From Fourth International, vol.4 No.2, February 1943, pp.50-55.
Transcribed, Edited & Formatted by Ted Crawford & David Walters in 2008 for the ETOL.
“Thousands of thoughtful business men and economists, remembering what happened after the last war, being familiar with the fantastic figures of this war, and knowing the severity of the shock to come, have been greatly disturbed. Some have concerned themselves with plans to get over the first year. Others have given thought to the more distant future.
“It should be obvious to practically every one that, without well planned and vigorous action, a series of economic storms will follow this war. These will take the form of inflation and temporary scarcities, followed by surpluses, crashing prices, unemployment and, in some cases, violent revolution,” (Our emphasis.)
Henry A. Wallace, Address on Post-War Policy, December 29, 1942
Vice-President Henry A. Wallace’s recent utterances are an outstanding example of the plans and schemes with which capitalist and middle-class economists, business men and statesmen are occupying themselves.
The period is favorable for such activities. As the war continues, heaping misery upon the masses of the world, they begin to ask: “What for?” They remember the pre-war years of depression and world economic catastrophe. They do not want to return to that world when the war ends. Confronted by this universal mood, the capitalist class is worried: it remembers the post-World War I revolutionary epoch, 1917-23, when the life of capitalism hung by the flimsiest thread.
Hence the mounting number of post-war plans. There is no limit to the promises they make: a warless world, social security, the abolition of economic depressions, everlasting prosperity – everything of course without abolishing the capitalist system.
Woodrow Wilson’s promises aimed to halt the revolutionary threat in the advanced countries; this time the masses of the backward regions are even now stirring in national and social ferment; so Wallace’s promises are also directed to the people of the economically retarded regions in order to halt their struggle against imperialism. Wallace promises the colonial peoples an international New Deal, an improved standard of living, industrialization, an end to imperialism – all naturally within the capitalist system and without abolishing it.
In this article we shall not examine the political measures advocated by Wallace which, as a matter of fact, in spite of their gloss of humanitarianism, differ little from Hoover’s and Hull’s schemes for policing the post-war world. We propose to examine here the economic measures advocated by Wallace.
Wallace promises the abolition of economic depressions, full employment, and the raising of living standards at home and abroad.
He declares in his December 29 address that his aim is not “to blueprint all the details” but “to begin now to think about some of the guiding principles of this world-wide new democracy we of the United Nations hope to build.”
Wallace gives much greater emphasis than Hoover or Hull to international economic relations. He says:
“Self-interest alone should be sufficient to make the United States deeply concerned with the contentment and well being of the other peoples of the world ... It is only when other peoples are prosperous and economically productive that we can find export markets among them for the products of our factories and farms.”
The entire scheme, its quintessence, rests upon industrialization of the backward areas of the world and freeing of world trade from tariff restrictions. In the course of his speech, Wallace snaps back at his capitalist critics: “is it ‘utopian’ to foresee that South America, Asia and Africa will in the future experience a development of industry and agriculture comparable to what has been experienced in the past in Europe and North America?”
The nearest approach to a concrete measure offered by Wallace to accomplish this purpose is free trade; he considers tariffs in the advanced nations the root of all the economic difficulties. He asserts:
“We must recognize, for example, that it is perfectly justifiable for a debtor, pioneer nation to build up its infant industries behind a protective tariff, but a creditor nation can be justified in such policies only from the standpoint of making itself secure in case of war.”
This is Wallace’s economic program – if these nebulous ideas can be called one. The question arises: Who will carry out these proposals? Wallace replies:
“Maintenance of full employment and the highest possible level of national income should be the joint responsibility of private business and of government.”
“The war has brought forth a new type of industrialist who gives much promise for the future. This type of business leader I have in mind has caught a new vision of opportunities in national and international projects. He is willing to cooperate with the people’s government in carrying out socially desirable programs. He conducts these programs on the basis of private enterprise, and for private profit, while putting into effect the people’s standards as to wages and working conditions.”
