Eugen Varga

Economic Basis of Imperialism in the U.S. of North America


Source: The Communist International, nos. 16-17, 1921, pp. 58-67. (8,770 words)
Transcription: Daniel Gaido and Ted Crawford
HTML Markup: Brian Reid
Public Domain: Marxists Internet Archive (2010). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.


Of all the capitalist Powers in the world the United States of America are at the present moment distinguished by the most vividly expressed Imperialist character. Whereas in England there is to be observed an almost general tendency in favour of a limitation of the military expenses and the liquidation of the Mesopotamian and Persian adventures, the United States are gradually developing into the largest military Power in the world—both on land and on sea. Their programme of shipbuilding is so great that its execution must lead by 1924 to a decisive supremacy of the American fleet over the naval powers of both England and Japan. As regards the land forces, it is proposed to form cadres, which will render possible a mobilisation of seven million soldiers (the “Rote Fahne” Berlin, September 1st, 1920).

The “Neue Züricher Zeitung” gave notice in December of the agreement entered into by Portugal and the United States, in virtue of which the latter guaranteed the inviolability of the Portuguese colonial possessions, while Portugal on the other part entitles the United States to organise in case of war a base for the American fleet on the Azores in the Atlantic. The United States are protesting against the privileges granted to England in Mesopotamia, demanding the right to participate in the exploitation of the oil fields of that country. The United States are disputing with Japan on the right of ownership in respect to the telegraphic cables which formerly had belonged to Germany etc. Everywhere the United States are profiting by their military (and financial) supremacy to obtain the extension of their military and economic power throughout the whole world. This evolution in the American policy has taken place only quite recently. True, already the war with Spain, which ended in the conquest of the Spanish possessions in the West Indies and the Philippine Islands, showed that American capital is striving to direct the policy of the Entente along the course of Imperialism. But only the last two or three year’s have revealed the full development of this tendency. Our task therefore consists in determining the changes in the economic policy of America which have called forth the above-mentioned political evolution.

Basis of the Economic System or the United States

The distinguishing feature of American economic management for a long time has been the enormous productivity of labour. Unfortunately we are not in a position to cite any statistical data which would confirm the fact, but it is well known and widely accepted.1 Another equally well-known fact is that the American workers of the white race enjoy a higher degree of material prosperity than any others in the world.

The great productivity of labour in America is called forth by the following three chief factors:

1. The favourable natural conditions of the country.
2. The considerable accumulation of means of production.
3. A most rational system of production.

1. The favourable natural conditions may be summarised thus: a large area of fertile land in comparison with the population; in view of the favourable climatic conditions all the European as well as the most important tropical plants may be cultivated, and first of all—cotton. Colossal underground riches, such as coal, oil, iron, copper, lighting gas, etc. Large navigable rivers and a country which is most convenient for the construction of railways and which is able to find within the limits of its territory all the most important kinds of raw materials which a cultured people needs.

2. The proportion of constant capital to the total capital is very high in the United States. In other words the worker in America sets in motion a much greater mass of machinery than his fellow in Europe: This fact may be observed most in the agricultural industry, in which all the work is done by machinery (the agricultural machines employed in Russia are mostly of American invention); in the mining industry where the use of machines is much more considerable than in Europe: finally, in the process of industrial production itself, as well as in transport (the number of automobiles constructed in the United States is increasing with a furious rapidity. The “Times” of October 20th. 1920, says that by 1922 this number will amount to 12 millions). To the above must be added that as a general rule the machines in the United States are not subject to “moral wearing out,” as Marx says; while in Europe people are very careful of their machines. Constantly repairing them, endeavouring as far as possible to prolong the time of their functioning, in America it is the custom to give up a worn-out machine to be demobilised, replacing it by a more modern one. Therefore in the United States industry is using the latest and best technical methods.

3. Work is more rational in the United States than in Europe, and this circumstance is closely connected with the social development of America. The latter’s population, not counting the coloured races, consists of the best elements from the population of Europe. Only people who are least conservative resolve to emigrate, who have known how to break with tradition, family ties, the mother country. In a word, the most advanced people of a given period. Owing to this circumstance, the whole intellectual life of America is much less conservative than that of Europe. America has never known feudalism, or nobility, titles, honorary posts or functions. The chasm dividing intellectual and physical labour is far less deep in America than in Europe. In America there is no backward illiterate peasantry like that of Eastern Europe—a peasantry which stubbornly repudiates all reasonable improvements in agriculture. Nor is there any of the guild standoffishness of the intellectual classes. Factory workers become intellectual workers while the students of the higher educational institutions work when necessary in factories, like ordinary factory hands. The result of such conditions is the rule of rationalism in production, unrestrained by conservatism, which greatly increases productivity of labour.

