Gerhard Colm and the Americanization of Weimar Economic Thought

Abstract

Gerhard Colm and the Americanization of Weimar Economic Thought William Milberg (bio) Hitler succeeded in destroying the culture of Weimar in Germany and in ensuring that Berlin and Vienna would cease to be centres of cosmopolitan intellect. What he did not intend, but could not prevent, was the dispersion of this genius throughout the world. (Pulzer 1998, 336) INTRODUCTION Gerhard Colm's "genius" was in the driest of subfields—public finance—of the most dismal of the social sciences—economics. And yet his approach to the topic put public finance at the center of a rigorous treatment of the relation between capitalism and democracy. Public finance is "political economics," Colm argued, since public and private realms in capitalism are inextricably linked, and the achievement of social goals must be connected to society's willingness to pay for their attainment. Colm's writings and government work—which spanned from his time as a doctoral student in Freiburg to Germany's prestigious Kiel Institute of World Economics in the 1920s and 1930s, where he served as research director; to Roosevelt's New Deal Department of Commerce; to Truman's Council of Economic [End Page 989] Advisers in the 1940s and 1950s—consistently showed that a capitalist economy could be best understood, and managed for the public good, through careful attention to public finance. This paper traces how the theory of public finance and economic planning developed in Colm's Weimar years was quickly embraced at the highest levels of New Deal thinking in the Roosevelt administration. Many refugee scholars made the rapid and successful transition into new academic settings.1 But to move, within six years of arriving in the United States from the very country with which your new government is about to go to war, into a high-level career as a policy analyst is a rare feat, and a phenomenon much less studied. I attribute Colm's meteoric rise in Washington to the fact that his Weimar-era approach to structural economic reform dovetailed surprisingly well with New Deal thinking at the time. His rationales for government regulation of large corporations and for provision of fiscal stimulus and job creation, and even his case for economic planning were fundamentally compatible with the left-institutionalist thinking of Roosevelt and his brain trust. Adolph Berle and Rexford Tugwell's New Deal proposals were premised on the idea that the role of government in a capitalist economy should extend well beyond the provision of countercyclical fiscal policy to deal with long-run structural weaknesses of a market system. Colm not only supported such planning, but also argued that it was key to the democratic attainment of the "public interest." Colm's political economy of public finance had particular resonance in Washington at a time when capitalism was revealing its deep structural flaws and the federal bureaucracy was more open to innovation than perhaps at any time in US history. Particularly after the austerity-driven recession of 1937, President Roosevelt showed a keen interest in finding new ways for the capitalist state to more actively govern the economy. Colm was integral to the formulation of one of the final legislative accomplishments of the New Deal, and one of the major pieces of economic legislation in US history—the Employment Act of 1946. [End Page 990] Colm's powerful intellectual project has enormous relevance in the aftermath of the Great Recession of 2008, and in particular in this moment when the tax policy discussion has come largely unhinged from discussion of the public interest. These issues are discussed in the conclusion of this essay, which looks at how two key Colmian insights have been ignored since the 1980s. The first is Colm's enduring case for anticyclical fiscal policy and in particular for job creation rather than financial bailout or simple government spending. The second is the need to connect tax rates to spending plans, where the latter are the result of a democratic deliberation of the public interest. REIMAGINING PUBLIC FINANCE AMIDST THE TURMOIL OF WEIMAR Gerhard Colm was born in Hanover in 1897 and received a degree in 1921 from the University of Freiburg. After postgraduate work at the Universities of Munich...