Paul Mattick 1956

The Economics of War and Peace

Source: Dissent, Vol. 3, No. 4. (Fall 1956), pp. 376-389.
Transcribed: by Thomas Schmidt;

Any contraction of the Cold War and ensuing attempts to “normalize” international relations raise fresh hopes for a peaceful solution of the prevailing imperialist antagonisms. For the Western world this involves new evaluations of the Bolshevik regimes and their aggressive aspirations, A new readiness to parley with the totalitarian world is then explained by a change of attitude on the part of the totalitarian. The new post-Stalinist policies would not alone, however, suffice for a real rapprochement between the East and the West. The Bolshevik quest for peaceful co-existence, interpreted as weakness, could actually strengthen Western anti-Bolshevik foreign policies. To maintain peace, it must be generally desired; and so it seems to be. Even the armaments race supposedly has no other object than safeguarding the peace of the world. The mounting stockpiles of atomic and thermonuclear weapons, the whole fantastic: paraphernalia of modern war, arc: not to be employed in war. They are there to deter the enemy from making it.

In a way, of course, the Cold War itself is an instrument of peace, Although involving frequent policy changes for both sides, it secures the balance of power and prevents major changes in world conditions, since every gain for one side tends to be countermanded by the other. Thus ate sustained the relatively static conditions of “co-existence.” “Liquidation” of the Cold War, while it would signal relaxed political-military competition, would also mean an intensification of economic struggles for world supremacy.

At first glance we may appear to be entering a period of worldwide peaceful capital formation. Though possibly postponing war, this would not necessarily lower the probability of its occurrence, since capital expansion, by favoring some nations more than others, leads always to new imperialist frictions. It was not the Great Depression, for instance, which led to the second world war but the cumulative effect of the competitive capital production that preceded it. This cannot be admitted-it was not even seen-by all who profited during the journey to depression; they simply marched on in the belief that their prosperity was the surest guarantee for progress and peace. Yet by so doing they created a situation that escaped their control and war became “inevitable.” The war itself, however, was made by social movements and ideas that had grown out of the depression. And though the people associated with these movements and ideas took the responsibility for war upon themselves, it was not a situation of their own making that enabled and required them to do so.

In this sense, wars, like crises, are inherent in uncontrolled capital accumulation even though their actual occurrence in time is not predictable. Just as a threatening crisis may be postponed through a sudden spurt, of economic and speculative activity set in motion by discoveries and innovations, so war may be postponed by a variety of circumstances that assure some sort of social stability despite the most intensive national competition in an international capital structure which is detrimental to the general expansion of capital. An economic crisis may be “consciously” postponed or mitigated by way of credit inflation and government intervention. This means simply that an existing crisis is prevented from running its course by “non-capitalist” methods of control-"non-capitalist” in the sense that their persistent application would slowly alter the existing structure of the capitalist “mixed economy” in the direction of complete government, control.


Private capital formation, involved in the production of marketable goods, finds its limitation in diminishing market-demand. In order not to reduce the marketability of privately-produced commodities still further, government-induced production is channeled into non-market fields-the production of non-competitive public works, armaments, superfluities and waste. Production is thus increased by both capital competition and government intervention; the latter counteracts the trend toward stagnation that is implied in the former, This is celebrated as the capacity to produce both “guns and butter.” Such government-induced “prosperity” may last for a considerable time; as long, in fact, as the shilling emphasis from private to government-induced production and vice versa forms the common policy of government and business. It may even do better than traditional, strictly-market-determined capital expansion. In any case, recent history has demonstrated the possibility of a prosperous development of the “mixed economy” under conditions of a shrinking world-market and increased government control.

A second look, however, reveals the “artificiality” of this prosperity and its inherent tendency to change the very system to which it is credited. It is for this reason that, whenever possible, governments representing private capital try to pare down expenditures, to end deficit financing and to restore government-run industries to private exploitation. This happened in post-war America and in other capitalist nations. But nowhere did it succeed in re-establishing previously exist relations between the private and public sectors of the economics The ratio of government expenditures to the American gross national product, for instance, “which was 20 per cent in 1939 and rose to 52 per cent in 1944, was still about 35 per cent in 1946."[1] Unless conditions should change radically in favor of a renewed market-determined expansion of capital, government-induced and therefore government-controlled production is bound to grow in peace as it grew in war. And so long as the principle of competitive capital production prevails, steadily growing production will in increasing measure be a “production for the sake of production,” benefiting neither private capital nor the population at large.

