basis are meaningless for military power. War -economic independence is possible today only for economic areas of continental scope. This experience, too, shows that progress can be sought only in cooperation and that short-sighted armament ambition is of no use, but does a great deal of harm. "1) Since Germany's armaments capacity could not be fully utilized in peacetime, but decommissioning is not desirable, the possibility and necessity arises for Germany to give prio rity to exports of industrial goods during peacetime. This export will have to be directed primarily overseas, since the vital needs of the European area in peacetime and in wartime should, as far as possible, also be satisfied equally in the civilian sect or, i.e., the conversion of German capacities to full wartime production should not in the future impair the supply of the rest of the metropolitan area too much, as will unfortunately have to be accepted in this war2). If it was said above that it is by n o means in the interest of the greater region to break up the non -German capacities to a large extent, it must be pointed out, moreover, that in many cases it is precisely in the German interest to have a healthy industrial base in the other sub-regions. Although the industrialization of other countries prevents German exports of consumer goods, it in turn creates much greater needs as a result of increased purchasing power and technical necessities. 1) "In d u st ri al izat ion in th e Sou th ea s t? " fro m "F ran k fu r te r Z eitu n g " o f A p ril 24, 19 41 , No. 20 6/ 20 7. 2) Fu rth er mo r e, u n fo rtu n ate ly , it mu s t n o w b e acc ep ted d u r in g th e w a r th a t, b e cau s e o f th e l i mit ed G er ma n ab i li ty to su p p ly , h er e an d th er e c ap a cit i es w il l b e b u ilt i n th e E u rop ean are a wh i ch a r e n ot d e s irab le f ro m th e st an d p oin t o f e xp ed i en t lar g e - sc al e p lan n in g . In th e s e in d u st ri e s, a p os si b l e lat er c on v er si on t o oth e r p rod u cti on a r e as wil l h a ve to b e con sid e re d fro m th e ou t s et.

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For example, the European southeast will be a much larger market for German industrial goods if the surplus population, whose purchasing power is extremely low, is integrated into the economic process through appropriate (labor-intensive!) industrialization. On the other hand, as the experience of the last decades has shown, industrial ization will always bring with it new needs of a higher order. The textile industry, for example, has a constant need for expensive machinery. In addition, however, textile production requires valuable auxiliary products such as tar dyes, finishing agents, etc., which can essentially only be obtained from Germany. It should be noted, for example, that the quantity of chemicals used in the production of rayon is three to four times the quantity of pulp. In principle, therefore, Germany is not opposed to the industrialization of the other parts of Europe, but merely has an interest in influencing the degree of industrialization and directing it according to overall needs in order to bring about a reasonable intracontinental division of labor. The slogan is not "destruction of industries, but expedient reconstruction". It is interesting to note that a similar policy has been adopted in the East Asian metropolitan economy, where the original intention was to concentrate industry in the Japanese island region, whi le Manchukuo, for example, was to remain exclusively a supplier of raw materials. In the course of practical work in the greater region, it was realized that a reasonable mixture of industrial and raw material economy - with one or the other area predominating in each case - was expedient and therefore industrialization was also promoted in Manchukuo. We remember the three basic requirements for location: raw material, labor, sales. In practice, it will never be the case that each subspace is self -sufficient in the interaction of these three factors. It is precisely the goal of the large -scale economy to overcome the lack of one or the other factor by complementary exchange with other subspaces. Thus, a country will not be able to fully process its natural p roducts because it lacks qualitative labor (labor in the broadest sense of the word, i.e., including intellectual labor, as well as the state of scientific research, etc.).' It will then be the right and the duty for this country to give the raw materials to more suitable space members for processing under reasonable conditions, before they are made available, for example, to non -space areas. Analogous to the principle that large -area needs must be met first in the metropolitan area itself, is the requireme nt that large-area raw materials be processed first in the metropolitan area itself. It will also often be the case that the sales basis for processing industries, which are based on particularly rich domestic raw material deposits and for which the factor labor is available in sufficient quantities, is not given in their own area. In the large -scale economy based on the division of labor, this circumstance will not be serious if the labor order of the entire area has recognized the production of the sub -area in question as expedient in itself. Due to the extensive elimination of "sales barriers" in

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the large-scale economy, the absence of these location conditions will be inconsequential (see section "Sales order", page 176). The factor "labor" must be discussed in more detail in connection with location policy. The factor "labor" differs fundamentally "from the other two factors of location determination in that it is determined not only by rational, but also by idealistic points of view. The following three principles apply to the use of the factor "labor": a) There must be no unemployment in the metropolitan area. Insufficient or no employment of the working population endangers the national, social and political objectives of the members of the metropolitan area. In order to achieve full employment or to avoid unemployment, however, the labor force should not be handed over to foreign conglomerates, if possible. The European metropolitan area must create the conditions to ensure that in the future its best workers are no longer given to foreign continents and thus lost to the European community of nations. b) Every manpower must, if possible, be employed in its own country. "Only the soil which a nation plows itself belongs to it in the long run, and the coal which it produces itself belongs to it. coal belongs to it, which it mines itself. No nation can leave such basic work - even if it costs a lot of sweat and is connected with dust and dirt - to laborers of other states. Foreign labor may help here i n addition or at peak performance, but the vital production itself must be secured by forces of one's own people. "1) c) The use of labor must be as rational as possible in the European production order. In practical large -scale organization, considerable tensions will now arise in the attempt to satisfy all three demands. If, for example, one were to adhere to the view that the labor force should be employed only in its own country, unemployment would be the inevitable consequence in the overpopulated countries. On the other hand, the employment of all workers in their home country would often contradict the principle of the most rational use of labor. The inevitable consequence of eliminating such "tensions" will have to be the exchange of labor. Countries with a surplus of labor will transfer workers to countries with a shortage of labor. In a large -scale community of nations, there is nothing to be said against such a migratory movement insofar as it not only avoids the uprooting of the workers, but also serves to promote the individual and collective interests of the large area. 1) S tat e S e cr eta ry Dr . S y ru p , " Arb e it s ein sa tz i m E u ro p ara u m" in " Deu t s ch e Ze itu n g in d en Nie d e rla n d e n " N o. 2 24, of Ja n u ary 1 7, 19 41 .

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"The worker can maintain himself and his f amily in the homeland by his earnings, he learns new methods of work in new surroundings and can later use his experience beneficially in the homeland, for every country and every occupation with an unmet need for labor is advanced in the rationalization o f work, in the use of working machines and technology ... The country surrendering surplus labor is thus relieved of material care for it; nor does it run the risk that these workers, through no or insufficient employment, will be weaned from work and beco me an antisocial element of the population; the savings flowing into the home country increase its power of consumption and production; the economy of the country, on the return of the workers, has the benefit of having forces accustomed to work, whose ext ended knowledge and experience are not to be underestimated. And the host country, through the increased input, is able to advance its tasks and thus serve its part in the overall metropolitan economy. "1) The European labor input policy must, however, set itself the goal of not encouraging an unhealthy mixing of European peoples and races. For national and political reasons, it would not be appropriate for a country to rely constantly on foreign labor. In the long run, therefore, the intensification of the domestic economic forces of a. In the long run, therefore, the intensification of a country's domestic economic forces must take into account the development of its population. However, seasonal workers (e.g., in agriculture and the construction industry) , whose stay in a foreign country lasts only a few months of the year and who return home to their families in the meantime, are an exception.

b) Technical production order.

As early as 1930, the International Chamber of Commerce had decided to combine the study of rationalization with that of cartelization. However, one did not essentially get beyond the usual committees, conferences, enquêtes and resolutions. The reasons are of the same kind as those we gave for the failure of the European cartel idea. Only the large-scale cartel will be able to vigorously promote rationalization in the European area. A comparison of the development of the North American and European automobile industries alone shows the undreamed -of possibilities and prospects for ratio nalization in the European area.

1) S tat e S e cr eta ry Dr . S y ru p , " Arb e it s ein sa tz i m E u ro p ara u m" in " Deu t s ch e Ze itu n g in d en Nie d e rla n d e n " N o. 2 24, of Ja n u ary 1 7, 19 41 .

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The problem of standardization, typification and standardization boils down to the economic goal of creating higher and more valuable production at cheaper prices with less labor.1) On the one hand, due to Germany's compulsion to export, on the other hand, due to international competition on the European markets, Germany has had to adapt to the demands of foreign customers for the most diverse types to a large extent. While rationalization made good progress in the German domestic economy, the industries involved in exports still had to adhere to a sometimes incalculable number of export products, which made production more expensive, but also made raw material planning more difficult. On the one hand, through agreements in large -scale cartels, and on the other hand, through changes in consumption, consumers must learn to do without the mul titude of types. In wide areas of the economy, this need not involve any loss of taste or quality. As an example, consider the iron material requirements of a southwestern European country. This was met from Germany, England or America, which led to the us e of a myriad of types. As a result of the closer economic ties between this state and Germany, only German types can be used in the future, which is also advantageous for the customer country due to the associated cost reductions and labor savings. There is no need to go into detail on the advantages that typing means for stockholding, especially in the metropolitan area. However, even in the field of rationalization, the national character of the individual European regions must be preserved, namely when the products of industry are at the same time cultural carriers. All special designs, which originate from a healthy national custom, must not be subject to schematization under any circumstances. Here, all cost considerations must take a back seat to the requirements of culture. In the future, entrepreneurs will no longer have to produce a large number of articles, often in a wide variety of industrial sectors, in order to achieve an overall turnover that is as crisis-proof as possible. Since sales are lar gely assured in the European region, companies can specialize in a specific, narrowly defined production program and thus reduce the cost of production and intensify technical research. However, specialization must not lead to "calcification". Care must be taken to ensure that specialization and economic stabilization do not breed "industrial pensioners. Price competition, which used to be the most important incentive for progress, will only exist to a limited extent in the

1) In p art ic u la r, t h e d e man d f o r th e p r od u c tion o f so - cal l ed "p eo p le ' s go od s," i .e ., in e xp en si v e m a ss -p rod u ced g ood s f or th e b r oad st rata o f t h e p op u lat ion , w ou ld h a v e to b e ext en d ed to th e me trop olit an a re a a s w el l.

