MIA > Archive > Fraina/Corey Archive > Decline of Am. Cap.
RECOVERY and prosperity must be on a lower level. From an economic viewpoint, this means the exhaustion of the progressive forces of production on a capitalist basis; from a class viewpoint, it means that capitalist domination prevents a reorganization of industry which would insure an upswing of production and consumption. The resulting class-economic crisis is an expression of the decline of capitalism.
This depression (and all the European post-war depressions) is quantitatively different from its pre-war predecessors in greater depth and duration: in the unprecedented decrease in production and employment and in the agonizingly slow and incomplete character of recovery. The quantitative difference is determined by a qualitative difference of the utmost historical importance: former depressions were an aspect of the youth and upswing of capitalism; depression now is an aspect of its old age and decline. The qualitative difference expresses itself in two major developments:
In every depression a combination of cyclical and non-cyclical factors is necessary to initiate recovery and invigorate prosperity. They permit the revival of production by providing the conditions for the accumulation of capital on an ascending scale. Although they react on one another, the two factors are independent. They are, moreover, affected by structural economic changes and the prevailing stage of capitalism. And where the factors do not combine in the right proportions, accumulation is limited and recovery and prosperity are incomplete.
The cyclical factors of recovery depend primarily upon the free play of economic forces. This restores (on a lower level) the equilibrium whose disturbance engendered crisis and depression. The process, as we have seen, takes the form of liquidation, which “eases” the disproportions created by excessive capital and capital claims, production, prices, and profits. Most important is the depreciation of capital and capital claims: their multiplication during prosperity determines the coming of crisis and depression, for the burdens they impose upon purchasing power, prices, earnings, and accumulation cannot be supported by production and consumption. Depreciation of capital and capital claims eventually sets in motion the cyclical forces of recovery. [1*] The weaker enterprises go bankrupt and the stronger write down capital assets and values. Limitation of production and depreciation of values reduce capital claims; this makes more profitable operation possible for the efficient survivors, within the restricted limits. Prices, particularly the prices of materials and labor, fall to a level where they encourage buying and producing. The output of capital goods moves upward, stimulated partly by the fall in prices but mainly by the pressure of unpostponable replacements and the efforts to increase the productivity of labor with more efficient equipment to offset the lower level of prices and profits. Production, employment, purchasing power, and consumption begin to rise because accumulation and the rate of profit rise. The stage is set for an upsurge of prosperity.
The working of the cyclical forces of recovery was substantially, if not wholly, free in the epoch of competitive capitalism. But capitalist production, which needs flexibility to “solve” contradictions and respond to new conditions, increasingly develops elements of inflexibility. These elements are interlocked with industrial concentration and monopoly: with large-scale industry, increasing specialization and immobility of productive capital, constantly higher fixed costs, control over markets and output, comparatively rigid and disproportional price structures, and the accumulation of reserves to offset the vicissitudes of the market. The capitalist system becomes both less responsive to changes and more sensitive to disturbances under the “controls” identified with the growing elements of inflexibility. They intensify the instability of prosperity (particularly as they are involved with the higher composition of capital, which lowers the ratio of labor and wages to capital and output, and aggravates the antagonism between production and consumption). They tend to deepen and prolong depression because the “controls” interfere with the free play of the cyclical forces of recovery [2*], prevent the “easing” of disproportions and create new ones. As accumulated financial reserves permit payment of fixed costs and even dividends, monopolist combinations are able to resist the destruction or depreciation of capital; and they resist the fall of prices because of control over competition and markets. Where monopolist combinations go bankrupt, the enormous fixed capital investment prevents their going out of business. Its control of markets and prices makes monopoly measurably independent of the compulsion to increase productive efficiency, and lessens the demand for capital goods. As monopoly maintains artificially high prices for materials used by other producers, it hampers their resumption of production on an enlarged scale. The price policy of monopoly, while it does not increase production and employment in its own field, tends to decrease them in other fields. “Unquestionably the duration and intensity of the cyclical depression was effectively and essentially unfavorably influenced by these [monopolist] organizations.” [1] Prices may, even where no monopoly exists, lag behind necessary readjustments under the influence of other forces. And where prices do move freely, their fall (and the destruction or depreciation of capital) is all the greater and more disastrous because of the lag in other fields. Thus prices, which once were, unevenly and within the limits of more decisive underlying forces, a “regulator” of production, now no longer perform that function or perform it more unevenly. In this, prices respond to the limitation and transformation of competition under monopoly capitalism. The result is that the cyclical forces of recovery are checked and distorted; liquidation goes on, but incompletely and disproportionately. Depression is deepened and prolonged. The forces which sustained capitalist production now turn into their opposites and become its antagonists.
During depression, the downswing of production, prices, and earnings tremendously increases the burden of debt and interest, one of the elements of inflexibility. (In agriculture, where it was impossible to limit production and prices moved most freely, the burden of interest became insupportable.) The Roosevelt Administration in March, 1933, resorted to inflation to lighten the monstrous load of debt and to stimulate recovery by raising prices. This created new disproportions. While the value of the farmers’ interest payments was reduced, industrial prices rose more than agricultural prices. An inflationary rise of prices tends to raise the rate of profit by increasing money earnings and decreasing the value of interest payments, of other fixed costs, and of wages. The result, however, is mainly a transfer, as earnings mount, of corporate payments from one type of investor to another. Prices and profits rose, real wages fell. Price disproportions were not destroyed; relations between one group of prices and another were changed, but prices in general tended to become more disproportional. The inevitable result was reaction and relapse. Production rose in anticipation of higher prices; but, with the exception of automobiles, the larger output was mainly in semi-finished goods. By July the inflationary upswing in production reached its limits; then production moved downward, in spite of the NRA and manipulations of the gold content of the dollar, until by November more than 50% of the “recovery” gains had been wiped out. [3*] Inflation feeds on itself: if stopped, reaction ensues; if continued, it holds the menace of a social-economic crash. Rising prices, inflationary or otherwise, may stimulate production for a time, but recovery and prosperity depend upon more substantial economic forces ...
Restoring the “free” play of competition and prices is impossible. It would, moreover, make the situation worse because of the highly complex and delicate relationships of capitalism to-day. Unrestricted liquidation, always destructive, might now prove catastrophic. In fact, in a prolonged depression, liquidation may, in spite of “controls” and partly because of them, reach a point where dangers multiply. So there is a resort to more “controls” in the form of state capitalism. But the effect of state “controls” is almost wholly negative. While they may temporarily prevent a more serious breakdown, they also hamper recovery by aggravating the disproportions created by the “controls” of monopoly capitalism. State intervention helps to maintain artificial prices, interferes with the destruction or depreciation of capital by granting loans and subsidies to tottering or inefficient enterprises, and insures, in one way or another, interest payments and higher profits. Thus the state strengthens the interference of private “controls” with the cyclical factors of recovery. The capital structure and property income are protected, resulting in an “inflation” of capital values and claims out of line with the existing level of production and consumption. The state’s vast resources, financial and compulsive, make it possible to adopt measures which stimulate industry; but, as in the case of the NRA, the stimulus is short-lived and ends in nervous reaction. Nor was this a result of the NRA’s incomplete state capitalism. The “controls” of state capitalism in Germany were, up to 1933, the most highly developed in the world, but they did not prevent the depression or bring about recovery. Fascist “controls”? Conditions became worse in Germany under fascism; a small revival in production, due to Hitler continuing the state capitalist measures of former governments, was offset by a decrease in wages and an increase in forced labor, with an economic catastrophe as the final result. After five years of consolidation, Italian fascism was helpless when the cyclical storm burst in 1929-30; conditions afterward were at least as bad as in other countries (with more of the burdens thrust upon the workers, deprived of the right of independent organization and action).
