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Fourth International, June 1946


J. Thorne

Profiteering in the Second World War


From Fourth International, June 1946, Vol.7 No.6, pp.Page 190-191.
Transcribed, edited & formatted by Ted Crawford & David Walters in 2008 for ETOL.


For two decades after the sensational profiteering scandals of the First World War, we were frequently assured in the capitalist press that all the necessary legislation had been worked out to keep the next war financially respectable – strictly a non-profit enterprise. The slogan to “take the profits out of war” became a national shibboleth. But this all-national slogan was soon manipulated by the monopolists to help sell the bloodier and more profitable Second World War. Roosevelt, it will be recalled, employed the slogan in his “Equality of Sacrifice” program. “No war millionaires,” he promised the American people.

Within only four years the number of billion-dollar concerns in America had risen from 32 to 44. Assets of the 44 had risen to $103 billions, more than a third the entire national wealth. Wall Street has become the “world’s banker.”

Whereas the First World War produced $28.5 billions of net profits and created 22,000 millionaires, the Second practically doubled the “take:’ enriching the monopolists by $56 billions – so far. Never before in history has any venture proven so profitable.

The Trillion Dollar War cost the people of the United States $336 billions, not counting destruction and suffering. On a world scale it claimed about 60 million casualties (so far). There were 1,071,266 American casualties (294,765 dead and missing). On this basis the $56 billions war profits meant that the monopolists raked in $933 every time blood was spilled anywhere in the world. Every time an American fell in battle the Wall Street tills rang up $52,000 blood profits.

Today the American financiers not only own two-thirds of America but hold a mortgage on the rest. The $279 billion war debt amounts to a mortgage of nearly $9,000 on every American family, a lien of $2,551 on every man, woman and child in the nation. American workers are being forced to pay $25 billion yearly, including $5 billions or more interest, toward this debt and other government expenses. Nobody believes the debt will ever be paid off; it will hang over the people indefinitely, as the World War I debt did.

The “60 Families” had their own unique theory of how to keep down the number of new millionaires: the more billionaires the less millionaires. They simply paid less dividends to the ordinary stockholders and kept more “reserves” under control of the top executives who represent the real owners.

Before 1940, corporate dividends were often as high as two-thirds of profits. But after 1940 the dividends were less than half of profits. The banks went even further in concentrating wealth. They kept back 80 percent of profits as “capital accounts.” (Federal Reserve Report, February 6, 1946.)

Consequently, liquid asset holdings of business increased 277 percent from 1939 ($17.5 billions) to 1944 ($66 billions). (Federal Reserve Bulletin, June 1945.) But as assets grew, the number of firms dropped by hundreds of thousands. In three and one-half years, 1941 through June 1944, according to Department of Commerce figures, the number of business establishments in the United States fell by 410,400,or about 13 percent. In the same years profits rose 30 percent.

But even the foregoing figures of doubled blood profits and increasing concentration of wealth into ever fewer hands, do not give the full picture of the actual degree of war plunder on the home front. These are over-all figures, averaging the profits of the richest monopolies with the losses of the little fry. Actually profit increases ranged up to 2,431 percent for whole industries and up to 11,743 percent for individual concerns. Following are Office of Price Administration figures for percentage increases of 1944 profits over 1936-39 averages, by industries (Congressional Record, January 22, 1946):



Motor vehicle parts


Iron, steel and by-products


Lumber and timber by-products


Electrical machinery


Communications equipment


Industrial electrical equipment


Other electrical products


Non-electrical machinery


Engines and turbines


Transportation equipment


Aircraft and parts


Railroad equipment


Food and kindred products


Meat products




Textile mill products


Petroleum and coal products


Rubber products


Bituminous and other soft coal


The Special Senate committee investigating the National Defense Program stated:

The Planning Division of the War Production Board has estimated that net profits, after renegotiation and taxes, of the war industries (metals, chemicals, petroleum and rubber) for the four war years will be about $16,000,000,00S0i.nce the proportion of civilian business in these industries had been very small, almost all these profits may be regarded as coming from Government business. Such profits are about twice the pre-war average of such industries.

