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Fourth International, September 1943


C. Charles

Postwar Planning: New Deal vs Old Guard


From Fourth International, vol.4 No.9, September 1943, pp.273-278.
Transcribed, marked up & formatted by Ted Crawford & David Walters in 2008 for ETOL.


Seldom, if ever, has a class faced victory over a rival power on the field of battle with less confidence in the future than the rulers of the United States. Against the revolutions they know are coming abroad they place their hopes on an “international police force,” plus the use of indigenous police agents such as Darlan, Giraud and Habsburg, and the application of a food policy “which will be a mighty weapon and a powerful persuader” against revolution. But what weapon can prevail not only abroad but here against the post-war economic crisis? The terrible thought runs through their minds: In case capitalism weathers the first shock will it be only to fall before later ones?

The gravity of the problem is undenied even by the 1east penetrating of the capitalists. On the basis of 1940 production levels (and the year 1940 was the most prosperous of the preceding decade) Department of Commerce statisticians calculate that the post-war period will find 19,500,000 unemployed. Here is how they reach this figure. There were over 9,000,000 unemployed in 1940. To these are added the increase by population growth and the war-induced growth of the working class through the proletarianization of former small businessmen and marginal farmers. The unprecedented technical advances which took place during the war means that 1940 production levels will be attained with a far smaller working force: millions will face technological unemployment. In limiting its estimate to nearly 20,000,000 unemployed, the Department of Commerce calculates that 2,500,000 will be kept in the army for post-war functions.

The total of unemployed thus would be equal to more than one-third of the present working population. And even these figures are grossly optimistic. The year 1940 is taken as the base period. But by 1940 the artificially stimulating effects of the war upon industry had already begun to operate. If the average of the decade 1930-40 is taken instead of the single year 1940 as the starting point of the calculations, the estimate of the number of unemployed is greatly increased. And if the economic level were to sink to 1933 levels, the unemployed would approach 30,000,000 in number.

The quarter-century since 1918 has left its sobering impression even on the capitalists. The confident capitalist class of World War I did not consider it necessary to formulate plans such as preoccupy their successors. The end of the war would allow them to pick up the string of their existence as before, they thought. The present generation of the capitalist class has lost this happy innocence.

The Role of Monopoly

As a matter of fact, the problem that faces the capitalist class today is much more aggravated than faced them25 years ago. The interim period between the wars was one of increasing monopolization of industry. The continued depression which threatened the profits of the monopolies and trusts as well as other capitalists was met by the monopolist by an ever greater scope of monopoly. The price of goods was artificially kept up by adjusting supply to demand – i,e., by curtailing production, which they were able to do thanks to the strengthened monopolies. Curtailment of production in turn meant acceleration of unemployment. Following the depression, the war has brought an even greater increase in monopoly. In spite of the “prosperity,” small businesses are dying off like flies in a frost. The end of the war will mean that American industry will emerge more than ever dominated by powerful monopolies.

Capitalist and reformist economists greeted the early monopolies with the claim that monopolies would mean that there would no longer be crises. This illusory perspective was already refuted by Kautsky and Hilferding early in this century; they showed that monopoly means deeper crises, war and political reaction; their subsequent desertion of the revolutionary movement did not alter the accuracy of their earlier work. In 1916, Lenin, in his book Imperialism demonstrated that the monopoly stage of capitalism means ever more ravaging crises. The prolonged economic depressions of the period between the two wars, a period of ever more intensive monopolization of economy, proved that Lenin was right. Even the bourgeois economists who testified before the Temporary National Economic Committee in 1937-38 were forced to admit what Lenin held in 1916.

All schools of capitalist ideology pay lip-service to the slogan of fostering small competitive capitalist enterprise. But any attempt to transform this slogan to effective action will end in a fiasco. The futility of trust-busting is apparent after half a century of such efforts. Even new industries, which in previous decades were the reserve of the small entrepreneur, are now, from their inception in the industrial laboratory, dominated by large-scale capital.

