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International Socialist Review, Fall 1958


Albert Phillips

The Deep Roots of Inflation


From International Socialist Review, Vol.19 No.4, Fall 1958, p.147-152.
Transcription & mark-up by Einde O’Callaghan for ETOL.


Can capitalism escape long-run inflation through a new industrial revolution or other means? The answer appears to be decidedly in the negative

This is the second part of a discussion article on long-range inflation. The first part appeared in our summer issue.

* * *

IN THE first part of the discussion we have seen that nineteenth-century capitalism, which was dominated by the Industrial Revolution, was able to simultaneously lower prices, expand accumulation of capital and production, lower hours of work, raise both money and real wages, and thus cumulatively expand the market despite periodic crises. Contrary to bourgeois economists, inflation as a long-range movement began about the turn of the century, and not in 1939, or 1954. We have seen that inflation began prior to significant war preparations, before state debt or, for that matter, debt in either producer or consumer goods assumed the importance it has today. This indicates that the inflationary process is rooted in capitalist production itself. It is the tendency to the falling rate of profit, along with the class struggle which is at the root of inflation, while war preparations, fictitious capital, and debt in general are derivative, although increasingly contributory, effects.

From a theoretical point of view, we saw that the tendency of the rate of profit to fall is dependent not simply on the rise in the organic composition of capital, but on the ratio established between the rise in the organic composition to the proportionate increase in labor productivity; and then by the ratio of this increase in labor productivity to the resulting increase in relative surplus value. We saw that the qualitative leap in labor productivity in proportion to the investment in capital, established by the Industrial Revolution, tended to exhaust itself by the close of the nineteenth century. We noted that the increasing sharpness of the class struggle tended to make both real and money wages inflexible, with a definite upward bias, as well as forcing a considerable shortening of the working day.

The jaws of the vise being tightened on capitalism are formed on the one side by the falling rate of profit, and on the other by the increasing pressure mounted by the working class. The immediate result is deepening inflation. The ultimate solution for the bourgeoisie lies either in the complete crushing of the working class, or in a new industrial revolution which could provide a new breathing space for the bourgeoisie. But, as we shall see, every movement towards the rate of capital accumulation necessary for a new industrial revolution only adds in geometric fashion to the inflationary fires now fiercely aglow.

It should first be noted that a Second Industrial Revolution has been hailed before in the capitalist world. [34] The previous “New Industrial Revolution” took its main point of departure from the then relatively new automobile industry, with its emphasis on mass production for a mass market, with smaller profits per unit. An extremely important part of this movement was the process of “rationalization” of production through the Taylor and Bedaux systems. In the final analysis, this earlier development was actually closer to a true industrial revolution than the development centered today around automation in the capitalist world, from the point of measurement of a leap in labor productivity in relation to the increase in the organic composition of capital. To this we shall return below. But in any case, we are aware that this “Second Industrial Revolution” ran its course very quickly, leaving relatively little impact on the society around it and succumbing swiftly to the general trends firmly established in capitalism. That is to say, the simultaneous ability to reduce hours of work and prices, and increase profits and wages at the same time – the characteristic achievements of expanding capitalism – was evident not for a century but for less than a decade; a decade which ended in the most drastic and lengthy depression in the world history of capitalism.

Is there any evidence that “automation” will have any greater, or as great an impact, coming as it does when the declining rate of profit presses harder on the possibility of revolutionary changes in over-all technique; when the working class is better organized; when the state, in the total interest of the capitalist class, must make ever greater demands upon production and upon the profits available for capital accumulation? Or does the evidence point in the direction feared by Sir Dennis Robertson, referred to above [p.95 of the summer International Socialist Review], where he equates even a relatively low rate of growth of capital accumulation with a further inflationary surge?

It is now at least ten years since the world was promised, or threatened, with a new industrial revolution. It is a period long enough to show evidence of its direction. Some sections among the bourgeoisie speak in terms of a long, gradual reduction in the work week. One recent report dreams that “in another century we shall be able to produce as much in one seven-hour day as we now produce in a 40-hour week.” [35] Others fear a great shortage of labor as they point to the planned rate of accumulation of capital for the next decade and a half. For all their optimism on the grand scale, these gentlemen are obviously badly worried by the inflation which they can neither explain nor control; an inflation which momentarily threatens to burst all restraints even in the face of cutbacks in military spending; in the face of raising the discount rate [36]; in the face of a certain increase in the productivity of labor; in the face of unsold goods and rising unemployment.

