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Dwight Macdonald

Sparks in the News

Good News – for Stockholders

(3 February 1940)

From Socialist Appeal, Vol. IV No. 5, 3 February 1940, p. 4.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The Department of Commerce has just released figures on last year’s national income which we may expect Roosevelt to turn to political advantage in his next fireside chat. According to the Department’s calculations, in 1939 total individual incomes came to $69,700,000,000, which is $3,400,000,000 higher than the 1938 total. Onward and upward with the New Deal!

But there is one detail the President won’t dwell on: the fact that dividend payments last year were 15 per cent higher than in 1938, while the amount paid out for wages and salaries increased only 5 per cent.

This means that the capitalist system is more unbalanced than ever, since wage-earners spend practically all their income, while investors save up to as much as half their income. There is too much surplus capital (the result of these savings) already piled up seeking a profitable outlet for investment. What is necessary for the system’s health is more markets, that is, more spending. The dynamics of capitalism, however, make it inevitable that, as the Structure of American Economy pointed out (p. 91): “As income expands, both expenditure on consumption and current savings can be expected to increase, but the increase in the latter will be likely to be very much more rapid.” The prediction has been borne out by the figures on 1939 income.

Behind the War Drive

This matter of “over-saving” is the theme of a letter sent me recently from Akron:

“Your two columns on the report of the National Resources Committee were quite favorably received here. I question one statement you make in the January 6 issue. You write of the polarizing tendencies of poverty and wealth, and say: ‘Economically, this is ultimately fatal for a number of reasons, one of them being that the masses spend almost all of their income on consumers’ goods (thus keeping the market humming) while the wealthy spend comparatively little and pile up bigger savings (which can only be used to build more factories, whose products must then still further crowd the market)’”

On this my correspondent comments:

“After the initial splurge of plant expansion following the war, the percentage of savings which went into new plant dwindled and that portion which went into non-productive speculation (and capital export) increased. This trend, of course, has been exaggerated in the past ten years and especially since 1937. The second war may offer the possibility of profitable plant expansion, but this is doubtful. Certainly it will not be in proportion to that of 25 years ago, and it will be confined to semi-heavy and heavy industries.

“A growing, lusty capitalism goes through the process you describe, but not a declining one. I think it would be more correct to say that the enormous capital accumulation, rather than having the domestic effect of increasing technological unemployment primarily, instead is a mainspring in the war machine – seeking new outlets in international spheres.”

I accept the emendation: American capital now presses for investment outside rather than inside the boundaries of the U.S. But I would add an emendation of my own: that there is a third field into which capital has poured with great volume in the last few years: investment in government debt. I have repeatedly noted in this column the huge percentage of banking resources now invested in government notes and bonds. This has implications both as to the war drive and as to the advance of fascism in this country.

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