The “controls” of monopoly, state capitalism, and fascism do not work, or produce disastrous results, because they are a compromise between the old and the new. They represent a departure from the relations of capitalist production within the limits of those relations: one interferes with the other. An aspect of this contradiction is thus set forth by Sir Arthur Salter:
“We have, in our present intermediate position between these two systems [“competitive” and “planning”], lost many of the advantages of both and failed to obtain the full benefits of either. Without securing the advantages of deliberate planning, we have enough official control and private privilege and monopoly to impede the automatic adjustments. From this worst of both worlds we must certainly escape.” [2]
Salter recognizes the contradiction without realizing its implications. Something much deeper than “competitive” and “planning” systems are involved: an objective clash between two economic systems, capitalist individualism and socialist collectivism. The cyclical factors of recovery depend upon economic individualism, the basis of capitalism; but industrial concentration means economic collectivism, an implicit abolition of capitalist production within the relations of capitalist production itself. Hence the old factors no longer work freely and efficiently; repressed by economic collectivism, they are distorted by the “controls” of monopoly and state capitalism, which are merely class-economic efforts to overcome the contradictory and antagonistic results of the clash between old and new forms of production. [4*] More than the problem of complex or collective economic forms calling for “planning” are involved in industrial concentration and monopoly. For industrial concentration, with its downward pressure on the rate of profit because of the higher composition of capital and its results, tends to make capitalist production unprofitable. The new collective forms of production are not merely a negation of capitalist individualism, they are a negation of profit itself. Capitalist “controls” and “planning” are, however, an effort to insure profit and accumulation, whose limited conditions are the cause of the crisis. Their purpose is not to liberate the forces of production and consumption, but to prevent transformation of the new economic forms into a socialist society. This is the crisis of the capitalist system, a direct result of the forces underlying accumulation and concentration ...
Recovery is not necessarily quick and prosperity substantial if no “controls” interfere with the cyclical factors. Comparatively few “controls” existed in 1873-79, yet the depression was both deep and prolonged. Recovery may be slow if the previous over-expansion, the accumulation of capital, was unusually great: it takes so much longer to liquidate disproportions and create new opportunities for accumulation. But the decisive element is the action of the non-cyclical long-time factors of expansion, which affect recovery and decide the character of prosperity.
Whether it takes a longer or shorter time, all that the cyclical factors of recovery can do is to restore an “equilibrium” and set the stage for an upsurge of prosperity. But the upsurge is not inevitable. For the equilibrium produced by the cyclical factors is necessarily on a lower level than the preceding prosperity. It revives the demand for capital goods, but mainly for replacements. This increases production and the rate of profit only on a small scale, however, as it does not permit of an ascending accumulation of capital, the indispensable condition for substantial prosperity. Production, employment, and wages still remain low, particularly as the productivity of labor rises. What is necessary is an increasing output and absorption of capital goods made possible by the development of old and new industries: an upswing in the long-time factors of expansion.
The output of capital goods creates purchasing power (wages, part of salaries and profits) which is spent on consumption goods. Production moves upward. This permits of an increasing production and capitalization of surplus value, the making of profits and their conversion into capital. In all pre-war depressions (and in the United States up to 1923) there was always a large potential demand for new capital goods in the unexhausted possibilities for expansion of old and new industries: mechanization of handicrafts or incompletely mechanized industries, building construction, railroads, agricultural machinery, electric power, telephone and telegraph, aluminum, rayon, and many others. These industries needed large masses of capital goods, whose production created purchasing power and demand for other goods while they threw no goods of their own upon the market or did so only eventually. (Where goods were thrown upon the market but were wholly new they did not compete with other goods, for their production itself created purchasing power. Where “new” goods supplanted goods formerly produced by handicrafts, the resulting diversion of buying was more than offset by the purchasing power created in producing the necessary capital goods.) The demand for new capital goods was stimulated, in the case of the highly industrial nations of Europe, by the export of capital, i.e., capital equipment, to economically undeveloped regions; and, in the case of the United States, by the large masses of capital goods absorbed in developing the inner continental areas, particularly in urban construction, railroads, and agriculture. As the output of new capital goods began to rise, its creation of purchasing power and demand quickened the cyclical factors of recovery by encouraging the older industries to invest in more replacements; as the output rose still higher, creating more purchasing power and demand, the older industries were forced to invest in new capital goods to meet the needs of larger markets. The resulting expansion of industry as a whole was greater than the rise in the productivity of labor, and was accompanied by higher employment and wages (often, but not always, including higher real wages). More workers employed meant more production of surplus value; more markets meant more realization of surplus value as profit; more output and absorption of capital goods, which embody capitalist claims to ownership and income, meant more conversion of profit into capital. Accumulation was active and prosperity surged upward.
The decisive part, accordingly, was played by the non-cyclical factors of long-time expansion. These factors are identified with the upswing of capitalism. But neither capitalism nor its upswing is eternal, for they develop conditions which exhaust the long-time factors of expansion, limit the accumulation of capital, and set in motion the forces of economic decline.
A minor aspect of capitalist decline is the cyclical limitation it imposes upon replacements. In American plants, in the spring of 1934, 20% of the equipment was in a condition of primary obsolescence, but there was no urge to replace it as the unused capacity was still larger, because of the depth of the depression, the previous overexpansion, and the disproportions created by incomplete liquidation and postponed recovery. “Until business becomes much better,” said engineers, “and until all equipment of a plant needs to be called into production, the installation of new machinery will lag.” [3] The productivity of labor rose, but mainly as a result of the intensification of labor. Nor was the situation much improved by NRA loans for the purchase of equipment (a repetition of European experience). Replacements may start independently of the non-cyclical factors, but only these can initiate the substantial recovery which makes possible increasingly larger replacements.
The major aspect of decline involves a scarcity of those long-time factors of expansion which alone stimulate an increasing output and absorption of capital goods. This seriously limits the accumulation of capital. And if the conditions of accumulation are limited, recovery must be incomplete and prosperity must be on a lower level.
Development in the older industries? But the possibilities are restricted by two conditions: the low level of production and consumption and the existing excess capacity. All industries are overequipped, particularly those with the largest masses of capital equipment ... The automobile industry, in 1932, had a capacity of 9,000,000 cars and an output of 2,000,000 [4]; it may reach the 1929 peak, but the industry cannot become the great force for expansion it was in the preceding years ... Nor can electric power repeat its 1922-29 expansion: industry is almost completely electrified, the crisis in agriculture prevents realization of its electrical needs, electrification of the railroads is remote, and an excess capacity already exists of at least 25%, which will be greatly increased by three power projects now nearing completion. [5] ... Railroads, one of the mightiest forces of expansion from the 1840’s to 1900, were still developing up to the World War; but in 1929 their mileage and the number of locomotives and cars were smaller than in 1919 [6], absorption of capital goods being limited to replacements ... Nor is there any hope of expansion in the telephone and telegraph industry ... Conditions are worse in the consumption goods industries which depend upon mass demand, for this demand can rise only if purchasing power is created by an increasing output and absorption of capital goods and the resulting industrial expansion ... Agriculture offers small prospects for any large absorption of capital equipment, because of the downward movement in exports and limitation of output: essential demand will be limited to more efficient replacements ... An upswing in building construction, in spite of the low level of activity in the depression years, is prevented by overexpansion, in relation to the level of business, in industrial and commercial structures, including moving picture theatres and garages, and by the low income of the masses (whose housing needs, if they could be satisfied, would stimulate construction for years to come) ... Serious limitations, moreover, are imposed upon expansion in the older industries by the slowing down, if not exhaustion, of industrialization in new or economically backward regions.
