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The New International, May 1938


David Cowles

Reform Labor Politics and the Crisis II


From New International, Vol.4 No.4, June 1938, pp.181-183.
Transcribed & marked up by Einde O’Callaghan for ETOL.


WHEN AMERICAN CAPITALISM was in its hey-day, there was some economic justification for reform labor politics. There was some justifiable hope that capitalism could grant, and reform labor politics could wrest, substantial economic concessions for the workers. That period was buried beneath the crash of 1929. Since then American capitalism has been declining and it cannot grant substantial concessions. Before, when the concessions might have been wrested, the workers did not want reform labor politics. Today they want it but it can gain them little.


However, even in the face of the widespread declines in production, employment and payrolls that took place between 1929 and 1937, a case could still be made for reform labor politics if only the following argument were true: That the declines in employment and payrolls were accompanied by increased profits for the capitalists. If this were true, reform labor politics would have a pretty strong justification. It could point to the inability of the workers to stave off falling wages and living standards because they limit their struggles to the economic plane. It could point to the bulging profits of the capitalists as something to be gotten for the workers through political action within the limits of capitalism. It could point to itself as the weapon by means of which the workers could gain substantial concessions in order to redress their economic losses. If this were true, reform labor politics would have an economic reason for existence. But is it true that the declines in employment and payrolls were accompanied by increased profits for the capitalists?

The facts are crushing proof that those who spread this argument as truth are either themselves ignorant or want to keep others ignorant. For the decline of American capitalism has not only smashed production, employment and payrolls, but it has also dragged down profits with it. For instance, the Federal Reserve Bank of New York, which is the dominant bank in the Federal Reserve System, publishes a monthly economic bulletin called the Monthly Review of Credit and Business Conditions. In the issue for April 1938, the bank gives a table showing the trend in the amount of profits made by the American capitalists. The table lists 37 groups of corporations, containing 700 of the largest industrial and mercantile corporations in the United States and engaged in the most varied fields of economic activity. It shows their profits during various years between 1929 and 1937. And it shows that the total profits of these giant corporations fell precipitately and was 21 percent lower in 1937 than in 1929.

The truth is that the decline of American capitalism is turning “sour” the very top cream of industrial corporations. “Sour” is the word used in financial circles but it is only another word for falling profits. This becomes crystal clear when we examine separately two of the corporation groups. One of them is the steel group, whose output is the very backbone of an expanding industrial economy and whose profits can increase only in an expanding capitalism. In 1929, the 29 corporations in the steel group accounted for 372.9 million dollars out of the total of 2,687.1 million dollars of profits made by the 700 corporations. But their profits in 1937 were 43 percent lower than in 1929. The other group consists of corporations producing food and food products. The output of these corporations depends upon the purchasing power of the masses. So do their profits. In the amount of profits that they made, they were probably second only to the steel group. Their profits fell just as sharply, dropping off 42 percent between 1929 and 1937.

Falling profits here do not tell the whole story. Class I steam railroads, which at one time were the sustaining force of American industrial development, and which still form a basic industry in the American economy – Class I steam railroads showed a loss in profits of 89 percent in 1937 as compared with 1929. The public utilities were one of the most important reasons for the prosperity that prevailed between 1923 and 1929. They are also strategically placed for profit-making, since they serve both consumers and industry. Nevertheless, public utilities (excluding telephone companies) made 31 percent less profits in 1937 than they did in 1929. Metals and mining corporations alone, of all the groups of corporations, showed a greater amount of profits than in 1929. However, its total then was only 70.6 million dollars, less than one-fifth of what the steel corporations showed. And its increase in 1937 over 1929 was only 10 percent.

These sharp declines in profits make ridiculous any hopes that reform labor politics can gain substantial economic concessions for the workers. The militant actions of the workers during 1937 make this hope even more ridiculous. For during this year the trade unions unleashed the greatest wave of strikes in the history of the American labor movement. Despite this they were unable to keep the rotten fruits of economic decline from being unburdened upon them. Could reform labor politics, whose action consists of talk and the ballot, succeed where the strikes failed?