In examining the results of this productivity in pre-war times, we find that up to the end of last century the influence of the first of the three factors mentioned by us, namely, that of the favourable natural conditions was particularly felt. The United States was a country exporting an enormous quantity of raw materials, chiefly grain, wool and kerosene, and importing factory products. The centre of gravity of the public economy was agriculture. The cultivated area of land increased from 536 million acres in 1880 to 839 millions in 1900 (and 878 million acres in 1910), while the value of the agricultural products increased from 22 million dollars to 47 million dollars in 1900 and to 86 millions in 1910.2 A colossal quantity of grain was thrown on the European market: Europe was then passing through an “agrarian crisis.” In 1905, with a general export to the amount of 1718 million dollars, the value of manufactured articles exported was only 160 million dollars: half-products 226 millions, foodstuffs and raw materials over 1000 million dollars,3 out of which were 401 million dollars of cotton, 4186 dollars crops, 211 million dollars foodstuffs (bread, meat, etc.). We see that in spite of the rapid industrialisation (to which we shall again refer) we have a characteristic picture of a colonial country. It must be added that a considerable share of European capital has been invested in American industry: that the steamship traffic was wholly in the hands of England and Germany, that the United States had no colonies and were not engaged in world politics: the basis for the foreign policy being the American continental doctrine of Monroe.

Meanwhile, however, the process of industrialisation of America had progressed with great rapidity, as the following figures will show:

Industrial statistics according to the data of American census:


In Millions
Year Capital Workers and Employees Cost of Product Cost of Material
1870 2,128.2 2.05 4,232.3 2,488.4
1880 2,790.3 2.73 5,369.7 3,396.8
1890 6,525.2 4.71 9,372.4 5,162.0
1900 9,817.4 5.71 13,004.0 7,345.4
1905 13,872.0 6.72 16,866.7 9,497.6
1910 18,490.7 7.43 20,767.5 12,195.0
1915 22,790.9 8.00 24,246.4 14,368.1

An extraordinarily rapid rate of development of the mining and other industries may be observed. It is clear that the time is not far off when the United States will become transformed from a debtor country, exporting raw materials, into an Imperialist capitalist Power. Even though these figures are of a too general character, they nevertheless show that while in 1880 the share of each worker was 1000 dollars of capital and 2000 dollars of worked product per annum, in 1915 the capital expended, was already 3000 dollars, and the cost of the manufactured products also 3000 dollars. While in 1880 the value of the products manufactured per annum constituted a figure which was double the amount of capital, both figures are almost equal in 1915. The turnover capacity of capital is slowing down its organic accumulation is rapidly increasing, serving as a typical illustration of Marx’s doctrine.

Economic Development of the United States during the War

At the time when in all the other warring countries the public economy was subjected to deep changes in consequence of the war, showing itself chiefly in the decline of material well-being, paper currency, high cost of living, stoppage in the growth of the population, and even reduction of the latter—America had not only not suffered from the war, but on the contrary she had gained by it. True, the prices had also risen greatly during the war, but this was not owing to a decrease of the productivity and the shortage in commodities ensuing therefrom, as in the other warring countries but was called forth by the favourable business conditions which had been created for America as the purveyor of the Entente.

Here are a few figures illustrating this fact:

The productivity of the United States amounted in millions to4


Year Coal
in Tons
Iron Ore
in Tons
Copper
in double cwts
Tin Kerosene
in Tons
Cotton
in Bales
Wheat
in Quarters
1913-1914 157 31.5 5.49 4.90 32.3 14.89
1914-1915 466 23.7 5.26 5.68 42.3 15.07 111.4
1915-1916 482 30.4 6.46 5.82 44.7 12.95 124
1916-1917 552 40.1 8.81 6.06 40.1 12.97 86
1917-1918 570 39.3 8.56 11.91 82
1918-1919 586 39.5 49.1 116
1919-1920 12.12

Some facts concerning the manufacturing industry are also well known: thus the colossal development of shipbuilding in America and the abnormal growth of the construction of passenger motor cars.5

The number of officially registered automobiles in the United Slates amounted to:


Year Quatity
1915 2,445,664
1917 4,983,340
1919 7,558,848
1920 9,000,000
1922
(Estimated)
12,000,000

(This number of automobiles is cited in the “Scientific American.” January, 1920. )

Out of this number of motor cars only 4 per cent. are trucks, the rest are passenger cars, mostly private ones. Out of 50 million tons of kerosene produced in the United States one-half is consumed by automobiles.

Finally we must mention the gigantic development the cotton industry, namely, in millions of pounds:


Year Consumed within the country Exported
1910 2,250 3,106
1915 3,588 4,404
1918 3,863 2,320

The period of war was an extremely favourable combination circumstances for the United States. All the productive forces of the country were drained to the utmost. “All the workers found employment, all the machines were in operation. The factory owners sent agents to the rural districts in order to obtain workers from the farming industry. From 30 to 50 per cent of workers (on an average) changed their place of work every month finding a better one in regard to the conditions of labour,” as G.E. Roberts, Vice-chairman of the National City Bank of New York, writes in an article entitled “Contemporary Prices and the Economic Situation” (“The Economic World,” November, 1920).