Development in the newer or wholly new industries? But the possibilities are small: no wholly new industries are in sight, most of the newer industries are comparatively highly developed, and those which are not are either unimportant or are hampered by general economic conditions ... Radio was already overdeveloped before the depression; television is still a thing of the future, nor does it offer much demand for capital goods ... The production of mechanical refrigerators and aircraft in 1929 employed only 31,590 workers, who received $48,096,000 in wages. [7] Neither industry is apt to develop on a large scale. And the development of air transportation can never absorb as much capital equipment as railroads and automobiles ... The air-conditioning industry, usually considered the most promising, manufactures a product whose use depends primarily upon a high level of prosperity. Factories and commercial buildings will not install the equipment if business is depressed and profits low. “The market in the residential field is not very promising. Initial costs constitute too high a percentage of total apartment rentals or home values except in the highest price classes. The industry appears to contain no inherent advantages which might cause it to run counter to the general trend of business during the next few years.” [8] ... Teletypesetters represent only a small capital equipment; the number of compositors displaced is greater than the workers employed in their production, and this is not likely to be offset by an upswing in the printing industry ... Factory-built dwellings, in addition to standardizing monotony and ugliness and creating large areas of potential slums, will result in an enormous displacement of workers in the building trades ... Decentralization of industry is limited by entrenched vested interests; it makes plants obsolete and reduces railroad freight haulage, and would, moreover, result in a lower demand for capital equipment than the existing industrial set-up ... Not only are the prospects meagre of new industries arising, it is very unlikely, if they do, that they will absorb such large amounts of capital equipment as railroads, telephones, electric power, and automobiles. This is a decisive factor, for upon the amount of capital goods absorbed by new industries depends the scope of the resulting industrial expansion.
These conditions, imposing serious limitations upon the accumulation of capital, exclude the possibility of any real upsurge of prosperity. Nor can the limitations be overcome by mere technological change. While some urge a moratorium on invention, others urge more invention as the means to restore prosperity: contradictory counsels to escape contradictions! Indignantly denying that science is responsible for the crisis, and ignoring the social relations of capitalist production which may turn beneficent science into its malignant opposite, two great scientists stake their hopes upon invention. “Science has made jobs, not taken them away,” says Karl T. Compton, with Robert A. Millikan emphasizing the point: “Every labor-saving device creates in general as many, oftentimes more, jobs than it destroys.” [9] This was measurably true (allowing for the increase in normal unemployment) only in the epoch of the upswing of capitalism, when technology completely revolutionized the structure of old industries or created gigantic new industries. The great demand for equipment stimulated the accumulation of capital and industrial expansion, with a resulting increase in employment because production rose more than the productivity of labor. There are no immediate prospects of technological changes developing which might create gigantic new industries requiring large masses of capital equipment. This appeared clearly from reports at a conference of capitalists, scientists, and educators, where the theme was: “This country is not about to pass into a period of stagnation which means decay,” for “science will liberate mankind.” [10] But the anticipated technological changes were all minor and in the nature of refinements or gadgets: airplanes powered from ground stations, moving pictures in color, and radio-tape newspapers with “road maps, fashion designs, comic strips for the children, and no end of things, for whatever a pen can portray facsimile radio will handle.” Where fundamental changes were anticipated in the technological basis of older industries, they would, unlike similar changes in the past, absorb fewer capital goods than existing equipment, fewer even than mere replacements. This difference between the older and the newer technology profoundly alters its economic significance: technology no longer tends to revolutionize the basis of old industries or to create gigantic new industries, with their great demands for new capital goods and the resulting industrial expansion and accumulation.
For the immediate future, at least, technological change will mainly express itself in piecemeal replacement of old equipment with more efficient equipment. This must necessarily mean disemployment. Equipment is more efficient and profitable only if it is labor saving, if its use displaces more workers than are employed in its production. Displacement was mainly relative in the epoch of the upswing of capitalism because the curve of production and accumulation was upward: displaced and newly available workers were absorbed by expansion in the output of capital goods and, consequently, the expansion of industry in general. Displacement is absolute in the epoch of decline because the curve of production and accumulation is downward: displaced and newly available workers are no longer absorbed by expansion in the output of capital goods, which are now limited to replacements. A prosperity based upon replacements means that depression levels of production move upward, but not much: industry tends to contract, not to expand. The result is disemployment, for the productivity of labor rises more than production. [5*]
What happens when technological progress is not accompanied by an increase in output while the productivity of labor rises, is graphically illustrated by the flour milling industry: value output in 1923 and 1929 was the same, but workers decreased from 35,194 to 27,154 and wages from $41,704,000 to $35,409,000, while profits and overhead costs (value added by manufacturing) increased from $162 million to $188 million. [11] Technological progress and the productivity of labor moved upward during the depression. The chemical industries strikingly reduced labor costs; replacement of obsolete equipment in the steel industry means installing a smaller number of more efficient machines; a Diesel oil locomotive reduces hourly labor costs from $2.75 to 99¢, or 64%. [12] New equipment increasingly tends to become apparatus and automatic machinery: the resulting higher composition of capital lowers still more the ratio of wages to profits and overhead costs. While, in 1929, the ratio was 36% for manufactures as a whole, it was only 26% in blast furnaces, 19.6% in the chemical industries (11.1% in alcohol), 19% in gas manufacture, 18.8% in flour milling, and 11.6% in tobacco products. [13] Industry moves toward the lowest ratios of labor to capital and of wages to profits and overhead costs. The other aspects of this movement, of the constantly higher composition of capital, is the absolute displacement of labor on a large scale unless it is offset by an accelerated accumulation of capital and industrial expansion, in which the basic factor is an increasing output and absorption of capital goods. Accelerated accumulation is excluded by the conditions of capitalist decline. The situation is aggravated, moreover, as industry lowers costs more and more through scientific management (mainly the intensification of labor) and rationalization. This means that a smaller quantity of labor and wages sets in motion the same quantity of fixed capital and a larger quantity of raw materials resulting in a higher composition of capital without the compensation of an absorption of new capital goods. The productivity of labor rises more than production. Disemployment must increase.
Efforts to stimulate the output and absorption of capital goods were largely unsuccessful, in spite of government loans for equipment and NRA ballyhoo to create credit expansion by forcing bankers to lend and producers to borrow. (As if ballyhoo can overcome the iron pressure of economic conditions!) The NRA, moreover, contradicted itself: it urged modernization of plants, yet many of the codes provided for the prevention of excess capacity. This “planned limitation of output” policy, characteristic of the NRA and other forms of state capitalism, necessarily means a lower output of capital goods. It may yield a higher rate of profit, but at the cost of lower production, employment, and wages.
More important were the efforts to stimulate building construction by means of a program of public works. All the arguments for public works make their starting point the fact that the curve of demand for capital goods is downward and that industry cannot revive by its own efforts: clear indications of capitalist decline! “The policy of public works,” according to one economist, “is in accord with economic laws, except that the initiative of private enterprise for long-term investments is replaced by an act of the state.” But he simultaneously points out the limiting conditions: “The public investments must first be supported and later replaced by private investments, or the recovery will not develop into prosperity.” [14] Accumulation of capital is the basis of prosperity. In the past construction was an important factor in the upsurge of prosperity because it represented an accumulation of capital and was identified with long-time factors of expansion. Public works are not, however, essentially an accumulation of capital; this makes them objectionable to the capitalists, particularly if they are self-liquidating and compete with existing facilities. If the costs of public works are met with issues of bonds, they represent a piling up of capital claims, which are a burden upon government revenues, production, and profits; if with immediate taxation, the situation is worse from a capitalist angle, for not even capital claims are piled up. And inflation as means of payment is dangerous. Public works can aid recovery only if the stimulus they create is invigorated by the working of long-time factors of expansion. But it is because these factors are not working that governments resort to public works.