Many bourgeois economists admit that the growth of monopoly was a major factor in the prolongation and intensification of the depression of 1929-40. In pre-monopoly capitalism, bankruptcies and falling prices paved the way to revive production at a profit for the remaining capital. Monopoly, however, with the aid of the state, stands above bankruptcy and maintains prices by curtailing production. This extension of monopoly was fostered by the “New Deal” through the NRA. Still greater was the growth of monopoly through the policies of the war administration. The huge accumulations of capital now bar the way to expansion of peace-time production.

The second factor that makes the post-war perspective darker than that after World War I is the monstrous national debt. It will act as a depressant on the forces making for recovery. If a large part of the debt will be paid by taxation of the workers – and this will be the earnest endeavor of the capitalist class – this means a decrease of buying power in the workers’ hands, together with an increase of wealth in the hands of the bondholders, who will be primarily the wealthy. Thus, industry will have to curtail production for lack of a market. To the degree that the wealthy are taxed, it means a lowering of the rate of profit, which is the driving force of capitalist production. And if resort is had to inflation o repay the debts contracted by the government to finance the war, the printing of money will mean that the workers will be paying the debt through their lowered standard of living, while the wealthy will be in a favored position as real wages sink, remaining small businesses will go bankrupt and be absorbed by the larger concerns. It must be recalled that all inflations are the prelude to economic crashes.

Can the masses be depended on to remain passive as they are shuttled from hunger in peace to rationing in war back to hunger in peace again? The shortness of the memory of the masses, which is the chief stock-in-trade of capitalist politicians, is not an immutable quality. It seems to be coming to an end now. In July 1942 Fortune conducted a poll which showed that 54 per cent of the people expected in the post-war period as much unemployment as before the war or more. Among high school youth (and this is highly significant as these are the young workers of the near future) a public survey of November 1942 proved that 59 per cent thought that their chances would be as bad or worse than those of their predecessors.

As frightened rulers used to call in their astrologers, the capitalists now call in their economists. These economists have built up in the last year a really copious literature. Bulk is its major attribute. Their task is to convince the workers at home and in the army that there will be no return to pre-war unemployment and hardship. The workers must be assured that the past is dead and the future will be an improvement. In the words of the letter of transmittal of the report of the National Resources Planning Board to the President: “We need to see more and more clearly the kind of world toward which we are headed in order to maintain the fighting spirit of our armed forces and the ardor of our industrial workers.”

The word planning has had up to now a grating sound to the ears of capitalist economists. Criticism of the anarchy and wasteful planlessness of capitalists society has always been one of the most vulnerable spots in the ideological defense of capitalism. But the day when planning was a tabooed subject among the bourgeois economists is now over. Everyone has plans, blue prints and prescriptions to bring the desired results and everyone has exorcisms to banish the undesired results. It is estimated that there are 300 organizations in the US dealing with the problems of the post-war world.

Of course, what goes under the name of planning is broad policy, rather than real economic planning such as inaugurated by the Soviet Union, and possible there only because of the nationalized economy. Often the plans are simply ludicrous puffed-up homilies, such as pay your debts, buy war bonds, save money – in other words live right and the Lord takes care of His own.

The Old Guard School of Planning

Amid the welter of proposals, two main lines can be discerned: one that can be called the Old Guard of capitalism, and is headed by the National Association of Manufacturers, which in March 1943 issued the pamphlet Jobs-Freedom-Opportunity in the Post War Years, the Preliminary Observations of the Post War Committee of the NAM. In the field of more theoretical economics the pamphlet issued by the Brookings Institution in December 1942, Collapse or Boom at the End of the War, written by Harold G. Moulton and Karl Schlotterbeck, holds the ramparts for the point of view of the Old Guard group.

The second group is centered about, the New Deal. Its two basic documents were issued on March 10 by the governmental National Resource Planning Board (NRPB): Report for 1943 – Post-War Plan and Program, and Security, Work and Relief Policies. The former deals with plans for the immediate transition from war to peace, and for the development of an “expanding economy,” plans for services and security and suggested plans of immediate action by state and local governments and regions. Security, Work and Relief Policies discusses in great detail social security and relief.