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future.1) The task of pricing policy in the future will be to se t prices in such a way that competition is transferred to the operating sphere from the outset. "The slogan must no longer be "price competition, but production competition. By bringing about an appropriate specialization of production, a meaningful coordination between large, medium and small enterprises can be achieved at the same time, and the latter two forms of operation can be given a larger field of activity. This line of thought is of decisive importance for the development of a meaningful European economy, i.e. one that takes into account the ethnic dispositions of the individual subdivisions. Some countries - especially France, for example - have had to endure industrial giants in the course of capitalist leveling, which are difficult to reconcile with their national character and style of work. In the future, the international division of labor will have to be carried out in such a way that the industries of not very advanced countries will confine themselves to the production of only "simple types, while Germany will be left to manufacture more complicated types. Good preliminary work in this field has been done by shifting orders to the occupied territories. Germany will to a large extent provide technical assistance to the other countries of Euro pe in so far as it concerns the establishment and expansion of industries which are within the scope of large -scale planning. This is an expression of the European community spirit that the other nations should not have to pay the price that Germany had to pay for its technical progress. On the other hand, however, Germany must have access to all the experience gained abroad so that it can evaluate it in the common interest. The often jealously guarded secrets of entrepreneurs must be used unselfishly for t he benefit of European production as a whole.

1) On th e o th er h an d , on e rep ea t ed ly h ear s th e vi e w th at c om p et iti on (i. e ., p ri c e co mp eti tio n ) for t h e ma rke t w ou ld re su m e a ft e r th e wa rti m e ec on o mi c sh o rtc o min g s h ad b e en el i min at ed . T h e r e is e ven a r em in d er th a t p ri c e co mp eti tio n mu st r e - e m er g e i f th e ec on o my i s n ot to st agn ate . Th e au th o r w il l d ea l w ith th e i mp or tan t top i c o f "p e rf or man c e an d co mp et iti on " i n a sp e c ial p ap e r. T h e r ef ore , on ly a f e w c ou n t er -a rgu m en t s a re m en t ion ed h er e : Pri c e c omp et it ion cau s e s p ri ce p re s su re , b u t p r ic e p r e s su r e in tu rn ca u s e s th e co mp u ls ion t o in cr ea s e p er for m an c e. In a con tr ol le d e con om y, h ow e v er, it i s n o t n ec e s sa ry t o t ak e th e ( s om et i me s lo n g, e con o mi cal ly u n p ro fi tab l e ) d et o u rs o f co mp et iti on in o rd e r t o i mp ro v e p er fo r man c e ( so m et i m es in t h e ca s e o f u n d e s irab le p r od u c tio n co mp on en t s ). Man y p o s si b il it ie s o f th e in cr ea s e in ou tp u t wi ll a ri s e ra t h er a lr ead y b y th e fa ct th a t on e ar ran ge s th e fa cto r s of p rod u ct i on fr o m th e ou t s et o u t p u t - act i v ely . T h en th e re i s s ti ll th e p o s s ib i l it y o f p r ic e p r e s su r e b y m ean s o f c on tr ol le d p ri c e s ( s e e se ct ion on p ri ce r e gu la tio n ) . Fu r th er mo r e, h o we v e r, it m u st b e sa id to th o s e ad mon i sh er s th at th e sta te h a s n o in ten tio n ( in th e in t er e st of p ro gr e s s an d th u s o f con su m er s ) o f wa iti n g s o lon g a ft er th e en d o f th e wa r u n ti l d e man d p r e s su r e ( wh ich i s wh at tr ig ge r s co mp et iti on in th e fir s t p la ce ) ar i s e s a g ain . Th e b roa d gu id e lin e s o f th e s e p o li ci e s, h o w e v er, a re in f lu en c ed or c o -d e t er min ed b y th e st e er in g b od ie s o f th e s tat e.

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In this context, a unifica tion of patent law is also necessary. In this area, the situation in Europe is particularly confused; each state has its own system of industrial property protection with its own patent laws, so that there are about 30 different patent systems in force in Europe, which cause a lot of superfluous work and many inconveniences. Von Knieriem makes the interesting proposal1) to set up the German Reich Patent Office as a "patent clearing center" for the entire European area. The German authority would have to car ry out the central preliminary examination of all patents, whereas the individual states should grant the patent in each case - for their national territory as before. Knieriem said, among other things: "It would probably be right to take the German patent law and the Reichspatentamt as a basis; this is proposed not so much because we expect an increase in power and influence after a German victory, but because of the goodness of the German patent law and the work of the German Reichspatentamt, which is rec ognized throughout the world, and because of the reputation of the German patent based on this. "1) In many cases, it will cause great difficulties to convince the individual members of the large -scale cartels of the expediency of a certain European production plan. Political pressure should be avoided at all costs in such cases. If there are obviously egoistic self -goals, the economy itself will find ways to bring about the desired production order. Within the framework of a large scale economy based on th e division of labor, the interdependence between the individual economic areas has developed to such an extent that any "troublemaker" can certainly be made compliant by some economic measures. In many cases, for example, it will be possible to achieve the objectives in the overall economic interest by blocking intermediate products. For consumers, a similar means of education can be applied if they do not want to depart from unjustified special wishes with regard to production types. By adding 10 or 20% to the price of special types, consumers will soon become comfortable in using standard types.

c) Operational production order.

The business management production order aims at the exact cost screening of the production processes at the members of the larg e-scale cartel. For successful business cooperation, however, a uniform terminology is again the basic requirement.

1) "E u rop äi sc h e V e re in h ei tli ch u n g d e s g e w erb li c h en R ec h t s sch u tz e s u n d Urh eb er r ech ts " b y Kn i er i e m in th e jo u rn a l " Ge w e rb l ich er R e ch t s sc h u tz u n d U rh eb e rr e ch t " of May / Ju n e 1 94 1.

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There is probably no other field of economics where terminology is as confused as in business administration. In practice, it must be noted time and again that the lack of uniformity in the most primitive formal requ irements makes factual cooperation immensely difficult. However, this would have an even more unfavorable effect in the cooperation between enterprises of different economies. Prof. Dr. E. Schneider, Aarhus, described the terminological difficulties partic ularly vividly in a lecture given in Berlin. In his presentation on the possibilities of business cooperation between Denmark, Sweden and Norway, he said: "Each of the three countries has primarily sought to create a national terminology with the result th at today there is unparalleled linguistic confusion in our field; it is impossible to call from one country to the other. The two essential prerequisites for fruitful intergovernmental research and joint work in the field of business administration are th erefore not even present in that part of Europe which, from a cultural point of view, tends to be called a unified area. In view of such a state of affairs, can we hope at all for fruitful cooperation in business administration between the peoples of the European continent? We must be clear about one thing: If we do not succeed in creating a terminology that is accepted and understood by all members of the European economic area, then there will be serious difficulties in solving the major tasks of the near future - I am thinking, for example, of international business comparisons. If, therefore, intergovernmental research work in business administration is not to remain just an empty word and is not to be exhausted in courtesy events, but is to aim at joint ly contributing to the solution of questions that are vital for the European continent, then the first prerequisite is that the partners involved speak the same language of business administration. And it must be possible, at least in the field of accounti ng, to arrive at a standard terminology that is just as binding between countries as is the case today in the field of natural sciences and technology. "1) However, one should not be deceived about the usefulness of managerial insights for effective market regulation. Business administration may well be an essential aid, e.g., in price determination, but it will never be able to replace pricing policy itself. The so -called "calculation cartel" is therefore not seen as having any development potential in the European large-scale economy. Again, we must point out the diversity of national temperaments in the European area. In view of the still missing awareness of order in many European regions, calculation guidelines will never be able to replace price fixing. The determination of fixed prices therefore offers a more reliable means of detecting underbidding than the orientation of pricing according to

1) E . S ch n e id e r, "Z w is c h en sta atl ic h e b e tr ieb s wi rt s ch a ftl ic h e Fo r sch u n g, " S ch r i ft en r ei h e 19 41, H ef t 2 d es V er e in s zu r B ef örd eru n g d e s G e w erb e fl ei ße s v on 19 21 , p ag e 12 /1 3.

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any calculation factors. "... For let us be clear about this: the calculation of real and appropriate earnings has become such an easily obscured matter in the age of multiple bookkeeping, of salaried economists and business lawyers, and of abysmal calculation sciences, that it cannot be dealt with in convoluted ways and with the deceptive collection paws of an endless palavers of experts…”1) This sentence is based on German conditions. But how much greater will be the difficulties of the correct determination of costs in the European area.

2. The paragraph order.

The sales order results organically from the production order. Without a sensible production order, a healthy market order is no t possible. If, in foreign trade, the manifold "sales restrictions" (tariffs, quotas, import bans, etc.) have hitherto been regarded as the cause of the impediments to interstate economic transactions, it must be emphasized, on the other hand, that the deeper reasons lie in the defective order of production. The intracontinental production order will bring the prerequisite for the elimination of foreign trade barriers and thus already carry in itself the sales order. This applies not only to the sales direc tion, but also to the sales volume and the sales price. If a sensible production order is established between the individual sub -regions of the metropolitan area, numerous other difficulties in international trade, such as discrimination in the right of es tablishment, in taxation, in the treatment of compulsory certificates of origin and declarations, etc., will also be avoided. In our antitrust system, we divided sales order into area (territory) order, quantity order, technical order and price order. In a ccordance with this system, we will deal with the sales order in the metropolitan area.

a) Area and quantity order.

Production capacities in the metropolitan area shall be adjusted as far as possible in terms of location and volume to the natural sales a rea as well as to the anticipated demand. 1) Fr o m " T h e B lac k Corp s, " May 19 41 .