A program of public works might serve useful economic and social ends. But they increase taxation: hence the opposition. The opposition is most bitter where the projects are self-liquidating, and particularly if they are dwellings for the masses. Yet at least half the people need better housing, even on the basis of existing low standards of “decency.” It is an accumulated deficiency, not simply a result of the depression. “American housing, ever since the period of industrialization, has never reached the lower half of the income groups except in the form of low-grade, inferior dwellings, slums in conception as well as final result.” [15] The Public Works Administration low-cost housing program, inadequate as it was, was virtually abandoned because of bitter opposition by realty interests. Two conditions are necessary to insure better dwellings for the masses: a substantial government subsidy or a substantial rise in wages, or both. Subsidy is opposed by realty and other property interests: it would mean more taxation and make existing “homes” obsolescent and unprofitable. And wages are sinking, not rising: embattled capitalist interests ruthlessly oppose substantial wages because they lower the rate of profit. The situation is hopeless: if the workers were unable to secure “decent” housing in the epoch of the upswing of capitalism, the chances are worse than negligible in the epoch of decline. Where there is some slum clearance, the new houses are beyond the paying capacity of the workers.
Public works degenerate into mere relief schemes and are whittled down to a minimum. Cash relief is replaced by low-paid forced labor. The Civil Works projects were mainly waste: private business interests objected to the competition of useful projects. Of the money voted for public works, $238 million was diverted to naval construction (in addition to direct naval appropriations in 1929-33 of $235 million) [16], while housing for the masses was neglected. The Civilian Conservation Corps enrolled 290,000 persons to work in the national forests at nominal wages: an American equivalent of the German “labor armies,” whose workers “get their keep but little or no wages.” [17] In both cases, moreover, definite militarization is involved: preparation of the youth for coming slaughters. Actual public works tend to become public buildings and “luxury” highways. This assumes its most revealing and brutal forms under fascism. Of Italian developments one bourgeois observer says:
“Fascism has to its credit no great housing schemes to relieve congestion and provide better homes for the working classes ... Slum areas have been cleared in order to make room for grandiose conceptions such as the great boulevard running from the Capitol to the Coliseum in Rome or the new park at Santa Lucia in Naples, but no real provision has been made for rehousing the population displaced. In this respect fascist history is one of unrelieved indifference and brutality ... Fascist architectural achievements are to be found in such things as exhibition buildings, palaces for the industrial and other corporations, squares in the principal cities where the fascist leaders can have an auditorium sufficiently large for their eloquence, innumerable post-offices ... railway stations ... decoration to the materialistic and brutally imperialistic system of fascism.” [18]
Nor is this the devil’s work of lesser breeds outside the law of an “exceptional” American civilization: it appears clearly, and still more clearly in its ominous implications, in the policy and activity of the Public Works Administration ...
The decreasing demand for capital goods is strongly affected by the slowing down of industrialization in new, economically undeveloped regions and the downward movement in population growth. The importance of the extensive expansion of capitalist production is evident in the enormous demand for railroad, building construction, and agricultural equipment created by development of the inner continental areas of the United States. Population growth provided an increasing mass of exploitable workers and consumers. Development of new regions absorbed increasing masses of capital goods, created new purchasing power and markets, and stimulated expansion in the older industries. Accumulation and production moved upward. Now the downward movement in population growth limits the number of exploitable workers and consumers. The slowing down, if not exhaustion, of industrialization in new regions restricts the movement of expansion, particularly in the construction and service industries which absorb large masses of capital but throw no goods upon the market. The result is a falling output of capital goods. Accumulation is limited. Prosperity is depressed.
This slowing down of extensive expansion represents an exhaustion of progressive economic forces. [6*] But only on a capitalist basis. For there are regions in the United States, and still more in the world at large, which lag woefully behind economically: another expression of the uneven development of capitalism. They need construction, electric light and power, transportation facilities, industrial plants. These developments are now hampered, however, by the conditions of intensive capitalist expansion, involving the inner relations under which surplus value is produced and realized.
The extensive expansion of capitalist production stimulates the development of large-scale industry and wider markets. Large-scale industry, with its higher productivity of labor, permits an increasing production of surplus value. Wider markets permit an increasing realization of surplus value as profit. The result is an intensive expansion of capitalist production, i.e., a constantly higher composition of capital, which constantly lowers the ratio of labor to capital and of wages to output, overhead costs, and profits. The gap becomes greater between production and employment and production and consumption. For capital claims mount. An increase in production absorbs fewer and fewer workers, until displacement is absolute. Relative wages, the share of labor in the proceeds of industry, become smaller. Markets and output shrink, excess capacity mounts. The production and realization of surplus value move downward.
Under these conditions it may be unprofitable to industrialize particular regions or to establish particular industries in those regions. Such development was easier in the past, when industry had a lower composition of capital, with lower capital claims, greater labor needs, and higher relative wages. Now the higher composition of capital means only a small employment of workers and only a small distribution of mass purchasing power. The creation of markets may be in sufficient and excess capacity prove disastrous. (Industrialization may be hampered, moreover, by the fact that it offers ruinous competition to the older regions.) These limitations apply to many undeveloped regions in the United States. They apply still more to colonial and other economically undeveloped lands: industrialization is backward and disproportional partly because of imperialist exploitation, partly because the high composition of capital, with its insufficient creation of employment and mass purchasing power, prevents the development of many large-scale industries on a capitalist basis. [7*] (The limitations are overcome, in the case of construction and service enterprises, by making payment on capital claims with exports of foodstuffs and raw materials; overexpansion results, however, and not only creates a disproportional economy, but is responsible for the world crisis in agriculture and mining.) In the epoch of the upswing of capitalism, extensive expansion stimulated intensive expansion; they react upon and limit one another in the epoch of decline.
The downward movement in capitalist expansion means a decreasing output of capital goods. But capitalist production depends upon an increasing output. Hence accumulation is limited. Prosperity is depressed. The results are lower production, mass disemployment, and falling wages for the workers, a sharpening of the permanent crisis in agriculture, contraction of opportunities for professional people. It means lower standards of living for the majority of the population.
While recognizing the importance of capital goods, some bourgeois economists insist that a decreasing demand may be offset by a new equilibrium. One of them says:
“There is danger of overstressing capital formation and of reaching the erroneous conclusion that full employment of the factors of production is quite impossible without forever elongating the process of production. If it should turn out that new investment on any considerable scale should not be in the picture for some years ahead, we may expect revival to be delayed. But there is no reason to doubt that the shift can eventually be made to a new balance in which production [capital] goods industries would be relatively less significant.” [19]
What is, however, the “overstressing of capital formation” but an admission that the accumulation of capital is the driving force of capitalist production? Accumulation on an ascending scale is possible only by “elongating” the process of production: more production and realization of surplus value, more conversion of profit into capital by means of an increasing output and absorption of capital goods, the embodiment of capitalist claims to ownership and income.
The contradictions, antagonisms, and crises produced by an ascending accumulation of capital are all aggravated by a descending accumulation. For capitalist production cannot stand still: it must move up or down.