Both groups place as first on the order of the day the preservation of the capitalist system. The NRPB documents were charged, even by such reputable journals as the New York Times, with plans that were socialistic; but of course the guiding line of the NRPB reports, no less than the NAM, is the preservation of capitalism.

The differences between the two, within the scope of their common aim to defend capitalism, are real and profound. They entail such questions as how to assure the continued existence and survival of capitalism, the degree to which it is necessary to make concessions to the masses, the role of the state, and other important disputes.

Both groups foresee an immediate crucial period between the end of hostilities and the placing into full swing of their respective plans. To bridge this crucial period both groups lay a great deal of emphasis on the “deferred demand.” People will need houses, cars, clothes, refrigerators, which were not supplied during the war. Upon this backing of accumulated demands they place their hopes for an impulsion toward prosperity.

But their reasoning is false. When didn’t the masses need the necessities, not to speak of the amenities of life? If need were sufficient to produce full-scale employment, there never would have been a depression. Even in the most prosperous periods a large part of the nation is under-fed, under-clothed and poorly housed. Need, of and by itself, cannot bring prosperity; it must be transformed into demand, that is, need made effective by money.

This is tacitly recognized by both groups when they emphasize the accumulated savings of the people as the starting point for a buying wave. The NAM estimates that at the end of 1943 there will be a total of $24,000,000,000 of war bonds held by the public, besides other savings. Undoubtedly these savings will be a cushion after the war, but its importance is greatly exaggerated. First of all much of the bonds and even more of the bank savings will be increasingly concentrated in few hands. Secondly, with the price rises which mark the war economy and which will be accelerated with the development of the war, the actual purchasing power of the savings will be greatly diminished even as compared to the present. It must be recalled that the price rise was particularly precipitated after the end of World War I. The effective demand in the hands of the masses will be quickly absorbed, above all under the strain of supporting large numbers of returning soldiers and former war workers who will be unable to find work.

But it is not to this phase – the transition from war to peace economy – that we wish to devote this article. It is rather to the long-range “plans” proposed by both groups.

The Old Guard school has a candid approach to the problem of bringing about prosperity. Its fundamental tenet is that the capitalist class must be assured a favorable rate of profit, high enough to induce the capitalists to permit their industries to operate. Once the rate of profit is restored, they argue, the capitalists will invest their money with the hope of receiving profits. This will create jobs and buying power. Let us quote directly from the NAM document:

“Investment, thus, is the keystone of creating jobs. If one looks back over the development of our country he finds that there has been a direct and unfailing relationship between the volume of investment and the ability of our workmen to find jobs. In periods when the public for one reason or another was unwilling to risk its savings in buying machines and buildings to be used for the production of goods, there has been unemployment, with our workers unable to find jobs which would enable them to use their strength and their ability to turn out the commodities and perform the services which the public would like to have.”

To insure profitable investment, the NAM holds that the government “should limit its activities on the economic front to maintaining a domestic and external environment that permits and encourages sound business operations.”

The major attribute of such a domestic and external environment is first of all the open shop. As regards wages the NAM is very vague and devious. However, what the NAM lacks in concreteness as regards wages is more than made up by the frankness of its theorists, Harold G. Moulton and Karl Schlotterbeck. They say, comparing the situation at the end of World War I with that following World War II:

“The economic situation on the whole is somewhat less favorable than that of 1919”; “the less hopeful outlook for satisfactory earnings [profits] is attributable chiefly to the high level of wage and raw material [farm] costs resulting from wartime policies.”

Thus to bring about a more “hopeful” outlook, wages must go down and profits up.