This process is somewhat obscured, it is true, by the apparent profitability of capital and the lack of large-scale unemployment. Like the state of prosperity, profitability, too, is now largely government-manipulated. Government spending and taxation are managed so as to strengthen big business at the expense of the economy as a whole. “Subsidy has become so all-pervasive that it can properly be said we live in an age of ‘government by subsidy,’ meaning that subsidy is a principal, or predominant, instrument for the effectuation of public purposes,"[2] Subsidies to other groups, to farmers, for instance, are merely a consequence of the subsidization of big business, which is unavoidable if economic decline is to be forestalled, Small producers do not share in government-induced “prosperity” and their spokesmen wonder why it is that “in a period characterized by three-shift industrial activity, tremendous sales volume and record-making profits, there is such a high rate of small business bankruptcies."[3] This is so because “the hundred biggest corporations accounted for 62.2 per cent of all prime defense contracts in the last live years,"[4] because big business generally financed its expansion largely from federal funds, raised its profitability by way of interest-free loans, tax evasions, accelerated amortization schemes, etc.-and because it cannot be otherwise since modern armament production presupposes the technologies of big business, which, as the factor that determines the trend of the economy, must be kept going at any price. Even though it is true that the government has “an enormous power, the very existence of which is fatal to private enterprise,” that’ it “can choose the companies that are to survive,” and that “the designation of these ‘chosen instruments’ often takes place as haphazardly as blindfolded children at a birthday party pin the tail on a paper donkey,"[5] still, as with competition, the distribution of social surplus-value by way of government policies must serve the further expansion of capital and therewith its further concentration.

However much production may be government-induced, the “mixed economy,” to be such, presupposes that a substantial part of the social capital remains in private hands. Since government funds can come only from taxation and, perhaps, from government-owned enterprises, additional funds must come from non-governmental sources. In order to increase the scale of production and to accumulate capital, government creates “demand” by ordering the production of non-marketable goods, financed by government borrowings. This means that the government avails itself of productive resources belonging to private capital which would otherwise be idle. The borrowed funds ate merely monetary expressions of the government’s power to set unemployed resources to work. The rising national debt indicates that this power has been granted only temporarily and for a price, i.e., the interest paid to the holders of government bonds. But as government-spending on non-profitable undertakings cannot yield interest, the national debt has to be serviced out of future profits by the creditors themselves.

The transfer of control over productive resources from private capital into the hands of government by way of deficit-financing which creates “demand” of a specific type, namely public works and armaments is, in part, an increase of the demand required for private Capital expansion, that is, for the production of additional capital. In this sense, deficit financing is the continuation of the accumulation process. But though government-induced expansion of production brings forth a larger productive apparatus, still nominally in the hands of private capital, it can be fully utilized only at the command of government. To the extent to which this is truer, private capital accumulation has reached the end. While production is still for private gain, economic expansion is a function of government. The growing national debt, or the continuous increase of government-induced production, implies an increasing nationalization of capital. Short of a reversal of this process, of a return to private, capital accumulation, there is no possibility of getting “the government out of business,” which is no longer business in the traditional sense, anyway.


To produce beyond the market demand under conditions of private capital accumulation made “sense” because of the concentration trend implied in capital competition. Stronger capital destroys weaker and prevents the rise of new competitors nationally and- with greater difficulty-internationally. “Over-production,” through the media of crisis and depression, destroys capital and enlarges the demand for the surviving bigger capitals, thus securing their profitability and further expansion. There would be less need for government manipulation of the economy if prolonged world-wide depressions were still a possibility, able to lead, by destroying capital, to a new international capital structure capable of further profitable accumulations. With this possibility eliminated because of nationally-directed economies, the improvement of conditions for private capital formation by holding back or cutting back existing amounts of government intervention are only a temporary possibility.