To summarize: Wallace proposes the abolition of economic crises and the raising of the living standards of the masses of the whole world through industrialization of the present industrially undeveloped areas and through free trade, The plan is to be achieved by private business, actuated by the profit motive, in alliance with “the people’s government.” No social revolution is required, no transfer of property from one class to another, no radical legislation.
If it could be done, it would be quite a trick, but can it?
Let us start with the question of “who.” The whereabouts of Wallace’s “new type of industrialist” is, and we fear will remain evermore, a mystery. His description certainly does not resemble any of the important business men or corporations of the present day. For example, the National Association of Manufacturers held a convention early in December, attended by 4,000 of the country’s industrialists. The importance of this assemblage is indicated by the fact that many top-ranking government officials – Henderson of OPA, Knox of the Navy, Nelson and Eberstadt of the WPB, etc. – appeared to speak. The exact position of the NAM in American life was noted precisely enough by Henderson, who declared with a touch of wryness in the course of his speech that he was presenting “a report from one of the strawbosses to the stockholders and their board of directors.”
Here is what the head of the “board of directors,” W.P. Witherow, the outgoing president of the National Association of Manufacturers, had to say about plans like that of Wallace:
“Personally, I am not interested in any other form of government or form of economy than our own. I admire beyond expression the stand the Russians have made. They are fighting nobly for Russia and Soviet ideals. We’re fighting for America and American ideals. I am not making guns or tanks to win a ‘people’s revolution.’ I am making armament to help our boys save America. I don’t want any ‘modified’ free enterprise or bill of rightless democracy. Immediately after the war, government aid to war-torn countries is a foregone conclusion. But not the rehabilitation of their economy or the reforming of their lives. I am not fighting for a quart of milk for every Hottentot, or for a TVA on the Danube, or for governmental handouts of free Utopia.”
Contempt oozes from every syllable of Witherow’s remarks – contempt for all believers in human progress and for politicians who are compelled to avow such a belief. Witherow speaks for the real, existing industrialists – quite different from Wallace’s word-picture.
The ideas proposed by Wallace undoubtedly have a certain scientific ring. The world saw a century of rapid economic progress between 1800 and 1900 when, primarily under Great Britain’s leadership, western Europe, the United States and Japan underwent a period of rapid industrialization.
These industrialized regions total only about one-quarter of the population of the world. Yet that constituted a gigantic advance for the whole world. Would not the industrialization of the other three-quarters of the world mean work for American factories, profits for American capitalists, higher wages for American workers, softening of economic depressions? Wallace becomes lyrical when describing the world of his plans.
But, sad to say, it is a mere utopia. These plans will never be realized. They are based on superficial reasoning. Wallace suffers from the great weakness of bourgeois social thought: the lack of a historical perspective, the absence of a historical sense. Even the best of the capitalist economists have considered capitalism the only social system, or the final and perfect result of human evolution, which will endure forever. Wallace goes further, he makes his plans as if the world were existing in the 19th century instead of being nearly half way through the 20th. A few corrective changes and the system will function as it did in its period of bloom – so he dreams.
He does not recognize that capitalism has undergone tremendous and irrevocable changes since the 19th century. He does not see that the system has passed, never to return, out of the stage of free competition; into the epoch of monopoly capitalism. A handful of capitalist monopolists dominate the economic life of this and every country, not a relatively large number of competing industrialists. Wallace’s plans are based on a nostalgia, not scientific analysis.
The present war has strengthened the monopoly character of modern capitalism. The War Production Board has estimated that by the past summer 34,000 small businesses had closed down. Tens of thousands more are going to join them. Wallace’s speech had barely had time to fade from the airways when Donald Nelson declared on December 31: “In connection with our distribution system we must squarely face the fact that the entire line of some distributors will be eliminated, and major parts of the lines of others will no longer be available ... This means the elimination of many stores.”
