William F. Warde

Economic Prospects in Postwar America

(October 1945)

Source: Fourth International, Vol.6 No.10, October 1945, pp.304-308.
(William F. Warde was a pseudonym of George Novack.)
Transcription/Editing/HTML Markup: 2006 by Einde O’Callaghan.
Public Domain: George Novack Internet Archive 2006; This work is completely free. In any reproduction, we ask that you cite this Internet address and the publishing information above.

Standing supreme in the midst of an otherwise impoverished world, bursting with wealth and productive strength, the plutocrats of the United States look forward to “The American Century.” They are energetically and ruthlessly proceeding to reorganize bankrupt world economy in line with their appetites and interests. While moving ahead with far-flung plans to subjugate and exploit the planet, they sing joyous carols about prospective prosperity at home.

The capitalist press nowadays is full of rosy predictions of the boom to come. The September 17 issue of Time summarizes them:

“Government and private business analysts agreed, in the main, on the immediate trend: business would slide downward for about six months, then climb. The optimistic guesstimators were almost unanimous: 1947 and 1948 will see national income on a high level – perhaps about $135 billion (wartime peak: $165 billion). Beyond that, some prognosticators foresaw a deep depression, perhaps beginning in 1949.”

Shares have hit eight-year highs and trade is booming in the New York stock market. This indicates that Wall Street is not simply talking for public consumption but is staking its money on an anticipated period of lush profits.

These predictions of postwar prosperity have been paralleled by promises from such liberal capitalist politicians as Secretary of Commerce Wallace and their choirboys in the labor movement of 60 million jobs based upon a $200 billion annual national income. In carrying out their social functions of deluding and misleading the workers, these charlatans are obliged to exaggerate beyond belief the estimates of the official big business organs.

As for the capitalists, they have plenty of reasons for complacency. First, they have piled up unprecedented profits during the war. Net profits after taxes of US corporations from 1939 to 1945 totalled $42.7 billions. Their net working capital increased from $24.6 billion in 1939 to $45.5 billion in 1945 ... a jump of 85 percent. Current assets rose from $54.6 billion to $98 billion in the same period. A prodigious accumulation of wealth!

Second, these profiteer-parasites do not have to worry about shutdown plants because the government has guaranteed their profits during reconversion. Tax-rebates of $5.7 billion will pour into the treasuries of the corporations next year. The tax laws virtually insure most companies against loss. The CIO Department of Research states:

“Should the entire steel industry, for example, drop down in operations to a point below 40 per cent of capacity, and lose as much money as it did in 1938, it would receive a check from the federal government for more than $167,000,000. This is 32 percent more than it was able to average in net profits after taxes in the four peacetime years, 1936-1939.”

Third, the industrialists are getting ready for a big boom. Their mouths are watering at the feast of profits they hope to enjoy. According to estimates given by the September 28 United States News, gross income of all US corporations in 1946 will be $190 billion. In 1947 gross income, they say, can be expected to reach $205 billion. They would receive a larger gross income in either year than was ever before attained in peacetime.

What will this mean in profits? If the excess-profits tax is repealed in 1946, corporate profits, after taxes, will amount to $5.5 billion. In 1947 net after taxes will be $9.3 billion. These will be record peacetime rake-offs.

This is the golden shower to which Wall Street is looking forward. But capitalist prosperity will not bring the same things to the workers as to the employers. What can the workers expect from a boom? What are the chances for full employment and improved standards of living? How long can such a period of prosperity last? In order to chart their course and plan their strategy in the next period the working class needs answers to these questions based upon a realistic appraisal of the main trends and prospects of American economy.

Factors Favoring a Boom

Let us begin our inquiry with an examination of the chief favorable economic factors which fill the American capitalists with such optimism. They see a huge domestic market crowded with consumers eager for the goods denied them in wartime and possessing unprecedented purchasing power. The June 15 United States News appraises this aspect of the situation in the following terms:

“Current income payments to individuals in 1945 will be about $159 billion, or somewhat higher than in 1944 ... It now is considered doubtful if current income of individuals after this war will drop much below $119 billion, compared with $76 billion in 1940 ... Savings of individuals accumulated since 1940 had reached a total of more than $121 billion at the start of this year.”

This reservoir of purchasing power is expected to give rise to a spending spree by the public.