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There must no longer be a constant discrepancy between optimum utilization of the plant and the market's capacity to absorb it. The very purpose of large scale planning is n ot to produce "haphazardly" for a "market" in the liberalist sense, but to give each production a precise predetermination. Quota fights will therefore be largely superfluous in the future large -scale cartels, because the sales quotas will coincide with th e capacities recognized as economically necessary. In an orderly large -scale economy, it is no longer justifiable for a wild struggle for sales to break out without regard for natural operational and spatial conditions, simply to secure the highest possibl e quota. In some branches of the economy, one has to observe a division of territory that is anything but in line with sound economic sense. The "quotomania" that has arisen either from the desire to secure sales at any price or from a purely capitalistic hunger for power must be consigned to the past.1) For cost-related and general economic reasons, the respective domestic market will be reserved for domestic production in the future. However, this is in no way intended to advocate rigid territorial isolat ion. Of course, the principle of home market supply only applies if the production of this home market has been recognized as justified according to the principles of the intracontinental division of labor. A healthy mixture of sales on the "home markets" is quite desirable; it is in the interest of a lively cooperation between the metropolitan partners and an interconnection of the markets. The earlier tendency of international cartels to focus primarily on securing the home market was due, in addition to reasons which are still justified today (e.g. freight savings), in particular to the instability of international price conditions and the uncertainty of the legal basis of the international cartel. On the other hand, too great a price burden was often imp osed on the company's own market, which, in addition to the territorial agreement, was possibly protected by a protective tariff. In the large -scale economy, neither uncertain price nor legal relationships are to be expected. On the other hand, however, an overpricing of the domestic market - possibly in favor of the foreign market - cannot be considered fair in an economic community based on the division of labor. Thus, in many cases, rigid territorial demarcations may be relaxed in the future. In addition to home reserves and divided markets, so-called "disputed territories" will no longer exist in the future, unless healthy sales conditions exist even without market regulation.

1) Con st ru c ti v e in d u s tri al p lan n in g w il l b e fa ci l itat ed a ft er th e war b y th e fac t th at, a s a re su lt o f th e ma jor str u ctu r al ch an g e s in th e E u rop ean mar ke t s in c e S ep t e mb er 1 9 39, i t wi ll h ard ly b e p o s sib le t o e sta b li sh u s e fu l " re f er en c e p er iod s ". Ho w ev e r , th e s e we r e o ft en ob s tac l e s to a r eo rg an iz ation o f th e p rod u cti on b as e in th e o v e ra ll in t er e st.

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Trade policy import quotas will become superfluous as cartel quotas take their place. The more the system of area and quota cartels is expanded, the more trade policy quotas will become superfluous. In many European countries, quotas have already been largely abolished. Even if the external cause was the great shortage of goods, which made the maintenance of import restrictions seem inappropriate, the new methods of sales policy, i.e. industrial agreements, have in the meantime proved so successful that in the future the quota economy will only be of secondary importance in intracontinental trade. If possible, precautions should be taken to ensure that overseas exports or, more generally, business outside the metropolitan area is conduc ted primarily from Germany. The metropolitan area has an interest in representing as uniform a trade weight as possible. This tendency would be impaired, however, if the export supply of the European bloc were to be fragmented. Since foreign trade with ove rseas is necessarily conducted on a two -way basis, consideration could also be given to routing imports from overseas centrally via Germany. The remaining European sub -regions would be allocated their share of the overseas imports, determined by negotiatio n, via the European central clearing system. The guarantee of a sufficient supply of the European sub-regions will exist already on the basis of the fact that Germany, in view of its high purchases of agricultural products and raw materials from the small European countries, will have to direct overseas products to these countries in addition to its deliveries of industrial goods in order to avoid payment passivity. Such an arrangement is all too natural and has nothing to do with the exploitation of a poli tical supremacy. In the course of this war, the overseas countries have pushed their self -sufficient efforts to such an extent that, as a rule, only the top products of European industry will enjoy lasting sales success. Here, however, Germany, as the lead ing industrial country, will be the given export factor of the metropolitan area. Germany thus helps the other areas of the European metropolitan area economy to secure an appropriate share of the natural resources of the rest of the world, with which they would not be able to supply themselves to the same extent from their own resources. The point of view of German leadership in overseas business is, of course, not to be applied schematically. Cases are quite conceivable in which, for political or economic reasons, another European sub -region is also entrusted with mild overseas business. However, precautions must be taken to ensure that anti -spatial forces do not exert a detrimental influence on the Greater European Community via the detour of involvement in overseas business. The overseas business of the metropolitan cartels will not be able to be ordered in the same way as the continental market. While in Europe both the supply and the demand side are largely subject to the continental principles of order, overseas the principle of free competition will still predominate. It 126

will mainly come down to a trial of strength with the U.S., while arrangements would have to be made with Japan in the spirit of the three -power pact. The official report on the me eting between Reich Minister Funk and the Japanese Foreign Minister in March 1941 states: "The purpose of the discussion was an exchange of ideas on the organization and deepening of German -Japanese economic relations and on the basis for the organization of trade and payments between the European and East Asian areas after the victorious conclusion of the war. 1) It is to be expected that these friendly arrangements will be made not only for the two major areas but also for third markets, especially South America. In contrast to European business, which will have a more planned economic character, the foreign trade merchant will basically be left to his own devices in overseas business. However, the policy of the Greater Region will have to provide extensiv e support to the merchant, especially to the export merchant. This is especially true in terms of prices. While in Europe, as we will see later, export subsidies can be reduced more and more, they will be more necessary than ever in overseas business. A characteristic feature of overseas business will be the increased re engagement of trade. In European business, import and export trade will not be superfluous (e.g., the assortment business)2); however, it will take a back seat to direct sales. However, in order to make the overseas business as successful as possible in the future, various regulatory measures by the state are also necessary, despite its' basically free -flowing character. Unreliable, inexperienced and incompetent export traders should be deni ed permission to engage in overseas business. Furthermore, the market would have to be regulated in such a way that German firms would not undercut each other under any circumstances. Twenty or thirty German firms could no longer be allowed to participate in a single tender in South America. However, selection among overseas traders must not result in a monopoly for a few firms. Healthy competition must be maintained by a constant influx of fresh blood. In order for the export and import trade to meet the d emands placed on it in the future, it must also be placed on a sound financial platform. The export and import trade, for example, cannot be expected to continue to work with the overhead margins of the pre-war years, while its "colleagues from the large -scale economy" are reserved a less risky and far more lucrative business. In order to be able to carry out a space -own market organization, the metropolitan economy has to carry out a certain strangulation against the outside world, be it through customs du ties ("external tariffs")1) , quotas or 1) A rti c le "E in s ch ar f e s In s tru m en t " f ro m th e " Fran kfu rt er Z e itu n g, " M arch 30, 19 41, No . 16 4/ 16 5. 2) C f. th e c om m en ts b y Dör in g , Fr itz, " Au sf u h rh an d e l in d er Gro ß rau m Wi rt s ch a ft, " "K öln i sch e Ze itu n g " N o . 11 1/ 11 2, of Ma rch 2, 1 9 41 . 1) Th e si gn i f ica n c e of "i n te rn al ta ri f f s, " on th e o th e r h an d , i s, a s we sh a l l s ee in th e s e cti on on " Pr ic e r e gu l ati on ", w ill b e la rg e ly l i mit ed can b e re s tri ct ed .

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import bans. In many cases, exclusive agreements between the economic levels of the metropolitan area economy will also be sufficient, all the more so because the economic discipline developing in the overall area and the interdependence of the economic entities of the metropolitan area economy make the "spatial interest" pred ominant.

b) Technical paragraph order

Even the most expedient production order would fail to achieve its goal if it were not accompanied by radical rationalization of sales activities. In terms of labor input and costs, a great deal of sin has been commi tted in the area of marketing. What was the use of German export companies reporting gratifying export successes, while 20, 30, 40 or even more percent of the foreign exchange earnings flowed back abroad via the detour of incidental costs for irrational sales apparatus, high agent commissions, travel expenses, advertising costs, etc.? Thus, high export figures often gave only a deceptive picture of the true "foreign exchange effect". Even if the "foreign exchange" problem in the European region will recede into the background in the future, special attention must nevertheless be paid to the distribution problem in Europe for reasons of supplying consumers at the lowest possible cost. It is also a matter of decency for the people working in production, who ar e responsible for the higher-quality economic performance, that the distribution organization should claim only that share of the national product which is justified on the basis of actual and most rational distribution performance. The distribution has to relearn in terms of costs and earnings. In the epoch, in which the world was under "sales pressure", it was the selling (indifferently whether the direct sale or trade), on whose achievements the weal and woe of the production enterprise depended in the s ubstantial measure. In the context of a demand covering economy, however, distribution is once again what it can only be in a healthy market order: a function of distribution. Distribution can therefore claim only that share of the national product which c orresponds to its output. It has already been pointed out that in the European area, distribution would largely be carried out by industry itself. This is in fact an inevitable consequence of the large -scale market organization. In principle, the trade will be completely eliminated in the case of large production volumes, while it will have a certain field of activity in the case of small and, in particular, mixed volumes. But even in the case of direct distribution, concentration and rationalization can s ave people and costs. 128

Some of the key words are: joint sales offices, sales representative associations, warehouse associations, joint market research, market observation and advertising. Advertising, in particular, will be more rationalized because it will no longer be necessary to chase customers away from each other, but instead to work together to provide customers with more advice. The large-scale cartel will again be able to provide valuable services in the technical organization of sales. The sho rt-term nature of most cartel agreements, which can be explained by their combative character, or the uncertainty of sales trends have so far made it understandable that companies have been reluctant to dispense with their own sales apparatus and methods. The crisis-proof and orderly large -scale economy, on the other hand, will create the conditions for the consolidation and standardization of the sales apparatus. However, any exaggeration and schematization is also inappropriate in the field of sales. Unde r no circumstances do we see the creation of tight "European syndicates" with their headquarters in Berlin as generally desirable. These would soon grow into colossi like foreign trade monopolies, which would all too easily slip back into the waters of an unhealthy distribution-oriented policy. Depending on the nature of the products, their sales volume and the distribution of sales in the various regions, full syndicates (for the entire metropolitan area) or broken syndicates (for organically connected are as, e.g. for the southeast, north and west of Europe) will be formed, or self -distribution by all or individual cartel members will be maintained.

c) Price order.

α) The way to the large -scale price. If it has been emphasized that the production order carries within itself the basis of the market order, there is no doubt that the price order is an indispensable correlate of the production order. While the production order represents the totality of the links of the economic body attuned to optimal efficiency, the price order is the nervous system that triggers the interaction of the links. If the nervous system is not intact, the best -constructed links cannot fulfill their functions.