The fact is that the costs of production are going up, and all indications point to a continuation, indeed an acceleration, of this trend. This is becoming so clear, and so helpless against it is this “new industrial revolution,” that the American capitalist class is becoming increasingly reluctant and unable to automatize on a large scale. We are now not far removed from the situation Britain faced some years ago, when their capital plant was becoming obsolete and they proved unable to transform in order to compete on the world market. Some among the spokesmen for the bourgeoisie, under the pressure of circumstance, are forced to rise above the confines of American exceptionalism and to view the fate of the American economy against the fate of capitalist economies abroad.

Professor Harold B. Wess, for example, of the Business School of the American University warns that “If the major trends in our country of the last twenty-five years are not reversed we will end up in the same plight as Great Britain and France now find themselves, or perhaps in an even worse condition ...” [37] Fantastic as it may seem to impressionists looking at our economy, the position referred to is that of near bankruptcy.

A striking illustration of the reason for Great Britain’s difficulty, and an even more significant example of the increasing cost of capital in relation to the increase in labor productivity is given in the following passage by none other than Georgi Malenkov: “It may be considered an established fact that in raising labor productivity decisive importance attaches to furnishing labor with electric power facilities at a rate that outstrips the growth of labor productivity.

“Turning to the experience of capitalist countries in this connection, the following example may be cited. The labor productivity of the US’s manufacturing industry increased by 31% between 1939 and 1953 while labor’s electric power facilities increased by 60%. US economic literature states that a 35% rise in labor productivity between 1950 and 1962 will necessitate an 84% increase in the electric power furnished to labor. The British, whom the Americans are squeezing in both their export and their home markets, explain their lag as primarily due to the inadequate equipment of labor with electric power, and consider this the principal explanation for the fact that British industry’s labor productivity is significantly lower than American industry’s.” [38]

Now a 35% increase in labor productivity in twelve years, a little under 3% a year, is in the first place hardly an indication of an industrial revolution. In the second place, the increasingly disproportionate increase in the cost of capital investment to the rise in labor productivity betokens inflation, and not a new industrial revolution. We note parenthetically that Malenkov has made it a matter of record that the nationalized economy in its Russian form, is not immune from the problems facing the western capitalist world. But this is subject matter for separate treatment. Let us investigate more concrete evidence of the increasing inability of the bourgeoisie to carry through their “new industrial revolution.”

Glen R. Fitzgerald, director of General Motors’ Process Development Section, told a meeting of the American Society of Mechanical Engineers that “we must be sure we do not overmechanize simply because we believe it is automatic – it must be good ... Studies show that as the ultimate in mechanization is reached, equipment costs increase at a much more rapid rate than the decrease in labor costs.” [39] Ralph E. Cross, vice-president of one of the more important firms manufacturing automated equipment, said that his company “could have cut in half the number of workers still on the Plymouth engine assembly line by further use of automation, ‘but the cost of the engine would go up if we did. The objective is not to reduce labor, but to get the proper balance between mechanization and labor, so that we will get the lowest possible part cost.’” [40] Ford has rejected an automated testing set-up already in use at Plymouth on the grounds of too high costs. Increasing caution is reflected in a recent report of the American Society of Tool Engineers, a group that might be suspected of partiality to automation per se, which found that only 17% of all industrial operations in highly industrialized Michigan are even capable of being automated. [41]

In some comments on a study by the Bureau of Standards of the cost of automatic assembly of components of radio, television, etc., as compared with hand assembly, we note the following:

“... MDE (hand) requires a capital investment of $82,000 for a productive capacity of 400 units per hour. MPE (automatic) requires a capital investment of $665,000 for a productive capacity of 405 units per hour. For a less than 10 per cent decrease in the cost of production, your electronics capitalist must increase his capital investment by over 700 per cent![42]

The capital coefficient, a term meaning the amount of investment in plant and equipment necessary to add one unit to annual production, is coming under increasingly careful scrutiny by statisticians, as for example by the National Bureau of Economic Research and the specially formed Leontieff group at Harvard. We can understand why. We have indicated above that the tendency for the capital coefficient to increase had already begun to show itself in the nineteenth century, although in a far less acute form. We can in any case recognize here the Keynesian marginal efficiency of capital and its tendency towards zero, or on a broadened version, the Marxist declining rate of profit. One recent study shows that with 1941 as 100, total output per unit of producers durable goods dropped by 1952 to an index of 70. [43]

