Post-War Keynesianism in Austria: The Role of Emigrant Economists

In 1938 and in the years before, some 100 economists of Austrian origin emigrated to the United States, to the United Kingdom, and other countries. Only a small number returned to Austria after 1945. In the first decades, Austrian universities were mostly unwilling to acknowledge higher academic credentials of returnees acquired abroad. Barred from teaching at a university, returnees sought work in other institutions such as the WIFO (Austrian Institute of Economic Research), or the Chamber of Labour. Although the number of Austrian economists in the US exceeded the number of emigrants to the UK, the influence of UK-returnees on Austria’s economic policy was more significant. The strong position which Keynesianism held in economic policy after 1945, was to a considerable extent due to the returnees’ superior knowledge of modern economic theories, and also of techniques of empirical research. During the period of reconstruction after World War II, Keynesianism was of little practical relevance. The moment for economic policies for full employment and economic stability came some 10 years after the war, when Austria’s GDP had surpassed pre-war levels. Keynesian economics became the basis for a fundamental change in economic thinking and economic policy. The economic process was now viewed through Keynesian macroeconomics. Against opposition from the conservative party and the Austrian School, and some reservations stemming from the Marxist tradition among social democrats, a pragmatic version of Keynesianism gained acceptance in the later 1950s and 1960s. Due to the central role of the social partnership’s wage and price policy, Keynesian policy in Austria was not limited to a mechanistic “hydraulic Keynesianism.” At least equally important was the reduction of uncertainty in the expectations of economic agents by stabilizing the framework conditions for business calculation and investment decisions. The policy of Austro-Keynesianism (1970–1995) was able to build on this foundation.