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The price system - or rather the price disorder - in Europe needs a fundamental reorganization if it is to contribute to the best possible promotion of the productive forces of the metropolitan area on the one hand, and if it is to ensure a fair evaluation of performance between the sub -areas on the other. Even if the so-called "cost price" is by no means to be elevated to the price ideal in the metropolitan area economy, a reasonably healthy relationship between costs and prices mus t be regarded as the basic requirement of metropolitan area price policy. Unfortunately, in many areas of international trade before the war, price ratios were found to be grossly disproportionate to service ratios. After "sales pressure" had largely disor ganized foreign trade price levels until the world economic crisis, further shifts in foreign trade price structures occurred from the beginning of the 1930s onward as "export pressure" increased. However, it was not until the various currency devaluations and the fundamental cuts in foreign trade relations associated with foreign exchange control that price relations between countries became completely disordered. Price relations became particularly confusing, however, when internal or external export prom otion measures were used in a way that was not in line with market conditions. Let us just consider the various European currency devaluations from 1931 until the outbreak of war. They resulted in exchange rate devaluations of about 22% to 60%.1) If one takes into account that the price level in the devalued countries rose only hesitantly in many cases following the currency devaluations, and if one further considers that German export prices were already very depressed to a large extent before the currency devaluations, one can appreciate the sacrifices made by the German export industry to supply the German economy with urgent import goods. There is no need to give practical examples of the sometimes appalling undervaluation of the highest achievements of German industry in exports. It goes without saying that the interstate price structure of the pre -war years cannot be carried over into the large -scale economy. The epoch, which was under the motto "Export or die!", has come to an end. It expressed the wil l of the German national economy to assert and develop its life in a time of world economic unreasonableness, whatever the cost. However, the previous practices of international performance evaluation are no longer compatible with Germany's future position .

1) I f th e e xch a n g e rat e d et eri ora tion s a re exp re s s ed a s a p e rc en t ag e of th e n e w exp ort p ri ce s, i. e . r ed u c ed i n acc ord a n c e w ith t h e cu rr en cy d e v alu ati on , exp ort lo s s es o f 28 to 15 0 % r e su lt ed for th e c ou n tr ie s w ith n on -d e val u ed cu r re n cy !

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The German economy has repeatedly been reproached for the fact that it was not the "foreign trade barriers" that forced Germany to adopt its new foreign trade policy methods, but that, conversely, it was Germany's trade policy methods that caused the foreign trade ba rriers in the first place. We will briefly address this accusation from the point of view of prices. It cannot be denied that in the first years after the introduction of foreign exchange control, German exporters often consciously or unconsciously pursued an undisciplined pricing policy with the help of bond, scrip and block mark transactions. However, with the increasing development of the state's foreign trade organs, this state of affairs was largely eliminated. Germany can even claim credit for having consciously worked toward fair, large -scale price formation since the mid -1930s. Germany realized that in the long run it was pointless to wage a ruthless competition against foreign industry. Experience up to 1935 showed that in the event of inorganic exp ansion of export business, countermeasures by foreign countries in the form of tariff increases or even direct import restrictions could almost always be expected. German export prices were therefore largely adjusted to the prevailing market conditions, even refraining from expanding or even maintaining export volumes. In the process, Germany consciously accepted price disadvantages not only in exports but also - in the form of price increases - in imports within the framework of reciprocal trade. If German y has now exported below cost, it is nevertheless unjustified to speak of "dumping". Dumping according to the classical definition occurs when the export price is lower than the home price of the exporting country or lower than the exporter's cost price. T his concept of dumping could have been justified in the age of unrestricted world economic trade and the consistent international division of labor. However, after the individual economies largely "decoupled" from free trade by means of trade policy measur es and especially after the currency devaluations, the concept of dumping lost its justification. Currency devaluation, as exemplified by the very accusers of German conditions, put all exporters - provided the domestic price level did not rise or did not rise significantly, which was true for a period of several years in the relevant devaluation countries - in a position to undercut to the extent of the currency devaluation without selling "below cost". The result was an indiscriminate tearing down of expo rt prices, which in turn forced competitors with non -devalued currencies to follow suit. It can be seen that the concept of "selling below cost" has thus lost its meaning. One should therefore refrain from always associating the term dumping with the expor ter's costs or cost recovery, but rather focus exclusively on the price and sales side, for example by accusing the exporter or the exporting country of dumping if it indiscriminately derouted prices in a sales country and sought to expand its sales withou t taking into account the production and market order in that country. In this sense, however, Germany had been working for many years before the 131

war to adapt its sales and price policy to th e prevailing market conditions. Thus, while Germany's export price policy before the war sought to stem the steady decline in export price levels, Germany, on the other hand, refrained from exploiting the shortage situation in the European region that set in after the start of the war by undisciplined price increase s. German export price s were raised only when it would have been irresponsible to stick to the previous basis in view of the rampant import price increases. The extent of German export price increases since the beginning of the war, however, is nowhere nea r that of import price increases. It has been an expression of the responsibility of German economic management for European economic life not to retaliate for earlier price sacrifices but to put a price brake on German exports. Given the importance of Ger man exports for the individual European countries, especially during the war, German export price policy has contributed significantly to preventing serious economic damage in these economies. ß) The large-capacity price. The "large-area price justified by the economy" is an extremely complicated structure, firstly because it cannot shed the dross of the previous "foreign trade price" overnight, since the latter is usually firmly rooted in the economic structure of any economy. On the other hand, however, t he newly formed large-area price without historical precedent is also complicated in that it must exhibit extensive differentiation according to a wide variety of viewpoints. Price formation in the future large -scale economy can by no means proceed according to the very simple principle "average European cost price + reasonable profit = price in Europe". The most serious deficiencies in the structure of foreign trade prices - i.e. the "historical burden" - have already been eliminated by the war itself, nam ely by the extensive equalization of European price differentials. From August 1939 to March/April 1941, for example, the index of wholesale prices rose by 55% in Sweden, 61% in Norway, 80% in Denmark, 63% in Switzerland, 35% in Bulgaria, and 103% in the f ormer Yugoslavia.1) In Germany, on the other hand, wholesale prices rose by only 5% during the same period as a result of the general price freeze. As a result of this development, German export promotion measures were largely eliminated. The war thus cont ributed substantially to the transition of the foreign trade price structure to the zone of equitable performance evaluation.2) In peacetime and under free wholesale arrangements, these corrections would probably never have been possible. 1) Yu go s la vi a, h o w e v er, fro m Au gu st 19 3 9 to F eb ru ary 1 94 1. Ac co rd in g t o th e r ep o rt o f th e Re ic h s - Kr ed it ge s e ll sc h a f t o f m id -1 94 1 on "P ri c e s an d Cu rr en ci e s in E u ro p e an d O v er s ea s, " p ag e 1 3. 2) In s om e ca s e s, th e in d i v id u a l n a tion al p ri c e le v e l s h a v e al re ad y ex c ee d ed th a t o f G er man y , so th at e v en d own wa rd cor r ect ion s w i ll h a v e to b e ma d e a ft er th e w ar.

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Within the "zone of justice", the large -area price will have to show a meaningful differentiation because in the European large -area economy not only the cost price and the purchasing power show strong differences by nature, but also the cost shifts caused by the autarkic tendency of the large area have to be taken into account in the price system in a meaningful way. In European price differentiation, however, the metropolitan area cartel will again be an extremely suitable instrument. There are no problem s of price policy and no problems of price technology which have not been solved by the cartel - especially the international cartel. When we discuss the principles of price policy in the European metropolitan area below, we assume that they are most appropriately implemented within the framework of a metropolitan area cartel. If the objective principle of organization is disadvantageous for the national economy in terms of price control, it is even more so in the large scale economy. Price policy can fulfi ll its task in the far more difficult conditions of inter -area performance measurement only if it forms an organic part of a central market organization policy, of which the cartel is an instrument. We will return to this line of thought below. We must now account for the essential features of managed price. It is a mistake to believe that price policy in the total market order is a simple matter. One could, however, make it easy for oneself by applying schematic methods, such as those represented by stop p rices1) , universally binding trade and profit margins, etc.. In the long run, however, the demands of a sensitive economy cannot be met in this way. A price regulator must have complete mastery of the laws of liberal price formation, for they are valid as long as an economic system grants the economic individual any self -interest and self -interest at all. In addition, the price regulator must also be very familiar with the methods of price control when it is necessary to intervene in the "free play of pric e-forming forces" in the interest of the economy as a whole. Indeed, the greatest difficulties often arise when the price coordinator has to constructively set new prices and thus anticipate the reactions of the economy that will result from his price fixi ng. A useful theory of the controlled price, which must always be a "just" price, i.e. a price determined by the overall interest, is not yet available. If in the following we point out some basic features of large -scale price formation, this is by no mean s intended to be an attempt at a theory of managed price, but merely to round off our consideration of market organization in the large -scale economy. Directed prices can be divided into two broad groups according to their objectives:

1) T h i s i s n ot to d i mi n i s h th e g r eat i mp o rtan c e of th e Ge r man p ri c e fr e ez e re gu l ati on fo r th e sp e cia l ci rcu m st an c e s o f th e p r e - war an d w arti m e p e riod .

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1. the production-oriented price, 2. the consumption -oriented price. The former aims at maintaining and promoting or inhibiting production, the latter at promoting or inhibiting consumption. In a National Socialist economic system, the former must always be a p erformance price (i.e., it must remunerate only actual, and indeed the best possible, performance of entrepreneurs or suppliers and not contain monopolistic or "profit" elements); the latter is usually a social price, because it will always take into accou nt the needs of the broad strata of the population. It is obvious that there are inseparable organic interrelations between these two price policy directions. It should only be pointed out that consumers are at the same time cost factors in the production sphere. However, in order to obtain as clear a picture as possible of the essential features of managed price, thi s systematization is expedient.

