Fenwick Archive  |  Trotskyist Writers  |  ETOL Home Page

James M. Fenwick

Books in Review

How the Other 2% Lives

(October 1942)

From The New International, Vol. VIII No. 9, October 1942, pp. 285–286.
Transcribed & marked up by Einde O’Callaghan for the ETOL.

Wages and Profits in Wartime
prepared by Labor Research Association
International Publishers, New York, N.Y. 1941. 32 pages, 5 cents

Paul Lafargue once said:

“Capitalist development has dragged humanity down to so low a level that it no longer knows, and can no longer know, other than one incentive: money. Money has become the prime mover, the alpha and omega of all human action. Balzac calls it ‘l’ultima ratio mundi’ (the world’s last argument).”

Thurman Arnold recently granted the public a quick glance at this very material basis underlying the business deals between some of the largest corporations in the country and Nazi Germany, with which malicious gossipers (no doubt) would have us believe the country is at war. Labor is also not unaware of the golden torrent which is making the capitalist class rich beyond the dreams of a Fortunatus.

It is undoubtedly a recognition of this awareness existing in the ranks of labor that impelled one of the official simpletons heading one of the prominent corporations of this country to confide to a union friend of ours: “We are not making a penny on our war orders. We take them only as a patriotic duty. Believe me.”

Needless to say, our friend, not being a graduate of the Harvard School of Business Administration, didn’t believe a syllable of what the official said. Which, of course, seemed to the official a very arbitrary attitude to take, as readers of The New International can well understand. The Stalinists, by one of those occasional and fleeting intersections of truth (or near truth) and political expediency which their policy evokes, have published a very useful pamphlet which every trade unionist will find handy in combatting corporation piety on the wages and profits question.

Since the pamphlet was published during the Hitler-Stalin honeymoon and since truth, for the Stalinists, is a function of the interests of the bureaucracy in Russia, it is probable that the pamphlet is not now easily available. Such being the case, fairly extensive quotation will not be amiss.

Illustrations of Profits

On profits during the First World War:

Skyrocketing of profits marked the First World War of 1914–18. In this country, net profits of 18 leading corporations shot up from $74,650,000 in the pre-war years 1912–14 to $337,000,000 in 1916–18, a rise of over 350 per cent. A group of electric machinery and appliance companies in 1917 had net income of 18,204 per cent on their capital stock.

On current corporation profits:

A group of 230 corporations producing iron and steel and other metal products, coal and heavy and light machinery showed net profits of $599,152,269 after all taxes and charges in 1940, the best profits in ten years and 71 per cent above the 1939 level. These profits of companies most directly involved in war prodution were more than 450 per cent in excess of the amount earned by these same companies in 1938.

On aircraft profits:

Twenty-four makers of aircraft in 1940 earned $69,866,405, more than double the profits shown in 1939, nearly three times 1938 results and more than five times their earnings in 1937.

On net profits per employee for seven of the largest corporations:


1940 Net

Net Profit
per Employee

E.I. du Pont de Nemours & Co.



Aluminum Company of America



General Electric Co.



Standard Oil Co. of N.J.



General Motors Corp.



American Tel. & Tel. Co.



U.S. Steel Corp.



On wage increases as contrasted with increases in net profit:

While in 1940 average weekly wages in all manufacturing rose only 6 per cent over 1939, the net profit of industrial corporations rose by 27 per cent.

In certain industries the discrepancy was even greater. In aircraft wages rose 5 per cent, profits 191 per cent. In iron and steel, wages rose 5 per cent, profits 98 per cent.

On the distribution of corporation dividends:

The government’s Temporary National Economic Committee reported that less than 75,000 persons – fewer than the number employed by, say, Standard Oil Co. of New Jersey – get fully one half of all corporate dividends. It found also that in 1935–36 some 800.000 families, or the top 2.7 per cent of all families in the United States, received 71.2 per cent of all dividends paid.

On the total value of corporation dividends:

Dividend payments, even counting only the New York Times’ incomplete listing, came to the stupendous sum of about $4,888,000,000 in 1940, a rise of 14 per cent above the previous year. No other form of income payments rose so much. Wages and salaries combined rose less than 6 per cent.

On the wages of corporation officials as contrasted with the wages of workers:

Eugene G. Grace, for example, as president of Bethlehem Steel Corp., received $478,144 in salary and bonus for the year 1940. This was $9,195 a week, nearly $230 an hour on a 40-hour week basis.

Weekly earnings of employees in the iron and steel industry in 1940 averaged $29.44 or only about $1,530 for the year.