The tendencies toward centralization and concentration of capital are by no means limited to trade. On January 6, Leo M. Cherne, executive secretary of the Research Institute of America, stated before the Sales Executive Club of New York that war “compulsives” are forcing the concentration of industry, the growth of monopoly, the death of small enterprise and the rationalization of business.
While the smaller businesses are dying like flies in the first winter frost, the monopolies, hand-fed by the government, have been growing more powerful as a result of the war program, adding to their plant capacity, absorbing the business of the small concerns and burying thousands of such firms, never to be resurrected despite the prayers of Wallace.
Thus it becomes clear that so long as capitalism endures, national and international economic life will be dominated by the monopolists. Any development at home or abroad will have to take place under their aegis. Capitalist profit is to continue to be the soul of national and international economic relations. Can and will the monopolists industrialize the backward sections of the world?
A glance at history is very instructive in this regard. During the period of competitive capitalism the following nations became industrial powers: England, the United States, France, Belgium, Germany, Italy, Holland, Austria-Hungary and Japan.
The end of the stage of competitive capitalism and the beginning of monopoly capitalism is dated roughly at the beginning of the present century. Since that time the only other nation that has become industrialized is the Soviet Union. Before that could be accomplished the Russian workers had to make a social revolution and fight an intense armed class war against international capitalism. The industrialization of the Soviet Union, the only country that was able to realize this goal in the last half century, was in spite of and in active struggle against all the monopoly capitalists.
India, China, the other parts of Asia, Africa, South and Central America have advanced but little in this time. They remain as before, regions of underfed and underclothes miserable masses, sources of raw material, areas whose main product is super-profits for the monopolists of the large industrial powers. The test of history would show that modern capitalism has not resulted in the large-scale industrialization of backward areas. What young and vigorous capitalism could accomplish is beyond the scope of decrepit reactionary capitalism.
The role of imperialism in the dominated areas can be stated briefly as follows: It industrializes the economically backward regions only to the degree, and only those particular industries necessary for the exploitation of these regions by monopoly capitalism. It stands in the way of full industrialization, such as has taken place in the advanced countries.
Modern capitalism, on a world scale, already suffers from excess productive capacity. The long depression of 1929-39 attests to that. Under such circumstances monopoly always tends to fight tooth and nail against the installation of new capacity either at home or abroad. With tremendous unused equipment at home, the monopolists ask themselves: Why set up more capacity abroad? The basic tendency of monopoly is toward maintaining the rate of profit by trying to limit supply and thereby keep prices above their value for as long periods as possible. To install more productive capacity in these conditions appears the height of delirium to the minds of the very logical directors of this insane system.
During the period of industrial capitalism, the individual capitalist was goaded by competition to extend the world market for all types of commodities including machinery and producers’ goods. Competition no longer drives him. Now (in between their wars to re-divide the world), the various monopolists have international agreements that parcel out the world market and establish each other’s spheres of exclusive domination.
In the period of industrial capitalism, international economic relations were primarily marked by the exchange of commodity for commodity: American cotton, tobacco and wheat for English lathes; German corn for English steel-mill equipment, French silks and luxury goods for British textile machinery. There was no lack of sharp dealing, particularly between the advanced nations and the natives of the backward regions of the earth, but by and large that came under the general heading of cheating. Among the Western nations commodity tended to be exchanged for commodity, value for value. Foreign trade was characterized by the export and import of commodities.
Under monopoly capitalism, however, the most profitable export from the advanced country is capital, rather than finished commodities. International trade tends to become in increasing measure the export of capital from the imperialist nations and the import of profits or goods, which embody the profits made from the exploitation of the toilers of the backward countries. Each imperialist country is characterized by an “unfavorable” balance of trade (the US excepted for reasons beyond the scope of this article). Each imperialistically exploited country is characterized by a “favorable” balance of trade (China excepted for certain reasons we cannot go into). Thus the poor nations give more than they receive, the rich nations receive more than they give.