Accumulation in the private or still largely private capitalist economy continues to require, however, periodic capital destruction for the further expansion of more concentrated capital entities within an altered international capital structure. Because the economic crisis has lost its effectiveness in this respect, the function of the so-called business-cycle, which has been taken over by government, appears as an armament-disarmament cycle, that is, as the increase or decrease of government spending in order to maintain and increase a given level of production. Its ideological expressions are periods of war- and peace-mongering, neither of which indicates a real drive towards war nor a real attempt to ward it oil. It merely reflects the impasse in which capitalism finds itself, with no solution in war and none in peace. There is no “grand strategy” with regard to war or peace. There is only a drifting towards one or the other, determined not by conscious considerations of long-term interests nor by an insane commitment to some “historical mission,” but by the economic impasse itself and the social inertia that is created by the ability to increase both productivity and waste-production.

Prior to the first world war, the relative stagnation of European capital was already mitigated by a government-fostered armaments race and America’s slowing rate of capital expansion was reversed by the war itself. Her recovery of 1915 “was generated by the demand for war supplies emanating from European governments.” Expansion of production “was derived in part from taxation and in part from the sale of securities to individuals and banking interests,” so that the process of American recovery “was generated by an outpouring of purchasing power by way of government treasuries. It did not begin with either an expansion of ordinary consumption demand or an increase in the production of capital goods."[6] Set in motion by the policies of governments engaged in or profiting from war, total world production rose to unprecedented heights. For the European nations it was a period not of real prosperity but a slow return to, and an insufficient enlargement of, their pre-war level of production at the price of increasing indebtedness to America. America prospered, however, and in 1929 her wealth was two-and-a-half times as great as in 1914. Measured by world production, economic activity had increased and capital had accumulated. Its seat of strength had shifted from Europe to America and as with all previous periods of depression, the war had touched off a new expansion of capital and had concentrated it in the strongest capitalist nations.

Though American production grew and her “national wealth increased, that portion utilized directly for the reproduction process of wealth continued to decline."[7] In other words, there was a slackening of the rate of accumulation; the percentage of productive capital in relation to non-productive wealth became less instead of more. This was no longer the type of capital expansion that characterized the nineteenth century; it was a condition which Keynes later called “liquidity preference.” The ratio of net investment to national income in the United States rose up to the turn of the century and declined from then on to nearly nothing in the 1929-1938 period.[8] The state of “liquidity preference” indicated that capital expansion initiated by war and carried over into peace was not enough to lead to a general expansion of capital production under the conditions of a market-determined economy. After a decade of limited prosperity, restricted largely to the United States, a new collapse of the market system Jed to new state interventions. These, however, succeeded only in stabilizing depression conditions; the full utilization and further expansion of production had to await another war.

Vast devastations in the second world war weakened both Europe and Asia and assured America’s supremacy within the world economy. War was now viewed “as a great new industry whose colossal demands stimulate economic activity in every nook and cranny of the economic system,” even though “the expected yields which raise the marginal efficiency of government investments arc mainly in terms of social and military advantages rather than pecuniary profits."[9] “The destruction of the European economy,” Thurman Arnold pointed our, “has solved the problem of ‘effective demand’ for the American economy, ...and we are in a dawn of the greatest industrial era this country ever had.” Destruction, he explained, “is sometimes necessary. When Hitler achieved power, the destruction seemed necessary. Now it is necessary to meet the threat of Russia... and perhaps a certain amount of destruction or dislocation may accompany the threat, but it is necessary to do it. And what has happened because of that necessity: we have gotten on our toes and we are going places."[10]

America has, in fact, maintained a state of virtually full employment by way of war, inflation and armament production. There was sufficient recovery in extra-American economies also, so that world production has risen over what it was before the second world war, but at the half-way station of reconstruction it became evident that the old pre-war contradictions had also been rebuilt. In the beginning of 1950, unemployment became once more a dominant issue and unsalable surpluses piled up in all capitalist nations. The Korean war ended the “recession” quickly. Not the marketability of goods in general but defense production was once more a prime concern.

The “business-cycle,” appearing as the expansion and contraction of government-induced production, is characterized more by political struggle than economic competition. But attempts at disarmament in the Western world, however seriously contemplated, are limited by private capital formation. Any new business decline brings with it a new shift to government spending. Partial disarmament may then be regarded as a sign of stabilization, to be discarded as soon as the economy requires additional government-induced investments. This, however, narrows the expansive power of private capital still further. Although the profitability of private enterprise may not diminish or may even increase through the enhancement of capital concentration, with regard to the whole of the economy less capital accumulates to private account. This is a new situation. In the past, nonprofitable capital was absorbed in larger capital units. Now productive resources are losing their capital function altogether.