The capitalist propaganda that the workers have a colossal backlog of savings must, of course, be heavily discounted. The bulk of the billions in war bonds and savings are held by the corporations, financial institutions and families in the upper income brackets. Nevertheless many better-paid workers retain part of their wartime earnings and others are ready to mortgage their incomes through installment payments to buy goods they want.

The more prosperous farmers are also waiting to turn their cash and government bonds into cars, tractors, household improvements, etc. The farmers have enjoyed a record net income, after expenses, of about $11 billion for the past two years. At the same time government guarantee of the prices of corn, wheat, cotton, etc. is scheduled to extend through 1948. Since the agricultural population is one of the main supports of the domestic market, this second great stream of purchasing power is counted upon to swell the boom.

The pent-up “effective demand” for such consumer’s goods as autos, radios, household appliances, etc., is expected to keep industry humming for several years. The duration of the boom can be gauged in no small measure by the number of autos that can be sold. The auto industry sets the pace for the rest of US production. It is the connecting link between light and heavy industry. Rubber, steel, glass, aluminum, etc., are closely meshed into its operations.

How many cars can the market absorb and how soon will it become saturated? The War Production Board predicts that about 500,000 cars will be made in 1945; 3.7 million in 1946; and almost 5 million in 1947. This would outstrip the record production of 4.7 million in 1929. The United States News estimates: “It may require two or three years to dull the edge of the boom in demand for automobiles.”

Along with the boom in consumer’s goods the capitalists anticipate a boom in construction. WPB Chairman Krug recently estimated that construction in 1946 would total $6.5 billion, 44 percent more than this year and slightly above 1939. Privately financed construction is estimated at $4,350,000,000, including $1 billion for new factories, the highest annual rate in history, and $1.5 billion in residential building.

Capitalism in Decay

However close these estimates are to the mark, the United States unquestionably has all the facilities needed to take care of these demands – and much more. The finest industrial apparatus known to man is concentrated within this country. It stands at the height of modern technique and organization. The war which bombed out and wore out the industry of all other major powers served to renovate and expand American industry.

Moreover the United States holds the lion’s share of the world’s wealth. The dollar is king in international finance and commerce. The entire world chases after the American dollar, the only strong and comparatively stable currency left in this poverty-stricken and bankrupt capitalist society. The United States not only has more and better machines but more and better ships and planes than any other nation. In the American working class it possesses the most efficient laboring force.

These circumstances give American capitalism control over world trade and enables it to shoulder aside competitors, conquer foreign markets, and become the chief supplier of goods and machinery. The degradation of the rest of the planet helps to enhance the profit-making powers of the US magnates.

This is one side of the picture, the side of American economy and its prospects which so tickles the palates of the profiteers and provides the material premises for Wall Street’s calculations. These are the aspects of the future emphasized by Big Business and so outrageously inflated by their apologists in labor and liberal circles.

But there is another and seamier side to this same situation which the capitalists are anxious to conceal from themselves as well as others and which their agents in labor’s ranks shrink from revealing. This is the hideous visage of capitalism in decay which lies beneath the surface of capitalist prosperity. Let us take a look at these grim features.

The United States has inherited from the war a national debt of over $300 billion. The war cost $341 billion. This is 11 times the cost of the First World War and nearly twice as much as the total expenditures of the federal government in the 151 years between 1789 and 1940! This colossal financial burden must have extremely serious consequences for American economy, and especially for the toiling masses.

The big monied interests, banks, insurance companies, corporations and wealthy individuals, own the greater portion of the bonds and other government obligations which constitute this national debt. They will have to be paid about $6 billion a year in interest. Where is this money coming from? The capitalists do not intend to shoulder any of these interest charges; they are already moving to eliminate the excess-profits and other taxes on the plea that they act as a brake upon industry. The representatives of the rich propose to squeeze the upkeep of this national debt out of the working people through extortionate taxes. The present national debt amounts to $2,100 for every man, woman and child in the United States, more than the yearly income of the average working class family. This is the burden the war has piled on the backs of the workers.

And this load of debt will become heavier in the future. The August 24 United States News reminds us that:

“Past experience indicates that the postwar expenditures growing out of the war gradually equal the cost of the war itself, as veteran benefits and interest costs accumulate.”