The reasons for this economic fact, characteristic of monopoly capitalism, is not difficult to deduce. The monopolists invest a sum in a backward country – let us say $10,000,000. Each year that country must not only amortize the principal, but also pay the interest – a modest 5 per cent, let us say – on the money advanced. The $10,000,000 goes to the backward country in the form of machinery owned by the foreign investors and in the form of money to pay wages, (The latter is a comparatively inconsequential amount.) The machinery is set up, workers hired and each year thereafter that country must send 5 per cent of the total investment back to the “home” country in the form of goods. The backward country must in such a case export $500,000 worth of commodities more than it receives each year. The profits from the investment appears in the greater export than import. The balance of trade and the balance of international payments figures are statistical proof of the correctness of Lenin when he characterized imperialism as a parasitic system. This continual drain on the backward nations is an obstacle to their industrialization and the improvement of the living standards of the masses living there.
Capital is invested in the backward sections of the world with the only aim of securing super-profits from the people toiling there. The capital invested falls into five main categories:
LOANS TO GOVERNMENTS AND GOVERNMENTAL UNITS. This is the largest single market for international loans. Whether such loans will result in some benefit to the masses depends upon the purposes they are put to. The capital invested may be used for schools, for roads that would benefit peasants and for improving peasant agriculture, for public housing, to aid cooperatives, etc. Or they may be used to bribe corrupt officials so as to get economic concessions, such as mines, oil wells, stretches of land, public utilities, favorable tariff rates, etc., or to form armies, to build roads, ports and railroads that benefit primarily the mines, plantations or oil wells of the foreign investor. The latter uses of loans to the governments of backward regions are the more general by far.
Interest and capital on the loan must be repaid. Funds for this purpose are raised by taxation. The governments of the borrowing nations attempt to shift as much as possible of the burden of taxation on to the masses. Increasing taxation of the workers, peasants and artisans is, indeed, a characteristic in this epoch of all lands both advanced and backward.
It is clear that such loans benefit but little the great masses, while the consequent increased taxation burdens them a great deal. The native capitalist may receive some benefits from such “public” improvements, but generally the benefits accrue to the upper sections of the native ruling class and the foreign investor. During the present war, such loans are being used as bribes to “convince” the native ruling class to line up with one or the other of the warring camps.
INVESTMENTS IN RAW MATERIAL AND FOOD PRODUCTION. The raw materials upon which modern economic life is based – metals, oil, rubber and fibres – originate in all parts of the world. Investment in mines, oil wells, rubber, cotton and jute plantations as well as tea, coffee, wheat, banana, sugar, pineapple and cocoa plantations and sheep runs, are the second most important field for investment in the backward regions. These enterprises are extremely profitable; the basis of this profit is the super-exploitation of the native masses.
Lewis Corey in his Decline of American Capitalism, cites two examples:
Nor do the food crops raised under imperialist control benefit the native masses. This is sharply emphasized by the fact that India, where hunger is constant, exports wheat and rice.
Imperialist investments in the development of raw material and food production thus bring little benefit to the backward countries, The foods and raw materials are shipped primarily to the industrial centers, The investments contribute little or nothing to the industrialization of these areas. They create twisted mono-cultural economies, completely dependent on the far-off industrial centers.
INVESTMENTS IN PUBLIC UTILITIES. This is the third most important field for investment. This category includes power plants, telephone and telegraph services, railroads, etc.
It might be argued that the investments in this group do genuinely advance the industrialization of those regions where they are introduced. On the one hand they do foster industrialization, but on the other hand these monopolist utilities place strict limits upon the extension of industrialization. An example is the electric light and power systems in many backward regions. The company, a powerful monopoly, faces the small native artisans and business men who consume the electric power. Monopoly prices are extorted for the electricity sold. Competition reigns only among the artisans and small business men who, vying with one another for sales, are forced to drive prices for their commodities down to rock bottom. Thus the foreign monopoly skims off the cream of the profits and the small residue it leaves to the native business man keeps him on a miserable plane from which he can never develop.