American capital expansion was bound to a production for European markets, particularly during periods of war, and to the export of capital mainly to Western nations. Due to structural changes in the world economy-the break-up of the world-market through the extraordinary and all-around production of the American economy, the industrialization of hitherto economically-underdeveloped countries, the autarchic tendencies of state-capitalist[11] nations and the collapse of an international division of labor determined by nothing but the accumulation needs of Western capitalism-Europe teased to be a market which made possible the further expansion and extension of American capital, Western Europe’s own export needs, as well as her inability competitively to meet American production, based, as it is, on a higher productivity, prevents a market integration of the economies of the free world.” An all-out American effort to capture the markets of the ‘’free world” is equally precluded by protectionist policies and the political necessity to maintain some sort of unity in the Western world.

Capital expansion implies, however, its concentration nationally as well as internationally. Its center, having shifted from Europe to America, threatens to shift again from America, to the newly-developing, so-called “socialist,” but actually state-capitalist, nations of the Eastern power bloc. Western superiority in production, though still a fact, is slowly declining. According to a study of the United Nations Economic Commission,[12] Russia accumulates industrial capital at a far higher rate than Western Europe, ...and is approaching the rate of the United Slates. To a somewhat lesser extent this is also true for the satellite countries. Even if trade relations between the East and West improve and develop, they will do so as by-products of the expansion of the new empires around which an increasing part of the world’s economic activity begins to revolve.

The totalitarian threat to the economic supremacy of the “free world” is not immediate, however, despite the high accumulation rate. Total production and general productivity in the East are still behind those of Western capitalism. This relative backwardness does not, of course, prevent countries of the Eastern power block from offering markets for other nations’ surplus products, for trade is not based on absolute surpluses. The fact that Eastern countries themselves stand in need of further industrialization does not hinder the export of industrial products if this appears advantageous for political or economic reasons, or both. There is nothing surprising about the fact “that the Russians have arranged to sell a million tons of steel to India or have undertaken to erect a new steel plant there or that they and the satellite countries are conducting an export drive in Middle East markets, with the accent on metals and engineering products. These are precisely the industries in which Soviet progress has been most rapid in recent years and in which investment has been particularly heavy."[13]

With lower wages and productivity in selected fields approaching that of Western Europe, Russia becomes a formidable competitor in even a strictly commercial struggle. And her opportunities in this respect are furthered by the greater inability of Western nations to support to any significant extent the industrialization of underdeveloped countries. Their own dependence on cheap raw materials and their unceasing need to export manufactured goods in increasing measure operates against the transition of the “backward” primary producing countries into modern industrial nations.

By introducing and developing the capitalist mode of production in other countries through colonization, trade or capital export, the advanced capitalist nations created the conditions of national revolution in all backward countries. 7’hcsc revolutions are still “capitalist revolutions”; but, being directed against both native backwardness and foreign control, they appear as anti-capitalist or anti-imperialist revolutions since they oppose the unity of interests of foreign capital and its native allies in the backward nations This new “nationalism.” which, on the one hand, disrupts the established international division of labor and, on the other, expresses how this division of labor (associated as it is with a particular constellation of accumulated capital) is inadequate for a further general capital expansion, affects the imperialist nations as well. The disintegration of the historically-developed world market, as well as the stagnation of capital at the base of this disintegration, leads them to always fresh attempts to solve national problems either by reshaping the world market or by gaining greater independence from it. The directing of economic policies by governments grows in both types of nations, those seeking expansion by freeing themselves from a controlled world market and those seeking expansion through such controls. The result of both these endeavors is a greater international capital development. Expansion takes place, though not in conformity with the existing centralized and market-determined international capital structure.