The following illustrations from the steel industry will be perhaps even more helpful: Charles M. White, president of the Republic Steel Corporation, said recently that the current expansion program of his company would cost around $85 a ton. He added,

“The next substantial increase in capacity beyond our present program will have to be built at a higher cost – not the $85 per ton we have been able to get away with up to now but a figure somewhere in the vicinity of $200 per ton. And the other steel companies are in about the same fix. And when we are through with that kind of expansion, the next step will be an entirely new plant at $325 per ton, which will include not only the cost of plants and auxiliary facilities but of essential raw material reserves as well. That can mean only one thing, as far as I can see: a thorough review of our entire pricing policy.” [44]

A.B. Homer, president of the Bethlehem Steel Company, estimated that the cost of achieving a 50% increase in capacity would range in the period up to 1971 from $100 to $500 a ton. For Bethlehem, he estimated net profit to be about $7 per ton of ingot capacity – not “too good” a result on an investment of $100 a ton and “3 times as bad” if the investment is $300 a ton. [45] For the steel industry as a whole in the recent past, its “total costs ... per hour worked have advanced since 1940 at the rate of 8.2 per cent a year, compounded.” In 1955, it took 40% more profits than in 1950 to pay the same returns on investments in the steel industry, while its long-term debt has tripled since 1946. [46]

In the public utilities sector of the economy alone, it has been estimated that the cost of construction of electric plant, which is only part of the costs, would rise by 1970 from less than $4 billion a year to $11 billion yearly. [47]

In the area of current cost, it is estimated that a minimum of $25 billion a year is needed simply to maintain existing plant and equipment [48]; that it would take $125 billion simply to put the nation’s industrial equipment as a whole in “first class condition,” an amount equal to one-quarter of the 1956 valuation of all industrial plant and equipment, and not much below the 1952-56 total of $152 billion spent on new plant and equipment [49]; that approximately 20% of the machine tools in the US are at least twenty years old, about 43% are ten years old, and very few of these have automatic controls like the latest models. [50] This may give us some inkling of the staggering cost of a “new industrial revolution,” a phrase so casually tossed about. It indicates, too, why every movement towards such a total transformation threatens at the same time a runaway inflation.

The accumulation of capital is the central reason for being of the capitalist system. It is therefore difficult to conceive of a bourgeois regime that freezes public and private investment at the existing rate. And yet the force of the contradiction is so great, the danger of runaway inflation so pressing, that the Tory Government in England took precisely this step in September 1957, while at the same time raising the discount rate, the cost of borrowing, to a fantastic height. [51] The underlying similarity of the crisis in Britain and the United States is emphasized by the fact that on September 23, 1957, barely two days after the British action, Eisenhower in an address to the Boards of Governors of the World Bank and International Monetary Fund “called on the financial leaders to consider carefully whether their programs of expansion and investment are too large.” [52] What a confirmation of the major thesis of Marx’s theoretical structure – that the ultimate barrier to capitalist production is capital itself!

Let us look at the same process through another way of measurement. Lewis Corey, one of the few American Marxists to have done serious work on the American economy, says:

“That the rate of profit tends to fall is an observable and acknowledged fact. An indirect proof is the constantly larger capital investment necessary to produce a unit of product. In American manufactures, fixed capital rose 1,758% from 1849 to 1889, output only 1,170%.” [53]

But that was in another century and before the death agony of capitalism. What is happening today in this relationship makes the figures that Corey cites pale into insignificance. The total output of all goods and services in 1953 dollars went from $187.9 billion in 1939 to $367.2 billion in 1953, a rise somewhat under 100%. But in order to achieve this increase, business expenditure for new plant and equipment rose from $5.5 billion in 1939 to $27.8 billion in 1953, an increase of close to 500%. Even if we were to allow for some under-utilization of man power and capacity in this period, the relationship would show little change. The CIO estimate is that with full employment, total output would have risen to somewhat more than double, rather than a little less than double. [54]

Part of this picture is the course of labor productivity, output per man hour, in relation to the pace of investment in capital goods. Half of the total 1954 valuation of capital goods, some $500 billion, had been purchased since the start of 1946. In the period from 1952 to 1956 a total of $152 billion was spent on new plant and equipment. This gives us at least a rough idea of the tremendously concentrated increase in capital accumulation in the past decade. What has been the corresponding growth in the productivity of labor in the whole economy?