What becomes of the unemployed workers under the conditions of a “new balance in which the capital goods industries are relatively less significant”? According to one bourgeois observer: “The manufacture of machinery and industrial equipment and the construction of new plants of all sorts have always employed so large a proportion of the American population that no ordinary reduction in hours could get them reemployed.” [20] Capitalists oppose any real reduction in hours and increase in wages, for that would decidedly lower the rate of profit. (In spite of all the ballyhoo, the NRA codes reduced only the very longest hours, precisely as they “raised” only the very lowest wages. Of 393 codes, all but 29 call for weekly hours of forty or more, up to fifty-four. [21] The average was probably forty-five hours up.) If the workers are unemployed, they produce no surplus value. Nor do they consume much. This means a contraction of employment in the consumption goods industries, with smaller production and realization of surplus value. The rate of profit moves downward. Within the “new balance in which capital goods industries are relatively less significant” the falling rate of profit is no longer offset by an increasing accumulation of capital; as intensive expansion still goes on, resulting in a constantly higher composition of capital and more downward pressure on the rate of profit, conditions arise tending to abolish profit altogether.
The tendency of capitalist production to abolish profit arises out of the accumulation of capital itself, in the conditions under which surplus value is produced, realized as profit, and converted into capital. It is interlocked with the higher productivity of labor and the abundance it creates or is capable of creating.
Accumulation, the making of profit and its conversion into capital, is the driving force of capitalist production. Profit is realized surplus value. Surplus value is unpaid labor, the appropriation of a surplus product for which the workers get no payment. Capital is profit converted into capital goods, whose ownership embodies capitalist claims to income. More surplus value is produced by increasing the amount of unpaid labor of the workers, more surplus value is realized as profit by the expansion of markets, and more profit is converted into capital by increasing the proportion of workers engaged in producing capital goods. Observe, however, the contradictions and antagonisms inherent in the process of accumulation:
An increase in surplus value (other than by exploiting more workers) is achieved by raising its rate, i.e., lowering the amount of paid labor, or wages, incorporated in a commodity. This means a higher productivity of labor, involving a higher composition of capital: relatively fewer workers receiving smaller relative wages set in motion a larger quantity of equipment and raw materials and produce a greater output of commodities.
The expansion of markets, necessary for an increasing realization of surplus value as profit, is accompanied by lower prices and higher profits. This is accomplished by lowering the values of commodities, decreasing the total amount of labor incorporated in a commodity while increasing the unpaid labor, or surplus value. But one result is a relative limitation of consumption among the workers, who numerically become a constantly more important factor in the market.
The conversion of profit into capital means an increasing output and absorption of capital goods. This throws a constantly greater mass of commodities upon the market. As the productive forces of society move upward, however, the forces of consumption move relatively downward. An excess capacity is created, bound up with the higher composition of capital, and results in the tendency of the rate of profit to fall.
A falling rate of profit is overcome by an accelerated accumulation of capital, involving an increase in the rate (and mass) of surplus value, a lowering of the values or prices of commodities, and an expansion of the market. But as this means a still higher composition of capital, the final result is an intensified downward pressure on the rate of profit.
The movement is animated by the tendency of the forces which sustain capitalist production to turn into their opposites and become its antagonists. There are recurrent cyclical crises and depressions, economic breakdowns which represent a relative inability of production to develop further on a capitalist basis. The breakdowns are overcome by accumulation on an enlarged scale. But the moment comes when this is no longer possible: the conditions of accumulation are increasingly limited, as every recovery and upward movement of prosperity mean a still higher composition of capital and an aggravation of the contradictions of accumulation. The relative inability of production to develop further on a capitalist basis tends to become absolute.
This is the basic contradiction: The more productive labor becomes and the more abundant the commodities it produces, the more important are the workers for the market. But the higher productivity of labor, because of the higher composition of capital, is accompanied by constantly lower relative wages and the displacement of labor: the consuming power of the workers shrinks as the output of industry mounts.
The contradiction was partly and temporarily overcome as long as there was an increasing output of capital goods and the accompanying industrial expansion. A constantly larger proportion of workers was engaged in the production of capital goods, the capitalization of surplus value and profit. The consumer demand of these workers created other demand and stimulated the consumption goods industries. Accumulation moved upward and the fall in the rate of profit was measurably overcome. But this is altered by the decreasing output of capital goods, resulting from exhaustion of the long-time factors of expansion, the limitation of mass consumption, and a highly developed industry which cannot profitably use all its existing capacity. Production, realization, and conversion of surplus value are limited. Accumulation moves downward and the rate of profit tends more sharply to fall.
Now the movement assumes catastrophic forms. Displacement of labor becomes absolute and the surplus population grows. The falling rate of profit was overcome by an accelerated accumulation of capital; this involved an increase in the rate of surplus value, or raising the degree of exploitation of the workers, and an increase in the mass of surplus value, or exploiting constantly more workers. As industry employs fewer workers the mass of surplus value must decrease, for there are limits to an increase in the rate of surplus value. Disemployed workers produce no surplus value and limit the accumulation of capital. The tendency of the rate of profit to fall is no longer overcome by more production and realization of surplus value. Not only does the rate of profit move downward disastrously, but, still worse, the mass of profits tends to shrink.
Underlying the whole process of accumulation, with its increasingly abundant output of industry, is a lowering of the individual values of commodities, as a decreasing amount of labor is incorporated in their production because of the higher productivity of labor. Prices tend to become unprofitable, a result of the capitalist drive to increase output, sales, and profits by lowering values and prices. Output, actual or potential, becomes so great that it can be absorbed only by a great increase in consumption, particularly among the workers. But the workers are largely excluded because the abundance is a creation of the higher productivity of labor, which is interlocked with higher capital claims, lower relative wages, and the displacement of labor by mechanical equipment. The whole tendency of capitalist production is to displace workers who consume with mechanical equipment which does not consume. But who is to consume the abundance? The equipment does not. The workers cannot, because of low wages and disemployment. [8*] For the workers to consume more is unprofitable: it means more employment and higher wages, and offsets the “economy” of displacing labor with equipment. By its greed for surplus value capitalist production develops the conditions which increasingly make surplus value unrealizable as profit. The pressure of abundance, actual or potential, breaks down prices and makes them unprofitable. The rate of profit moves downward disastrously. Capitalist production reacts against abundance and resorts to “planned limitation” of output.
This is the crisis of the capitalist system, arising out of its economic law of motion: the accumulation of capital. For the more it proceeds the more accumulation limits the conditions of its being. The more capitalist production drives after surplus value the more its production becomes limited. The more capitalist production drives after profit the more it becomes a will-o’-the-wisp. The more capitalist production drives after the realization of surplus value as profit and the conversion of profit into capital, the more accumulation tends to move downward. It is the final expression of the fact that the forces which sustained capitalist production now turn into their opposites and become its antagonists ...
As, from the viewpoint of distribution, the crisis of the capitalist system appears as a crisis of consumption, the liberals cry: “Release the forces of consumption! Let the people consume!” Their argument is thus tersely expressed:
“It seems self-evident that under the set-up of large-scale industry, more is to be gained by the community through low prices, high wages, and a large production at a small profit margin than by the contrary policy.” [22]
Undoubtedly. But who is “the community”? It is an aggregation of antagonistic classes dominated by the capitalist class, whose interests are not identical with those of “the community.” They clash on all fundamental issues. Production itself creates purchasing power, but it can do so under capitalism only if it also creates profit and permits its conversion into capital. Where the output of capital goods is decreasing and the output of consumption goods is increasing, the policy of “low prices, high wages, and a high production at a small profit margin” works in the direction of abolishing profit altogether. For, at a particular moment in the development of capitalist production, a condition arises where it is no longer possible to offset a smaller rate of profit with a greater mass of profits, for the mass itself begins to shrink. The capitalists realize this empirically, if the liberals do not theoretically. Hence the enraged opposition to the “convincing” argument of more mass purchasing power and consumption. Liberals want to solve the problem on the basis of the relations of distribution, of consumption, but these relations are a function of the relations of production: under capitalism, consumption is permissible only if it yields a profit. In order to maintain profit, capitalism represses not only the prevailing abundance, it represses still more the potential abundance inherent in industry. The struggle to release the forces of consumption is necessarily a class struggle against the class-economic relations of production based upon private ownership and profit.