The Old Guard’s International Plan

The NAM places great stress on the external requirements for prosperity. It lays down an international program for American capitalism. On the rehabilitation of the war-devastated countries (which will include practically all Europe) the line of the NAM is thus expressed: “It may become desirable for the stronger nations and their citizens to assist the weaker in the process of rehabilitation. Then, as nearly as possible, such assistance should be made on a sound economic basis consistent with the national welfare of the assisting country.” Aid will thus be forthcoming only if the profits of the American capitalists are directly or indirectly guaranteed. It will mean the economic domination of the world by the US in the interests of American foreign investors. This is clear in the following words of the NAM on repayment of debts:

“Lease-lend operations are being conducted on such a huge scale that payment of interest on the balances at the close of the war or repayment of the capital will probably be beyond the economic power of the beneficiary countries and probably could not be accomplished without disrupting their own economy. Therefore, arrangements should be contemplated looking to drastic scaling down of interest charges, together with repayment of interest over a long period of time. The principal should not be cancelled, however, since the United States may in the future be justified in asking for foreign credits or other considerations reciprocal to the present needs of those countries which are now obtaining lend-lease assistance from the United States.”

In other words, use the debt as a means of coercion to obtain favorable terms abroad for American capitalism.

The NAM document also declares, with reference primarily to Latin America, that economic domination must be backed up by more than moral suasion:

“Rights of investors in many countries who are not nationals thereof have been frequently and seriously violated in recent years. Satisfactory international relations are impossible, and international movement of goods, services, and capital is restricted to the disadvantage of all concerned, so long as these conditions exist.

“Investors in countries in which they are not nationals cannot rely on economic benefits of their operations for protection, but must look, first, to the laws of the country in which they are investing, and, second, when justice is denied, look to their own governments for support. Specifically we believe that the proper departments of the United States government should take appropriate action to protect the property, rights, and interests of American citizens in foreign countries.”

Speaking of the British and other rival although Allied imperialisms the NAM lays down the policy of the “Open Door” long favored by American capitalism: “In colonies and dependencies all nations should be treated on an equal basis in such matters as investments, trade, and travel.” That means all other markets must be open to American imperialism while its own markets are barred to others.

Thus the political, economic and moral code of the Old Guard reduces itself to: at home, lower living standards for the masses by union smashing, wage cuts, revocation of social legislation; abroad, super-exploitation and oppression of the masses of the world. In the international aspects of the post-war plans of the Old Guard are present potential aggression, both economic and military, against colonial and semi-colonial peoples and against rival imperialisms. The ground work of World War III is being laid while World War II goes on.

This is the post-war plan of the more conservative section of American capitalism. By all indications, such as the recent action of Congress in refusing appropriations to the NRPB, it is the preferred policy of American capitalism.

The New Deal School of Planning

The New Dealers do not completely share the optimism of the Old Guard on the power of capitalism to maintain full production and absorb all the unemployed. They agree with the Old Guard that investment is the basis of jobs and prosperity, but argue that the capitalist no longer can find the opportunity for profitable investment. In former decades such outlets for capital investment were supplied by the growth of population, the opening of new territory, new industries, and the construction work all this involved. But, claim the new Dealers, these long range factors have been exhausted: the rate of growth of population has declined, the frontier is closed, new industries no longer require many workers due to modern technique. The New Deal group foresees, therefore, a constant army of unemployed. To employ this large number who can find no room in private industry, a large-scale program of public works is necessary. In periods of prosperity the public works program will be slowed down as private industry absorbs many workers; in periods of depression, when private industry is curtailing production, the public works program will be accelerated until the forces of private industry recuperate and are able to re-employ the unemployed.

According to the New Dealers the government is thus destined to play an important and direct economic role in the future, to a much greater extent than previously. Only through cooperation of government and private capital will the possibility for the development of expanding economy be realized.

The NRPB document Post-War Plan and Program outlines in some detail such a public works program, while its companion publication proposes a program of large-scale intensive social and employment insurance. Some of the outstanding proposals follow:

  1. Development of new industries and processes by research in government departments and government-aided private concerns.
  2. Government partnership in certain industries, such as aluminium, magnesium, shipbuilding and aircraft. In these industries, considered crucial in war and peace, which private capital will not and cannot develop, the government would place large investments. (It was this proposal in particular which occasioned the accusation of socialistic plans against the report as a whole.)
  3. Government control of patents and properties seized from the enemy with the aim of having them used by the government or licensed to private industry.