As against a long-term average annual increase in productivity of roughly 2½%, the years from 1947 to 1956 show an annual increase of from 3.0 to 3.6% [55] How significant is such an increase when compared with the demands of an industrial revolution; or when measured against the proportionate increase in the organic composition of capital; or even when it is looked at in relation to recent periods in the past? Ewan Clague, Commissioner of Labor Statistics, says,

“To the question, is there any indication that there has been a significant gain in productivity in the post-war period, owing perhaps to automation? The answer is substantially no ... as far as our figures are concerned, there is nothing more spectacular occurring in manufacturing productivity now, after World War II, than there was after World War I. In fact productivity rose faster from 1919 to 1925 than it did from 1947 to 1953.” [56]

But by November 1956 a high government official is quoted as saying that “Something worries me more than prices. In the past year – if our statistics are right – there has been very little increase in productivity. What the cause is I wish I knew. I still don’t understand it.” [57] He concluded by estimating that productivity for the past year had gone up about 1%. In commenting on a recent study, Burton Crane of the New York Times says,

“It is interesting to note that since the end of 1953 the rates of gain in both wages and productivity have fallen below the long-term trend line. In fact, actual productivity over the past nine quarters has gone down a trifle ... Somebody had better do something about increasing productivity.” [58]

But what other path is there for the bourgeoisie except to invest more and more in plant and equipment, until they are stopped either by a crash, or by their own government which is being forced to recognize the self-contradictory character of their mad race against the declining rate of profit?

The bourgeoisie is in a terrible dilemma. It is aware that the solution of the neo-classical Austrian school, a depression which would drive out the more inefficient producers, tend to devaluate existing capital, and break through the wage level by creating unemployment, would threaten a revolutionary upheaval, and at best would provide in directly economic terms only a temporary solution, if that. On the other hand, it is recognized that the same upheaval will take place if inflation is unchecked. The middle road, taken by England and proposed by Eisenhower here, is no alternative at all. The proposal to freeze the economy at existing levels, to hold everything motionless as is sometimes done as a joke in the movies, is impossible. Not only is it contrary to the inner essence of capitalism which is to expand or to die, but it is also contrary to the logic of the class struggle. The needs and desires of the working class cannot be frozen by either request or command from the bourgeoisie or from their lieutenants within the working class.

It would not be amiss at this point to take a quick glance at the question of wages and administered prices, the main objects of attack in the current debate.

We have up to now discussed the characteristics of twentieth-century capitalism and automation with regard to the first of our decisive ratios; that established between the degree of change in the organic composition of capital to the consequent degree of change in the productivity of labor. The second, as we know, deals with relative surplus value.

There can be little doubt that both real and money wages have shown a long-range rise in the twentieth century as well as the nineteenth. With 1926 as 100, for example, average hourly earnings rose from 30.6 in 1900 to 102.3 in 1934, with drops in 1921-22 and during the depression years. In terms of real wages, with 1926 as 100, the index rises from 64.5 in 1900 to 131.4 in 1934. [59] It is of course true that the rise in wages lagged behind increases in productivity and in the national income, so that a relative comparison would show a somewhat different picture.

Nevertheless, the complaint of the bourgeoisie against wage levels has for them a certain degree of legitimacy, especially in the most recent period. Ordinarily in the past, periods of rising prices have left wages further behind than appears to be true today because of the higher extent of organization and resistance of the working class. According to the CIO, with January 1953 as 100, average straight-time earnings went up to 120 by May 1957, about keeping pace with price increases. [60]

The important thing here, however, is that a revolutionary working-class leadership would challenge the inability of capitalism to accomplish in the present what it was capable of doing in the nineteenth century; i.e., lower prices, lower hours, increase wages, and expand production. It would challenge the bourgeoisie to either put up or get out of the way and let the proletariat reorganize society to accomplish precisely what capitalism is no longer capable of doing. The transitional steps would include a 30-hour week at 40-hours pay, increased basic wages and lower prices. But this subject is not within the scope of our present discussion.