1. The production-oriented price.

a) The individual out put price. The output price is made up of the cost price and the entrepreneurial profit. The specific feature of the output price is that it does not recognize these two elements unconditionally. Price policy in the total market order is rather interested in the composition of these items and tries to influence them either for reasons of production policy1) or for reasons of sales policy1) . Price policy can trigger the following production policy effects: aa) Quantitative production support, bb) quantitative production inhibition,

1) Th e fu n d a m en t al p re req u i si te fo r p r od u c tio n con t r ol b y me an s o f p ri ce p ol icy i s th e exa ct con n e cti on b e t we en c os t s an d p r ic e o f th e p rod u c t to b e con tro ll e d . A " m an ip u lat ion " of th e p r ic e cal cu l ati on of d i f f er en t p rod u ct s or e ve n of t h e en t ir e p r od u cti on p ro gr a m of a co mp a n y w ou ld m ak e b ot h th e c om p an y a n d th e in t er - co mp a n y rati on al iza tio n o f p rod u cti on v e ry d i ff ic u l t. Th e p r oc ed u re o f c al c u lat in g th e en ti r e en t r e p ren eu ria l p ro f it in p ri ce p oli cy m ea su r e s, as h a s b ee n p op u l ar l y ap p li ed u p to n o w, mu st th e re fo r e b e ab an d on ed in th e fu tu r e if p r ic e p o li cy i s n ot to d ep r i v e i ts e l f o f i t s r eg u lato ry fu n c tio n . 1) Th e r ea s on s o f sal e s p oli cy in th i s c on t ext c o n s is t m er el y i n mak in g p rod u c tio n a v ail ab l e to c on su m er s a s ch eap l y a s p o s si b l e, i. e. in th e g en era l ob je ct i ve o f an y p ri c e p o li cy. T h e sp ec i fi c sal e s p ol i cy m ea su r e s a r e d eal t with u n d er t h e s e cti on " Th e C on s u mp t ion - Ori en te d Pri c e" .

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cc) business production support, dd) technical production support. This provides the price policy c orrelate to large-scale production planning. Autarky measures and other production planning measures can be implemented successfully only if they are accompanied by a supportive price policy in the sense that the price provides a sufficient incentive to su pport these measures. Inhibiting prices are intended to curb production that is undesirable in the large -scale economy, whether, for example, by making it more difficult to obtain overseas raw materials or by providing price policy support for the use of r aw materials, labor and capacities for other production areas. Far more difficult than the area of influencing production in terms of volume is the area of promoting rationalization and progress by means of controlled prices. Here, the market regulator can not only draw up "plans", but must seek to sense the intensity and direction of entrepreneurial initiative in order to bring it into line with public service objectives by means of clever price policy measures. It is necessary to discuss this difficult com plex of questions in more detail. Since the - regulative of price competition in the metropolitan area is substantially limited1) , the controlled price must take over the function of the economic efficiency increase and the development promotion in the production sphere. The determination of the "price justified by the economy of large areas", i.e. the price which on the one hand triggers the healthy functions of free competition and on the other hand takes into account the specific objectives of the econom y of large areas, is extremely difficult. On the one hand, it must not be so high that any initiative for progress and rationalization on the part of the entrepreneurs is extinguished. On the other hand, a price that is too low would also entail the danger of the entrepreneurial initiative becoming rigid. This would be particularly the case if fixed entrepreneurial wage rates were introduced or if, which would be tantamount to this, every success in progress were automatically skimmed off by corresponding p rice reductions. price reductions. One might soon make the observation that the skimmed profit would be compensated by "inertia costs"! The latter remark raises an important, if not the most serious, problem of the future economic order.2 ) 1) C f. th e n ot e on p a g e 17 1. 2) A f e w m on th s af te r t h e co mp le tio n o f th i s w ork, th er e h as b e en a w el co m e ch an g e in th e fi e ld o f p u b li c p ro cu re m en t fr o m co s t p r ic e t o fi x ed p r ic e . It is n o l on ge r th e in d i vi d u al co st s for a p a rti cu l ar o r d er th at a r e to b e d e ci s iv e fo r p r ic e d et er m in at ion , b u t rat h e r a fi xe d p ri c e - wh i ch i s, h ow e v er, a l so ca lc u la ted on th e b a s i s of ty p i cal c alcu lat ion s - th at i s va lid for a lon ge r p eri o d . Sin c e th e co n tra ct or i s at th e sa m e ti m e a s su red th at ad d iti on al wo rk d u e to in t er i m i mp ro ve m en ts in th e c o sti n g b as i s w il l n ot b e sk i m me d of f, an in c en ti v e is c re at ed for h i m t o r at ion a liz e an d p r o mot e p r ogr e s s.

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The present constraints in the field of pricing in Germany, if they were to become permanent, would certainly have considerable disadvantages for the development and technical progress of industry. Just think, for example, whether the unique technical successes of the German chemical industry (nitrogen, gasoline, light metals, Buna, etc.) could have been achieved if it had been necessary to work on the basis of the LSE, i.e., starting from the cost price and allowing a profit of up to about 10%. With such a schematic assessment of the profit, no entrepreneur would in the long run take the risk, let alone the initiative, for large -scale technical experime ntal work. This places an enormous responsibility on the market regulation bodies. They must not only be calculators, but also good psychologists. In each industrial sector and in each European region, the situation can be completely different. For some industries, development tasks are no longer given, so that the price has to perform exclusively the function of rationalization pressure or even of mere cost compensation. Other industries are still capable of development to a high degree. However, there is another important aspect: entrepreneurs who serve progress out of love of work and healthy ambition are usually content with a lower profit margin than those for whom entrepreneurial activity is primarily a means to an end, namely to the end of improving t heir personal living conditions.1) There it is more the joy of creating, here the pleasure of consuming, which makes life worth living. In the European metropolitan area, the "costs" of the initiative can thus present a very different picture. The difficulties of the price problem make it understandable how important it is to include price control in the central market organization. A "price regulator" for a specific area would never be able to familiarize himself with the real conditions in his branch of industry to the sam e extent as a "product regulator" for a specific field. In making this statement, we must by no means be deceived by the successes of the German price commissioner. We must take into account that the price commissioner has for years drawn on the "initiativ e substance" of the German entrepreneur and that, in addition, the war has triggered a "sacrifice initiative". We must be aware that there will be a break in the curve of entrepreneurial initiative and that the best success will not be achieved by the market organizer who can constantly come up with "snappy" price reductions for his superiors, but that the ultimate success will be achieved by the one who sets the "right" price. The success of a pricing policy cannot be expressed exclusively in figures. If, for example, a price reduction 1) In th e d i s cu s s ion of " en tr ep re n eu ri al p ro fit , " h o w e v er, it i s o ft en ov er loo ke d th a t a " fu n g ib i li ty" o f m on e y , i. e. al so o f p ro f it, n o lo n ge r e xi st s to th e fu ll e xte n t in th e t ota l ma rk et o rd er, b e cau s e t h er e ar e man y p o s sib il it ie s fo r e con o m ic m an ag e m en t t o in f lu en c e th e u s e o f en tr ep re n eu ri al p ro f it wit h r ega rd to ma cro e con o m ic n e ed s. P rof it i n th e ord e rly ma rk et e con o my th u s h as a co mp l e te ly d i f f e ren t m ean in g f ro m th a t in th e lib e ral i st ec on o my, e v en if b oth s h ou ld h a ve th e sa m e l e v el .

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of 10% is decreed, a concrete improvement of the consumer's purchasing power in the amount of this percentage occurs, but what is not measurable is the retroactive effect of this reduction on the initiative of the entrepreneu r. Any impairment of his initiative has the effect of a creeping disease. Its effect is not felt until it is too late. One may then realize that it would have been of greater advantage to the community if it had made a "sacrifice" to the entrepreneur's initiative, that most precious commodity of an economy, in the form of foregoing a price reduction. To observe the vital forces of the economic body continuously, i.e. to estimate the behavior of the initiative potential of the entrepreneurs always correctly, can only the market manager who is in close contact with the reality of life in his area of production. It is not through medical screening, as would be brought about by a centralized coordinated pricing policy, but through the good family doctor -the product steward-that the health and growth of the body can best be assessed and promoted. The product manager does not even need to put his ear very close to the body of the economy in order to be able to perceive and diagnose its slightest stirrings in time1), but for him a look into the eyes of the patient is often sufficient to be able to prescribe the right medicine. Now, the advocates of subject-specific pricing policy will raise an objection that certainly cannot be dismissed out of hand. Rentrop -Kayser say: "Pricing policy has a chance of success only if it is structured on a supra -disciplinary and supra-ressort basis. A look at practic e proves this; where this principle is not followed, the pricing policy has failed to be a resounding success. As a rule, therefore, the responsible head of a country's supreme price authority will have to report directly to the respective head of governme nt. He or she should stand not below, but alongside, the line ministries (trade, commerce, food, forestry, social affairs, etc.). The departments always see price issues only through their departmental glasses. The head of industry, trade and commerce, for example, usually strives to keep food prices and thus the cost of living low in order to keep wages and thus production costs low and to be able to sell his goods competitively against other countries, while the head of agriculture, in turn, strives to in crease the prices of his agricultural products in the interest of agriculture. It is the task of the head of pricing policy to balance these different interests and to keep them aligned with the overall interest. Only a pricing authority that is independent in all directions can pursue a policy of 'economically justified prices and charges.) 1) F or mu lat ion a cco rd i n g to R en t rop - Kay s er, "Pr ei s p ol iti k u n d Pr e is ü b e r wa ch u n g in E u rop a, " Mu n ich an d B e rlin 1 94 1, p ag e 32 . 1) F ro m "P r ei sp o li tik u n d Pr e i sü b er wa ch u n g i n E u rop a, " b y Re n tr op - K ays er , Mu n i ch an d Be rl in 19 41, p a ge 3 0/ 31 .