This is borne out by the projected budget for next year. For a decade preceding the war the federal government failed to balance its budget. A normal prewar budget approximated $5 billion. The proposed budget for the next fiscal year may run as high as $50 billion! Even a penny-pincher like Senator Robert Taft of Ohio cannot see how it can be cut below $20 billion. This means that in one way or another the masses must be forced to deduct from their income the $6 billion annual interest charges on the debt plus $6 billion for the cost of the military establishment to guard the world for Wall Street. They must also pay for a swollen bureaucracy, foreign loans of many hundreds of millions, subsidies for farm commodities, and all the other overhead costs of a government dominated by the plutocrats. This cannot help but exercise ruinous effects upon their living standards.

While taxes slash into the workers’ income from one side, constantly rising prices will take bigger and bigger bites from another. The inflationary processes have been gaining momentum during the war. In the past five years there has been at least a fifty percent rise in the cost of living.

Under pressure from the profiteers the administration is hastening to scrap all price controls. As every worker and his wife knows, wartime controls did not prevent prices from mounting. Nevertheless they did act as a curb on runaway inflation. The removal of these restraints will give the green light to the speculators and profiteers.

The Scourge of Inflation

With the acceleration of the inflationary forces we can expect an even greater increase in living costs during the next five years. As the CIO-PAC pointed out in its pamphlet, The People’s Plan For Reconversion:

“After World War I, from Armistice Day to June 1920, the cost of living went up 46 per cent. What happened to payrolls in the same period! (Watch it – watch it carefully!) Payrolls went down 44 per cent.”

Although they keep quiet about it, the US capitalists are preparing to repeat the same performance after this war on a grander scale and with far more catastrophic consequences for the working class.

Unrestrained prices will become the main means in the hands of the capitalists not only for gouging the consumers but for slashing the real wages of the workers. Even where workers succeed in their struggles for wage increases, they will find that these gains are swiftly nullified by the unchecked ascent in the cost of living. Without a rising scale of wages to cope with the soaring cost of living labor will suffer falling living standards.

On top of heavier taxes and higher prices the workers will feel the effects of the advances in labor productivity during the recent years. While the monopolists have tightened their grip on American economy during the war, there has been a tremendous increase in productivity through the rationalization of industry and improvements in machinery and “knowhow.” The November 1944 CIO Economic Outlook reports that “in war industries the rise in output per wage earner since 1941 has been estimated at almost 30 percent (in terms of value). Output per man hour in manufacturing as reconversion is completed will be , at least 25 percent above the 1939 level.” The Bureau of Labor Statistics estimates that postwar productivity in manufacturing industries will increase at the rate of 10 percent a year for three years after the first full year of reconversion. This means that 30 percent or so fewer workers can produce the same amount of goods as in the prewar years.

These developments will certainly serve to reduce the opportunities for employment in the postwar boom. There were 9 million unemployed in this country as late as 1940. What then are the real prospects for employment on the assumption of a full-blown boom?

Prospective National Income

When we consult the capitalists themselves we find that not one of their authoritative spokesmen admits the probability or even takes seriously the propaganda about 60 million jobs at 40 hours a week based on a $200 billion annual national income. This kind of eyewash is exclusively reserved for those workers who retain some confidence in capitalism and its would-be liberal and labor saviors. At a “War and Reconversion Congress” held late in 1944 by the National Association of Manufacturers, its president Robert Gaylord scoffed at such predictions.

“Let’s look at the facts,” he said. “In 1929, 48 million people worked a little more than forty-eight hours a week and there was virtually no unemployment. That was 2,304 million hours a week and it produced a national income of $83 billions. Now, it is said, that 2,400 million hours a week, or only 4 percent more than we worked in 1929, can produce 240 percent more national income. Let’s think straight. Are we talking $200 billion real dollars or 50-cent dollars?”

As we see, the representative of Wall Street contemptuously brushes aside the whole proposition.

From the spokesman for Wall Street, let us turn to England for an appraisal of US Employment Prospects. The August 11 issue of The Economist, that influential organ of British capitalism, undertakes a “clinical examination” of American economy. The author frankly avows the motive for this inquiry:

“Since Bretton Woods proposes the establishment of a direct link, however elastic, between the different national economies, it is imperative to know to what sort of prime mover the British economy is to be linked.”

