Chris Harman

Thinking it through

War losses

(February 1991)

From Socialist Worker Review, No.139, February 1991, p.6.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

AMERICA AND Britain began the war in the Gulf just as recession was beginning to hit their economies very hard. The Financial Times reported on the fourth day of the war:

‘Output from Britain’s factories in the three months to November fell by 2.7 per cent compared with the previous quarter. This was the largest fall since the recession of 1981.’

It is not rare for wars to follow on from recessions – the Second World War came after the 1930s slump, the Korean War after the American recession of 1948-9.

It is not difficult to see why there should be a connection. Economic crisis hits certain states more seriously than others, producing deep political strains which certain rulers try to ease by reaching for their guns.

So last summer Saddam Hussein, facing bankruptcy as a result of waging the Iran-Iraq war, sought to recoup his losses by seizing Kuwait. The US, out to show that it could protect its client dictatorships in the region, set out to punish him for stepping out of line.

But in some wars a second motive can be involved. The ruling classes of major powers can see war as a way of escaping from recession.

War can create an enormous demand for the products of otherwise idle factories, and so help rekindle boom out of slump. The diversion of resources into means of destruction can also act as a dampener to the frenzied expansion of means of production during the boom.

This can prevent investment rising much faster than profit, heading off a catastrophic fall in profit per unit of investment – the rate of profit.

So in 1941 a big section of American capitalism was overjoyed by the outbreak of war. They could fight to establish their world wide dominance, defending their existing interests against German and Japanese encroachment. Simultaneously, they could displace their allies, Britain and France, in parts of the world. In the process, they could pull the American economy out of the great slump.

Again, in 1950 the Korean War came as a relief to American big business. Just as post-war disarmament had opened the door to a new recession, the southward advance of North Korean troops provided an incentive to the US government and Congress to unite on a massive arms programme.

This war, however, will be different in its economic impact, despite the role economic crisis played in its origins.

In 1941 all the world’s great economic powers switched over to war production. No individual national economy stood to lose out in international markets as it diverted resources away from civilian investments.

In 1950 too all the then most important economies – the US, the USSR, Britain, France – raised their arms expenditure, although to differing degrees. The economies which spent little on arms – West Germany and Japan – were still marginal to the world system.

Since then, however, things have changed dramatically. The Japanese and German economies have been growing faster than the American economy for 40 years, precisely because they spend much less on arms.

Their ruling classes reckon that American capitalism’s own interests force it to act as a policeman for the whole world system.

When there is American military action they do not directly oppose it, but neither do they contribute much to it. They prefer to pour resources into civilian investment, so as to carve out for themselves a growing share of the world market, including the US market.

This was how they behaved in the Vietnam War and during the Second Cold War in the early 1980s. It is how they are behaving with the Gulf War.

The result is that US capitalism’s attempts to assert its global military dominance weaken its international economic competitiveness. Hence the massive US deficit and the dependence of both the US government and US firms on massive borrowing.

The result is a contradiction that goes right to the heart of the US ruling class.

It wants, desperately, to prove it is still the most powerful and most important ruling class in the world. It hopes that if it does so it will be able to force the Japanese and Germans to concede to it on the economic front.

But it also lives in fear of a long and expensive war which would exacerbate its economic problems.

Such a war might provide a temporary boost to the flagging markets of some sections of the US economy. But its cost would increase government deficits, force up interest rates, drive major firms even closer to bankruptcy than at present, and threaten the stability of the world banking system.

The US’s aim, then, is victory in a short war. And that would only boost small, specialised sectors of the economy, while closures, bankruptcies and unemployment would continue to sweep through the rest.

But the aim may be very difficult to achieve.

The length of the military confrontation does not depend just on the US, but also on the durability of the Iraqi resistance, the accidents of war, and the degree to which bribery and bullying can hold together a coalition of governments, many faced with enormous domestic opposition, all with individual interests that can differ from the US.

Even in the event of US military calculations proving correct, the war will not be fought against a background of boom and rising living standards at home, as were the Second World War, the Korean War and the Vietnam War. Its backdrop will be an economic crisis.

More likely, however, is an outcome which will be much more costly to the US, and much more destabilising for the whole world system.

A war that has grown out of the world economic crisis will add to that crisis – and increase the chances of revolutionary change in at least some countries.

Last updated on 11 June 2010