Even though both in competitive capital accumulation is contradicted by America’s own economic activity at home and abroad, deviation from that faith is held to be a temporary expediency. America’s foreign economic policy is still concerned with the resurrection of a “free,” that is, American-controlled world market and the resumption of “genuine” capital accumulation, i.e., for the augmentation of private capital. All “non-profitable” activities associated with the extra-market expansion of production are undertaken not for their own sake, but are regarded as expenditures to keep the world open to American capital expansion. In view of America’s dominant position in world economy this would imply total re-organization of the world’s capital structure and division of labor and subordination of all national economies to the accumulation requirements of American capital. But this is an impossible task and the sad conclusion follows that “the great era of economic growth which the Western world has experienced may finally come to an end-not because of technological limitations but rather because of market limitations ... for the political and ideological difficulties to be surmounted in bringing about the necessary expansion of world-trade may be greater than people are prepared to face."[14]

Whether it is warranted or not, such pessimism does not form policies. Even if capital concentration and centralization cannot embrace the world, there is still the choice between a larger or smaller slice of it. Although existing state-capitalist systems are irrevocably lost to private capital exploitation, (as George F. Kennan has said, “there is a finality for better or worse, about what has occurred in Eastern Europe."[15]) large parts of the world are still wavering between mixed and totalitarian systems of capital production. If the trend of the time favors the latter, that is only one more reason to combat the trend. It is the ostensible success of the state-capitalist systems in maintaining themselves and developing their economies which encourages underdeveloped and hitherto controlled nations to follow their example.

from a strictly private-enterprise point of view, containment of the state-capitalist systems would not be enough. The slowing-down and eventual destruction of all forms of “socialism” seems here a necessary prerequisite for the restriction of governmental economic power in the capitalist nations. Front the ruling capitalist point of view, however, government investments in its own defense and in the defense of allied nations are not only a way of combating the external state-capitalist threat; they are a medium for maintaining a necessary level of economic activity at home. Further increases in government expenditures arouse no fear so long as they promise to create an economic situation in which the absolutely increased government spending is relatively smaller because of a much larger profitable private capital expansion. This, then, is the goal of investments for defense. If it succeeds in stopping the further spread and expansion of competitive social systems, it will secure a larger base of operation for private capital. The existence of such a base still does not guarantee successful capital accumulation, but without it, expansion has no chance at all.

Propaganda to the contrary notwithstanding, American economic foreign policy directs itself to the possible-that is, to attempting to maintain its present dominant position in world economy. This, of course, includes attempting to maintain, gain, or regain influence in and control over accessible parts of the world. Respect for the freedom and self-determination of other societies, it is said, does not “require the West to surrender its own security and its truly vital economic interests in the name of self-determination which insists upon expressing itself in a national form."[16] Though little can be done about existing state-capitalist systems, new ones must not arise. The “free world” must not shrink nor must the nations comprising it contradict the economic interests of the West, i.e., American interests on which the economies of the Western world depend. In brief, the defense of the West is the defense of the status quo, fortified by the hope, if not the conviction, that even a divided world still offers opportunities for capital expansion.

“Coexistence,” once an empty phrase, constitutes for the time being an acceptable basis for American foreign policy. The struggle for a “free world” has, however reluctantly, given way to the attempt to maintain Western capitalism in its present form. In all probability the turning point came with the Chinese revolution and Russia’s possession of atomic weapons. There was also a purely internal movement away from the war-geared economy. Depression and war hasten the decline of private enterprise. And though armament production may forestall a depression, war, as it is now waged, may easily lead to the complete extinction of private enterprise economy. In any case, the degree of government control over the American economy, fostered by a decade of depression and the second world war, was out of all proportion to social power relations as they actually prevailed and the persistent individualistic ideology. The fear grew “that the larger intervention of government in the areas of what has been private business, undertaken in the hours of military danger and continued over a time whose end is not in sight, will become a permanent part of the American way of life."[17] The reaction against this tendency is a reaction against economic militarization and war.


Production for defense involves far more than just armaments. The economy is constantly being reorganized to cope with frequent shifts of power positions due to political, economic, and strategic changes. The military apparatus, consisting of branches of the armed forces and the economic, scientific and administrative machinery behind them, becomes increasingly more expensive because of both quantitative growth and qualitative changes. Technological innovations are undertaken without regard to cost in order to gain advantages over the potential enemy. All this leads to intensive economic activity and the increasing productivity supports constantly growing non-productive efforts. But the previous trend of capital accumulation, the concentration of surplus-value as private capital, changes into concentration in the hands of government. // constantly maintained, and even without war, this process must lead to a complete change of the capitalist system. Since the trend is visible through social change as well as through the separate experiences of individual capitals, private-property interests must oppose it even if their immediate profit requirements force them to support it.