The Senate committee also discovered that of the 100 corporations having the largest volume of war business, three in. creased profits 10 times, 19 trebled their pre-war profits and 24 others had war profits 1 to 3 times normal profits. Of the rest, 12 companies which had shown losses in 1936-39, earned between $1 and $18 millions in 1942. Labor officials who accused the corporations of a “Business As Usual” policy were quite wrong. It wasn’t usual at all. It was quite unusual.

The 200 largest steel corporations more than doubled their annual profits during the war. The CIO United Steelworkers of America published an analysis entitled Five Years of War Profits, declaring that open and concealed steel profits from 1940 to 1945 exceeded $2 billions, an average of $245 millions yearly. Reported profits, after taxes, were: 1936-39, $576,000,000; 1940-44, $1,225,000,000, an increase of 113 percent.

And these fantastic profits were over and above equally fantastic salaries paid to top corporation executives. There was no salary freeze for Charles E. Wilson, President of General Motors. GM paid him more (besides dividends) in 1943 than the combined salaries of the United States President, Vice President, entire Cabinet, entire Supreme Court, Speaker of the House and General Eisenhower.

The 802 New York, New Jersey and Connecticut member banks of the Federal Reserve System had net profits of 7.2 percent in 1943, 9.5 percent in 1944 and 11.6 percent in 1945. The Federal Reserve reported “The principal reason for increased net profits of most banks was the increase in volume of earning assets, chiefly Government securities.” These banks also made “sizable additions to current net earnings from profits on securities sold during the year.” Not only the war debt but the war inflation, paid off for the big bankers.

The Excess-Profits Taxes

Not all the profiteering was strictly legal. Fourth International reviewed the typical frauds in December 1943 (George Breitman, Wartime Crimes of Big Business). But the profits cited in this article had the full approval of Congress and the Administration. Obviously, the “excess profits” taxes were essentially window dressing.

Now the government is returning 10 percent of excess profits taxes and guaranteeing profits for the next 10 years. The rebate of excess profits taxes amounts to about $2,840,000,000, more than half the total net corporate profits in the banner year of 1937.

Besides, if the profits of any company in the next 10 years drops below its so-called normal profit level, it is entitled to a cash refund from the US Treasury to make up the difference. Industry could collect in this manner a total of $62 billions from Uncle Sam’s 10-year profit-guaranteeing fund.

The steel industry, already having net working capital of $2 billions, will get $200 millions rebate from the Treasury. If no profit is reported in 1946, a further rebate of $149 millions is guaranteed. This would be 29 percent more than average peacetime profits. Here is how it works. Bethlehem Steel Corporation took advantage in 1945 of the carry-back-carryover provisions of the tax law to write off $44,100,000 for amortization. Thus, instead of its actual $22,676,000 profits, Bethlehem showed a paper loss of $27,218,000 on its tax returns. So Bethlehem applied for a refund and the US Treasury dug into the American public’s pockets to hand BethIehem an additional $34,980,000. Bethlehem’s final profits were therefore actually $57 millions, 60 percent of it an outright gift from the government.

While the corporations were piling up unprecedented reserves, the government was providing more than two-thirds of the $25 billion for the new plants. What little the corporations invested in plants did not even equal the depreciation and was furthermore charged against taxes or to current operating expenses. But that did not prevent the corporations from acquiring a 50 percent increase in machine tools during the war. General Motors increased its machine tools almost 100 percent, from 75,000 in 1940 to 143,774 in 1943. The total of machine tools rose from 934,000 in 1939 to 1,400,000 by 1944 (Congressional Record, January 22).

The leading corporations increased their productive wealth in other fields in similar proportions – all at the expense of the people.

This short economic summary shows that for the American plutocracy the Second World War was the most profitable enterprise in its whole career. It made the American capitalists the richest rulers that had ever emerged in human history.

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Last updated on 9.2.2009