The method of strike struggles was often sit-ins, whereby the workers seized control of the plants of giant corporations in order to wrest economic concessions from them. The workers not only seized properties, but they held them until the capitalists granted their demands. In both ways they challenged the very foundations of the capitalist system – i.e., the sanctity of private property and the legal right of the capitalist to unhampered use of his factory. Nevertheless they could not shunt off the decline heaped upon them by capitalism in the form of unemployment, wage cuts, and lower living standards. But can reform labor politics, moving in the ethereal atmosphere of parliamentary halls, succeed where they failed?

The strikes were often pitched battles in which the workers engaged in armed struggles with the police, the state militia, and the courts. In short, the workers met in head-on conflict the very instruments of oppression of the ruling class. And as often as not the workers emerged victorious. Can reform labor politics, then, which leaves unchallenged the class control of the state – can it succeed where they failed?

The armed might of the workers failed because it was not consciously directed against capitalism. The conscious aims were union recognition and wage increases. The methods of struggle were incidental to this aim. That they had to resort to methods which challenged capitalism itself proved certain important facts: First, declining profits hampered the capitalists and they could not give in easily to the economic demands made on them. When they did give concessions, it was only because not doing so would endanger the very foundations of their profit system. They gave in for the moment and prepared for a more propitious time to strike down the workers. Second, the workers were concerned, first and foremost, with their own welfare and they acted as a class. If they could not get concessions through “normal” methods of struggle, methods that did not contravene the status quo, they stood ready to challenge capitalism itself. Third, the trade union leaders found they were unable to gain concessions through conference room compromises and they either had to ride the tide of militancy, even when it challenged capitalism, or be cast aside. The fact that so many sit-ins took place was due primarily to the militancy of the workers, who were goaded on by economic decline. It was due, also, to their constant pressure upon the leadership for action, and their ability to check the benefits of that action by their every day experience. Despite all this militancy, the workers suffered in the economic decline. And they suffered precisely because their challenge to capitalism was occasional, incidental, and subsided soon after it began.


The persistent reformer may brush aside these difficulties by admitting them. All that we say is true, runs his argument. Nevertheless, conditions have changed. The present is better than the past and economic conditions are improving. For him, as for the famous Dr. Pangloss, this is on the way to becoming the best of all possible worlds.

Again, those who spread these arguments are either themselves deceived or they plan to deceive others. Consider the rate of decline in the basic economic indexes during the seven months following the current crash which began August 1937 and compare them with the seven months period following the crash of September 1929. The Federal Reserve Board’s unadjusted index of industrial production dropped 14 percent in the 1929 crash, but it dropped 31 percent in the present depression, falling over twice as fast as it did in 1929. This drop reflects not just a few, isolated corporations but all manufacturing and minerals production. Moreover, it affected the profits of the capitalists. The Standard Statistics index of the profits of 161 corporations, representing industrials, railroads and public utilities, fell off only 34 percent in the six months following September 1929 but they fell 59 percent in the same six months of the current depression. It affected the workers even more sharply. During the seven months of the 1929 depression, the Bureau of Labor Statistics index of factory employment fell 5 percent, but it crashed 19 percent in the present one. The rate at which the workers were thrown into unemployment was almost four times as great in the present depression as it was in the previous one. During the same seven months, the Bureau of Labor Statistics unadjusted index of factory payrolls fell 13 percent in the 1929 crash but it fell 29 percent in the current one.

Here are comprehensive indexes from the most reliable government and capitalist sources and they prove certain things beyond question: First, the present depression is far worse than the previous one. Second, the drastic declines in production had scarcely less drastic effects upon the profits of the largest corporations. Third, these corporations kept their profits up somewhat by passing a substantial portion of their economic decline on to the workers in the form of falling employment and smaller payrolls. Fourth, with all the decline the militant opposition of the unions to wage-cutting had this effect: Whereas employment during the current seven months of depression fell almost four times as fast as in 1929, wages fell a little over twice as fast. The militancy of the unions stopped mass wage-cutting far more effectively in 1937 than in 1929.

