Leon Trotsky

and Economic Life


Written: 1934.
First Published: Foreign Affairs, April 1934.
Source: Class Struggle Official Organ Of The Communist League Of Struggle (Adhering to the International Left Opposition), Vol.4 No.9-10, October 1934.
Republished: From the Arsenal of Marxism, Fourth International, Vol.17 No.2, Winter 1956, pp.18-21.
Online Version: Vera Buch & Albert Weisbord Internet Archive.
Transcribed/HTML Markup: Albert Weisbord Internet Archive/David Walters.

Introduction by Editors of Fourth International

This article first appeared in the magazine Foreign Affairs in April 1934. Trotsky’s analysis of the disruptive effect of World War I on world capitalist economy sheds light on the still more violent effect of World War II, particularly its effect on the normal economic cycle. The growth of autarchy, which he comments on, is duplicated today in its most extreme form by the economic blockade initiated by Wall Street against the Soviet bloc. Trotsky wrote in the depths of the depression that followed the postwar prosperity of the Twenties. Our prosperity, paralleling the prosperity of the Twenties, has not yet been matched by a plunge like that of the Thirties, but the very height of the prosperity is an indication of the abyss we can reach in the coming depression.

* * *

Italian fascism has proclaimed national “sacred egoism” as the sole creative factor. After reducing the history of humanity to national history, German fascism proceeded to reduce nation to race and race to blood. Moreover, in those countries which politically have not arisen – or rather descended – to fascism, the problems of economy are more and more being forced into national frameworks. Not all of them have the courage to inscribe “autarchy” openly upon their banners. But everywhere policy is being directed toward as hermetic a segregation as possible of national life away from world economy. Only 20 years ago all the school books taught that the mightiest factor in producing wealth and culture is the world-wide division of labor lodged in the natural and historic conditions of the development of mankind. Now it turns out that world exchange is the source of all misfortune and all dangers. Homeward ho! Back to the national hearth! Not only must we correct the mistake of Admiral Perry, who blasted the breach in Japan’s “autarchy”, but a correction must also be made of the much bigger mistake of Christopher Columbus, which resulted in so immoderately extending the arena of human culture.

The enduring value of nations, discovered by Mussolini and Hitler is now set off against the false values of the 19th century; democracy and socialism. Here, too, we come into an irreconcilable contradiction with the old primers, and worse yet, with the irrefutable facts of history. Only vicious ignorance can draw a sharp contrast between nation and liberal democracy. As a matter of fact, all the movements of liberation in modern history, beginning, say, with Holland’s struggle for independence had both a national and a democratic character. The awakening of the oppressed and dismembered nations, their struggle to unite their severed parts and to throw off the foreign yoke, would have been impossible without a struggle for political liberty. The French nation was consolidated in the storms and tempests of democratic revolution at the close of the18th century. The Italian and German nations emerged from a series of wars and revolutions in the 19th century. The powerful development of the American nation, which had received its baptism of freedom in its uprising in the 18th century, was finally guaranteed by the victory of the North over the South in the Civil War. Neither Mussolini nor Hitler is the discoverer of the nation. Patriotism in its modern sense – or more precisely its bourgeois sense – is the product of the 19th century. The national consciousness of the French people is perhaps the most conservative and the most stable of any; and it to this very day it feeds from the spring of democratic tradition.

Growth of World Economy

But the economic development of mankind which overthrew mediaeval particularism did not stop within national boundaries. The growth of world exchange took place parallel with the formation of national economies. The tendency of this development – for advanced countries at any rate – found its expression in the shift of the center of gravity from the domestic to the foreign market. The 19th century was marked by the fusion of the nation’s fate with the fate of its economic life; but the basic tendency of our century is the growing contradiction between the nation and economic life.

