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Albert Gates

How Long Will the Post-War
Economic Boom Continue?

(21 October 1946)

From Labor Action, Vol. 10 No. 42, 21 October 1946, pp. 3 & 6.
Transcribed & marked up by Einde O’Callaghan for ETOL.

The United States is now experiencing an economic boom featured by tremendous production and what is, economically speaking, full employment. On its face, this would appear to answer all those who forecast a post-war crisis. The capitalist economists quite naturally hail the present period as a living answer to the critics of capitalism. Yet the boom, unlike previous ones, does not seem to inspire genuine confidence in capitalism. The reasons for this are to be sought in the doubts produced by the long economic crisis of the 1930’s and the World War. An “instinctive” doubt in the strength of United States capitalism pervades the whole country, despite the appearance of economic strength.

Long before the war came to an end, the question of the future of American economy had already occupied the minds of the leading economists of the country, especially those employed by the government. Government economists, for the most part New Dealers, pictured post-war economic prospects under the influence of the crisis of the 1930’s. The crisis had taught these economists to be wary in their prognoses and to steer clear of that vapid optimism which characterizes the writings, speeches and prophecies of the “captains of industry” and their hired economists and statisticians.

Rise in Production During the War

While the war was still on, they observed the tremendous rise in production, the growth of productive plant technological advances, and the increase in the number of workers. They compared this general economic growth with the factors which produced the great crisis, the collapse of the market, the increase of productivity and the decline in working force, the shrinking of the domestic and international markets; and concluded that an economic crisis in the post-war period, marked by mass unemployment was inevitable unless protective measures were taken in advance. Using the year 1940 as their point of departure because it represented the year of greatest peacetime production, these economists pointed out that despite this high level of production 9,000,000 workers could not be absorbed by industry or agriculture.

The spectre of mass unemployment haunted these men, particularly since the war economy created a new labor force of many millions. If peacetime production did not succeed in far surpassing the production levels of 1940, they said, then the crisis is inevitable. The New Dealers, under the leadership of Henry Wallace, began a campaign for “full employment” and maximum production. By full employment they meant 60,000,000 workers based on production at a rate of from $150 to $160 billion annually. They did not ask that these levels be attained the day the war ended, but rather that this goal be adopted and all efforts directed toward reaching it as quickly as possible after the war, to prevent an inevitable post-war “depression” in the reconversion period.

In the minds of these New Dealers and in Wallace’s book the proposal is made that where private enterprise is unable to fully operate its industries and employ a maximum of workers, the government must step into the picture to guarantee the above aims. That means to support the economy with public works, subsidies and the operation of plants shut down where it would not conflict with private industry. Big business and its spokesmen turned on Wallace as the exponent of a “state-controlled economy” as against “free enterprise.” They argued that left alone they could achieve prosperity; that the evils of American society spring from government intervention (they begged for government intervention and government efforts to save big business during the ’30’s).

Post-War Crisis Is Inevitable

The New Deal economists, however, were not the only ones who forecast a post-war crisis of U.S. capitalism. For different and more fundamental reasons, the Marxists also forecast a postwar crisis. The difference is one of time. It is not a question of whether a post-war crisis is inevitable, but of exactly when it will come. The Workers Party, for example, has said that a post-war crisis is inevitable, but before it comes the country will experience a short period of boom made possible precisely by the conditions created by the war. In its resolution on the Unitfid States, adopted at its convention in June, the Workers Party authored some of these factors:

“While the HISTORIC prospect of American capitalism is that of declining production and mass unemployment as part of the social crisis of capitalism on a world scale, the IMMEDIATE prospect is for an economic boom with a high level of production and a relatively small amount of unemployment. The boom is based upon a conjunction of the following factors: (a) the ready market provided by five years of accumulated demand for consumer goods as a result of curtailed production during the war; (b) the potential purchasing power represented by cash reserves accumulated during the war-time period of full employment and overtime pay (over $150 billion dollars in bank deposits and war bonds of individuals); (c) the relatively high incomes of five million farm families whose prospects for continued prosperity are good as a result of the vast agricultural areas devastated by the war; (d) the large orders for heavy equipment placed by foreign countries through credits made available by the U.S. government loans (Great Britain, France, Belgium, The Netherlands); (e) the continued government expenditures for military purposes (though reduced, still higher than any previous peace-time budget), for various subsidies, GI loans and other allowances, and for necessary public works, including those of local government; (f) the huge cash reserves of corporations piled up out of war-time profits and available for extensive modernization of plants and equipment; (g) the swollen cash reserves of banks available on easy terms for industrial expansion and the financing of consumer credit accounts; (h) the prospect for continued employment and rising prices, both of which induce workers to invest their earnings in durable goods like houses, automobiles, refrigerators, radios, etc., rather than bank them.”

Not all the factors outlined in that resolution have occurred precisely in the way described. But in the main the picture presented in it is what we observe in the present economic situation. A few illustrations will suffice to prove the point.

The Boom Side of the Picture

On the boom side of the picture the following factors must be readily-acknowledged as its strong aspects, despite contradictory elements:

Production: Taking the 1935-1939 average of a 100, the production index rose to 174 at the end of July 1946 and continues to rise. In the terms of money, industrial production takes place at an annual rate of $172,000,000,000. Allowing for price changes, this is the highest peacetime production rate in American history, far beyond the demands of the New Deal economists. It compares favorably to wartime production.