The rapidly developing industrialisation is showing itself in the modification of the forms of foreign trade. It is a well-known fact that the excess of the American exports over the imports constituted in 1919 over three milliard dollars, i.e. almost the half of the total exports. The export of the manufactured goods had already then exceeded that of agricultural products. Here are the corresponding figures in millions of dollars:


Imports Exports Export Surplus
Foodstuffs, raw 545.3 678.5 123.2
Foodstuffs, in prepared form 555.7 1,963.7 1,408.0
Raw materials 1,674.3 1,610.1
Half-products 610.3 922.4 312.1
Manufactured goods 492.3 2,564.6 2,072.0

After the end of the war the United States appear as an industrial country, exporting chiefly manufactured goods.6

Agriculture has not suffered either from the surplus consumption called forth by the war, as had been the ease in the warring countries of Europe. The best proof thereof is the development of cattle breeding. This department of rural economy shows the following picture (“Statesman’s Yearbook.” 1920):


In Millions
Horses 19.8 21.6
Horned Cattle 61.8 68.1
Sheep 52.0 48.8
Pigs 58.2 72.9

The total cost of the farm produce in millions of dollars amounted to:


1910 8.56
1917 19.33
1918 22.48
1919 24.98

In ten wars the cost had increased by three times, and as the rise in the prices had not nearly reached these proportions it is clear that a considerable increase of production has taken place. Therefore the rise in the prices in America must be examined from a different plane than that of Europe. In the latter the high cost of living must be ascribed to a shortage of commodities called forth by the abrupt fall of the productivity, whereas the State standardising of the prices was unable to suppress their rise. In America the rise in the prices and the colossal profits of the capitalists were the result of the competition among the warring countries in regard to the products of American industry, notwithstanding that the latter had been working under increased productivity.7

The profits were received by the capitalists of the United States in two forms. First the American investments (interest-bearing papers), which, had been in the hands of the citizens of the countries of the Entente before the war, were claimed by the American Government and returned to the United States, Second. Enormous masses of gold began to stream into the United States. The result of this was that out of the total quantity of the actual gold fund belonging to the State and emission hanks of the whole capitalist world, and amounting by the end of 1920 to 1501.3 million pounds sterling, not less than 853.4 million pounds sterling, consequently over one half, belong to the United States. (“The Economist” February 19th 1921).

But the United States have not only paid all the money which they owed Europe, they have not only taken to themselves more than half of the gold fund of the capitalist world, they have besides this acquired claims of the value of many milliards on the European countries and especially England. From a debtor-country the United States have become a creditor-country—the world creditor. The paper currency of the United States is on par with the gold.

The causes which in other countries had called forth a deep change in the structure of the public economy had exercised but an insignificant influence in America. The United States entered the war rather late and with such comparatively small forces that the hindrance to production in the presence of such rich resources as the United States dispose of was of no significance.8 The direct development of the United States from a colonial agricultural, indebted State into an Imperialist industrial Power was not only not delayed by the war, but it was undoubtedly accelerated by it.

Period of time since the end of the war to Spring 1920

The above favourable business, conditions continued after the war approximately up to the spring of 1920. The States of Central Europe which had up to then been under boycott, began to take part, directly or indirectly in the purchase of American goods. But it was soon evident that Europe, including the countries of the Entente, had become economically weakened and deprived of purchasing power. Even England was not in possession of a sufficient reserve fund in gold or American investments to be able to finance properly the purchasing operations in the United States; the rate of exchange of the English pound sterling had fallen in comparison with the dollar by 20 per cent., and the currency of the other European countries had fallen to 1/10 and even to 1/100 of the nominal value in gold. This inevitably led to the decrease of the purchasing capacities of these countries in respect to the United Slates and called forth an over-production crisis which had to take place in the United States for the very reason that the public economy had not been disorganised by the war.9

It is interesting to note how the crisis panned out. The capitalist circles, as usual, would not believe that the favourable trade conditions had passed away. According to the report of the “Controller of the Currency” the total sum of credit opened by all the banks of the U.S. amounted to:10


In Millions of Dollars
On June 30th 1919 25,086
On June 30th 1920 30,892

The credit increased by 20 per cent. in one year and during an evident fall of production. These are the data given by Professor Lederer; the average production for the period of time from 1911 to 1913 estimated at 100 per cent.

Data on the produce of farming according to the market statistics.


Oct. 1919 Spring 1920
(Max figure)
Oct. 1920
Cattle (total) 151 139 116
Bread and Flour 127 102 122
Wool 124 132 89
Sugar 127 184 59
Coal 152 131 137
Iron 102 159 146

The same process is to be observed in regard to many other commodities and also in the transport enterprises. Furthermore, in spite of the decrease in production, the reserves in the warehouses have decreased but very insignificantly, constituting for instance in February 1920—534 per cent, in October 1920—504 per cent, of the turnover for the last month at the same time that, on the contrary, the unexecuted orders have decreased from 32 per cent. in February 1920 to approximately 10 per cent. of the turnover in October 1920. One may say that with the exception of separate cases the quantity of manufactured products has in general considerably diminished from the autumn of 1919 to the spring of 1920.