In these ways, according to the NRPB, the government will be able to accept and fulfill the responsibility of assuring jobs to all at decent pay.

Like the NAM, the NRPB report places considerable stress on the international aspects of the problem of insuring jobs. It foresees the large-scale development and growth of American capital goods industries to aid in the development of Europe, China, Latin America and other backward areas. The fallacy of this international aspect of the New Deal plan I have discussed in detail in another article. [1]

The Theory of Underconsumption

The job and insurance program will be financed by borrowing and taxation, but fiscal policy is also to become a means of avoiding both extreme boom conditions as well as conditions of depression. When a boom appears imminent, according to the scheme, borrowing and taxation will be resorted to with the aim of tapering off the boom by withdrawing purchasing power. Contrariwise, when a depression menaces, buying power will be transfused from the financial reserves in order to increase production. The buying power will be injected by repayment of loans, by public works, insurance payments, lowered taxation.

Essentially, the NRPB reports represent a variation of the underconsumptionist theory of crises. According to this theory, crises are caused because people do not consume all that is produced. The capitalists, who have the bulk of the savings, refuse to consume when hard times threaten. At such times, the capitalists cut down on personal expenditures, as well as investment in industry. On the other hand, the workers do not consume primarily because they do not earn enough. Therefore, reasons this school of reformism, if the workers’ income were raised during or just prior to depressions by job guarantees, social and job insurance, by public works and maintenance of wage rates, this would lead to an increase in the money in circulation, thus stimulating demand and production, with the resultant prosperity shared by the capitalists who would be assured of a market for their goods.

Undoubtedly, these proposals at first sight appear to have an element of plausibility. But history is the laboratory of the social sciences, including economics. For a scientific criticism of these plans, the lessons of history must first be closely examined.

The crash hit in the autumn of 1929. For nine years previously, the Old Guard was politically in power through the presidential terms of Harding and Coolidge, while Hoover was finishing the first year of his four year tenure. Unionism had reached in 1929 the lowest point in the last half century in numbers and militancy, The government frowned on all measures of social security; In truth, this was the Golden Age of the Old Guard. Then, if ever, their methods should have been shown as efficacious in avoiding the crash. Yet, the economic crisis hit with unparalleled ferocity. For over three years, from 1929 to 1933, the Old Guard, under Hoover, tried their measures of ending the crisis. The incantation of “prosperity is just around the corner,” which by sheer repetition was to have restored public confidence and prosperity, proved to be impotent magic. History proves the Old Guard method met ignominious failure.

Roosevelt took the presidential chair at the head of a New Deal administration in 1933. A program of public works and relief was established. CWA, FERA, PWA, WPA, NYA, CCC FSA, TVA, USHA, and other letter combinations denoting public work and relief administrations became American household words. While these programs were in operation, industrial production did slowly increase until it reached, in 1937, a level approximately that of 1929. But unemployment remained a major problem until the end of 1941,for throughout the decade productivity had been increased because of technical advance, and fewer workers were required to produce as much as had been produced in 1929. Moreover, the hesitant climb of industrial production came to an abrupt end in 1937. In a few months, the level of industrial production declined by 33 per cent from 1937 levels. This sharp decline, more precipitate than that of 1929-30, proves that the public works program had not induced a normal cyclical prosperity. Once the crutch was removed, the recovery collapsed. The final return to “normal” prosperity – as “normal” as we will ever know under capitalism – was due not to the public works program but to the war program. The entire experience of the public works program of the New Deal bears out the statement of one bourgeois economist: “The public investments must first be supported and later replaced by private investments, or the recovery will not develop into prosperity.” Thus the history of the Roosevelt administration shows that the under-consumptionist panacea of the NRPB, which is simply the New Deal once again, is impotent against the forces of present day capitalism, and met the same failure as the Old Guard policies.

