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Dwight Macdonald

Why Is Hitler Winning?

(July 1940)

From Labor Action, Vol. 4 No. 14, 15 July 1940, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Fortune Magazine Analyzes the War Economy of the Allies and Comes to the Conclusion that American Capitalism Can’t Win a Totalitarian War without Going Totalitarian Itself

How did it happen? And what must American capitalism do to prevent its happening again in a few years over here?

These are the question Fortune, the dollar-a-copy house organ of American big business, answers in an authoritative and enormously interesting article in its current issue.

Fortune surveys in great detail the war economy created by the democracies and comes to some conclusions as to this country which are not ordinarily put down in public print. But in talking to a dollar-a-copy audience, the editors of Fortune no doubt felt they could be realistic and frank.

Bankrupt Empires

The most remarkable discovery of Fortune’s editors is that the British and French empires no longer pay their own way. They are living off accumulated capital like a couple of elderly ladies who have to go into their savings a bit each year to keep going. Or as Fortune puts it, after presenting a detailed analysis of the empires’ balances of international payments for the prosperous year 1937:

“On the merchandise side of the international ledger, they import so much more than they export that the huge income from their services – interest and dividends from their $26 billion worth of foreign investments, their shipping, from tourist spending within their borders, from banking commissions accruing to London and Paris as financial capitals – can’t make up the difference.”

France and her empire ended up the year $164,000,000 in the red. The only part of the British Empire that produced more than it received was Canada, and it was only the huge gold production of South Africa and Canada ($675,000,000 in 1937) that enabled the Empire to bring its books into a rough balance at the end of the year.

Why the Allies Lost

But this economic failure of the two empires was a long-range factor, not an immediately dangerous weakness. They could have won the war in spite of it. And every one expected them, to do so. Fortune shows that the democracies went into the war with adequate supplies within their own empires of every one of a list of twenty strategic raw materials except one, namely, oil, which they had no trouble getting on the world market. Germany had sizeable amounts of only five – steel, coal, sugar, zinc, and potash. The democracies, furthermore, had a combined war chest, in gold reserves and foreign investments, of no less than $37 billion as against a Germany stripped by the effort of rearmament of almost all her gold and liquid reserves, and blockaded from most of the world market by the British fleet.

Why, then, did the Allies fail? Fortune answers quite frankly: because they did not have totalitarian regimes which kept down wages, smashed unions, organized national production without paying too much attention to private property interests, and generally converted the nation into a barrack camp. The Nazis built this sort of a war machine, and won the war.

The Choice for U.S. Capitalism

From its study of the Allied experience. Fortune concludes that the only way a capitalist America – and no other kind of America is, of course, considered by the editors of Fortune – can win its coming struggle against Nazi imperialism will be to become the same sort of totalitarian society as exists in Germany. Fortune’s conclusions may be summarized in four propositions:

  1. War is no longer an accident, an episode, but an integral part of the existing world order (“It is of the nature of democracies to regard war as something apart ... The fact is that, irrespective of the direction of democratic institutions, war is a recurring phase of the democratic existence.”)
  2. The kind of Wehrwirtschaft (“war economy”) the Nazis have created is something quite different from the sort of emergency wartime dictatorships (M-Day plans, etc.) put into effect by the democracies. (“Thus France went to war under what are generally described as totalitarian controls ... And yet the state did not really take charge. It simply established its civil servants and military officers inside the normal economy, which was still run by much the same masters.”)
  3. This Wehrwirtschaft is a totalitarian proposition, ruling the whole national economy (business as well as labor) in the interest of war preparations and in that interest alone. (“In a war economy, the government makes the decisions. It commands a man’s soul and his labor and it rations his bread. The government fixes wages and prices and profits ... And through its leverage on the national income, it can squeeze the economy into any shape it desires. Thus a nation’s productive capacity is shifted from consumption to war goods.”)
  4. And finally, lest there be any illusions as to the nature of this sort of “war economy” which Fortune sees as the only possible way for American capitalism to withstand Hitler, there is this warning: “Our statesmen are deceiving themselves and they are deceiving us when, with phrases cut to the ballot box, they say that a nation can be made ready to fight an efficient war without touching hard-bought social gains.”

That is, the editors of Fortune politely call President Roosevelt a liar.

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