There are certain signs indicating that the advent of the crisis had been artificially accelerated by the large American capital. The concentration of property in trusts and the centralisation of the practical management of the enterprises has gone nowhere so far as in the United States. Therefore nowhere else can the market be so much under the direction of ruling capitalism as in the United States. Consequently there may be conditions which allow of the acceleration of the crisis. Unfortunately we have not got the corresponding American data on the basis of which we might judge how far our presumptions had been practically carried out. In the above mentioned article Professor Lederer says:

“When in spring, 1919, together with the fall of American prices the rate of exchange of the European drafts and consequently also the purchasing capacity of the European countries decreased, the larger organisations of American capitalism, the banks, decided to limit the credits in future and to demand the return of loans advanced; this was soon carried out on a large scale. The limiting and the refusal of credit placed the industrial and commercial enterprises in a difficult position, compelling them to sell their goods promptly for the settlement of their liabilities. They could not keep their goods but were compelled to get rid of them even at a loss. True, they had received large profits under the favourable war conditions but nevertheless they looked upon their losses as a threat against their very existence, because they had to—and this was a second consequence of their situation so obviously pointed out by the above figures—reduce production, and consequently dismiss the workers, annul the orders for half-products, raw materials, etc. Thus, the crisis spread throughout the whole department of public economy. And in this way at the time when the whole world was still experiencing the greatest and most urgent need of American commodities, their production was forcibly reduced in order to avoid a worse evil, namely, the accumulation of stale goods, hopeless in the sense of finding a good sale. From the capitalist point of view such a limitation of credit was naturally most efficient, in that it averted a catastrophic over-production.”

It is significant that the rate of discount was raised on May 1st to 7 per cent., and has remained at that rate ever since.

The Present Economic Crisis . . . . Decrease of Production and Fall of Prices

In describing the course of the crisis we must base our statements almost exclusively on English sources of information, owing to the absence of American statistical material. Judging by the information given by the “Economist” the crisis developed very slowly: capitalism tried to send the surplus of its goods to the world market: that is why the exports of the United States continued to increase up to October 1920 and the possibility of a greater economic catastrophe was averted by the organised action of the larger capital. Nevertheless the fall in the prices and unemployment attained really gigantic proportions

We have already given figures in regard to the dimensions of the reduction of production for the period from spring to autumn of 1920, In September the “Economist” says: “Trade and industry are most irregular.” In October “the number of annulled orders is increasing rapidly, the reserves in the stores, instead of diminishing, are increasing. The public refuses to buy,” In November the consumption of cotton fell lower than it had ever been since August 1914 (see the different numbers of the “Economist”). The crisis is greatly influencing the cotton industry. The textile factories are closing one after another. (“The Times,” December 23rd.)

The crisis affected also the manufacture of automobiles, which had developed so greatly during the war.

The Ford enterprises of world-wide renown were closed at the beginning of the year because the storehouses contained ready but unsold automobiles to the value of 25 million dollars.

“L’Information” (December 20th 1920) thus depicts the general state of affairs just before the advent of the New Year.

“The Europeans are now experiencing a feeling of satisfaction at the thought that the United States, a country abounding in gold and products, the creditor of the whole world, the only country in which gold is in circulation—begins to suffer like all the other nations: but oh! the irony of fate! To suffer not from penury, but from its wealth. The United States are suffering at present from the acute decline of their commerce, which in connection with the approaching winter is revealing all the symptoms of growing intensity. The number of bankruptcies is increasing day by day, The Stock Exchange is demoralised. The export trade, so flourishing during the war is rapidly falling—true, with the exception of foodstuffs and raw materials; a catastrophic fall of the prices in all branches of public economy is causing the despair not only of the factory owner, but of the farmer as well. The crisis has especially exercised its influence over industry; the latter is, in its turn, weekly dismissing the workers and reducing production: in view of the diminution of orders not only in the country itself, but abroad also. Fabulous sums invested in interest-bearing papers at the rate of exchange of six months ago are not redeemable, as these papers do not find purchasers even at considerably reduced prices,”

The fall of the prices on the American market acquired great proportions in 1920. The general figures give the following picture:


Year Month “Statist” Index Broad Street Bureau of Labour
1913 100 100 100
1920 January 225 227.2 248
1920 May 215 216.4 272
1920 August 200 195.7 262
1920 September 183 184 250
1920 October 170 170 242
1920 December 141

We have no more symptomatic figures; but by the notices in the “Times” we are able to follow the course of the extremely rapid fall of the prices of separate goods:

November 14th, 1920—Wheat 202; maize, 93.5; flour, 8.70; suet. 20.40; coffee, 7.23; sugar, 3.12; cotton, 15.85; copper, 15; iron, 44.50.

March 19th, 1921—Wheat 179.5; maize, 84; flour, 7.00; suet. 12.55; coffee, 5.34; sugar, 5.13; cotton, 11.45; copper, 12; iron, 29.

These goods are noted down not according to a certain system but only in the order they are set down in the weekly reports from the “Times”. The figures show the stupendous fall of prices, especially in copper, iron and cotton.

The manufactured articles do not permit of such comparative statistics. But here also the fall in prices was at least the same, especially in the prices for clothes, shoes furniture etc., where the strike of the purchasers showed itself more acutely.