For the “crisis of abundance” involves a struggle between an old and a new social order: capitalist individualism and socialist collectivism. While consumption under capitalism is still individual, production has become collective. But collective or social production has so enormously increased the productivity of labor and of industry that its output can be absorbed only collectively, by the socialization of consumption. This is the objective basis of socialism. Only a practically “free” distribution of products, made possible by the abolition of private ownership and profit, can absorb the abundance of which industry is capable: only production for use, not profit. The alternative is limitation of production, mass disemployment, and starvation. And so highly developed are the social forces of production that they not only make comparatively simple the transition to socialism, under which distribution of products is in accordance to one’s labor, but socialism would speedily move into communism, under which distribution is according to one’s needs. [9*] For the basis of communism is an economy where labor has become a minimum in comparison with the mechanical equipment of production, with the resulting abundance and leisure freely and fully consumable by all the people ...
Capitalism and its class representatives will not release the forces of abundance and abolish profit. They can be released only by socialism and its class representative, the revolutionary proletariat, mobilizing its own forces and the forces of the other exploited elements of society for the overthrow of capitalism. So capitalism resorts to the “planned limitation” of output to preserve some measure of profit. Thus capitalism, the historical creator of abundance, becomes the enemy of abundance. Limitation of production is the fundamental objective of the “planning” of state capitalism (and fascism). This appears clearly in the NRA, which permits, in the words of the Cotton Textile Code, “appropriate steps to keep production in reasonable balance with demand.” [23] Every now and then the mills close down to maintain prices and profits. There is no policy to stimulate and realize demand. Workers are thrown out of work because of the abundance their labor creates.
The results of “planned limitation” of output are disemployment, falling wages, and mass misery. Discontent and class action are aroused among the workers (and other exploited elements, potential allies of the workers) . Repression is, accordingly, another fundamental objective of state capitalism (and fascism): to prevent class action and its development into a revolutionary struggle for the overthrow of capitalism. This appears clearly in the NRA, which started with the most liberal pretensions and proceeded to deflate labor: to permit the imposition of company unions and of a more centralized authority of the capitalists over the workers, to prevent and break strikes, and to prepare for compulsory arbitration. These developments, and their promise of sterner repression to come, are aspects of the struggle for power arising out of the crisis of capitalism.
Nor is a potential revolt of the masses the only danger. For limitation of production is a desperate shift and results in an enormous aggravation of the contradictions and antagonisms inherent in the capitalist economy. Conflicts within the bourgeoisie become sharper – over prices and competition, over foreign trade policy. Agriculture and industry clash more sharply. The limited conditions of production and consumption, and of profit making, exclude the possibility of all capitals surviving. Destruction and depreciation of capital proceeds on an unparalleled scale: an essential condition of a higher rate of profit where the mass of profit tends to shrink. The smaller enterprises are hit hardest, and concentration and monopoly grow, but the larger enterprises do not wholly escape. A new equilibrium is created, a depressed prosperity with lower production and mass disemployment. It is an extremely unstable equilibrium. The rate of profit tends more sharply to fall, as it is maintained primarily by price-fixing and other measures which limit production and consumption. Because of its pent-up forces the capitalist economy becomes more explosive. Strangling in the abundance of which its productive forces are capable, capitalism struggles more desperately for expansion in foreign markets to absorb surplus goods and capital.
It is the pressure of abundance inherent in large-scale industry and its tendency to abolish profit which force capitalism to expansion in foreign markets. This disposes of all the arguments for a “closed economic system” or Autarkie. As capitalism is strangling in its own abundance, it must export goods and capital to preserve profit and the rate of profit, to survive as a system. A “closed” economy would aggravate all the contradictions and antagonisms of capitalist production, tend more strongly to abolish profit. (“There are no reasons to think,” says an American advocate of Autarkie, “that the world will not get along at least as well under such an economic system as it did under international capitalism, although the transition will probably be accompanied by a lowering in the standards of life of vast numbers.”) [24] A “closed” system, moreover, under the conditions of the world today, particularly if it takes the form of, e.g., self-sufficiency within the British Empire, is an act of aggression against other nations. It is, finally, as reactionary as limitation of production, the alternative to socialization of consumption: for the alternative to capitalist “internationalism” is not an impossible or stagnant Autarkie, but the cooperative, creative internationalism of socialism and communism.
But a “closed economic system” is incompatible with capitalist expansion, and expansion is imperative. So the nations resort to an intensified struggle for foreign markets ... Fascist Italy forces lower living standards upon the masses of workers and peasants (and lower bourgeoisie) to stimulate exports. While the people eat less bread, wheat is exported ... Fascist Germany rejects Autarkie and struggles desperately against economic isolation. A foreign trade council is set up, exports are stressed and subsidized, and living standards among the mass of the people are forced down to stimulate exports ... Both Italy and Germany prepare for imperialist conquests, which are urged as indispensable to national well-being ... Britain and Japan engage in an open trade war, with the active participation of the governments; other trade wars go on, become fiercer, create the conditions of resort to arms ... The struggle for foreign markets is accompanied by more protection of the home markets: capitalist nations want to sell more than they buy. [25]
The United States pursues a similar policy ... At first the measures of the Roosevelt Administration, concentrating on the home market, were greeted as steps toward the “new era” of a “closed” system. But these hopes were rudely shattered when depreciation of the currency was used to strike at Britain and France, the most brutal form of waging trade wars ... The next stage was marked by concentration on Latin America and the Montevideo Conference, directed primarily against Britain. It was a conference of economic vassals dominated by the United States: protests by the Cuban and Mexican delegations were disregarded. This stage was marked by adoption of NRA codes exempting exports from the provisions for “fair” competition, by the demands upon Congress to protect “American manufacturers from the more intense competition of Japan in Latin-American markets and in the Philippines,” by the recognition that limitation of output in agriculture is no compensation for foreign markets and the American demand for larger wheat export quotas under an international agreement, by more protection of the home market and measures to strengthen the powers of the President for waging tariff wars. [26] ... The third stage in the development of the Roosevelt Administration was the emergence of a sharper imperialist policy, marked by a challenge to Japan over the exploitation of China and the deliberate use of the NRA to strengthen war preparations.
Expansion in foreign markets to-day is necessarily entangled with imperialism. The conviction is prevalent in reactionary circles, and it may yet develop the “liberal” and “labor” ideology of social imperialism, that imperialism is the only solution of the American crisis, the only means of restoring prosperity. But the general crisis and decline of capitalism must necessarily limit the development of American imperialism. Other capitalist nations are imperialist and rivalry is intensified in the struggle for a redivision of the world, while the international long-time factors of expansion are restricted by imperialism itself. International communism and the Soviet Union are world powers, thrust across the path of imperialism. The magnitude of the American economy requires a tremendous imperialist expansion seriously to aflect prosperity under the conditions of decline. Pre-war Britain exported up to 50% of its capital and derived nearly 10% of its national income from overseas investments; the United States, in 1923-29, derived not much over 1% of its national income from foreign investment and exported less than one-sixth of its capital. [27] Considering the world situation, it is impossible for the American export of capital, particularly as it becomes mainly an export of interest, to develop on a scale sufficiently large to stimulate an upsurge of prosperity. All imperialism can accomplish is to raise the rate of profit of some monopolist combinations, to aggrandize the financial oligarchs, to prolong the agony of a dying social order and prevent the birth of a new order. The price? Mass disemployment and starvation, if on a slightly lower level, the oppressive burdens of increasing armaments, and the barbarism of a new and greater world war: all strengthening the elements of economic and cultural decline and decay.