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The danger of a professional interest policy would undoubted ly exist if price control were included in the central product control, if the market regulation bodies were autocratic entities.2) However, as in the total market order all economic events do not take place autocratically but within the framework of a large whole, on the one hand the supreme market -ordering authority will supervise its subordinate bodies with regard to their price policy. On the other hand, however, we are in no way advocating the abolition of the objective principle of organization in the price field. What we consider appropriate is merely to reduce the objective price control to the determination and coordination of the "broad lines" of price policy. The supreme price authority has to work out the general price tendencies from the work of the market regulation bodies, on which it has to report continuously, and from this, in turn, to give the market regulation bodies practical working lines for their price policy. If the objective organizational body does not confine itself to the steering function, but wishes to determine directly the entire price formation from coal to the cleaning agent of the one -man operation, there is too easily the danger - and also the necessity - if it works responsibly, that it will have to set up an enormous orga nizational apparatus and objectively examine every price winner down to its finest ramifications. The consequence, however, would be that the price authority would come very close to a specialized market regulation authority in terms of scope and mode of o peration, which would lead to a double organization; in order to be able to do a good job, the price authority would ultimately have to take an interest in all economic processes in a production area (raw material situation; production and sales conditions). In this way, it would perform almost the same tasks that are also incumbent on the central market regulation bodies. But there is another aspect to consider. Just think of transferring this functional price policy to all sub-regions of the metropolitan a rea! Inter-regional cooperation would encounter immense bureaucratic difficulties. Such inconveniences have already developed in the course of the expansion of state price control in the European area according to the current German model. Some European pricing authorities today already operate with such thoroughness that they prefer to approve a much -needed large-scale price that does not meet, say, a particular paragraph of the Price Regulation. One must not be guided in these lines of thought by the pres ent situation in the price field. It is clearly under the sign of "price buoyancy"; in it, therefore, the price commissioner also had to gain a predominant position. However, the closer we get to the equilibrium between supply and demand after the end of the war, the more price policy measures will be able to be integrated into the harmony of overall economic policy. Indeed, if a sphere of price pressure were to re-emerge here or there, the interest of economic policy would probably

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shift primarily to the p roduction side, and thus the primacy of the technical principle of organization would clearly become apparent. In addition, it has to be said that the way in which a manager approaches his tasks also plays a decisive role in the problem of technical or fun ctional management in the price field. If the future price managers take the same economic policy initiative as the present price commissioner, they will certainly be no less successful. b) The cartel compensation price. If it is already difficult to det ermine the correct price for a single plant, the price problem becomes even more complicated when several plants produce the same product or when the production sites of an entire continent are to be brought to the same price level. Even if the starting co nditions of all entrepreneurs are largely equalized, wages, raw materials, power costs, different capacities, freight rates, etc. will result in a strong differentiation of the cost price. Consider, for example, the extremely cheap electricity in Norway, the cheap lumber in Sweden, the low wages in the Balkans, the favorable freight rates of production facilities located on waterways, etc. From the multitude of different service prices, prices must now be formed which represent the most expedient link to th e consumption price. The most important balancing factor in interstate trade has been the tariff. It will retain its importance as long as other methods of market organization ar e not developed. It would be a mistake simply to abolish customs duties in order to bring about cooperation on a large scale, i.e. to establish a customs union, without the function of customs duties being taken over by other regulatory factors. A mere customs union would create more disadvantages than advantages. "... And all those will be wrong who believe that by a customs union all European countries would be united, in order to set up thereby practically only again a reduction of the English world econ omy. Customs unions are a means of eliminating superfluous difficulties between two economies of the same level. A fundamental elimination of customs barriers in today's Europe would unnecessarily disturb and endanger the growing together of the European e conomies by premature experiments. "1) In many publications, the example of the German Customs Union is cited as a model for the "European Customs Union". It must be pointed out, however, that this example is not valid insofar as the industrial economy at the time of the German Customs Union was still in the early stages of development, while today's customs walls conceal many "fully developed" economic entities with quite different structural forms. 1) H e in r ich Hu n k e, "V ol k u n d Rau m in d er w irt s ch a ft sp o lit i sch en N eu o rd n u n g E u rop a s," Jou rn a l o f G eop o lit i cs , Volu m e 1 7, I s su e 12 .

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In dealing with the tariff problem, we must recall our presentation of the future European production order. We saw that only those capacities will have a right to exist which are justi fied in terms of large -scale economy, and that only these capacities will be guaranteed secure production and sales conditions within the framework of the European market organization. This, however, puts a different face on the tariff problem. Just as we see the trade policy quota slipping into the large -area cartel quota, the tariff will be nothing more than a price factor in the context of the large -area cartel. Since industries are already granted "protection" by production and sales agreements, the tra de policy weapon of the protective and prohibitive tariff is transformed into a pure problem of finance on the one hand and cartel price compensation or consumption burden on the other. As far as the financial problem is concerned, it should first be said that, for reasons of market order, financial tariffs should be largely eliminated in the future in the European large-scale economy. This will be all the more possible the sooner the states can make up for the corresponding loss of revenue by increasing th e general productivity of the large -scale economy and thus by increasing tax revenue. We need not deal with the problem of price equalization and the consumption burden in this context. It can be included in our general considerations of this problem area. The customs problem of the future large -scale economy will thus be: Not customs unions, but industrial agreements and thus, on a case -by-case basis, reduction or elimination of tariffs.1) Market regulators and cartels will have to prove that industrial ag reements can bring about a more appropriate and flexible market organization than is possible with the rigid and schematizing tariff principle. Before we turn to cartel equalization, a brief word should be said about the inter -company price equalization procedures that exist in addition to customs. In particular, government subsidies, tax policy and rail tariff policy come into consid eration here. As a matter of principle, we are of the opinion that a market organization unit (cartel) should use supra -company means only in very exceptional cases. The cartel is not only a performance community, but also a victim community. Therefore, th e cartel must first and foremost take possible price compensation within the framework of its own market organization. The psychological significance of the primacy of cartel compensation is obvious. 1) Ho w e v er, t h i s wi ll n ot re su l t in a g en er al el i mi n ation of cu sto m s p o li cy as an in s tru m en t of lar g e- s ca le p rod u ct i on . A p art f ro m th e fa ct th at cart e l s c an n ot b e e stab li sh ed in a ll are a s, i t i s q u it e c on c e i vab l e th a t cu st o m s d u t i e s wi ll re ma in in p l ac e ( e. g. if a stat e d o es n ot p art ic ip at e fu l ly i n th e w ork o f th e G r eat er Ar ea an d d o e s n ot w i sh it s " trad e so v er e ign t y " to b e i mp a ir ed ) . In an y ca s e, h o w e v er, a g en er al "E u rop e c lau s e" wi ll h a v e to ap p ly to th e e con o m ie s p ar ti cip a tin g in th e Gr eat er Ar ea. It go e s wi t h ou t sa yin g t h at a u n if or m an d , ab o v e al l, u n i fi ed cu sto m s ta ri f f wi ll h a v e to b e wo rke d ou t fo r th e m etr o p ol ita n ar ea .

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By using state funds, the responsibility of the cartel to master the fate of the entrepreneurial community by its own efforts would be impaired. The idea of performance would be diluted if the item "state aid" were to find its way into industrial calculations all too easi ly. Here, some of the mistakes of pre -war economic policy must be made good. Inter -company funds should only be used if the cartel community is not able to provide the services on the one hand and a burden on the consumer is not considered desirable on the other. For example, rail tariff policy would have to help overcome the remoteness of peripheral areas from the market. Government subsidies would be considered for supporting large new material projects. Tax policy would be used in particular to pursue na tional and social objectives (e.g., tax policy for eastern regions). Now we come to the large -area cartel equalization itself. The purpose of cartel equalization is to equalize different output prices if producers with different production conditions "meet " in a given market sector.1) This formulation of cartel compensation will initially come as a surprise. Until now, "cartel equalization" was understood to mean the equalization of over or underdeliveries in terms of quantity or value. When revenue equalization took place, it usually involved the offsetting of over - or underpricing at a transfer price guaranteed for all cartel members (e.g., average revenue). As a rule, therefore, offsetting took place only in the sphere of quantity or revenue, but only in very rare cases did it penetrate into the sphere of cost price, in the sense that, at given prices, offsetting took place between the producers' cost/revenue margins or pricing was closely based on pur e cost price. Up to now, the cartel price was basically based on the cost price of the marginal enterprise.1) The other enterprises then reported so -called differential* profits, i.e. they had an additional profit in addition to the "pure output prices", which already contained an appropriate compensation for profit and risk. v The economy has been aware of the inadequacy of this leveling procedure as long as cartels have existed. This is why there has been constant concern about "further deepening of the p ricing policy [to the effect] that the actual production costs of the various goods should be more strongly reflected in the prices".2) 1) I f th e r e is on ly on e p r od u c er or i f th er e ar e s e v era l p rod u c er s w ith th e sa m e p ro d u c tion con d iti on s, th e "p u r e c o st p r ic e ", a s d i sc u ss ed i n th e p r e vi ou s s ec tio n , can b e ad op t ed a s p ri ce s, u n l e s s sp e cia l sa le s p ol icy co n sid er ati on s ( s ee s e ct ion " Th e con su mp t ion -o ri en t ed p ri ce " ) h a v e t o b e ta k en in to ac cou n t. 1) A mon op oly p o si tio n of th e car te l i s a s su m ed h er e. W e mu st tak e th i s mon op ol y p o s iti on as g i ven in p r ic e p ol icy con sid e rat ion s in th e c o n te xt o f th e t ota l cart e l . ( C f. h o w e v er ou r re ma rk s o cca s ion a lly in th e t re at m en t o f th e ou t si d e r p rob l e m in th e t ot al ca rt el (p a g e 1 58 f f. ) on th e n atu r e o f th e fu tu r e mon o p oly ). .. " 2) T s ch i e r sch ky , S ., "K ar te llp o li tik, " B er lin 19 3 0, p ag e 72 .