On the expenditures of the rich – the MONTHLY budget of Gloria Vanderbilt:







Poultry and eggs














Servants (10)




Incidentals, etc.


Month’s total


On the contrast between the wage necessary to maintain “the American standard of living” and the actual wage level in industry:

But in no American industry do the wages average as much as $48 a week, the amount required to meet Ezekiel’s American standard of living. In all manufacturing industries in 1940, weekly earnings averaged only $26.05, or nearly $22 below that standard.

Income Shares and Other Facts

On the distribution of the national income in 1935–36:

More than a million (1,162,890) families had yearly incomes of less than $250.

Over 19,000,000 families, or about two-thirds of all, had yearly incomes of less than $1,500.

Over 23,240,000 families, or more than three-fourths of all, had yearly incomes of less than $2,000.

A few families were getting all they needed – and more. At the very top was a little group of only 75 families each having an income of $1,000,000 and over. These are the real “Rulers of America,” the richest monopolists, including the Rockefellers, Morgans, Astors, du Ponts, Mellons, Ford and Vanderbilts.

Next came about 384,000 families, less than 1 per cent of all, who had incomes of $10,000 and over. Only about 793,000 families, or less than 3 per cent, had incomes of $5,000 and over.

Taking the whole national consumer income of fifty-nine billion dollars in 1935–36. nearly a tenth of it all went to about 178,000 families and individuals who had incomes of $15,000 and over. This little group of men and women at the top represented only one-half of 1 per cent of the whole population. But they got almost as much income as the whole lower third of the population.

On the standard of living under the war economy:

And Barron’s, financial weekly, January 6, 1941, declared that “the defense program will mean a curtailment of civilian consumption. There can be no sure protection of a subsistence minimum.”

On the tax burden on lower income groups:

Already, the Temporary National Economic Committee has shown, families with incomes of $500 to $1,000 are now paying 18 per cent to 20 per cent of their meager incomes in taxes.

On the assumption that an increase in wages will mean a proportionate increase in the price of commodities:

Since labor costs form such a comparatively small proportion of the value of the product, it is clear that wages paid can rise by a considerable amount and still remain a small percentage of the total value of the goods. Labor cost is only a minor element in retail price. Take the apparel, or clothing, industry, for example, where labor cost is only 19.6 per cent. It is estimated that if the clothing workers win a 10 per cent increase and the manufacturers and retailers pass this entire burden on to the consumer, the increase would amount to only 49 cents on a $25 suit of clothes.

On production possibilities in the United States, based on a survey made in 1934–35:

If the existing plant and manpower in the United States were fully employed in the production of honest goods and services for the consumer, the total output, value in 1929 dollars, would be not less than 135 billions, or an average per family of approximately $4,400.

On the possibilities of securing wage increases in this period:

The Congress of Industrial Organizations, in its Economic Outlook, April 1941, said that it had won in the first four months of 1941 wage increases totaling $380,000,000 annually.

On the utilization of the slogan of “national defense”:

War hysteria is a sharp weapon in the hands of such employer groups. In the name of “national defense” they advocate longer working hours in defense industries and abolition of overtime pay. Speeding up production in their plants because of the “national emergency” often means greater output per hour with no corresponding increase in numbers employed.

On labor’s answer to the campaign of the employers:

Labor’s program in answer to war hysteria and employer attacks on labor standards calls for wage increases and extension of social and labor legislation.

On the answer of the employers and their press to such a program:

The employers will undoubtedly oppose every point of this program. They will continue their blitzkrieg against the economic and legislative gains of the people. In this reactionary drive they will be supported as always by the capitalist press pouring out slander against progressives of every shade whether in the AFL, the CIO or other workers’ organizations.

It seems almost unnecessary to add that time has witnessed the overnight ascendancy of the Stalinists and the Daily Worker to a leading position in the drive against the working class. Today, naturally, they disavow or conveniently forget nearly every point made in this pamphlet.

Lest some naïve individual brusquely conclude that there is a direct connection between the abrogation of the Hitler-Stalin pact and the change in policy of the Stalinists, we hasten to point out that changes of this sort are resolved in the more ethereal realm of Stalinist “dialectics.” The demonstration is very simple: as is well known, truth is not an absolute. What was true and good a year ago may be false and evil today. QED.

One may safely assume that any other explanation is Trotskyist slander.

Fenwick Archive   |   Trotskyist Writers Index   |   ETOL Main Page

Last updated: 15 January 2015