The rise in wages notwithstanding, the fact remains that those economists, including so-called “liberal Democrats” of the Seymour Harris-John Galbraith type who would place responsibility for the present inflation in equal proportion on labor and capital, cannot substantiate their position. Over the past four years, according to government figures, labor’s share in the national income rose 3.7%; small unincorporated business dropped 4.5%; farmers went down 36.5%; while corporate profits increased by 16.4% and interest income rose 40%. [61] Thus the total increase in the share of national income was 56.4% to profits and interest combined while labor’s, again, was only 3.7%. Indicated here is an interesting relationship between profits and interest which we will comment on below, but for now it should be clear that the responsibility for inflation does not rest in the consumption section of the economy. In this connection we further note the report of the Bureau of Labor Statistics:

“The index for unit labor costs was lower than the price index for every year prior to 1956, although the difference was very slight and probably insignificant in 1953 and 1954.” [62]

On the other hand, those who believe that artificially high administered prices and profits are the cause of the inflation are not much closer to the truth. In reality prices cannot be set and maintained for any considerable period of time by any group, no matter how determined or seemingly powerful. The economic laws of motion of capitalism remain more powerful than the will of the capitalist class. And the competitive struggle for an increase in labor productivity finds its way through the medium of the world market even through the state monopoly of foreign trade in Russia. As Galbraith of Yale correctly maintained [63], administered prices are neither morally improper, nor a transient phenomenon. Basically they are not actually “administered” at all. They are nothing less than the reflection of the need for capital to accumulate in the teeth of the falling rate of profit at an advanced stage of its operation. The magnificently self-styled “democratic” alternative proposed by Walter Reuther, to the effect that the corporations ought to go into the stock market rather than depend on high prices and internal accumulation, is a fantasy. If his advice were followed to the letter, the probability is that prices would go still higher because of the rise in discount and interest rates.

As a matter of fact, a recent report [64] indicates that business concerns raised more funds through the sale of new stock in the first half of 1957 than in any first half year since World War II, and that the higher long-term capital requirements were financed in increasing degree from security issues. This has taken place despite the fantastically high “administered prices.”

There is evidence, indeed, to indicate a decline in profits in the post-Korean period. The typical profit ratio for manufacturing corporations in the pre-Korean and Korean war periods was 11%, while the typical ratio in the period since, before taxes, has been 9%. [65]

The combined pressure of the declining rate of profit and the resistance of the working class first manifested itself in rising prices at the opening of the twentieth century. By the middle of this century the pressure has become so intense that the capitalist state, as we have seen, has begun to intervene to slow the accumulation of capital itself. But there is yet another phenomenon characteristic of this century as contrasted with the last, which, while developing out of the basic pincers movement we have been describing, takes on a life of its own, and returns to add fresh contradictions, illusions, and further fuel to the inflationary holocaust. That phenomenon is the growth of debt.

Of the three major debt-developing areas, production, consumption and state debt, in the nineteenth century only the first had begun its real growth. Even in the field of production, as we have earlier noted [p. 97 of the summer International Socialist Review], it was still possible for Carnegie towards the end of the century to personally finance a tremendous expansion in the production of steel. By the turn of the century such developments became increasingly rare. The growth of personal fortunes, great as they were, could not keep pace with the growing level of capital accumulation. Stocks, bonds, and bank loans became the primary means of filling the gap. And if by 1916, that is, after 116 years of capitalist development, the total net corporate debt stood at $40.2 billions, by 1952 it had risen to $167.4 billions, while by 1956 it stood at $208.2 billions. [66] That is, in the latest four-year period alone, corporate indebtedness rose slightly more than it did in the whole earlier 116-year period.

In the years from 1921 to 1929, corporations expanded long-term indebtedness by 111% while national income rose only 29%. [67] In 1952, corporate debt was about 43.5% of assets, which represented an increase of 5% since 1945. [68] Figures quoted above indicate that external financing is increasing relative to internal financing, and although this relationship has not always held true, Reuth-er’s advice to the corporations seems somewhat superfluous.

In the area of consumer debt, we know that buying on credit did not develop until well beyond the turn of the century. But by the beginning of 1957 total consumer debt was over the $40 billion mark. [69] It has risen 400%. since 1939, “considerably faster,” said the US Chamber of Commerce with a noticeable degree of understatement, “than consumer income.” [70] Capitalism is beset not only with contradictions in production, but also with contradictions in the relations between production and consumption. This would seem clear enough evidence, if more were needed, that wages are not too high, but on the contrary not high enough to pay for goods already produced and sold. But in order to avoid any misunderstanding with readers who may believe that the road to the solution of the difficulties of capitalism lies in raising wages and thus increasing the market, let us repeat that the difficulty lies in the falling rate of profit and labor productivity; in production and not in distribution. And without solving the contradiction in production, the increase in wages can only intensify the capitalist crisis.