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Following this line of thought, it was now hoped that increasing rationalization and standardization would lead to a leveling of the cost level. Efforts were also made to achieve more cost -oriented pricing by loosening price restraints (e.g. by mean s of calculation cartels). However, a fundamental change in cartel pricing policy has not been achieved. On the one hand, standardization and typification have not yet progressed to the point where they have had a cost equalizing effect, and on the other h and, due to a variety of economic policy measures (e.g., labor input, raw material management, inclusion of even the least efficient capacities in the production process), cost divergences tend to be even greater than in the past. On the other hand, howeve r, there has been no loosening whatsoever in price commitments. "Today, there is a lot of talk about "good operations" or "medium -quality operations". This is to be decisive for the price assessment in place of the past border enterprise. It is questionabl e whether this method can remedy the weaknesses of marginal cost pricing. First of all, the determination of the average good operation will cause some difficulties already in a purely formal sense. Which value should be decisive: the simple arithmetic mea n, the weighted arithmetic mean, the central value, or the densest value? These values can often have large differences. The purpose of the mean value is, on the one hand, to induce the "bad" farms (those in the zone of cost undercoverage) to improve their production conditions, but, on the other hand, not to give the better farms a more favorable pension because the farms beyond the mean value work poorly or have to remain in the market due to supply conditions. However, the first objective will often prov e to be unattainable in practice. The management of poorly performing companies will have no or only an indirect influence on a whole series of cost factors. Only the problems of the location, the size of the enterprise, the degree of employment, the assor tment of goods, the employment of labor, the procurement of raw materials, the financing, etc. and the resulting different cost structures in the enterprises are to be discussed. The entrepreneur will not be able to change many cost factors even with the best will in the world, so that he would fall into the loss zone through no fault of his own. How much more difficult is the problem now in the metropolitan area with its even greater differences in level! Neither the price calculation according to marginal costs nor according to medium -quality operations seems to us to be suitable for providing a basis for the price justified by the large -scale economy. Instead, we consider the "cartel compensation price" to be an appropriate and, above all, fair price basis . The cartel compensation price is a price formed by pooling the "pure performance prices" of the cartel members. We recall that the price for performance is the price which, on the one hand, leaves a reasonable profit for the entrepreneur,

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but, on the other hand, is also capable of exerting pressure for rationalization if necessary. By the cartel compensation price the most favorable price position for the consumer is reached undoubtedly in so far as the differential profits, which would be taken due to un changeable production conditions of the bad enterprises by the good enterprises (over their genuine achievement rents!), fully benefit the consumer. This demand will hardly be approved by the "good" farms. However, as we will try to prove by the following example, the cartel compensation price has a full factual and moral justification, especially in interstate economic transactions. Let us assume for the sake of simplicity that for a given product there are only two producers, namely a German and a Norwegia n company. These two firms will have to charge the pure output price for those quantities they sell in their home markets. They will also be able to charge this price in all other markets where they do not "meet". As a rule, the reserve markets will not be included in the cartel compensation calculation because the cost price, as an expression of the natural production conditions of a country, should also reflect the natural consumption, i.e. living conditions. A new price will have to be formed in all markets in which the two producers now appear together. If we assume, for example, that the pure output price of the German company is RM 14.00 and that of the Norwegian company RM 10.00, the third markets will not be charged one or the other price without fur ther ado, but a new price will have to be set taking into account the purchasing power ratios of these markets. In our example, let us assume that in third countries a wholesale price of RM 12 is necessary or appropriate. In this case, the Norwegian compan y would have to accept a differential profit of RM 2, while the German company would have to accept a loss (assuming that the full or partial non -reimbursement of a fair profit is already to be evaluated as a loss) of RM 2. The cartel compensation price now requires the Norwegian company to transfer the excess profit to a cartel fund, which in turn uses it to compensate the German company for its loss-making large-scale price.1) As far as the technical side of this procedure is concerned, the following can be said: The settlement of over - and underprices takes place via the cartel office or directly between the cartel members. If over- and underprices in a particular cartel do not balance out,

Note a ft er p rin tin g th e wo rk: 1) Wh il e i t i s i mp o s s ib l e to h an d l e d i ff e re n t p ric e s in t h e fr e e m ark e t, th i s i s o f cou r s e p os s ib l e fo r p u b l ic c li en ts . Th e lat t er m eth od i s rep r es en te d b y th e "g r ou p p r ic e s " wh i ch are n o w t o b e i n tr od u c ed fo r p u b li c c on tr ac ts . Th i s i s an i m p ort an t st ep in th e d ir e cti on w e h a v e ou t lin ed . I f th e id ea of th e " grou p p ric e " i s a p p l ie d to th e su p p ly o f th e fr e e ma rk et, th e in e vit ab l e c on s eq u en c e mu s t b e th e " ca rt el c o mp e n s ati on p ric e " d i s cu s se d b y "u s ".

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the cartel settlement could be extended to the effect that the responsible "cartel office" collects or distributes the differential amounts. If possible, however, each cartel should seek full compensation within itself, so that the compensation system does not become too complicated. One might be inclined to regard this compensation procedure as a new bureaucratic device which unnecessarily complicates interstate trade. However, any economist familiar with the export policy of the past decade will, on closer study of this procedure, come to the conclusion that it offers a far more individual and flexible means of accommodating the justified interests of producers and consumers from the individual sub -regions than the state price gouging which has been customary up to now. Moreover, the system of cartel equalization will not, of course, be applied to all ar eas of inter-regional trade. First of all, all self -sufficient markets will be eliminated. In addition, in large areas of intracontinental trade, price fixing will not be necessary in such a way that the price is already formed according to the law of supply and demand, without market -regulating influence, on the basis of principles which do not run counter to the overall interest. Finally, in the case of divided markets, cartel compensation will only be considered if the level differences are particularly sharp and if significant volumes are involved. Now we come to the justification of the factual necessity and justification of the cartel compensation. The Norwegian entrepreneur will object that his cost price is based on a higher output and therefore the e xcess profit cannot be taken away from him. On closer examination, this argument will prove to be untenable. First of all, we assume that the Norwegian's more favorable production costs are not based on a false cost price for intermediate products. This possibility must be particularly emphasized in the case of the Nordic countries. The more favorable cost ratios of the Nordic producers are due not least to extremely depressed prices for German intermediate products, which were formed in the era of destruct ive competition between German, English, American, French, etc. competitors. The maintenance of these prices is not justifiable in an orderly large -scale economy. Should the Norwegian producer still have substantial cost advantages (e.g. through cheaper el ectricity) despite reasonable prices for intermediate products, then our remark must be recalled that the managed price is nothing other than the price of the free competition economy, corrected by large -scale economic objectives. Assuming free competition between the German and the Norwegian producer, the Norwegian will hardly stick to a price of RM 12. He will lower it to RM 11, - or even RM 10,- depending on the particular circumstances (possibilities of capacity expansion, reaction of the German competit ion etc.). This is not a theoretical assumption, but everyday practice. We refer only to our remarks made at the beginning of this chapter on European price conditions before the present war. If the Norwegian is now assured an adequate market share at a 144

price of RM 12 by the large -scale market organization, the excess price of RM 1 or RM 2 is not his own merit, but that of the market organization system. Therefore, he cannot justly lay claim to this excess profit. Another objection could be that the Norwegi an company acknowledges that the overprice of RM 2.00 is an effect of the market regulation system and therefore agrees to pay it to the German producer, but not to the German producer, since this would "keep his inefficient company afloat". This objection would be valid if the German price of RM 14 were based on an uneconomic production method. However, we expressly assumed that the price of RM 14.00 was a "correctly determined output price", i.e. that this price fixing was, to a certain extent, the macroe conomic sanctioning of the production reaching the market. Thus, our compensation system can only be a mixture of such cost differences for which a company is not responsible. The objection therefore leads to the question: Is the maintenance of the German operation justifiable in terms of location and production or not? This question, however, would fall into the realm of considerations about the production order. If we now assume that the German plant has higher cost prices as a result of remediable backwar dness, it could be examined on a case -by-case basis whether the cartel community might not intervene with its price and compensation policy to enable the plant to achieve a higher level of output. In fact, it has already been suggested1) that backward plan ts with higher cost prices should be raised to such a level of production by using the differential profits of other plants that they too will be able to operate at better costs in the foreseeable future. The question will now arise as to how the determination of the value compensation quotas and the setting of the compensation prices will be carried out in practice. It can certainly be expected that, on the one hand, many entrepreneurs will not be able to determine their cost prices correctly2) , and that, on the other hand, despite the factual and moral justification of cartel equalization, the implementation of this procedure will cause some resistance among the "better" entrepreneurs. To answer this question, it is best to consider an old -style cartel negotiation. If, when a cartel monopoly was assum ed, marginal costs were the decisive factor in price fixing, in practice it was not the case that each cartel member brought a detailed, watertight calculation to the price fixing, possibly even calculated according to a common scheme, but each participant had his "price idea" in his head which he tried to defend. This idea did not even have to agree with the actual cost price (if the entrepreneur was at all aware of his cost price!). The more heated the price debate became and 1) " Di e so zia l e K alku lat i on ," D eu t s ch e B e rg w er k s -Z ei tu n g No. 1 1, o f Ma y 14 , 1 94 1. 2) R ef e ren c e i s mad e in p arti cu lar to th e in ad eq u ate ly d e v elop ed ac cou n tin g sy s te m of th e co mp an i es in th e s mal l E u rop ean st at e s.

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the more often the prices wer e negotiated, the more certain it became that the marginal cost of production would be determined. How will the cartel price-fixing technique work in the future? It can be assumed that the setting of a cartel price among the German cartel members will be b ased closely on cost price. It can also be assumed that the accounting system will be refined in the course of the next few years to such an extent that the cost price calculations will come ever closer to the real production conditions. This will make it p ossible for the German part of the cartels and the German cartel supervisory authority to calculate a compensatory price. In many cases, however, the foreign members will not be able to determine the cost price exactly because of the inadequacy of their ac counting systems. In addition, they will often be reluctant to disclose their cost ratios. If these difficulties exist, it will be the task of the cartel to determine the approximate position of the foreign companies, just as it determined the marginal com pany in the liberal procedure. In which form the foreign members are then to be included in the compensation calculation will have to be decided differently from case to case. If syndicates exist, there will be no difficulties. Furthermore, the foreigner will of course accept the cartel compensation without further ado if he himself is a subsidized enterprise. The questions of cartel compensation are, as can be seen, of an extremely difficult nature. We have therefore been able to confine ourselves to a description of its basic features and must leave the examination of its usefulness to practice. In any case, it can hardly be disputed that this procedure is most likely to meet the requirements of fair price formation. It is another matter whether true justi ce can always be enforced in practice.

