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War Deal


Dwight Macdonald

The War Deal

(20 September 1939)


From Socialist Appeal, Vol. III No. 72, 20 September 1939, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).


II

Social Consciousness in Steel

When Europe went to war in 1914, the American steel industry lost no time in squeezing the last drop of profit from its strategic situation. As Allied orders poured in, prices soared, profits rose to unheard-of figures. Even after the United States entered the war, steel prices were maintained at prices high enough to yield huge profits. After vainly appealing to the steel-masters’ “patriotism,” the Wilson Administration was driven to threaten nationalization. This bluff, which every one knew the government had no intention of backing up, failed to move the steel industry. As Judge Gary, its spokesman, coldly remarked in March of 1918, just as the Germans were getting their last and most nearly successful “break-through” under way: “The manufacturers must have reasonable profits in order to do their duty.” Profits first, then patriotism.

In the opening weeks of this war, we find an amazing reversal of this policy. Overnight, as German guns roared in Poland and German torpedoes sent British ships to the bottom, a “buyers’ market” in American steel changed into a “sellers” market.” Orders from Europe began to pour in – for rails, for pipe, for scrap iron, light steel, and a hundred other types of non-military steel products. (The Neutrality Act forbids sale of munitions, but every ton of rails exported to a belligerent country releases that much of its own productive capacity for munition making.) The reaction to this flood of export orders was unexpected. On September 15, the Steel Corporation’s chief subsidiary, Carnegie-Illinois, announced that prices on light steel for the last quarter of the year would be the same as they had been in the third quarter. This policy of no price increases so far has been followed by the other major companies in publishing their last-quarter prices. And this is in spite not only of a rush of new business but also of a rapid rise in the prices of such raw materials as pig iron, spiegeleisen, and ferromanganese.
 

“Industrial Statesmanship”

The N.Y. Times, announcing this seven-days’ wonder, comments that “while this policy reflects the known desires of the Administration in Washington and takes into account the nationwide fear of high prices,” it is by no means popular with many steel men, “particularly those of senior rank.” It is not customary in the steel business for the “known desires of the Administration” to be deferred to, nor have the steel barons in the past shown any concern over high prices – quite the contrary. Why this excess of social consciousness?

The Times’ explanation is as puzzling as the fact itself:

“The view that the price of steel has an important bearing on the national wage and price structure ... was held to be a more important arguments against an immediate price advance than the sudden change from a buyers’ to a sellers’ market in the last fortnight, allowing prospects for handsome profits after a long period of lean earnings ... The steel industry has given evidence of industrial statesmanship which is quite at variance with the traditions and experience of former periods of prosperity.”

It is clear that something much more potent than “industrial statesmanship” must have induced the steel companies to temporarily forego “handsome profits.” This new policy is a particularly dramatic illustration of the institutional nature of both war and capitalism in the year 1939.
 

Towards State Capitalism

War in our time seems to have become such a gigantic social and economic enterprise, requiring such staggering capital investment and such a centralization of control, as to be beyond the grasp of even the most powerful private capitalist group or corporation. The problems raised by modern war, in neutral as well as in belligerent countries, can only be met by the state – acting, of course, as the agent, trustee, and executive Committee of the bourgeoisie. Hence the lead taken by the Administration, not “Wall Street” in arranging war credits for the Allies in this country. And hence this renunciation on the part of the steel industry of its sacred “right” to charge all the traffic will bear – a renunciation of immediate, individual profits for the sake of the greater security of the entire economic system. The Administration was the better able to persuade the steel industry to follow its lead because the present head of the U.S. Steel Corporation is a very different sort of industrialist from the stubborn and individualistic Judge Gary. When the House of Morgan two years ago put at the head of the Steel Corporation young E.R. Stettinius, son of a former Morgan partner, it served notice that a new era was beginning. For Stettinius has worked closely with the Roosevelt Administration ever since NRA days, and he has continued this “cooperation.” He was inevitably chosen to head the War Resources Board recently set up by the War Deal. In Stettinius, the “Morgan man,” the head of the nation’s biggest industrial corporation, the White House intimate, one aspect of the War Deal – and right now the most obvious aspect – is symbolized.

But Stettinius is also symbolic of the changing nature of American big business. As stock ownership has become more and more widely scattered, the conception of “ownership” has become increasingly vague. What Walter Rathenau wrote in 1918 of the then more advanced German capitalist system, is now applicable to our own:

“The claims to ownership are subdivided in such a fashion, and are so mobile, that the enterprise assumes an independent life, as if it belonged to no one. It takes an objective existence, such as in earlier days was embodied only in church and state, in a municipal corporation, in the life of a guild or religious order ... The depersonalization of ownership, the objectification of enterprise, the detachment of property from the possessor, leads to a point where the enterprise becomes transformed into an institution which resembles the state in character.” (Quoted in Berle and Means’ The Modern Corporation and Private Property)

This development, of course, has not affected the social base of the bourgeoisie, which still remains in its control, through ownership, of the means of production. But it has had a great, and all too little realized, effect on the agencies through which the bourgeoisie maintains its class rule. This is true above all in the supreme crisis of war. American capitalism went into the last war with a laissez-faire philosophy – though already its economic foundations had been largely institutionalized. This war finds the state and the corporation, Washington and Wall Street grown much closer together – and the shock of war, the supreme crisis of any social system, has already in the brief space of two weeks enormously hastened the process of fusion, as the overnight replacement of the old reformist “brain trusters” with Wall Street’s “men” in the top circles of the Administration dramatically indicates.


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