The development of German capitalism was one of the most dynamic character. In the middle of the 19th century the German people felt themselves stifled in the cages of several dozen feudal fatherlands. Less than four decades after the creation of the German Empire, German industry was suffocating within the framework of the national state. One of the main causes of the World War was the striving of German capital to break through into a wider arena. Hitler fought as a corporal in 1914-1918 not to unite the German nation but in the name of a super-national imperialistic program that expressed itself in the famous formula “to organize Europe”. Unified under the domination of German militarism, Europe was to have become the drill ground for a much bigger job – the organization of the entire planet.

But Germany was no exception. She only expressed in a more intense and aggressive form the tendency of every other national capitalist economy. The clash between these tendencies resulted in the war. The war, it is true, like all grandiose upheavals of history, stirred up various historical questions and in passing gave the impulse to national revolutions in the more backward sections of Europe – Tsarist Russia and Austria-Hungary. But these were only the belated echoes of an epoch that had already passed away. Essentially, the war was imperialist in character. With lethal and barbaric methods it attempted to solve a problem of progressive historic development – the problem of organizing economic life over the arena which had been prepared by the worldwide division of labor.

No Solution

Needless to say, the war did not find the solution to this problem. On the contrary, it atomized Europe even more. It deepened the interdependence of Europe and America at the same time that it deepened the antagonism between them. It gave the impetus to the independent development of colonial countries and simultaneously sharpened the dependence of the metropolitan centers upon colonial markets. As a consequence of the war, all the contradictions of the past were aggravated. One could half-shut one’s eyes to this during the first years after the war, when Europe aided by America, was busy repairing its devastated economy from top to bottom. But to restore productive forces inevitably implied to reinvigorating of all those evils that had led to the war. The present crisis in which are synthesized all the capitalist crises of the past, signifies above all the crisis of national economic life.

The League of Nations attempted to translate from the language of militarism into the language of diplomatic pacts the task which the war left unsolved. After Ludendorff had failed “to organize Europe” by the sword, Briand attempted to create “The United States of Europe” by means of sugary diplomatic eloquence. But the interminable series of political, economic, financial, tariff, and monetary conferences only unfolded the panorama of the bankruptcy of the ruling classes in face of the unpostponable and burning task of our epoch.

Theoretically this task may be formulated as follows: How may the economic unit of Europe be guaranteed, while preserving complete freedom of cultural development to the people living there? How may unified Europe be included within a coordinated world economy? The solution to this question may be reached not by deifying the nation, but on the contrary by completely liberating productive forces from the fetters imposed upon them by the national state. But the ruling classes of Europe, demoralized by the bankruptcy of military and diplomatic methods, approach the task today from the opposite end, that is, they attempt by force to subordinate economy to the outdated national state. The legend of the bed of Procrustes is being reproduced on a grand scale. Instead of clearing away a suitably large arena for the operations of modern technology, the rulers chop and slice the living organism of economy to pieces.

In a recent program speech Mussolini hailed the death of “economic liberalism,” that is, of the reign of free competition. The idea itself is not new. The epoch of trusts, syndicates, and cartels has long since relegated free competition to the backyard. But trusts are even less reconcilable with restricted national markets than are the enterprises of liberal capitalism. Monopoly devoured competition in proportion as the world economy subordinated the national market. Economic liberalism and economic nationalism became outdated at the same time. Attempts to save economic life by inoculating it with virus from the corpse of nationalism result in blood poisoning which bears the name of fascism.

Mankind is impelled in its historic ascent by the urge to attain the greatest possible quantity of goods with the least expenditure of labor. This material foundation of cultural growth provides also the most profound criterion by which we may appraise social regimes and political programs. The law of the productivity of labor is the same significance in the sphere of human society as the law of gravitation in the sphere of mechanics. The disappearance of outgrown social functions is but the manifestation of this cruel law that determined the victory of slavery over cannibalism, of serfdom over slavery, of hired labor over serfdom. The law of the productivity of labor finds its way not in a straight line but in a contradictory manner, by spurts and jerks, leaps and zig-zags, surmounting on its way geographical, anthropological and specific refractions of the “rule”.