BANKING CAPITAL. Investment in banks primarily aims at financing the activities of the foreign concerns. However, a great deal of this type of foreign capital finds its way into circulation as usurers’ capital, which sucks the blood of the peasantry and artisans of China, India, Indo-China, and the peons of Latin America. The local usurers who charge huge rates of interest are organically linked up with international finance. The statements of the international banking houses do not include the item: 100 per cent interest rate on a loan to a peasant of India; but it is there nevertheless. Need it be argued that in no sense can this usurers’ capital be construed as advancing the industrialization of the backward parts of the world or raising the standard of living of the masses living there?
FACTORIES. Examples of such imperialist investments are the textile mills of China and India, the meat packing houses in Argentina and Chile, the metal smelters of Malaya and Chile. Do not at least these investments result in a true industrialization of these territories; do they not, by supplying commodities needed by the population, result in an improvement of their living standards?
To properly answer these questions, it is necessary to note that investments in this last category fail mainly into the following subdivisions:
There are foreign-financed factories, particularly in textile, which do mean industrialization of the backward areas, to a certain limited extent. Such investments depend on a comparatively extensive market. Cheap textiles have been an important field of investment of this kind for England and Japan, primarily in India and China. Spanish and French capital is often found predominant in low-priced textiles and in food processing, such as flour-milling, in Latin America. These investments do have the effect of lowering the prices of the commodities produced. But the development of these industries is fettered by the restricted market for even the cheapest goods produced due to the low incomes of the great masses, particularly of the peasantry.
Furthermore, such forms of industrialization often result, paradoxically enough, in impoverishing huge masses. For the establishment of such factories, like the importation of cheap finished goods, means the ruin of the great mass of the artisans, who cannot compete with machine-produced articles. In the 19th century, in western Europe and the United States, this meant great suffering, but of a temporary nature; the displaced artisans would find work either in the expanding industries or by migration to the free lands of western America. In the backward countries the advance of new industry is in no measure comparable to the displacement of artisans who, if they seek escape to the land, find it already occupied with teeming populations and with huge stretches preempted by feudal lords and imperialist plantations. The influx of ruined artisans forces up agricultural rents as the competition for the land is increased; the peasantry is further degraded and impoverished and therefore offers an even worse market for finished goods than before. Similarly in the cities, as the number of workers bidding against each other for jobs is increased, the wages are driven further down. Thus the comparatively small increase in industrialization raises the living standards of some very little and actually forces down the levels of many others. One could write the history of India during the last 80 years in terms of this process.
Our analysis has shown that the basic tendency of modern imperialism has not been to industrialize the backward regions of the earth and not to raise the standards of living of these hundreds of millions. In spite of his unctuous phrases, Wallace does not offer and cannot offer any means to transform this basic tendency. The only modification that Wallace offers to the system of imperialist penetration is the establishment of free trade, limited only by such protection in the advanced country as is required “from the standpoint of making itself secure in case of war.” (What, in a warless world!)
Wallace’s panacea would actually worsen the present situation. Were free trade to be adopted by the backward countries, it would counteract that importation of factory capital induced by protective tariffs enacted by the industrially retarded countries. However, it appears, insofar as we can ascertain from his extremely disorganized and confused statements, that Wallace does not advocate free trade, for such countries, but only for the United States and the industrially advanced nations.
Wallace’s proposal at first glance seems to strike a blow at the monopolists, who certainly built their monopolies behind tariff walls which excluded competition from abroad. But today, when the monopolies are already established, the results of Wallace’s proposal would be quite different and just the opposite of weakening the trusts and large combinations of capital. With modern international cartel agreements-pacts between the monopolists of various countries to recognize exclusive spheres of domination – the monopolist no longer depends primarily on tariffs, but on such agreements between monopolists to assure their economic ‘empires. Thus, the abolition of tariffs would have little effect on the competitive position of the key industries: steel, aluminium, electrical goods, chemicals, oil, etc. The major effect such a move would have would be to strengthen the large monopolistic aggregations of capital at the expense of the remaining small-scale competitive business, outstandingly farming.