It is interesting that in face of such a colossal fall in prices, American capitalism displayed an extraordinary stubborn power of resistance. It is true, the number of bankruptcies was doubled but there were no crashes of banks or large capital enterprises. Some of the banks, it is true, were compelled to stop payment because the farmers refused to bring their produce to the markets at the diminished prices. The number of bankruptcies and the dimensions of the bankrupt concerns were approximately three times greater in the autumn of 1920 than in 1919 but we do not find here the gigantic crash which formerly generally accompanied such a fall in prices. The colossa1 organisation of American capital, the close contact between the banking and the industrial capital did not admit of any greater upheavals. As regards the petty trade and industry it must be specially marked that the prices fell much more slowly there than in the large trade.

According to the “Federal Reserve Board Bulletin” for January the prices for instance of foodstuffs fell in the United States in November, 1920: in the wholesale trade by 8½ per cent., in the retail trade only by 2½ per cent. This enabled the petty shopkeepers to get rid of their supplies without too great losses. But the whole burden of the crisis fell on the working class.

The Crisis and the Working Class

During the war the American working class passed through a period of favourable trade conditions. Everything tends to show that the material conditions of life of the American working class had improved during that time. I have no precise data on the subject at my disposal. The immigration of unskilled workers that is to say or cheap labour force, had practically ceased; the new crisis fell more heavily on the American working class.

This crisis is revealing itself chiefly in colossal in unemployment. The number of unemployed was estimated to be four millions by the end of the year. In view of the absence of a workers insurance in the U.S. we can not obtain the precise information on this subject, as in England and Germany. At any rate unemployment in the U.S. is colossal. At the same time there is also a considerable number of proletarians working only half-time.

In connection with unemployment, American capitalism has greatly reduced wages.

All the American and English papers are full of news items concerning reductions of wages of from 10 to 40 per cent. On a par with this, piecework is being introduced in branches where labour has been hitherto remunerated on the principle of working hours, for instance in the tailoring industry. Furthermore, the capitalists are carrying on an attack against the system of “closed shop,” which compels them to receive only industrially organised workers in some of the enterprises. Finally, there is the law against the freedom of strikes. We have not got the full text of the law, which came into operation in the beginning of April. It was passed by the Senate in December of last year under the name of the “Poindexter anti-Strike Law.” According to data of the International Bureau of Labour, it was the armaments industry that had created and defended this law. It purported to create special legal “protection” for the workers who wish to work and chiefly to ensure the normal functioning of transport. The law prescribes Draconian penalties up to ten years imprisonment.

The regulations of the law (which we do not cite here for lack of space) are such that their direct application permits the instigation of law proceedings against every leader of a strike and every striker. In other words, the American capitalists have started a war on all the fronts against the working class. And they are meeting with success.

But what is the position of the working class in this struggle?

It is necessary to remark that among the American workers one does not observe the unanimous organised resistance which the working class of England is displaying now. We are meeting daily in the American capitalist Press notices regarding the consent of the workers to the reductions of wages, and even in some cases the workers are proposing the same on their own initiative. The capitalist Press is naturally searching first of all for facts which might be useful to capitalism, but in the American papers11 available to us, although we do find communications regarding separate instances of acute struggle, we see no indications of an organised struggle such as has engaged the whole working class of England. Notwithstanding the greatest development of capitalism, the class consciousness of the proletariat of the United States has attained a very low level; otherwise how could it have happened for instance that millions of worker should have given their votes at the last Presidential elections to such a glaringly expressed type of a reactionary as Harding? How could it have happened that the leader of the organised workers was S. Gompers, a man whose anti-proletarian sentences are published in italics even by the capitalist Press; the same Gompers who left the Yellow International because the latter was “too revolutionary” for him; the same Gompers who publicly censured the appeal of the transport workers protesting against the sending of war materials to Poland?

“It is quite possible,” says Gompers,—“that the Polish invasion was undertaken as the only means of averting the offensive organised by the Soviet Government. Moreover, the present Polish Government is perhaps the most democratic in Europe.” (“New Republic”, November 15th, 1920.)

How could it have happened that the hero of the American social democracy, the imprisoned E. Debs, whom the “humane philosopher,” Wilson, would not allow to leave the prison even as a candidate for the Presidency; how could Debs have asserted publicly: “if you had brought the American Socialist Party to Lenin’s programme, you would have killed the party”? How could he have been against any attempt at an armed class struggle? How could it have come to pass that in a country of the most ruthless class inconsistencies, in a country where De Leon had anticipated the most important elements of the Bolshevist doctrine—there are three Communist sects, but no Communist mass party?

What is the cause or this inconsistency between the fact of a colossal class antagonism on the one hand and such a weak class consciousness of the American proletariat on the other?

It is no easy matter to give an answer to this question which is so important to the whole course of the world revolution. We think that the answer will be given by the internal discord among the proletariat, the sharp differences between the condition of life and the ideology of the separate workers’ grades.

We shall endeavour to explain this briefly.