Employment: 58,000,000 are now gainfully employed. This marks the highest employment levels ever reached in this country. As a result of this employment, unemployment is at the very-low point of 2,000,000. From the standpoint of capitalist economics, this really means no unemployment whatever and compares more than favorably with the prosperity period of the ’20’s. It is certainly an improvement over 1940, the previous high economic year when more than 9,000,000 were unemployed.

Business profits: These have reached a new all-time high annual rate of $11,000,000,000, AFTER TAXES!

Income payments: These are now paid at the annual rate of $167,000,000,000 and are also the highest in history.

Farm incomes: In contrast to previous periods when farm income also suffered in relation to industrial, at the present time it is at an unprecedented height, accompanied by a great reduction of farm debts and mortgages.

And finally, there is a vast increase in construction which employs a vast amount of capital goods.

But this is only one side of the picture. On the other side, we can see some of the factors which make for the future decline, great disproportions which exist between the classes in the present boom revealing that, within the confines of the boom, a new enrichment of the capitalist class takes place at the expense of the workers and the mass of people. Thus, there is a continuation of the process of development and the relationship of the classes that existed prior to and during wartime.

First of all, though not most important, taxes remain at a high rate for all the classes, but effect the working class most sharply of all; shortages in raw materials continue, as in freight transportation.

Real Wages Are Declining Rapidly

Most important factors, however, are the following:

Wages: While employment is at its height, take home pay has actually declined (8.5 per cent between April 1935 and July 1946). But worse than that, real wages have declined to their lowest point since the early years of the war due to the rapid rise of prices.

Prices: What the capitalist class has been unable to take directly from the working masses, it is taking by increasing prices. Prices rose higher since the expiration of the old OPA last June 30 than in the previous 38 months. Taking the August 1939 price index of 100 as our measuring point, the index of 28 basic commodities reached 250 by the end of July. Even under the OPA the price index rose to 199. Compared to the post-war period of the First World War, when prices rose by one-fourth, we find now that prices have risen by more than a third since the end of the war.

Inventories: Related to the decline in real wages and rising prices, is the increase in inventories to a record $30,000,000,000. Inventories continue to rise and although big business does not yet regard this as “excessive,” it is reaching a danger point. Two factors are responsible for this pile-up of goods and they do not conflict: (a) consumers are not buying goods in the amount forecast because of higher prices and fears for an unstable future; business is holding back goods waiting for an even greater kill on the market by holding out for still higher prices. At a not too distant point, saturation will be reached in the pile-up of goods which must result in a decline in production and a rise of unemployment.

Why cannot this boom period last indefinitely? Because long-term factors operate against it so long as the capitalist system continued to exist. The basic hope of American capitalism for prosperity rests upon a domination of the world market. The domestic market no longer provides the means for the present level of production since that would require a continuously rising standard of living of the masses, rising wages, declining prices and a decline in the profits of industry and finance. But under the capitalist system, wages can never equal production; on the contrary, production far outstrips wages. The greater the industrial potential, the more refined the technological organization of industry, the more vast is the production of goods, the greater is the narrowing of the domestic market.

It is this which drives American capitalism to enlarge the market for its goods beyond the borders of the country. If it can dominate the markets of the world, then it can safeguard the domestic market and keep a high level of production and employment. But it is precisely this factor which operates against the prospects of a future, extended period of economic boom.

In world economy, the United States meets with the sharpest rivalry of other capitalist powers in a struggle over control of the world market and sources of-raw materials. While it is true that American interests have been significantly advanced over pre-war years, the other powers are fighting back most desperately. This is especially true of Great Britain which is struggling to maintain the Empire against the encroachments of American imperialism.

In addition, there are political factors which intervene to make more difficult the realization of the American businessman’s new aim. Stalin’s Russia has already erected a fence around the Balkans and Eastern Europe. The United States meets the rivalry of her Allies in Western Europe who themselves rest upon the exploitation of their colonial empires. And it is precisely these empires which the United States wants to free from their control, to open them up for exploitation by American capital. Thus far we have mentioned only the factor of imperialist rivalry. But there is the factor of colonial revolt and the movement of national independence which militates against this long-term aim of the United States. American policy against these independence movements are qualified by the prospects that might exist for her exploitation of these “independent” countries.

The Prospects for Export of Capital

The devastation of Europe by the war has considerably reduced the prospects for an immediate export of huge masses of capital by the United States and for the present one cannot say with certainty that Europe offers any large hope for the end-products of American expansion.

These then are some of the factors of disintegration which face American capitalism. On the one hand, we have cited the elements which give rise to the present boom. On the other, are the elements which threaten its continuation. The principal reason for the boom lies in the scarcities, created by the war economy; the moment these are supplied, American capitalism must rest its hope on the conquest of the world market.

But even the present boom rests upon a diminishing share of the masses in the prosperity that does exist. Thus the struggle that occurs now is around the effort of’ the monopoly capitalists to squeeze ever greater profits from the masses of the working people, while the workers fight desperately to obtain a greater share of the national product. When one observes the real decline of wages and the continuing rise of prices which eats into the standard of living of the masses, it is clear why the struggle of the workers for wages must accompany an unrelenting struggle against rising prices.

The fact that the struggle between monopoly capitalism and the workers is so sharp in the boom period is the living proof that the boom is extremely tenuous, reflecting not a period of rising, expanding capitalism on a world scale, but a declining, narrowing capitalism which can exist only by depressing the level of existence of all the people in the world – as well as those in the United States. In this very fact, lies the necessity not merely for the struggle of the workers at home against imperialist capitalism, but also for the world solidarity of all who work in order to live.

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