The capacity to produce an abundance of waste-matter is greater in some countries than in others; the capitalist nation most productive in this respect is also the strongest in military terms. It sets the standard for waste-production and induces such production in countries still capable of real capital formation. Russia, for instance, need not be faced with the problem of “over-production” even if there was a complete cessation of armament production. It is not only because of her general backwardness and need to expand production of both capital and consumption goods; it is also because-theoretically-her social organization allows for a nationally-planned determination of both the volume and the direction of production. The kind of planning actually undertaken is, of course, determined by the needs of the class-divided country within the setting of international power politics. All the possible advantages of complete government control can thus be only partly enjoyed. The fate of Russian economy remains bound to the fate of capitalism in general. In principle, however, and assuming that Russia existed in an unassailable state of isolation, she could for some time to come engage in “genuine” capital accumulation.

Even now Russia experiences an enhanced capital expansion, but this expansion is not of the type that spelled the rise of capitalism. It is the type characteristic of its decline. “Over-production,” which hitherto arose out of over-accumulation and capita) stagnation, now accompanies as waste-production the very first stages of capital expansion and even that of primitive accumulation. In this way, ascending state-capitalism finds its way blocked by the descending private enterprise system. Private enterprise, still on top in terms of production and productivity, helps determine the character of state-capitalist production and its exploitative social relations. Waste-production is thus a form of competition between the “people’s socialism” and the “people’s capitalism,” in which the advantages are still on the side of Western capitalism.

State-capitalist governments, representing the economic system in ascendancy, favor peace. They will, of course, go to war in defense of their existence or to hold their own and acquired territories and even perhaps when war appears to be a short-cut to imperialist goals-a convenience rather than a risk. Yet, being still behind leading capitalist nations economically, an all-out war would push them even farther back whether they were to emerge “victors” or “losers.” Though born of war and revolution, they do not see them as necessary to expansion- at any rate, not at this juncture. Armaments production on its present scale, which to the Western world presents a temporary, if dubious, way out of an insoluble dilemma, is to them an even heavier burden that hinders their development and postpones the realization of their goal- to reach and over-reach Western capitalism.

“Economic interests” hitherto often made for war. Now they have apparently become a deterrent to war in spite of and because of armament production which, in size and destructiveness, has no counterpart in history. Neither the capitalists nor the state-capitalist nations are ready to drive their antagonisms to the point of war, not merely because of their mutual respect for the destructiveness of modern weapons, but also because of their concern with capital accumulation in both its traditional private and modern national form.


The drive of private enterprise systems to keep on accumulating in the traditional way and ascending State-capitalisms are, so to speak, only the two main rivers of development. They are Hooded by many contributory streams of independent source. Rising nationalism in backward nations and social struggles in advanced countries, though often losing their identity by having to assert themselves within the larger conflict between traditional and totalitarian capitalisms, assert themselves nevertheless and turn the wider social struggles into something more than just a contest between two different, yet interlocked, systems of capital production. The amalgam of contradictory social trends prevents any stable partition of the world into two opposing unified camps and therewith a peace based on an understanding or compromise between the two great contenders for world rule, Russia and the United States.

The present line-up of opposing nations is as temporary and polymorphous as was the division of the world into fascist and anti-fascist powers during the second world war. It is, in fact, a mere, consequence of the last war, not the result of conscious efforts to unify part of the world behind one or another principle of social organization. Dependent nations will follow the policies of the great powers only so long as their power prevails, and a nation’s power prevails only so long as it grows. Stagnation for one implies expansion for the other just because the world is not partitioned into two huge, unified camps. In order to avoid stagnation, each power must increase its economic strength and therewith maintain and enlarge its influence over other nations, for economic expansion is now coupled to imperialistic control in such a way that the one is a pre-condition of the other.

Without doubting the sincerity of the desire for peace among Eastern as well as Western nations, their unavoidable economic: expansion will necessarily re-open the question of crisis and war. “Co-existence” has no future, as it involves transforming capitalist mixed economy into complete government control. A failure to stop the further growth of state-capitalist systems must lead to the nationalization of capital in countries still largely dependent on a market-expansion of capital production. Economic crisis is no longer a solution because of its restriction in space and because of altered social conditions in which depression, no less than armament production, involves the further growth of the “public sector” of the economy.