The decline and decay of capitalism do not exclude a revival of prosperity. For the cyclical movement goes on and contradictions are still “solved” by the alternation of prosperity and depression. But on a lower level: prosperity is more incomplete than formerly, accompanied by limitation of production and disemployment, developing swiftly toward a new crisis, while depression is more prolonged and grinding. As in post-war Germany, the upswings are shorter and the downswings longer. The tendency is toward a condition of chronic depression, interrupted by fitful revivals of prosperity. Cyclical fluctuations “irritate” and exhaust capitalism, intensify the crisis and decay of the system: for cycles are now an aspect of decline and not of growth.
Nor do the decline and decay of capitalism exclude all possibility of growth. There were elements of decline in the upswing of capitalism, but the general tendency was upward; there are elements of growth in the decline of capitalism, but the general tendency is downward. Decline and growth do not exclude each other, said Lenin in 1916: “In the epoch of imperialism, now one, now another of these tendencies is displayed, to a greater or less degree by certain branches of industry, by certain strata of the bourgeoisie, and by individual countries. As a whole capitalism is growing more rapidly, but not only is this growth becoming more and more uneven, the unevenness is also showing itself in particular in the decay of the countries which are richest in capital (such as England).” [28] The forecast is more than fulfilled, with changes which emphasize its truth. Now capitalism is declining more rapidly, with growth becoming more rare and uneven. Now decline and decay are most clearly manifested by American capitalism, the mightiest in the world, which in the pre-1929 post-war period experienced an upsurge of prosperity (with, however, the elements of decline developing on a potentially large scale, most clearly apparent in the absolute displacement of labor and the growth of normal unemployment). More than ever is it a case of dog eat dog. Expansion in particular industries is primarily at the expense of other industries: the eventual result is an intensification of the inner crisis of the capitalist system, because of the limited conditions of production and consumption. Expansion of particular countries is primarily at the expense of other countries: the eventual result is an intensification of the world crisis of the capitalist system, because of the limited conditions of imperialism to-day.
The lower level of prosperity means lower levels of employment, wages, and standards of living. It means an increasing misery for the masses. This conception of Marx, abandoned by his reformist “disciples” and ridiculed by the bourgeois economists, is a dialectical, not an absolute tendency: it does not move in a straight line, but contradictorily and unevenly. Marx himself analyzed the opposing forces (among them the labor movement). The tendency toward increasing misery is interlocked with the surplus population; it is inherent in capitalist production itself, and arises out of the conditions created by the higher composition of capital, particularly the absolute displacement of labor and the lowering of wages.
The industrial revolution was accompanied by increasing misery for the workers because the productivity of labor rose more than production. Displacement of labor was absolute, hours rose while wages fell, and a surplus population was created.
In the epoch of the upswing of capitalism the tendency toward increasing misery was checked because production rose more than the productivity of labor. Displacement of labor was primarily relative, wages rose while working hours fell, and some of the worst industrial abuses were wiped out. An offset, however, was the growing surplus population and increasing misery in countries being industrialized and in colonial lands.
The tendency toward increasing misery resumes its full force in the epoch of capitalist decline, because expansion is limited and the productivity of labor moves upward while production moves downward. Displacement of labor is now absolute. Disemployment and the surplus population grow. Wages and standards of living fall. Starvation mounts in the midst of abundance. Imperialist wars draw in larger masses of people and become more destructive and agonizing. Out of decline, decay, and misery arises the scourge of fascism, which is capitalism using its vilest elements and means to preserve its mastery.
Increasing misery is now not only on a larger scale than in the earlier stage of capitalism, there are qualitative differences of the utmost class-economic importance.
The increasing misery of the industrial revolution was accompanied by economic progress: liberation of the productive forces of society. It was an increasing misery limited to the industrial and agrarian masses, and it was compatible with rising standards of living in other classes.
The increasing misery of the decline of capitalism is accompanied by economic reaction: repression of the productive forces of society. It is an increasing misery not limited to the industrial and agrarian masses, for it draws within its orbit large groups of the lower bourgeoisie, the “white collar” workers, and the professionals: technicians, teachers, physicians, intellectuals. Unlike the situation in earlier stages of capitalism, their fate is now bound up with that of the directly productive workers.
Under the impact of all these developments, dominant institutional and ideological relations break down. The class-economic crisis becomes a class-ideological crisis. Old and new clash more consciously and aggressively. Depressions are now a revolutionary force, for they mark another shattering of the hopes aroused by incomplete and short-lived prosperity. Thrust into action for elemental rights and on elemental issues, the proletariat and its allies broaden their action under pressure of the struggle itself and the opposition of reactionary forces. Into the arena of social war is thrown the ideological influence of the Soviet Union, where socialism is being built up while the capitalist world sinks deeper in the mire of economic and cultural decline and decay. As the crisis sharpens in all its aspects the struggle for power becomes sharper: evasions and compromises avail not, it is either communism and progress or fascism and reaction.
Imperialism makes the crisis and the struggle for power international. For the crisis of the capitalist system in the highly industrial nations affects the economically backward lands under their control. More and more the interests of colonial lands clash with those of the “mother” country. This is particularly apparent in the British empire, a disproportion of the first magnitude, within whose limits is the monstrous disproportion of the hegemony of Britain, which is shrinking economically and politically. India struggles for independence, Canada and Australia increasingly lean toward the United States. Disintegration of the empire arouses the imperialist appetites of other nations and prepares a new struggle for the world’s redivision. As capitalism declines the ruling class increasingly turns to Caesarism (whose modern form is fascism), a system which merely levies class tribute independent of economic function or progress: the Caesarian or tribute aspects of imperialism are emphasized and it becomes a major sustaining force of the new reaction. So the struggle against capitalism is necessarily a struggle against imperialism. Colonial peoples revolt against their imperialist oppressors: the “race” war, an ideological screen for imperialism, is transformed into a class war. Colonial revolts become part of the struggle for power in the “mother” country: they react upon and invigorate one another, both aspects of the world revolution.
The revolutionary struggle is international, as socialism itself is international. The immediate forms of the struggle vary in time and place, from colonial liberation movements to the direct proletarian struggle for power and intermediate forms determined by the stage of the crisis and the balance of class power; but all forms of the struggle are unified by international communism into one offensive for the annihilation of capitalism and imperialism, and for socialism, the only alternative to economic and cultural decline and decay.
1*. “Crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions which restore the disturbed equilibrium for a while ... The equilibrium is restored by making more or less capital unproductive or destroying it. The principal work of destruction would show its most dire effects in a slaughtering of the values of capitals ... The fall in prices and the competitive struggle would have given to every capitalist an impulse to raise the individual value of his total product above its average value by means of new machines, new and improved working methods, new combinations, which means to increase the productive power of a certain quantity of labor, to lower the proportion of the variable to the constant capital. The depreciation of the elements of constant capital [in addition to wage reductions] would be another factor tending to raise the rate of profit ... The stagnation of production would prepare an expansion of production, within capitalist limits. In this way the cycle would be run once more ... under expanded conditions of production, in an expanded market, and with increased productive forces.” Karl Marx, Capital, v.III, pp.292, 299.
