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

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The Nature of Rationalization

Now that we have gained an overview of the facts regarding rationalization, we can understand the nature, the point of rationalization.

The word “rationalization” is used with different meanings. It initially referred to a unique historical process. When monetary value stabilized in Germany after the inflation disaster of 1923 and this stabilization caused a sales crisis in German industry, companies had to adapt to changed sales conditions. At the time, German industrialists and their industrial managers cried out: “Our factories have become obsolete! We are no longer competitive! We must rationalize our plants!” German industry needed to catch up with the technological developments that had begun in the United States in 1914. The technological renewal of German production facilities was accompanied by the development of an industrial model based upon the division of labor, the introduction of new processes to rationalize and intensify work, and the standardization and scientific application of management principles. This process of rapidly adapting German industry to the new conditions—which unfolded between 1924 and 1929—was described as “rationalization.” This term was also adopted by other countries whose national economies required similar transformation processes.

Rationalization created its own market. The technological renewal of all sectors of German industry, the construction of new plants, the modification of old ones and the installation of new machines created a huge demand for building materials, equipment, tools, and iron. The industrial branches that produced capital goods experienced brisk sales. Because they employed a growing number of workers and paid ever-higher wages, the market for consumer goods expanded as well. In the course of 1926, these developments enabled Germany to overcome the economic crisis that followed the stabilization of the mark. The years 1926 to 1928 were the years of the great rationalization boom. This was a time when German capitalists believed that, through rationalization, they could quickly overcome the economic consequences of both the war and Germany’s defeat; a time when general economic optimism made it easier for German workers and salaried employees to secure a significant rise in their wages and salaries; a time when the German people’s standard of living increased rapidly, German democracy was strengthened and the German people threw their full support behind Stresemann’s peaceful foreign policy.

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