Nevertheless, precisely because they accepted the limitations of capitalism, the workers also had to accept the capitalists’ right to cut his costs and their own “right” to swell the permanent army of unemployed – which is itself one of the basic features of capitalism in decay. Reform labor politics also accepts the limitations of capitalism. Can it succeed where they failed? The workers were able to put a heavy brake on wage-cutting only by means of great economic struggles. How could reform labor politics aid them substantially when it shuns the grime and blood of their daily struggles; when, even if it does capture office, it leaves untouched the very organs of suppression which the workers must battle daily?

The answers are too evident to need extended discussion. The workers must redeem their temporary submission to capitalism with increasing challenges to the very foundations of capitalism. The sanctity of property they repudiate with sit-ins. The authority and assaults of police and militia they answer during strikes with whatever weapons at their disposal. The injunctions of judges they disregard as they would the warnings of ordinary individuals. The very necessities of existence compel them, in their economic struggles, to challenge the limits of declining capitalism or sink into submission and poverty. But reform labor politics whirls in a loftier orbit. It moves in an atmosphere of council chambers, of counting of ballots, of counting of political trades and of counting of political clubs. Where the workers temper their ideological submission to capitalism and the state with class struggles that challenge both capitalism and its state, reform labor politics need challenge neither at any time and accepts both – always.


Even yet, the economic justification for reform labor politics is not entirely destroyed. There is still a final refuge for reform labor politicians and opportunists. The argument may still be made: True, there has been economic decline in the past. True, there is worse economic decline today. But what of the future? Are there not reserves of expansion for American capitalism to draw upon? Should not the workers, through their political action, share in the profits which an upswing in capitalism will surely bring? The questions are rhetorical. The answer expected is, “Yes, of course!” But the dynamics of capitalist development repudiate this false optimism with all the heavy weight of precipitate decline. Here, too, those who put forth the argument are either deceived themselves or they want to deceive others.

A sustained upswing of capitalism depends upon an increasing output and absorption of capital goods. This has been true of all past upswings. This was true of the recent upswing. It is also true of any future upswing. In the past, three factors supplied the market for an increasing output of capital goods and in this way sustained the upswings of American capitalism. These three factors were mechanization of old industries, development of new industries, and industrialization of new areas. But for today, and for the future even more than for today, these sustaining forces of capitalist upswing have been in large measure exhausted. There are no old industries to be mechanized. There are no new industries whose development requires enormous output of capital goods. The new areas to be industrialized are contracting year by year. Within the United States, the profitable industrialization of the West has been pretty well exhausted. The foreign areas to be industrialized are contracting. Established countries are not good fields for capital investment because they are already over-developed and cannot profitably stand further investment. The undeveloped and colonial areas of the world are either divided up between the imperialist powers or they are the scenes of bitter competition. And the exhaustion of these sustaining factors of capitalist upswing makes futile any hopes of future recovery. But it does forebode decline.

It is the fear of this future that makes Barron’s Financial Weekly entitle the leading article of its first issue for the current year The Big Question for 1938. In its very opening sentence it poses this question: “The big question for 1938 is whether the American people will increase their per capita production, or dissipate their energies in fighting over the division of a subnormal output.” In support of its thesis it publishes a graph of per capita output which shows that in the depression year 1932, per capita output was flung Sack to what it had been in 1900. The peak year of the depressed recovery that followed the depression was 1937. That year also marked the turning point into the current depression within a depression. But in 1937, according to the graph, per capita output was flung back all the way to 1914. With these figures in mind and current depression already on, they pose the two alternatives.

Naturally enough, their two alternatives are both within the limits of capitalism. Actually, however, there is only one alternative within these limits. Under capitalism, the alternative of increasing the per capita output is impossible. The fact is that capitalism is declining. In its agonized efforts to keep up profits it is restricting and destroying production, it is destroying employment and the purchasing power of the workers, and it is destroying the living standards of workers and farmers. There is no avoiding it: Capitalism cannot increase per capita output.

The only future under capitalism is one of “fighting over the division of a subnormal output”. But as capitalism declines further, there is less and less “subnormal output” to divide. The struggle for a greater share of less and less becomes sharper. The chasm that divides capitalists and workers yawns deeper and wider apart. Throughout the country, capitalist decline displaces the workers from industry and disinherits the farmer from agriculture. At the same time the “subnormal output” presses down both them and the middle class. This is filling up a reservoir of discontent which, once directed and released, will roll like a torrent through the country and shatter with its power the oppressive burden of declining capitalism.