At the termination of the crisis of 1857, the bourgeoisie assured all that this was the last and final crisis; the disturbances to the economy caused by the discovery of gold would never be repeated. After the crisis of 1873, it was as seriously avowed that the railroad development of the American West, which had brought the crisis, was over and that American industry was at last mature, and its growing pains over. The crisis of 1890, attributed to investment in South America, was declared the last one, as world economy was finally well developed and a reasonable, stable, crisis-less economy could be expected. The panic of 1907, which led to wide-scale bank failures, was the cause of the founding of the Federal Reserve Bank and the same assurances were made as had been made after each preceding crisis. Following the short but intense depression of 1921, came a six year period of prosperity. Loudly, the apologists for capitalism asserted that the dire predictions of Marx had been refuted. Melvin A. Traylor, president of the American Bankers Association, stated: “We need not fear a recurrence of conditions that will plunge the nation into the depths of the more violent financial panics such as has occurred in the past.” Less than two years later came the crash of 1929. The present credos of the Old Guard and the New Deal will inevitably take their places in the lists of exploded panaceas and convocations for a capitalist economy without crisis.

For the Old Guard, the lessons of the past are a book which they can never hope to understand. What it proclaims now is the secret of permanent prosperity, could have been written fifty or a hundred years ago, and have had the virtue of being at least a comparatively fresh illusion.

Nor does the New Deal, bound to the capitalist system which it hopes to set in working order, really understand economic depressions. The lack of understanding of the under-consumptionists can be gauged by the fact that Keynes, the fountainhead of this New Deal wisdom, solemnly assures us that unemployment was avoided in ancient Egypt and medieval Europe because the slaves of the former and the serfs of the latter were kept busy at a type of public works in pyramid and cathedral building. In reality, unemployment was an impossibility in those two societies; it is unique to capitalism. In this connection, let us recall Engels’ celebrated reply to the under-consumptionists of his day, that mankind has under-consumed since the days of the Pharaohs, but overproduction is a phenomenon that began in 1825.

The “Labor” Theory of Under-consumption

Undoubtedly the under-consumptionist New Deal school is still popular among the masses of American workers. Trade unionists feel that the theory of under-consumption gives them further arguments for demanding higher wages. It is tempting to blame economic crises on the short-sightedness of the capitalists, who simply will not grasp the fact that the masses of the workers are their best customers and that all they need do is to pay these workers higher wages in order to ensure the existence of unfailing purchasing power for their goods and thus avoid all danger of crises.

But it is a wholly fallacious argument, which Marx refutes in Capital (Volume 2) in the following words:

“It is sheer redundancy to say that crises are produced by the lack of paying consumption or paying consumers. The capitalist system recognizes only paying consumers, with the exception of those in receipt of poor law support or the ‘rogues.’ When commodities are unsalable, it means simply that there are no purchasers, or consumers, for them. When people attempt to give this redundancy an appearance of some deeper meaning by saying that the working class does not receive enough of its own product and that the evil would be dispelled immediately it received a greater share i.e., if its wages were increased, all one can say is that crises are invariably preceded by periods in which wages in general rise and the working class receives a relatively greater share of the annual product intended for consumption. From the standpoint of these valiant upholders of ‘plain common sense,’ such periods should prevent the coming of crises. It would appear, therefore, that capitalist production includes conditions which are independent of good will or bad will and which permit such periods of relative prosperity for the working class only temporarily and always as the harbingers of the coming crises.”

The popular but fallacious trade union argument deplores the short-sighted capitalist who will not bring prosperity by paying higher wages; equally fallacious is the New Deal argument which deplores the short-sighted capitalist who resists a public works program as the road to prosperity. The objections of the Old Guard to the New Deal program is neither short-sighted nor ill-willed, but is based on the obvious consequences of the New Deal program.