In the 19th century, the struggle for the greatest productivity of labor took mainly the form of free competition which maintained the dynamic equilibrium of capitalist economy through cyclical fluctuations. But precisely because of its progressive role competition has led to a monstrous concentration of trusts and syndicates, and this in turn has meant a concentration of economic and social contradictions. Free competition is like a chicken that hatched not a duckling but a crocodile. No wonder she cannot manage her offspring!

Economic liberalism has completely outlived its day. With less and less conviction is Mohegan’s appeal to the automatic interplay of forces. New methods are needed to make skyscraper trusts correspond to human needs. There must be radical changes in the structure of society and economy. But new methods come into clash with old habits and, what is infinitely more important, with old interests. The law of the productivity of labor beats convulsively against barriers which it itself set up. This is what lies at the core of the grandiose crises of the modern economic system.

A Tragic Paradox

Conservative politicians and theorists, taken unaware by the destructive tendencies of national and international economy, incline towards the conclusion that the overdevelopment of technology is the principal cause of present evils. It is difficult to imagine a more tragic paradox! A French politician and financier, Joseph Caillaux, sees salvation in artificial limitations of the process of mechanization. Thus the most enlightened representatives of the liberal doctrine suddenly draw inspiration from the sentiments of those ignorant workers of over a hundred years ago who smashed weaving looms. The progressive task of how to adopt the arena of economic and social relations to the new technology is turned upside down, and is made to seem a problem of how to restrain and cut down productive forces so as to fit them to the old national arena and to the old social relations. On both sides of the Atlantic no little mental energy is wasted on efforts to solve the fantastic problem of how to drive the crocodile back into the chicken egg. The ultra-modern economic nationalism is irrevocably doomed by its own reactionary character; it retards and lowers the productive forces of man.

The policies of a closed economy imply the artificial constriction of those branches of industry which are capable of fertilizing successfully the economy and culture of other countries. They also imply an artificial planting of those industries which lack favorable conditions for growth on national soil. The fiction of economic self-sufficiency thus causes tremendous overhead expenditures in two directions. Added to this is inflation. During the 19th century, gold as a universal measure of value became the foundation of all monetary systems worthy of the name. Departures from the gold standard tear world economy apart even more successfully than do tariff walls. Inflation, itself an expression of disordered internal relationships and of disordered economic ties between nations, intensifies the disorder and helps to turn it from a functional into an organic one. Thus the “national” monetary system crowns the sinister work of economic nationalism.

The most intrepid representatives of this school console themselves with the prospect that the nation, while becoming poorer under a closed economy, will become more “unified” (Hitler), and that as the importance of the world market declines the causes for external conflicts will also diminish. Such hopes only demonstrate that the doctrine of autarchy is both reactionary and utterly utopian. The fact is that the breeding places of nationalism also are the laboratories of terrific conflicts in the future; like a hungry tiger, imperialism has withdrawn into its own national lair to gather itself for a new leap.

Bourgeois Rationalizations

Actually, theories about economic nationalism which seem to base themselves on the “eternal” laws of race show only how desperate the world crisis really is—a classic example of making a virtue of a bitter need. Shivering on bare benches in some God-forsaken little station, the passengers of a wrecked train may stoically assure each other that creature comforts are corrupting to body and soul. But all of them are dreaming of a locomotive that would get them to a place where they could stretch their tired bodies between two clean sheets. The immediate concern of the business world in all countries is to hold out, to survive somehow, even if in a coma, the hard bed of the national market. But all these involuntary stoics are longing for the powerful engine of a new world “conjuncture”, a new economic phase.