This is the present and this is the future which confronts capitalism and the capitalists. Unable to keep up profits through increased production, capitalism restricts production. This cuts purchasing power, cuts output, destroys living standards. No matter. Capitalism must struggle to keep up profits. That is the life-blood of the system. That is the foundation for the dominance of the capitalists. Viewed from their angle, both capitalism and the political dominance of the capitalist class must be maintained even if workers and unemployed, farmers and middle class, everyone except the narrowing circle of capitalists, are bent beneath the back-breaking burden of economic decline. The one question they pose is: How can they keep the swelling discontent from overthrowing them and their system?


Liberals and conservatives, big capitalists and small capitalists, all agree in this: capitalism must be saved. What they disagree in is the method of saving it. The liberal capitalists think capitalism can best be served by keeping the masses quiet with minor concessions. The form of democracy need not be swept aside since the contented masses will not use them to destroy capitalism. The monopoly capitalists think that concessions that were minor during the period of expanding capitalism are major now because capitalism is declining. They cannot be granted to the masses and discontent is sure to grow. The political forms of democracy permit this discontent to be channelized against capitalism and the rule of the capitalists. Therefore democracy must be destroyed. The state must emerge as the naked instrument of class rule.

Although the liberal capitalists are in control today, the course of events makes certain the political leadership of the monopoly capitalists. For as discontent multiplies and the threat to capitalism grows, the liberal capitalists will be faced with the alternatives: Either they support democracy or capitalism. If they choose democracy, they will have to submit to the destruction of capitalism. For inevitably, the workers and farmers will use their political democracy and civil liberties for this purpose. If they choose capitalism, they will have to support the only method that can save it in the approaching period of strife – fascism. And this means they would destroy workers’ democracy. However, the experience of all history has proven that no class abdicates its power willingly. The capitalists of the United States are no exception. In the face of the approaching conflict, liberal capitalists and monopoly capitalists will slough off their minor differences and unite on their common platform: the maintenance of capitalism and the power of the capitalists. And in such a conflict the only instrument to save capitalism is – fascism.


Economic decline and the danger of fascism haunt the workers like specters. Their political answer can take two forms: one is reform labor politics; the other is labor politics also – but revolutionary labor politics. Both agree in their immediate aim: to use the political strength of the workers, farmers, and middle class in order to gain economic concessions for them from the capitalists. But here they separate.

The method of reform labor politics is to accept capitalism; to work within its limits even when, as is the case today, those limits are contracting and making it impossible to gain substantial economic concessions. Revolutionary labor politics works with the conscious knowledge that the overthrow of capitalism and the construction of socialism are the only way which can ensure the workers and farmers the real betterment of their living standards which the great wealth of the United States permits. It only begins with the struggle for substantial economic concessions within capitalism. It realizes that they are incompatible with the continued existence of capitalism. And it uses the struggle for concessions as a lever with which to overthrow the system.

Reform labor politics worships existing class-political relations as the savage worships an idol. Revolutionary labor politics would destroy existing class-political relations because they ensure the dominance of the capitalists and they stand in the way of the welfare of the workers and farmers.

Reform labor politics does its work within existing parliamentary grooves only. Revolutionary labor politics is tied by an indissoluble cord to the every-day struggles of the masses. It is first, last, and always, the political aspect of the workers’ struggle for a better wage, better working and better living conditions, better schools, and a better life.

While reform labor politics scrapes obsequiously before the status quo, revolutionary labor politics prepares to overthrow it.

Both face the workers with their platform. Reform labor politics has the greater audience today. But capitalism in the United States is declining sharply. The danger of fascism grows. What are the political consequences of reform labor politics in the present crisis?



In the preceding article on Labor Politics and the Crisis the words “reformist labor party politics” appeared twice. This was due to an editorial error. The words should have been “reform labor politics”. The incorrect wording gave the wrong impression that I considered current labor political movements to be of two sorts: one sort being reformist and the other being revolutionary now or potentially revolutionary. It was my intention to leave this question open until I had sufficient evidence at my disposal to warrant a responsible judgment. – D.C.

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