Moreover, alternating between “toward” and “away from” government-induced production does not await the actual expansion or contraction of the economy. The “mixed economy,” containing both friends and foes of governmental control, displays both tendencies simultaneously. Internal political struggles may determine which tendency is emphasized. But in a crisis, all capitalist governments resort to economic controls to save themselves and the system to which they are committed. Political groupings least concerned with prevailing property relations will go tardiest in applying government controls. And thus it comes about, in the “democracies,” that is, that in a real or even manufactured “national emergency,” governmental power will often go to those groups ready to extend governmental control. This explains the existence of political groups that favor “national emergencies” as a vehicle leading to their success.

Business activities relate to the present, not to the long-run trend towards nationalization; but as the former are only a part of the latter, they defeat their cause by serving it. At the same time that capitalists light the encroachment of government, they look for government protection and subsidies. For the immediate gain, they destroy their future; yet, to have a future presupposes immediate gain. Their inconsistencies make up political platforms: reduction of the government budget on the one hand and a rise in the debt-limit on the other. This ambiguity is all-pervading; in order to make secure as much as possible of the old property relations, policies are evolved which undermine the existing capital structure even more; the defense of the status quo hastens the social transformation process and the latter strengthens the desire to stop the metamorphosis of capitalism-a vicious circle which can be broken only by social catastrophe.

The nations of the Eastern power block, whether captive or free, see in their own existence the future of the world economy. As products of recent history, they do not believe in restoring past conditions and power relations. They are in any case determined to defend their new position in the world economy, that is to defend the newly-evolved ruling classes which are based on somewhat different property relations and changed ideologies while defending the nation. As all decisive social changes favor certain interests and suppress others, they cannot conceive of a peaceful abdication of power groups. As they see it, transforming a partly-controlled social system of capital production into totalitarian state-capitalism involves social struggles and war and they find it necessary to prepare for war.

Though not “inevitable"-there is no force external to human activity which could unleash it-war remains highly probable as the prepared for, yet undesired result of relentless competition between East and West for economic and political advantages in the world economy, of national competition and competition for power positions within nations. Even so, war will occur only in the absence of social forces ready and strong enough to prevent it. Since such social forces may arise, the question of whether a third world war is “inevitable” may be answered by the simple procedure of looking around for trends and movements opposing it. Here, the picture is disappointing despite increasing agitation for peace and obvious inclinations to reduce armaments. For the desire for peace restricts itself to verbal statements which are unconnected with any activity able to turn the tide of history. No attempts are made or even suggested to alter social relations that require crisis, war and revolution to adapt themselves to changing economic circumstances. The hope for peace rests on nothing more than the “accidental” nature of major occurrences in capitalism, on the possibility that an uncontrolled shift of situations may postpone and prevent a violent solution of accumulating contradictions.


1. Arthur F. Burns, The Frontiers of Economic Knowledge, Princeton, 1954, p. 40.

2. Walter Adams and Horace M. Gray, Monopoly in America, New York 1955, p. 98.

3. The New York Times, January 12. 1956.

4. The New York Times, April 3, 1955.

5. Blair Holies, How to Get Rich in Washington, New York, 1952, p. 31.

6. Harold G. Moulton, The Formation of Capital, Washington, D.C, 1935, pp. 65-66.

7. Robert R. Doane, The Measurement of American Wealth, New York, 1933, p. 16.

8. For statistical evidence see: Simon Kuznets, National Income-A Summary of Findings, National Bureau of Economic Research, New York, 1946, p. 53.

9. Dudley Dillard, The Economics of John Maynard Keynes, New York, 1948, p. 243.

10. Proceedings of a Conference sponsored by the Economic and Business Foundation, New Wilmington, Pa., December 20, 1918, p. 18.

11. By “state-capitalist” I refer to the social and economic systems of those countries that are described politically as Communist.

12. The New York Times, March 23, 1956.

13. The Financial Times, London, December 19, 1955.

14. Henry Grayson, The Crisis of the Middle Class, New York, 1955, p. 160.

15. The New York Times, May 7, 1956.

16. The Political Economy of American Foreign Policy. The Woodrow Wilson Foundation and the National Planning Association, New York, 1955, p. 224.

17. Edwin G. Nourse, The 1950’s Come First, New York, 1951, p. 152.