Will it come? Predictions are rendered difficult, if not altogether impossible by the present structural disturbance of the whole economic system. Old industrial cycles, like the heartbeats of a healthy, body, and a stable rhythm. Since the war we no longer observe the orderly sequence of economic phases; the old heart skips beats. In addition, there is the policy of so-called “state-capitalism”. Driven on by restless interests and by social dangers, governments burst into the economic realm with emergency measures, the effects of which in most cases it cannot itself foresee. But even leaving aside the possibility of a new war that would upset for a long time the elemental work of economic forces as well as conscious attempts at planned control, we nevertheless can definitely foresee the turning point from the crisis and depression to a revival, whether or not the favorable symptoms present in England and to some degree in the US prove later on to have been first swallows that did not bring the spring. The destructive work of the crisis must reach the point if it has not already reached it—where impoverished mankind will need a new mass of goods. Chimneys will smoke, wheels will turn. And when the revival is sufficiently advanced the business world will shake off its stupor, will promptly forget yesterday’s lessons and will contemptuously cast aside self-denying theories along with their authors.

But it would be the greatest delusion to hope that the scope of the impending revival will correspond to the depth of the present crisis. In childhood, in maturity and in old age the heart beats at a different tempo. During capitalism’s ascent successive crises had a fleeting character and the temporary decline in production was more than compensated at the next stage. Not so now. We have entered an epoch when the periods of economic revival are short-lived, while the periods of depression become deeper and deeper. The lean cows devour the fat cows without a trace and still continue to bellow in hunger.

All the capitalist states will be more aggressively impatient, then, as soon as the economic barometer begins to rise. The struggle for foreign markets will become unprecedentedly sharp. Pious notions about the advantages of autarchy will at once be cast aside, and sage plans for national harmony will be thrown in the waste-basket. This applies not only to German capitalism, with its explosive dynamics, or to the belated and greedy capitalism of Japan, but also tot he capitalism of America, which still is powerful despite its new contradictions.

The United States represented the most perfect type of capitalist development. The relative equilibrium of its internal and seemingly inexhaustible market assured the US a decided technical and economic preponderance over Europe. But its intervention in the World War was really an expression of the fact that its internal equilibrium was already disrupted. The changes introduced by the war into American structure have in turn made entry into the world arena a life and death question for American capitalism. There is ample evidence that this entry must assume extremely dramatic forms.

The law of the productivity of labor is of decisive significance in the interrelations of America and Europe, and in general in determining the future place of the US in the world. That highest form which the Yankees gave to the law of the productivity of labor is called conveyor, standard, or mass production. It would seem that the spot from which the lever of Archimedes was to turn the world over had been found. But the old planet refuses to be turned over. Everyone defends himself against everybody else, protecting himself by a customs wall and a hedge of bayonets. Europe buys no goods, pays no debts, and in addition arms itself. With five miserable divisions starved Japan seizes a whole country. The most advanced technique in the world suddenly seems impotent before obstacles basing themselves on a much lower technique. The law of the productivity of labor seems to lose its force.

But it only seems so. The basic law of human history must inevitably take revenge on derivative and secondary phenomena. Sooner or later American capitalism must open up ways for itself throughout the length and breadth of our entire planet. Buy what methods? By ALL methods. A high coefficient of productivity denotes also a high coefficient of destructive force. Am I preach war? Not in the least. I am not preaching anything. I am only attempting to analyze the world situation and to draw conclusions from the law of economic mechanics. There is nothing worse than the sort of mental cowardice which turns its back on facts and tendencies when they contradict ideals or prejudices.

Only in the historic framework of world development can we assign fascism its proper place. It contains nothing creative, nothing independent. Its historic mission is to reduce to an absurdity the theory and practice of economic impasse.

In its day economic nationalist led mankind forward. Even now, it is still capable of playing a progressive role in the colonial countries of the East. But decadent fascist nationalism, preparing volcanic explosions and grandiose clashes in the world arena, bears nothing except ruin. All our experiences on this score during the last 25 or 30 years will seem only an idyllic overture compared to the music of hell that is impending. And this time it is not a temporary economic decline which is involved but complete economic devastation and the destruction of an entire culture in the event that toiling and thinking humanity proves capable of grasping in time the reins of its own productive forces and of organizing those forces correctly on a European and a world scale.

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Last updated on: 7 April 2009