The American proletariat possesses a labour aristocracy. The latter consists of skilled workers organised in unions: they enjoy a monopolist position in the closed shops: by means of high initiation fees they make it difficult for new members to join their union; they despise the “unorganised lumpen-proletariat.” They consider themselves the aristocrats of the working class, leading the lives of petit bourgeoisie, fencing themselves off from the general mass of workers. The second stratum, which has become separated from the general mass of the proletariat, is the group of immigrant foreigners, who have no intention of ending their lives as American wage workers but who are striving at whatever cost to save as soon as possible enough money to buy a piece of land in the home country and to farm it as small landed proprietors. The third stratum includes the most militant elements—it is composed of acclimatised immigrants, unskilled or partly skilled workers. The coloured races occupy a special position; up to quite recent times they were not allowed to join the union on principle. The conditions of pay and of the mode of life of the above-described grades of the proletariat are so different that it is very difficult to weld these groups together on the basis of a homogeneous class policy.

The growth of class consciousness is impeded by the circumstance that it is not so difficult for the ablest representatives of the American working class to join the class of petty-bourgeoisie or to enter the circle of persons exercising the “free professions”—it is much easier than in Europe. The absence of the need of a qualification for the occupying of any official position, the great number of educational institutions, which, give the necessary instruction and training for becoming an engineer, lawyer, doctor, and the possibility of rising above the level of the working class by means of skilful speculation or some invention—all this induces the best minds of the American proletariat to seek their well-being, not in the conditions of a class struggle in the ranks of the proletariat, but in the endeavour to pass on to a higher rung in the social ladder along the individualistic road.

In conclusion it must be noted that the high level of material prosperity of the American skilled workers which has been rising ever higher during whole decades (with the exception of the first decade of the nineteenth century) has probably contributed most of all to the fact that in the United States revolutionary class consciousness has not attained the requisite development. True, there have been instances of frequent cruel and sharp collisions but there was no revolutionary proletariat as a whole class. At the present moment a fierce struggle is going on chiefly around the question of the “closed shop.” As all indication of obduracy with which the bourgeoisie is conducting the struggle, the fact may be observed that the Bethlehem Steel Co, is refusing to sign agreements with their contractors in New York and Philadelphia who do not agree to the principle of “open shops”.12 Capitalism is trying to destroy the hated system of “closed shop”. We wish it success because this would mean a step forward on the road to the uniting of the proletariat. But the American proletariat will become revolutionary only when the United States are drawn into the European capitalist crisis: when American capital will not be able to ensure to the proletariat the customary high level of the material conditions of existence, when it will be impossible to overcome the present crisis painlessly.

The Imperialist Attempt to Overcome the Crisis

The causes of the actual economic crisis are of two kinds: on the one hand they evolve out of the “norma1” course of capitalist production. A crisis usually follows a period of favourable trade conditions. On the other hand the crisis is rendered more acute by the economic breakdown of continental Europe—a breakdown which we have described in No.14 of our journal. The situation of the United States in comparison to Europe is analogous to that of England in comparison to continental Europe. The United States cannot sell their goods on the European markets because the countries ruined by the war are not in a position to purchase them. Hence the depreciation of the currency of the whole world; a colossal agio on the American currency, which leads to the result that American goods cannot compete in the world market, and moreover even more that that, the goods of the countries with a low rate of exchange are competing with American goods within the limits of the United States. This agio on American currency has greatly increased since the war, and it is continuing even now, notwithstanding the acute crisis through which the United States are passing.

The rate of exchange of the dollar in comparison with the currency of the other principal countries amounted on March 21st, 1921 (“The Times”) to:


Money Exchange Taxed Unit Parity Rate of Exchange
London, stp. term 1 4.86 3.92
Amsterdam, short-term 40.20 34.7
Russian roubles 100 r. 61.46 0.50
Paris, short term 100 fr. 19.30 5.95
Berlin (telegraph) 100 mks 23.80 1.60
Christiania 100 kl. 26.80 6.05
Stockholm 100 kr. 26.80 22.90
Copenhagen 100 kr. 19.30 17.30
Rome 100 lira 19.30 4.05
Montreal on London (Telegr. draft) 1 4.86 4.48

We see that the currency of all the European countries, even that of the rich neutral Holland. has greatly fallen in comparison with the dollar; in respect to pounds sterling the decrease amounts to over 20 per cent.; the Italian lira is quoted at 18 per cent. of its value; the mark about 7. per cent.; the rate of exchange of the East. European countries, for instance, Austria, Hungary, Poland, has sunk to 1 per cent. of the nominal value.

It is quite comprehensible that under these conditions the normal sale of American goods in the above-mentioned countries is almost impossible. Of all the countries of the world only Japan and Switzerland have a full-value currency in comparison with the United States; the currency of Canada is almost on a par, as well as that of some of the South American States. But the population and the purchasing capacity of these countries are too insignificant for the United States export.

American capital has made an attempt, in the same way as English capital, to support the purchasing power of the foreign countries by investing American capital in foreign enterprises. The United States have become the world banker. During the war American capital was mostly invested in the State loans of the allied countries: the debts of the countries of the Entente amount. approximately to 15 milliard dollars. After the war almost all the countries and loans, as well as the larger joint-stock enterprises, knocked at the doors of the American money market and begged for a loan. If we look through the communications in the “Economist” for the last six months, we shall find the names of almost all the countries of the world as debtors of America: the states of South America, the Belgian railways, Danish towns, English banks, “completely trustworthy enterprises paying 8 per cent. interest.” The direct investment of American capital is also widely practised. Formerly the European capitalists owned American shares and bonds; at present the American capitalists are buying up shares and enterprises throughout the whole of Europe, and paying fabulously low prices. One million dollars is equal in Central Europe to 25 million lire, or 60 million marks, or 600 million Austrian kroner, etc.