The result of lowering tariff walls would be disastrous upon these last industries. Cotton, tobacco, wheat, meat and wool would be permitted to enter this country more freely. Produced with cheap labor from the rich territories of the tropics and the Argentine and Australia, these products from abroad would be able to undersell the farmers and small-scale capitalists. The imperialists, whose products would find a wider market, would be strengthened. Swift and Armour would flourish at the expense of American meat production. Thus the medicine Wallace offers to the small business man and the farmer turns out to be – poison.
Nineteenth century competitive capitalism in its growth brought a liberalization of politics, at least at home; 20th century monopoly capitalism brings only a trend to reaction at home and abroad. Washington supports Vargas of Brazil, Batista of Cuba and the dictators of the banana republics; London maintains the princes of India; France, the shahs of Northern Africa. imperialism allies itself with all that is reactionary in the backward areas; the 12th century is supported by and supports the 20th.
To raise the living standards of the backward regions, and thereby to create an internal market able to support a genuine flourishing of industrialism, it is first necessary to free the peasants from the burden of feudal rents and taxes – i.e., first must come the agrarian revolution. But that means an end to the economic and political power of the native princes, landlords and capitalists. Who would then allow the imperialists the economic concessions they get from the native rulers? And who knows where the chain of social upheaval, commencing with the agrarian revolution, would lead? No, the imperialists reason, we receive our super-profits by the exploitation of the native population. For that the more reactionary the political setup the better. To raise the living standards of the peasantry would mean higher wages for the workers on the plantations and in the mines.
On January 7, 1943, in the city of London, this amiable dialogue took place:
Leopold Amery, British Secretary of State for India: The ruling princes of India
“are not merely, as is sometimes suggested, museum pieces reproducing the splendor and chivalry and also perhaps the casualness of the Middle Ages.
“They are responsible rulers of territories, some of them equal in population and extent to major European nations, and their responsibilities are by no means small, Their primary responsibility is the good government of their own people in accordance with such methods as suit the disposition of those people and in accordance with the spirit of the times.”
In reply, according to the New York Times, the Maharajah Jam Sahib of Nawanger, “pledged his loyalty to the British crown and expressed gratitude for the protection afforded by the British Navy.”
This exchange of affectionate sentiments took place, of course, without consulting the wishes of the Indian masses or, for that matter, the British workers. Basically, this relation between the British imperialists and the feudal princes of India is similar to the relation between the US and Vargas, for example.
Wallace’s proposals in no way touch the irreconcilable opposition between imperialism and the industrialization and raising of the standard of living of the masses of the backward regions of the world. We have dealt in such detail with Wallace’s views, not because his stale hash of outmoded petty-bourgeois ideas deserves it in itself, but because of the enthusiasm with which the liberals and Stalinists, and the national AFL and CIO leaders greeted these vapid phrases.
We can confidently predict that the colonial and semi-colonial masses will not greet Wallace’s refurbishing of imperialism with enthusiasm. Monopoly capitalism appears to the colonial masses only as capitalism in its decrepitude, only in its most reactionary, parasitic, oppressive and degenerate form.
At the same time, however, it develops a numerically small but cohesive and powerful native working class, imbued with a hatred for the present economic system, root and branch. It is this working class, and only this class, leading the great mass of the peasantry, that will accomplish the industrialization of the backward parts of the world.
How will the economically advanced nations outside the US fare at the end of this war? Wallace does not deal with this question – and for good reasons.
The war is bringing to Europe and will bring to Japan great devastation. At the war’s end will American capitalism cooperate in the reconstruction of these areas? In the course of his already cited speech, Witherow, the president of the NAM, declared: “Immediately after the war, government aid to war-torn countries is a foregone conclusion. But not the rehabilitation of their economy.”