2. The consumer-oriented price.

As a matter of principle, the correctly measured output prices or compensation prices must be set as consumption or market prices. In the long run, an economy cannot live cheaper than it is able to produce. In order to be able to live better and cheaper, it must therefore also strive to produce better and cheaper. This fundamental theorem applies to the entire economy as such, as well as to the trade in goods and services between the indiv idual economies affiliated to it, and ultimately to every human being. The orderly large -scale economy must pay special attention to the fair measurement of performance. The people who work diligently and intensively should also be able to live

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better than those who, according to their whole attitude, lead a more contemplative existence. Nothing is therefore more to be rejected than an artificial increase in purchasing power. The standard of living must correspond to the standard of performance! Nevertheless, in a sensibly controlled economy, it will not be possible to avoid allowing "unreal prices" to apply for a shorter or longer period of time in special cases. Such "consumption -oriented" prices thus aim at enabling consumption at such prices which are be low the "performance costs". The resulting shift in purchasing power can have two different causes: On the one hand, it may serve to raise that purchasing power which is below the normal average for the metropolitan area, but on the other hand, it may serv e to raise purchasing power in relation to cost prices which are particularly high as a result of synthetic production, exploitation of low -value sources of raw materials, etc. The close interrelationships between production -oriented and consumption-oriented prices are particularly evident here. To discuss the problems of consumption -oriented prices in more detail would exceed the scope of this paper. We shall content ourselves with stating that there are three different possibilities of shifting purchasing power in the metropolitan area: cartel equalization, public subsidy and currency differentiation. The cartel compensation body would have to ensure that underpricing is sensibly incorporated into the overall price structure of the large -scale cartel. If any undercutting were to jeopardize the production policy objectives, compensation for differences via the cartel office would have to be considered. Public subsidies in their various forms will continue to play an important role in price policy -although priority should be given to cartel compensation (see page 200). Currency differentiation would mean a shift in purchasing power among the entire economy involved. Reference has already been made to the strong structural differences in the European area. The countries of the North and West have roughly the same economic and social structure as Germany. In some cases, their purchasing power is even better than ours. In contrast, however, the economic structure in the east and southeast, and to some extent also in the south, is completely different. We need only point out that the average British income before the war was six times that of the Balkans. One can, so to speak, draw up an income and price level for the European area which constantly *drops more and more from north and west to south and east. In order not to dis turb the sub-regions in their structural economic development, one could consider to introduce a currency differentiation, e.g. with some Balkan countries, or to maintain the currently still existing exchange rate differences. Thus, price differentiation w ould exist eo ipso for 147

any import as well as export activity between the countries concerned. However, since the functioning of a European central clearing system is severely hampered by such currency differentials, the determination of permanent exchange rate relations corresponding to performance level s would be preferable to all manipulations in this area.

C. The settlement order.

The problem of market organization in the European area cannot be treated exhaustively without also dealing with clearing issu es. It is not the place here to illuminate the problems of future clearing in Europe in all their interrelationships. Only the characteristic features and, in particular, their lines of connection with the market order are to be pointed out. The reasons for the failure of the gold currency system need not be recorded in detail. The gold-currency system assumed complete freedom of movement of interstate payments. A prerequisite for the proper functioning of this system was, of course, a balanced balance of p ayments. If it was possible, even temporarily, to balance the balance of payments by using gold and foreign exchange reserves or by mobilizing intergovernmental credit, measures had to be taken to balance the balance of payments in the long run, and these measures intervened deeply in the national economic structure. These measures took the form of influencing the domestic price level and thus imports and exports through central monetary and credit policy. The resulting regulation of the balance of trade th en influenced the balance of payments in the desired sense. It follows from this that the fundamental prerequisite for the functioning of the gold-currency system is a high degree of price and wage responsiveness on the part of the economies participating in this system. However, this was no longer the case with increasing growth of the individual economic bodies in the sense of a natural independent development. If, for example, a deflationary policy no longer leads to price reductions and thus to an incre ase in export activity, but to economic decline and unemployment, a responsible economy can no longer adhere to such a system. It would be quite unthinkable, however, for an economic policy that consciously pursues autarkic and autonomous tendencies to sub ordinate itself to the "free game for gold points". In the meantime, this system - just as we saw with the liberal market order - which was certainly an ideal solution under given conditions, has suffered such shipwreck throughout the world that, if one ta kes an objective view, one can hardly dare to claim that German economic policy is to blame for the decline of the world economy.

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If the gold currency has no place in national trade, bilateral clearing cannot be a permanent solution either. The disadvantage s of this system are well known. Whereas the "fungibility" of free foreign exchange used to allow importers to buy where they could obtain their goods most cheaply, in bilateral trade they had to conform strictly to the conditions of the clearing system. The consequences could be an increase in the cost of imports, a deterioration in quality and, not least, a reduction in import opportunities. A second difficulty of the clearing agreements lay in the clearing backlogs. Not infrequently, waiting periods of h alf a year, a year and more resulted. The exchange rate ratios resulting from the clearing balances and their not always desirable consequences for foreign trade activity, and even for the economic structure of the partner countries, are well known. In add ition to these factual difficulties, however, there are the bureaucratic complications resulting from the various approval procedures (import permits, clearing permits). In the future large-scale economy, both the factual and the formal grievances must be eliminated. Planning in the metropolitan area would be cheated of its success if "clearing", which in the final analysis can only be a technique, were to impede or even prevent the interaction of productive work in the metropolitan area. In the large-scale economy, the solution to this problem can again only lie in a meaningful harmony between freedom and binding. The freedom of the gold exchange system and the binding function of the clearing system must be meaningfully coupled. This is where multilateral c learing, or "super clearing" as it was once called, offers the desired solution. The purpose of multilateral clearing is the multifaceted clearing of interstate commodity and payment transactions via a central office.1) This means that two countries, such as Germany and Denmark, are no longer bound by strict bilateralism, but Denmark can, for example, cover any asset balance in Berlin by purchases in other countries. This clearing system cannot be conceived in such a way that each state within Europe can bu y indiscriminately wherever it wishes to buy and to the extent that it has credit balances on the central account, i.e. Denmark cannot, for example, buy up all Romanian oil or Norway cannot buy up all Hungarian wheat, but the basis for multilateral trade i s, of course, quantity regulation. Here, however, again the problem of interspatial planning by the agricultural market organization or ' the large -scale cartel sets in. Of course, the basis for clearing trade can only be production and thus quantity regulation. We see, therefore, that the order of sales is built on the order of production, and that the order of clearing is built on the order of sales. Money thus regains its original and true purpose: it no longer decides on the course of the economy, but m erely serves to facilitate it technically.

1) S ett l e men t wi th ot h er la rg e - sc al e ec on o mi e s wou ld h a v e to tak e p la ce , a s b e fo re , wh eth er in tw o - way t ra f fi c o r in " fo r ei gn ex ch an ge ".

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With the multilateral system, both the disadvantages of the gold currency system and the bilateral system can be largely eliminated and, moreover, the beneficial effects of these systems can be furthered. Within the metropolitan economy, the economic status of each subspace is determined by its productive performance. Multilateral a ccounting of performance ensures that a counterpart corresponding to the performance is guaranteed for each economy. As a result of the predetermination of each production in the metropolitan area, substantial structural shifts (if they are not deliberatel y brought about and thus taken into account in the overall planning)1) in the economic relations of the sub -areas, as well as cyclical movements, are largely eliminated. This means, however, that deep -rooted passivity in the current accounts of the subregi ons can no longer occur; the means of the gold currency, the deflation policy, becomes obsolete. But long -term clearing arrears need no longer exist in multilateral traffic either.2) They will be able to be cleared away as a result of the versatility of cl earing. If, however, a sub region should fall into effective arrears (e.g. due to crop failures), the European Economic Community will not deprive it of clearing and thus import possibilities; the ''corresponding amounts will be advanced to the creditor country by its clearing institution in the form of a loan. This procedure has already been applied to various agreements. Irrespective of this, however, clearing arrears may in future even take on the character of liquidity reserves to a certain extent, so that a high balance, e.g. at Deutsche Verrechnungskasse, would even be welcomed. Thus, when the issuing bank was set up in the General Government and in Belgium, provision was made for the inclusion of balances with the Deutsche Verrechnungskasse in the note cover. In the long run, however, ea ch European sub -region will have to perform in accordance with the demands it makes on the other sub -regions. It is not acceptable that in the long run the European community of services should provide the same living opportunities for an underperforming s ubregion as for a high -performing one. A prerequisite for the functioning of multilateral traffic is, of course, a good regulation of mutual clearing parities. Here we must refer to our remarks on "price differentiation" in the metropolitan area. It goes without saying that the Berlin clearing house, because of its central position and its throughput volume, must become the clearing center of Europe and that the Reichsmark must become the leading currency. 1) Th i s w ou ld in c lu d e, f or e xa mp le, th e p rob l e m o f exp o rti n g cap i tal t o su b - re gi on s th a t st il l r eq u i r e ext en s iv e d e v elo p m en t. Th e cap i t al mo v e me n t s n ec e s sa r y in th e con t ex t o f E u rop ean p rod u ct ion p l an n in g wou ld b e u s e fu l l y in c lu d ed in th e su p e r - cl ear in g sy st e m. 2) W e a s su m e h er e, of c ou r s e, th e p ea c eti m e co n d iti on s. It i s q u i te n at u ral th at b al an c e s may n o w a ri s e in wa rti m e in fa vor of th e b el l ig er en t p ow e r s. H er e, too, we h a ve th e p rac ti cal e xa mp l e o f a " su p er - cl ea rin g ".

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If multilateralism overcomes the former material dif ficulties in payment transactions, formal simplifications must also occur at the same time. The system of import and export licenses must and can be largely abolished in the European area, as can the other formalities arising from the "foreign exchange compulsion". The European market organization in conjunction with the clearing system will provide sufficient guarantee for an appropriate control of the intracontinental trade in goods, so that a "superimposed" clearing bureaucracy is unnecessary. Just as before the world war the "London payout", i.e. the transfer of a payment amount from the bank account of one country to the bank account of another country in London by the foreign trade merchant was a sensible arrangement, so in the future the "Berlin payou t" will also be able to be a matter of course, the difference being, however, that in London the merchant worked with a private bank, whereas now he has to deal with a central official institution. This official institute, however, not only gives him a saf eguard for the handling of the respective payment transaction, but is at the same time the expression of a monetary system which is no longer determined by chance and uninfluenceable forces, but by the will of a large -scale economy geared to fair performan ce evaluation, value safeguarding and constant prosperity promotion.

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