In this way, in spite of the bad trade conditions and unfavourable exchange, American capital succeeded in maintaining its export trade during the first period of the crisis. In October, 1920, the export trade of the United States was higher than ever. Only in November an abrupt fall began; the export trade was 67 million dollars less than in 1919. Since that time affairs are going on in the same way from month to month.

The investing of capital in foreign enterprises, the danger of the loss of the European market in consequence of the disorganisation of the European public economy—all this compels the United States to carry on a world policy in spite of the resistance of some of the conservative circles! All the attempts to return to the old American continental policy, all attempts to “fence oneself off” from Europe, suffer a defeat before the exactions of economic necessity. At the present moment the United States is the most Imperialist power in the world!

In order to complete the picture we must stop to consider closely the facts, which characterise this American Imperialism and the tendencies of the latter. In substance it does not differ in anything from British and German Imperialism, except perhaps by its still retaining false pacific phraseology. During the last five years, ever since the Americans occupied Haiti, American soldiers and sailors have killed 3250 men, according to the official data of the Ministry of Marine. Under the sound of Wilson’s pathetic speeches on the “rights of peoples” the United States have occupied Nicaragua and Costa Rica, and introduced a military dictatorship in these states: (“Labour Leader,” October 21st, 1920.) Militarism is revealing itself ever more acutely, both on land and sea. The United States withdrew from the League of Nations because they would not submit to the hegemony of England. At present the United States are on the surest way to become the strongest military power in the world. They are entering into a conflict which is acquiring an ever more acute form with the two other world powers, England and Japan (we cannot consider France a world power in spite of her high sounding policy). Affairs have reached a point when America is seriously looking forward to the possibility of an Anglo-American war.

What is the cause of Anglo-American antagonism?

First of all the question of the war debts. The cautious United States lent money for carrying on the war to England directly—chiefly to England, and the latter supplied France, Italy, Belgium, etc. under the present unfavourable rate of exchange these debts are now laying an extremely heavy burden on the countries of continental Europe. The demands of England on these countries are creating a considerable risk. France’s ruthless altitude towards Germany is partly due to the fact that she is oppressed by her debts to England. Therefore the English politician, Keynes, in his book on the peace of Versailles proposed as the only way of solving the question that America should annul her demands to all the allies and debtors, that England should do the same in respect to the continental countries of Europe, while France should reduce her demands for the reparation of her war losses to the proportions which would be acceptable to Germany. However, the semi-official attempt of England to obtain the consent of the United States for the carrying out of this financial plan met with a decisive refusal. The capitalist rulers of the United States are in no wise inclined to sacrifice their milliards in order to restore European capitalism. This is to our advantage, but England was annoyed by this fiasco.

On the other hand, the United States is displeased with Europe: “Europe has fallen in the eyes of all respectable Americans, in view of her constant wars and revolutions and her non-desire to implant a peaceful industry,” and so on. (“The Nation,” November 6th, 1920.)

The activities of the League of Nations are arousing to a still greater degree the displeasure of the United States, especially when the mandate for Mesopotamia was given to England and the mandate given to Japan for the possession of the former German cable station on the Isle of Yap, and also for the possession of the German cables. The United States are interested in Mesopotamia chiefly on account of the latter’s oil fields. On November 26th of last year the United States protested sharply against the Mesopotamian mandate for England. At first sight it is difficult to understand why the United States, the largest producer of oil in the world, should protest so strongly on the subject of Mesopotamia. But at present oil is the only commodity which in spite of the crisis is in great demand on the market: therefore its price is continuing to increase in spite of the general fall of the prices in the world market. The American production of oil (kerosene) is utterly unable to keep pace with the rapid increase of the number of automobiles. Matters have become still more complicated by the fact that British capital has secretly bought up or taken possession of the oil areas lying beyond the limits of the United States territory, including the Mexican oil fields. The situation was described by Senator Mackellar in the Senate on January 1st, 1921. “Great Britain receives from the United States about 8 per cent. of the oil for her commercial and military fleet at a price varying from 10 shillings to 13 shillings and 4 pence per barrel, while she herself is supplying American ships in the Near East at the price of 2 to 3 0s. 6d. per barrel. America possesses only one-sixth of the world reserves of oil, but she consumes approximately three-fourths of the world output.” Mackellar gave a list of the British oil possessions: “large areas” in Persia, Mesopotamia, Egypt, India and smaller fields in Canada, the East Indies, producing almost one-fourth of the world output. He adds: “Great Britain or her citizens are greatly interested in the oil fields of Mexico, the United States, Russia, China, the East Indies and other countries. This circumstance permits her to control almost half of the world output of oil”. The orator remarks that under the actual consumption the American reserves will be exhausted approximately within 15 to 30 years because England is grasping the diminishing American reserves while keeping her own untouched. The United States have sufficient power to “press England to the wall” by refusing to grant permission for her to purchase American oil. England asserts that she cannot pay her debts to America, while at the same time she is buying up the oil fields of the whole world.