We do not know if this was a slip of the tongue, but if it was, it can be described as a Freudian error, which reveals the true feelings of the one who uttered it. Undoubtedly at the end of the war there will be a strong section of the American capitalist class which will oppose the re-invigoration of potential competitors, whether ally or foe, during the war. Certainly any economic aid to the devastated regions of Europe will take place on a capitalist basis: the loaning of money at high rates of interest to these countries, and, to that extent, their economic “colonization” to American monopoly. The American monopolists will attempt to exercise economic domination over Europe; they want, in the indiscreet phrase of Luce, an “American century.”
The exact attitude, after the war, of United States monopoly capitalism to its present allies, cannot now be given except in these wide generalizations; but one thing is as irrefutable as any truth can be: the Allied capitalists will aim at the complete economic destruction of the Axis powers, primarily of Germany. Various methods are even now being proposed to accomplish this purpose. Modern capitalism, far from advancing the industrialization of the backward sections of the globe, is aiming at the de-industrialization of the second leading industrial power of the earth and the main industrial power of Asia. Under the formula of “disarming the aggressors” the heavy industry of Germany and Japan will be throttled. Not only will the standard of living of the German and Japanese masses thereby be depressed to new lows, but all continental Europe as well as large parts of Asia will likewise suffer, for the economic life of Europe and north-eastern Asia has long been based on German and Japanese industry. The policy of the American monopolists toward Europe and Japan will bring it into a head on clash with the masses of Europe and Asia.
Modern capitalism, in its reactionary stage, is undoing in large measure the main accomplishments of its progressive period, namely the industrialization of important nations. Hitler long ago announced his plans to de-industrialize France and all of continental Europe outside Germany and convert these areas into mere producers of light goods, agricultural products and raw materials for Germany; Allied imperialism will attempt to impose the same reactionary program on Germany and the Axis. This similarity of program on both sides of the warring lines shows the profound urge of imperialism to force the wheel of industrial progress backward.
The end of the war will find the capitalists of the United States conjuring up vistas of world domination. But, in addition to world-wide resistance, one of the main obstacles in their path toward realization of their goal will be the workers at home. Their unions are strong, their monetary wages high. During the war, the capitalists are able to maintain high rates of profits by the huge scale of the war effort. But after the war, when the economic activity it engendered declines, the high wages of the workers will be an obstacle to the functioning of the profit system. The scale of wages will lower the rate of profit. The attack on the living standards of the American masses, whether through an open wage cutting policy or through inflation or both, is inevitable in the next period.
At about the same time that Wallace was delivering his speech on post-war policy the Brookings Institution of Washington issued a pamphlet entitled, “Collapse or Boom at the End of the War,” by Harold G. MouIton and KarI T. Schlotterbeck. This pamphlet, comparing the possibilities for capitalism in the period immediately following this war with the immediate post-World War I years, says:
“The situation, on the whole, is somewhat less favorable than that of 1919.” “The less hopeful outlook for satisfactory earnings [profits] it must be repeated is attributable chiefly to the high level of wages and raw material costs resulting “from war time policies.” At the same time the pamphlet points out the huge problem of unemployment that will certainly come after the end of the war. In America we are going to faced the threat of unemployment and a certain attack on the living standards of the workers, and their organs of economic defense, the unions.
Wallace’s ideas are chimeras, we have shown. Modern capitalism results in stunting and distorting the economies of the backward nations, not in advancing them; in super-exploiting their populations and not in raising their living standards; in oppressing them in cooperation with feudalism and dictatorship, not in liberating them. Today’s capitalism will result in the ruin of cultured and economically advanced nations, it will result in the destruction of the living standards of the masses in this country, and not in their improvement.
But Wallace is a conservative utopian on another score: he foresees the continued rule of capitalism. And in this even more than his other dreams, he shows himself existing completely in the land of phantasy.
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