The negative character of debt is nowhere more clearly seen than in the sector of state indebtedness. Over the long haul it has become an increasingly large percentage of our national income. In 1799 it ran about 10% of national income; in 1919 it was 41%; by 1945 it was 142%; and by February 1946 it was 160%. [71] These figures do not mean that it constantly and unilaterally went up. There have been many fluctuations. But the main line remains clear. And while it is obvious that war spending has been a major cause of the qualitative rise in state debt, it is not the only cause. The increasing acuteness of capitalist contradictions has drawn the state into ever widening sections of the economy. We note that in the summer of 1940, when the World War II program had barely begun, the state debt “was nearly twice as large as it had been in the year 1919, which marked the peak of the debt incurred in connection with World War I. War has undoubtedly reinforced the trend towards expansion of the public debt, but it cannot account for the trend itself.” [72]

In absolute terms the federal debt takes on equally fearful proportions. If in 1940 it was above $40 billions, and the then Secretary of the Treasury Morgenthau was reluctant to raise the statutory limit above $50 billion [73], today the debt is at the $275 billion level. The present discussion is whether or not to raise the statutory limit to $300 billion, and this under a regime of “sound money” men.

But the national debt, which is nothing more than a paper reminder of values already consumed or destroyed, does not just stand off by itself. It leads through a thousand veins into the heart of the capitalist credit and finance structure. We have earlier noted that over the past four years the increase in the national income accruing to interest payments rose 40%, as against 16.5% for profits. Let us give just one example of the forces making for such a division.

With two big issues of notes coming due, the government this year (1957) offered nearly $13 billion in new 12-month plus notes bearing 2½% interest in exchange for the two maturing issues which bore only 2½% interest. The difference in interest was estimated at $100 million. Nothing new has been created, but in the course of this one little transaction that much new “capital” has been manufactured out of thin air. Seven billion dollars a year is paid out in interest on the total national debt, a tidy sum which the government might well meet by issuing new notes as in the instance above.

The national debt is held in great part by corporations and banks, who by the magic of capitalist bookkeeping list it as assets on their books. In July 1953, for example, according to the Federal Reserve Bulletin, corporations, insurance companies, and banks held in the neighborhood of $125 billion of government securities, with banks holding the lion’s share. Directly or indirectly these securities become the basis for new loans and investments. At the beginning of 1957 the American Bankers Association called for a change in regulations which would allow them to make $10 in loans based on $1 in reserves instead of the present six to one ratio. [74] Even if the reserves represented actual wealth, the banks are still creating paper wealth and demanding the right to increase their ability to do so. But what are these reserves in the first place? In the immediate past banks have been selling government securities in order to bolster reserves for loans and investments. In the feverish world of capitalist finance, paper capital grows in geometric fashion, while real production faces the reality of the declining rate of profit.

The sicker the system, the more debt appears as wealth, the greater is the production of fictitious capital. By 1957 the US Chamber of Commerce estimated total public and private debt at close to a trillion dollars. [75] While net public and private debt rose from $82.1 billions in 1916 to $552.7 billions in 1952 [76], gross national product rose from $46.2 billion in 1909 to $143.8 billion in 1950. [77] That is, in a roughly comparable period, while production of goods and services rose about 3.25 times, net debt rose more than 6.5.

We have seen that all movements in the direction of increasing labor productivity qualitatively only add to the inflationary movement. But what about a socialist society? There are those who ask if a nationalized economy would not face the problem of an increasing rate of capital investment for a decreasing rate of increase in labor productivity. We are aware that in the Soviet Union, at any rate, this is indeed an acute problem. [78] This important question deserves, and it is to be hoped, will soon receive analysis. But it is clear that capitalism can offer only increasing contradictions; poverty in the midst of potential plenty; inflation combined with depression; “little” wars in the midst of so-called “peace”; and increasing contamination from nuclear fallout as the H-Bombs are tested for use in another world war.