The starting point of his examination is the fact that “The American economy is dominated by the enormous, almost miraculous increase in its total output that has occurred during the war.” The US produced nearly twice as much in 1944 as in peacetime. Here are the official estimates of the Gross National Product given by the Department of Commerce:



$  99.4



$  54.8



$  88.6



These statistics make it clear that “if America is to avoid mass unemployment a far larger total of goods and services will have to be produced and consumed than ever before in peacetime.” In a pamphlet entitled “National Budgets for Full Employment,” the National Planning Association has estimated that, to secure full employment, the Gross National Product at 1941 prices would have to be about $170 billion, which is equivalent to about $200 billion at inflated 1944 prices. Can American economy “generate effective demand to the tune of $170 billion by 1950?” asks the author.

He proceeds to analyze the three main components of the national income: consumption by individuals, government expenditures, and capital goods investment.









of National
Planning Ass.











Capital Goods





Gross National Product





The first observation made on these figures is that the most optimistic calculations of the National Planning Association fall short of the required amount of $170 billion by $8.5 billion. Then the writer proceeds to demonstrate how greatly over-inflated the estimated items of the $161.5 total are.

The projected $114.1 billion civilian consumption would have to be 50 percent larger than in 1944 and 80 percent more than in the record peacetime year! Despite “an infinity of unsatisfied wants,” the author doubts that the American public can “make such a jump in its consumption habits.”

The capital expenditures which are put at $22 billion “seem to be even more optimistically estimated.” “Residential construction was only $3.5 billion in the boom days of 1929 at the high costs then prevailing, and never exceeded $2.5 billion (at current prices) in any year in the decade before the war. Yet the estimate is for $6 billion. Similarly, the estimated $13 billion investment in producers’ plant and equipment has never yet been attained in peace or war. The entire investment by the Federal Government in war plants over the whole period from July 1, 1940 has only been about $16 billion. As for the estimate of $2 billion for net export balance, it is only necessary at this stage to note the fact that every plan published in the United States for achieving full employment provides for a large export surplus.”

The writer concludes “that, in the absence of any special stimuli, the flow of effective demand may fall short of the volume necessary to achieve full employment, not by $8.5 billion as the NPA estimates, but by something like $15 or $20 billion.” At best The Economist doesn’t give American capitalism more than a fifty-fifty chance of avoiding “another large-scale depression.”

Thus we learn from the testimony of the capitalists themselves that the prosperity which is supposed to create full employment will do nothing of the kind. It will be accompanied by mass unemployment running into the millions. This does not trouble the monopolists because they can still make plenty of profits without capacity production and maximum employment. UAW-CIO vice-president Walter Reuther presented some informative figures in the September 16 New York Times demonstrating the big corporations’ ability to get along on considerably less than capacity output.

“Sixty-five industries reporting to the War Production Board have revealed the volume of production at which they feel confident of breaking even in peacetime operations. Of the sixty-five, fifty-one stated that they could operate without loss at less than 70 percent of capacity output. The break-even rate for the automotive industry is 55 percent.”

Monopolist Policy

The industrialists can be prosperous at an 80 percent rate of operations although 20 percent of their working force is compelled to remain idle. The restriction of production is an essential policy of the capitalist magnates who own and control American industry. To maintain their monopolist positions and profits they keep prices up, beat wages down, and curtail production. That is why they seek to scrap or close down all the government-owned plants they can’t use profitably, however easily these facilities can be converted to civilian production.

Reuther complains that the monopolist pattern of “low wages, high prices, high profits per unit, few units” brings about “deficient purchasing power, shrinking markets, rising unemployment, a growing conviction on the part of those whom industry has thrust aside that the game of free enterprise, played at their expense, isn’t worth the candle.” All this is certainly true. But Reuther, the “labor statesman,” will not get very far in his attempt to persuade the plutocrats to change their ways. They are hell-bent upon preserving their profits and privileges, regardless of the productive potentialities of our economy and no matter how great the suffering of the masses.

The workers know only too well how sharply the radiant forecasts and extravagant promises of full employment clash with the present reality. The Associated Press reported on September 21 that 2,500,000 had been laid off since Japan’s surrender – and the lines of unemployed lengthen every day. Industrial production fell from 212 percent of the 1935-1939 average in July to below 195 percent in August. It is expected to drop below 175 percent in September. Department store sales, electric power output and steel ingot production have declined proportionately.

This recession has already inflicted severe wage-cuts, mass unemployment, starvation level unemployment insurance and their attendant evils upon the workers. But these conditions are only “temporary,” the capitalists tell the workers. Just grin and bear them, and in a year or so, when the transition from war to peacetime economy is completed there will ensue a wonderful era of prosperity. Such is the solace they offer the workers.