But Mackellar was surpassed by Mr. Phelan, a democrat from California, who said that the Englishmen “are imitating the Huns.” When they appealed to America to help during the war, saying they were “in a fix,” they simultaneously began to purchase oil fields in foreign countries: they obtained from America four milliard dollars (one milliard pounds sterling), and used their own money in order to monopolise the world output of oil.

Mr. Phelan then passed over to the Japanese question. In California the Japanese are buying kerosene from the British Company at the price of 10 shillings the barrel while the Californians have to pay 13 shillings and 4 pence. A limit will be laid to the acquisition of the Californian oil field by the English by the passing of a general bill “against foreigners.” The orator mysteriously mentioned “underground sources” through which he had obtained information regarding a recent meeting of English and Japanese representatives at which, the Japanese were being encouraged to oppose this bill as being “cause for war.”

In view of such an acute state of affairs, it, is not surprising that one of the most aristocratic of American papers, “The Nation,” speaks openly of the possibility of an Anglo-American war. (“The Times,” February 5th, 1921.)

The English are trying by all means to mollify the displeasure of the United States in regard to the oil question—but evidently without success (see Barker’s article on “World Oil Reserves in the United States” in the November issue of the “Contemporary Review” and other English papers). This displeasure has increased under the influence of the Anglo-Japanese alliance. The results are obvious; an ever-increasing armament on the land and on the sea. We have already mentioned the gigantic, shipbuilding programme of America; it is being carried out without respite, especially after the proposition on the part of America (made probably only for form’s sake) regarding the cessation of all military construction for a whole year, had been rejected by Japan, At the end of 1920 the Senate passed a resolution to reinforce the Panama Canal by constructions supplied with the strongest artillery in the world (“Frankfurter Zeitung,” December 31st, 1920), The work for the preparation of military technical means is continuing, liquids as well as gases producing an absolutely deadly effect are being manufactured. The United States are striving to create bases on all the seas, and they are carrying on an Imperialist world policy in the spirit of old times, They are protesting against the cession of the isle of Yap to Japan, and entering into an agreement with Portugal for the right of creating an American marine base on the Azores, etc.

But they have directed their chief attention to the countries which are as yet on the threshold of capitalist development, without being at the same time colonies of some European State, such as South America and China, America wishes to guarantee for herself the possession of these States a colonies, and then not only to separate herself from “sick” Europe by a wall of high custom duties or if necessary by prohibiting all imports—but to fence herself off from all imports on the part of countries with a low rate of exchange. Such is the economic significance of the victory of the Republican Party at the election, such is the inner meaning of Harding s policy; i.e. of the policy of big American capitalism, which, like England and Germany of pre-war limes, has but one issue at present, the policy of Imperialism.

What is the prognosis of the economic future of the United States?

We presume that the highest point of the crisis has been attained already, symptoms of improvement of the economic conditions are to be observed. One may say with assurance that, owing to the colossal wealth of the country, imperialist capitalism will be able to cope with the crisis. But, notwithstanding all this wealth, in spite of the efficacy of the policy which is seeking in South America and China compensation for the loss of the European markets—the restoration of American public economy is impossible if the breakdown of European capitalism should continue at the former rate. The future must lead inevitably to a collision between three world Powers—the United States, England and Japan—a collision which is called forth by the efforts of each of these countries to acquire possession of the, as yet healthy, elements of the world public economy. This second world war will call forth then a crisis of the capitalist countries similar to the one which has at present taken hold of continental Europe.

 

Notes

1. We refer the reader to the interesting book of A. Shadwell “Industrial Efficiency” in which he examines and compares the productivity of labour in America, England and Germany.

2. “The Statesman’s Yearbook,” 1907 and 1920.

3. Ibidem.

4. These data are taken from “Statistisches Jahrbuch für das Deutsche Reich 1919” and from “Statesman’s Yearbook”, 1920. For the products of the mining industry the calendar year is used, and for agriculture the year of operation.

5. In a most interesting article published in the “Contemporary Review” November, 1920, E. Barker writes on the question of kerosene which is now the most vital one in the Anglo-Saxon Press.

6. The change in the nature of the export is reflected in the movement of the population: the census of 1920 shows for the first time the preponderance of the town population over the rural one.

7. Notwithstanding that there is but a slender connection between the rate of discount and the share of capitalist profit, we must still note as an index of the height of the capitalist profit that the rate of discount in the U.S, by May 1st, 1920, was equal to 6 per cent., and since that day it has been invariably 7 per cent.

8. The war expenses of the U.S were nevertheless considerable; the State expenses rose from 7.4 dollars in 1913 to 70 dollars per head in 1920.

9. See the above mentioned article of G.E. Roberts.

10. Wirtschaftliche Korrespondenz, 7th February, 1921.

11. We have read. “The Communist,” “The Toiler,” “Industrial Worker,” “The World,” “Advance”, and the radical bourgeois “Nation,”

12. “The Nation”, January 19th 1921.