34. Note, for example, The Second Industrial Revolution and Its Significance in the May 1930 Annals of the American Academy of Political and Social Science. According to the editor of the series, “The contributors are authorities in their respective field – economists, engineers, businessmen, educators, authors, statisticians, lawyers. They represent a cross section of American constructive thought – capitalists, socialists, labor leaders, liberals, conservatives. “ See also Walter Meakin in The New Industrial Revolution (Brentano’s, New York, 1928) in which we read that “the suggestion that nothing less than a new industrial revolution is involved in the process of ‘rationalization’ may be so sweeping a statement as to need justification. This will be found in the following pages ...” (p.7) Meakin devoted most of his analysis to the developments in Germany.

35. USA in New Dimensions (Twentieth Century Fund, July 15, 1957).

36. In September 1957 Great Britain raised its discount rate an entire 2% to a very high 70A.

37. Quoted by Arthur Krook in the New York Times, June 7, 1957.

38. Malenkov’s speech at the Twentieth Congress of the CPUSSR, Pravda, February 19, 956. (As translated in the Current Digest of the Soviet Press, VIII, No. 9.)

39. Detroit News, November 29, 1956.

40. Detroit News, May 21, 1956.

41. New York Times, August 14, 1957.

42. Lynn Marcus, Automation – The New Industrial Revolution in Fourth International, Spring 1954.

43. Edward F. Denisen, of the Department of Commerce’s Office of Business Economics, in Problems of Capital Formation (National Bureau of Economic Research; Studies in Income and Wealth, IX, Princeton University Press, 1957), p.255.

44. New York Times, May 23, 1956.

45. New York Times, November 28, 1956.

46. New York Times, July 24, 1956.

47. New York Times, November 28, 1956.

48. Del S. Harder, Executive Vice President of the Ford Motor Co., in a speech published in the Ford Rouge News, November 23, 1956.

49. Estimate by Dexter M. Keezer, head of the Economics Department of the McGraw-Hill Publishing Co., Detroit News, February 9, 1956.

50. Business Week, October 1, 1955.

51. New York Times, September 21, 1957.

52. Detroit News, September 23, 1957

53. Lewis Corey, The Decline of American Capitalism (Covici-Friede, New York, 1934). pp.122-23.

54. Economic Outlook (CIO), April 1954.

55. Labor’s Economic Review (AFL-CIO), June-July 1957.

56. New York Times, September 5, 1956,

57. Joseph A. Loftus, dispatch from Washington, New York Times, November 23, 1956.

58. In a review of Wages, Prices and Productivity – A Wall Chart – prepared by Ed-dy-Rucker, Nickels, Co., New York Times, May 28, 1956

59. Moulton, Income and Economic Progress, Op. Cit., p.185.

60. Labor’s Economic Review, op. cit.

61. As quoted by Senator Kerr (Dem., Okla. ) while questioning Secretary of the Treasury Humphrey, Detroit Free Press, June 26, 1957.

62. As quoted in Laker’s Economic Review, Op. cit.

63. Editorial in New York Times, July 17, 1957,

64. Survey of Current Business, Department of Commerce publication, September 1957, p.1.

65. Figures for manufacturing corporations from Federal Trade Commission and Securities and Exchange Commission by Edwin L. Dale Jr., New York Times, May 11, 1957.

66. Survey of Current Business, September 1953, pp.14, 17; May 1957, p.21.

67. Evans Clark, Internal Debt of the US (Twentieth Century Fund; Macmillan Co., New York, 1933),pp. 16, 17.

68. Daniel H. Brill, Board of Governors of the Federal Reserve System, in Problems of Capital Formation, op. cit., p.178.

69. New York Times, January 2, 1957.

70. New York Times, February 15, 1957.

71. Our National Debt (Committee on public Debt Policy; Harcourt, Brace & Co. Inc., 1949), pp.12-13.

72. Anatol Murad, Private Credit and Public Debt (Public Affairs Press, Washington, D.C., 1954) , p.54.

73. Editorial in the New York Herald Tribune, January 31, 1940.

74. New York Times, January 25, 1957.

75. New York Times, February 15, 1957.

76. Survey of Current Business, September 1953, p.14,

77. John W. Kendrick, National Productivity and Its Long Range Projection (National Bureau of Economic Research; Long Range Economic Projection; XVI, Studies in Income and Wealth, Princeton University Press, 1954), pp.82-83.

78. See, for example, Maurice Dobb, Soviet Economic Development Since 1917 (International Publishers, New York, 1948), p.239; Malenkov in the Current Digest of the Soviet Press, November 8, 1952, p.51; also Malenkov as quoted in the New York Times, August 10, 1953.

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Last updated on: 30 April 2009