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Otto Bauer, "The Nature of Rationalization" (1931)

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But the rationalization boom soon ended. Once the greater share of German companies had completed the technological renewal of their plants, the technological transformation process progressed more slowly. This caused a drop-off in the demand for capital goods and a sales slump in the capital goods industries. The dismissal of large numbers of workers in the capital goods industries led to a decline in business for the consumer goods industries. The result was the severe economic crisis of 1929. A rationalization crisis followed the rationalization boom. Now the companies that had greatly expanded their plants and production capacities between 1924 and 1928 saw that they were unable to sell the quantities of goods they were capable of producing and that they were unable to fully utilize their new plants and machines. The optimism sparked by rationalization faded. People began complaining that rationalization had been overhasty and excessive, that it had often been “mis-rationalization.” The population no longer believed that the consequences of war could be overcome by rationalization. In their disappointment, people turned against democracy, which was incapable of reviving the national economy; against the working classes, whose wages had risen excessively; against the policy of reconciliation, which had cravenly awarded the victorious powers high tributes to be paid from the fruits of German labor. In 1930, a wave of anti-democratic nationalist reaction swept across the nation. The joy over rationalization disappeared in similar fashion in other countries. Whereas the United States had once demonstrated its faith in the triumphs of rationalization by electing Herbert Hoover—the creator of organized rationalization—to the presidency, his popularity waned in the fall of 1929, when the rationalization boom also turned into a rationalization crisis in America.

The historical purpose of rationalization was to adapt the national economies that had gone through war and inflation to the new economic situation brought about by the stabilization of monetary value. In this original sense, rationalization ended in 1929. Its accompanying ideological phenomena have also come to an end—the effusive admiration of the “American economic miracle,” the exaggerated illusion that the “new industrial revolution” would secure permanent prosperity, steadily increase the living standards of the working classes and overcome all the evils of capitalist production.

Source: Otto Bauer, Kapitalismus und Sozialismus nach dem Weltkrieg, Erster Band, Rationalisierung Fehlrationalisierung (Berlin: Büchergilde Gutenberg, 1931), 161–63. Translation by Adam Blauhut.

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