But the drastic slowdown of the industrial apparatus which the capitalists so blithely dismiss as an insignificant and fleeting episode is only in its first stages. All the commentators expect the downward trend to continue for a number of months. None can be sure how deep it will go or how long it will drag out. In any event its effects upon the national economy in declining wages and fast-rising unemployment have hardly begun to manifest themselves.

How big will the army of unemployed become in the coming period when vast numbers are thrown out of war jobs and 8 million veterans are slated to be demobilized? Estimates of peak unemployment before “reconversion” runs its course have ranged from 12 to 18 millions.

Meanwhile the income of the employed workers has already been drastically reduced. Statistics cited in the September 28 United States News show how deeply the worker’s income is being slashed by the shortening of the work week alone. The average weekly earnings of factory workers in 1944, before withholding taxes of 20 percent, were $46.08, representing straight-time and overtime pay for 45.2 hours. If we adjust this $46.08 according to the official cost of living increase of 26.6 percent after 1939 (in reality the increase was easily double), this left the worker with a real wage of $36.51 in 1944.

With the loss of overtime pay, however, on the basis of a forty hour week and a 29.8 percent increase in living costs since 1939, the real earnings of the average worker have shrunk so far this year to $28.66. Thus the workers have been walloped by a thirty percent cut in their pay envelopes simply through the return of industry to a forty hour week. And even if the unions should win their demands for a thirty percent wage increase, it would merely bring the total take-home pay up to the wartime level.

In the second place, the capitalists themselves know, despite the hokum they feed the workers, that even when production whirls again, millions of people will remain on the breadlines. A secret OPA report predicted no less than 10,400,000 unemployed by December 1946 when industry will have completed its reconversion. OPA head Bowles told 1,000 business magnates meeting at the Waldorf-Astoria on September 20 that several groups of government economists “agreed that there will be ‘superficial’ prosperity in 1946, with big profits and dividends, but that under the surface there will be a drop of $25 billion in gross national income and 8,000,000 or 9,000,000 unemployed, half of them war veterans, by midwinter, with 6,000,000 still jobless by a year from Christmas.”

Thus even on the basis of a boom many millions of workers will be unable to find places in industry. Of the 8 to 10 million jobless and returning veterans who will be pounding the pavements in 1946 no more than a fraction can expect to find steady employment. The promise of “60 million jobs and a $200 billion national income” under the existing economic system is a patent fraud.

Even assuming that the postwar boom measures up to the expectations of Wall Street, it will not shower any bounties upon the masses. The plutocrats will certainly rake in huge profits and wallow in luxuries. But the toilers will still be afflicted with burdensome taxes, skyrocketing prices for the necessities of life and cuts in real wages. The working class will receive a smaller proportionate share of a considerably reduced national income.

The Socialist Solution

In view of these tendencies the militants in the unions must understand and teach their fellow workers that unemployment, growing insecurity, lowered living standards and all the other afflictions of labor are not passing phenomena. Not even a boom will eliminate these evils which flow like pus out of capitalism in its decay.

And what lies beyond any such period of feverish capitalist prosperity? A new and more catastrophic depression! The colossal productive forces pressing against shrinking markets along with insurmountable tariff walls, accelerated inflation and monstrous national debt will inevitably assert themselves in an explosive manner. The bigger the boom, the deeper, more widespread and devastating will be the consequent crisis.

In peace or in war, in boomtime or in depression, the wealthiest capitalist nation cannot satisfy the basic needs of its working people for jobs at living wages, decent housing, adequate food and clothing. So long as the rich continue to coin profits out of the sweat and blood of the toilers, they do not care how many are out of work, go hungry and homeless, and lack all hope for the future.

The war has disclosed the prodigious productive capacities of our economy and proved that it can easily create enough for everybody. The capitalist peace will serve to impress more and more upon the minds of the masses the truth that they can find no solution to their social problems under rotting monopoly capitalism. Only a clique of capitalist magnates stands in the way of abundance. To expand production and achieve full employment the workers have to wrest control of the factories, banks, and other major means of production from the hands of the monopolists and establish their own rule over industry and society. Production for profit must be supplanted by production according to a unified plan determined by the needs of the entire people and directed by the associated producers themselves. This is the socialist remedy for capitalist anarchy, insecurity and misery.


Last updated on: 5.2.2006