The Results of Public Works Plans

The program of public works undoubtedly would satisfy useful social and economic needs. But the question in dispute is: Will a program of important public works aid or hinder the recovery of private capitalism? The Old Guard is unquestionably correct in insisting that a program of public works will result in the placing of an obstacle in the process of the recovery of capitalism. The following considerations will make this clear:

  1. A program of public works will increase taxation. If the incidence of the taxation falls on the workers this means a lowering in their purchasing power, and a curtailment in production. If it falls on the capitalists, this means a lowering of the already low rate of profit and a further delay in recovery.
  2. A program of public works runs into competition with private industry. A public housing program clashes with the private realty corporations, public power plants with private electric utilities. Thus the scope for profitable investment is further reduced by a public works program.
  3. A public works program, with decent wages, tends to increase the workers’ wages in all parts of the economy. From the point of view of the workers this is highly desirable; but in relation to capitalist recovery this is a major disaster. An important factor in the cyclical recovery of private industry from the depression is the lowering of workers’ wages, a lowering which up to the 1929 crash has been a concomitant of depression. The workers’ unions tend to collapse, as the competition from the remaining jobs among the workers assumes cut-throat proportions. Finally wages are driven to such a point that the capitalists feel it possible to operate once more and hope for profits. For, as the Brookings Institution pamphlet frankly and correctly took as the starting point of its argumentation, wages must be cut if profits are to rise.

If the capitalists try to drive wages below those paid in public works, the workers will leave private industry, being assured of a job on the public works program. Feeling a certain measure of security, the workers will be encouraged to organize and press demands for higher wages from the private employer. This will lower the rate of profit in private industry, bankrupt many capitalists, drive private capitalism further down into the crisis. The workers of the bankrupted shops will look for work on the public works, thus increasing its scope.

The economy will be cleft into two antagonistic sectors: public and private industry. Between these two sectors a struggle will develop. Far from bringing industrial recovery to the private capitalists, the public works by raising wages will drain the strength out of the profit system. It will become a matter of life or death for private industry to abolish the public works program. Violent struggles will ensue as the workers will strive to defend what they have gained. The program of reform, like all reform in the period of capitalism, is doomed to a brief and unhappy existence as the forerunner to either a reaction of a Kornilov, Mussolini or Hitler, or the social revolution of the workers.

The Real Barrier to Production

>What the New Dealers refuse to understand is that, as Marx put it, “The real barrier of capitalist production is capital itself.” It functions for the accumulation of further capital; capitalist production is production for capital. What is necessary is the transformation of this system into one in which production becomes an ever-expanding system of creating goods for the benefit of the society of producers. This transformation requires one pre-condition: the expropriation of the capitalists who, not out of ill will but as a functioning class, bar the way to production for use. Against that, however, New Dealer and Old Guard stand together.

The fundamental fallacy of the New Dealers is explicitly stated by the New Republic, which championed the NRPB reports in a supplement to its April 19 issue called Charter for America. It says of the men who ideologically fathered the NRPB reports (Veblen, Hobson, Brandeis, Keynes, Hansen):

“These men have taken an approach to the economic problem that has not been dogmatic in the sense of the rejection or espousal of any ‘system,’ but has been rather an engineering one. They have, by and large, asked what resources in men and material we have, and how those resources can beat be organized to achieve the social goals that the sense of the whole community regards as desirable.”

These reformists thus refuse to see the truth: that capitalist society does not function to achieve social goals the community as a whole regards as desirable, but rather operates to achieve the goals considered desirable by a small part of society, the ruling capitalist class, which places its profits as the paramount concern of society. Society does not exist to satisfy the requirements of the community but the profit needs of the capitalist class. The government, no matter whether conservative or liberal, remains a social organization whose purpose is to insure the rule of the capitalist class, and by its policies to assure the receipt of profits, which is considered the first claim on society. When the needs of the great majority of society come into conflict with the capitalist system and the capitalist class, the government’s role is to ascertain that the latter triumphs. Capitalist class parties may differ and sometimes do differ deeply on how to achieve the purpose of the state, but despite these differences all capitalist parties represent poorly or well the capitalist class. This true role of the government cannot be seen by the petty-bourgeois New Republic, which assigns to the state a super-class social “engineering,” rather than a class role. Upon this illusion the New Deal’s leftish liberals build their economic castles in the air.


1. Wallace’s post-war Utopia – why American Capitalism Can’t Bring World Prosperity, Fourth International, February, 1943.

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