2*. Many bourgeois economists insist that “fixed” union wages and unemployment insurance or relief are elements of inflexibility which interfere with recovery. Unlike the other elements, however, they increase instead of decrease consumption and production. But they eat into profits and the income of the well-to-do. Hence the opposition, which becomes most brutal under fascism.
3*. Production moved upward again from November 1933 to March 1934, but regained less than half the losses of July-November 1933. Profits rose, employment and wages fell. In March 1934 employment in manufactures was only 76.4% of the 1926 level and wages only 59.4%. Even the small gains from November to March were made possible only by the fact that the government poured money into industry at the rate of $470 million monthly: exactly as, in Germany, the small revival which started in the fall of 1932 was almost wholly in industries aided by grants of public money. New York Times, April 19, 1934; John T. Flynn, Other People’s Money, New Republic, May 9, 1934, p.364; Robert Arzet, Hitler Economy Calls for Low Price System, New York Herald Tribune, May 20, 1934.
4*. Depression is deepened and prolonged also by imperialism, another expression of class-economic efforts to overcome the contradictions and antagonisms of monopoly capitalism. Imperialism makes prosperity more unstable by making it increasingly dependent upon the world market, which becomes more unstable because of imperialist disproportions and antagonisms. The cyclical crash of 1929-30 came first in the major industrial nations, concurrently in the United States and Germany. It reacted upon the world economy, particularly the agrarian lands. Where the prices of agricultural and mineral products had been falling steadily but slowly before the crash, they now fell sharply. The world agricultural crisis became worse. This crisis was a direct result of imperialism, for its drive to earn profits on exported capital stimulated the production of agricultural and mineral products beyond balanced needs, particularly as synthetic raw materials were making highly industrial nations less dependent upon agrarian lands. The disastrous fall in the purchasing power of these lands limited their imports. Foreign trade experienced the greatest absolute and relative losses in history. Import “controls” made the situation worse. Industrial production moved more rapidly downward, particularly in the export industries. Countries which had been borrowing money to pay for imports, particularly from the United States, were hit most severely, for after 1930 the American export of capital fell to zero. In 1931 the depression was aggravated by the world financial crisis resulting from agrarian countries suspending payments on foreign obligations. Britain was forced off the gold standard; and while temporarily overcome in the United States, the financial crisis burst with all the greater fury in the spring of 1933, forcing the closing of banks and suspension of gold payments. Underlying all these developments are the disproportions among nations in the world market. One set of disproportions exist and develop between the highly industrial nations (analogous to the inner disproportions between industry and industry): they force production and exports regardless of one another. A second set of disproportions exist and develop between the imperialist industrial nations and undeveloped agrarian lands (a magnified expression of the inner disproportions between industry and agriculture). These disproportions are not new, but they become increasingly greater, more acute and dangerous; they aggravate the economic and political antagonisms of imperialism, and deepen not only the cyclical crisis but the crisis of the capitalist system. Capitalism is now threatened by the world market, with whose growth it was interlocked. The forces which sustained capitalist production now turn into their opposites and become its antagonists.
5*. Agriculture also is limited to more efficient replacements, adversely affecting the capital goods industries and the farming population itself. Formerly the results of the intensive development of agriculture – higher productivity of labor and displacement – were offset by extensive expansion in territory and markets. The slowing down of this expansion and increasing productivity in 1920-30 displaced nearly 1,000,000 persons from the farms. Now displacement is accelerated by the deliberate or “planned” limitation of output. The small and poorer farmers, the American peasants, must bear the burdens.
6*. Exploitable workers and consumers are further limited by the mass disemployment characteristic of capitalist decline. It is an ironical comment on the Malthusian “law” that the surplus population of unemployed and unemployable workers assumes increasingly larger proportions precisely when population is moving downward and agriculture is choked by its own surplus. It is not a problem of the pressure of population upon limited means of subsistence. It is a problem of the pressure of comparatively unlimited means of subsistence upon production, price, and profit. The abundance of means of subsistence, a result of the higher productivity of labor, tends to force down prices and profits: hence production is limited and disemployment and the surplus population increase. Every mode of production has its own law of population. But in no mode of production except the capitalist does the development and productivity of industry create a surplus population.
7*. These conditions, if Russia had not overthrown capitalism and had been drawn within the orbit of capitalist decline, would have severely hampered industrialization. Instead, under the dictatorship of the proletariat, industrialization proceeds more rapidly than was the case in capitalist countries (emphasized during the depression by falling capitalist output and rising Soviet output) because of the socialist relations of production: abolition of private ownership and profit and the resulting planned economy. Only socialism can assure free, rapid, and proportional industrialization in colonial and semi-colonial countries, where imperialist domination, moreover, transforms the struggle of workers and peasants into a struggle against capitalism.
8*. The workers are the fundamental factor in this problem of consumption, precisely as production itself is fundamental. Only a release of the forces of consumption among the workers can release these forces among the farmers and the useful functional groups of the middle class. This is the direct opposite of the situation in the epoch of the upswing of capitalism.
9*. Socialist construction in the United States, after the conquest of power, would be much easier than in the Soviet Union, which inherited a very backward economy. History thrust a twofold task upon the Bolsheviks. They were compelled to concentrate upon industrialization (accomplished by capitalism itself in the more highly developed countries) simultaneously with the development of socialist relations. This enormously complicated the problems of socialist construction. The other great complication is the Union’s isolation in a world of capitalist states.
1. Oskar Morgenstern, Free and Fixed Prices During the Depression, Harvard Business Review, October 1931, p.62.
2. Sir Arthur Salter, Recovery, the Second Effort (1932), p.19.
3. New York Times, April 22, 1934.
4. New York Times, March 20, 1933.
5. New York Times, November 11, 1933.
6. Department of Commerce, Statistical Abstract of the United States, 1931, p.413.
7. Statistical Abstract, 1931, p.836.
8. G.E. Barber, The Air Conditioning Industry, Harvard Business Review, April 1932, p.358.
9. New York Times, February 24, 1934.
10. New York Times, May 26, 1934.
11. Statistical Abstract, 1931, p.819.
12. New York Times, June 28, 1933; December 16, 1933.
13. Statistical Abstract, 1931, p.816.
14. Gerhard Colm, Why the “Papen Plan” for Economic Recovery Failed, Social Research, February 1934, p.96.
15. Lewis Mumford, The Shortage of Dwellings and Direction, New Republic, February 28, 1934, p.70.
16. Jonathan Mitchell, The Armaments Scandal, New Republic, May 9, 1934, p.353.
17. New York Times, April 11, 1934; May 14, 1934.
18. Hugh Quigley, Fascism Fails Italy, Current History, June, 1934, pp.258-59.
19. Alvin H. Hansen, Trade, Commerce, and Commercial Crises, American Economic Review, September 1933, p.507.
20. Financing Capital Goods, Today, March 17, 1934, p.21.
21. New York Times, April 26, 1934.
22. Editorial, Profits Under the NRA, New Republic, December 13, 1933, p.115.
23. New York Times, May 9, 1934.
24. Clark Foreman, The End of Internationalism, New Republic, August 9, 1933, p.335.
25. New York Times, December 20, 1933; March 24, 1934; May 8, 1934.
26. New York Times, December 14, 1933; December 26, 1933; April 18, 1934; May 9, 1934.
27. Department of Commerce, Commerce Yearbook, 1931, v.I, pp.318-19.
28. V.I. Lenin, Imperialism (1916), p.112.
Last updated on 29.9.2007