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Shane Mage

Economics of Peaceful Coexistence

(Summer 1960)

From International Socialist Review, Vol.21 No.3, Summer 1960, pp.79-81, 90.
Transcribed &marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The president of Italy visits Moscow; the chancellor of West Germany flies to the US, while Krupp attends a trade fair in East Germany. What deals were made?

This article consists of excerpts of a report given by Shane Mage to the Founding Conference of the Young Socialist Alliance in Philadelphia on April 16.
The reporter presented to the conference a resolution titled, “The Fight Against War,” which was adopted by an overwhelming majority.
Copies of this resolution may be obtained by sending twenty cents to: Young Socialist Forum, Box 471, Cooper Station, New York 3, N.Y.

LET us now consider a more intricate aspect of the present world situation, the emergence of antagonisms between the capitalist powers which were previously submerged by the need to build the dominance of the United States through the military lineup of blocs. Today this structure has shown signs, not of coming apart, but of resolving itself into mutually incompatible elements.

Now one thing that must be understood to understand European politics today, and the politics of the Summit Conference also, is the importance of the European Common Market. It went into effect a year and three months ago and in the next four years will result in the elimination of custom barriers and trade restrictions among the nations of continental Europe. Now when I talk of the Common Market, I should really talk of the two common markets, the so-called Inner Six and the Outer Seven. This is one of the lines of conflict in capitalist Europe today and one of the most important ones.

The Inner Six are Italy, France, West Germany, Belgium, Holland and Luxembourg. If you go over them you will see that these are the countries in which the Catholic and clerical parties hold real dominance ...

Facing these countries is the Outer Seven which can be described as Britain and its satellites – the Scandinavian countries plus Austria, Switzerland and Portugal. The conflict seems to boil down to the conflict between British capitalism and the French and German capitalisms.

The French and Germans see a great potential in this Common Market, encompassing an area with a population equal to that of the United States with production close to it. The breakdown of barriers, the rationalization of European capitalism constitutes a great and real potential for the big and dynamic industries that can take advantage of it.

But this means a wall will be erected around the common market against the rest of the world. And the first country hit is England which will find itself increasingly squeezed out of its markets in Europe to the advantage of certain sections of the French and German capitalist class.

NOW so far this seems fairly elementary. The lines are easy to see. Then comes another question which is much more difficult – the German question. It is only on the surface that the split is between France and Germany, on one hand, and England on the other. Now the German question is to be discussed at the Summit Conference and the economic background is going to be very important there so it will probably not appear in the newspapers.

In order to understand what’s going on in Germany today, let’s go over a few facts.

A year ago, German Chancellor Adenauer announced his intention to retire. He appointed his successor, a man named Franz Etzel. The faction of the majority party in the parliament decided not to accept, as chancellor, Adenauer’s appointment, but to choose Erhard. Both of them are practically indistinguishable except that Etzel is a Catholic and Erhard, a Protestant. Both are liberals in the European sense, absolute free traders. Seemingly only a question of personalities. Adenauer decides this cannot be, thus another five years in office for himself.

The second fact: This year, the Common Market was to be accelerated. The targets for tariff reduction internally and increase externally originally set for 1962 were to be advanced to July 1, 1960. Adenauer went to Washington, got the approval, or at least what he thought was the approval, of the State Department for this. On his return he found that his party had decided against it, and the economic officers of the Common Market had decided against it.

THE third fact: While Adenauer was in Washington demanding that the United States stand firm, firm, firm against any concession that could lead to a recognition of East Germany, a cozy little gathering under the title of International Trade Fair was being held in the city of Leipzig, East Germany. It was “totally unpolitical” – no question of political recognition of anyone by anyone – just to talk markets, investments and other minor details like that. While Adenauer was visiting Washington, the cream of the Ruhr – people from Krupps, Siemens and so forth – were visiting Leipzig – to see their old relatives.

Now very clearly what is happening is an important split within the German capitalist class concerning radically different orientations. These are going to come out more and more in the years ahead. To slap a label on them, perhaps a bit arbitrarily, but in general it’s good – the Catholic wing that wants to build a little Europe, people like Adenauer, who see their future in cooperation with the United States against Russia; against the Protestant wing, very important in the Ruhr, who have certain “sentimental” ties to the East, who haven’t forgotten the Drang nach Osten and at the same time think they can do business with the English. The people around the distinguished Chancellor of the Exchequer Erhard are opposed to this Common Market idea even though they won’t say so. They are opposed to Adenauer down the line and look toward the reorientation of West Germany’s special politics, certainly to a bloc with England, ultimately to a deal with Russia.

All right, that’s one or two or three lines of fissure in Western European capitalism. A different though not unrelated question, is the question of oil.

There is at the moment a war going on in Algeria in which thousands of people have died, in which the question of oil is not irrelevant. We can delineate four people, in the general sense of the word people, who control oil in the world. They control different kinds of oil. First of all, there’s the French government, who has discovered oil in the Sahara and would like to be able to use it. It would be very useful in the Common Market. It would free France from dependence on the international cartel which as everyone knows is very friendly and harmonious, when they are not sticking knives into each other’s backs. These are the American, English and Dutch oil companies – the Dutch being a satellite of the English. A small French company which used to be the only one in France is also a satellite of the cartel. This cartel used to monopolize the world but the monopoly is cracking. There’s a third free-lance buccaneer in there. If you read in the paper about the sudden diplomatic sickness a few months ago, not of Khrushchev but of Gronchi, the president of Italy, his sudden recovery, voyage to Moscow, one might recognize the fine Latin hand of Enrico Mattei, and the National Oil Company of Italy which has penetrated strategic sections of the Middle East. This company is making rather grandiose plans for marketing its oil in Germany and in the countries of the Common Market.

Then the fourth person, a man named Khrushchev, who also has a little oil to dispose of from places like the Caucasus and Baku. So when you see the divisions among these four, five or six, you get some idea of what is going to be said in those secret sessions at the conference of the four great powers who are going to be discussing “Berlin.”

NOW if the Soviet Union is no longer the butt, the goal of the attack of the West, if it’s no longer threatened with immediate attack, immediate threat of nuclear destruction, one of the most profound reasons has to be found in that the Soviet Union has become an integral part of this very complicated game of power politics. And that each Western country, taken separately, thinks that it can do better business with the devil than its neighbors can.

But the Soviet Union is not a country without its own problems. It has very real ones and its part of the Summit Conference is not an unselfish one. The facts of Soviet economic expansion since the war are very familiar. I don’t want to go over them here and the basic analysis that we have worked out concerning the society of the Soviet Union is in the resolution that you have before you. I would like to state two things, though, about the Soviet Union in the present period.

First of all, up to 1956, de-Stalini-zation was a stormy process under increasing pressure from below. It was a process culminating in the mass movement for democratization throughout Eastern Europe in the summer of 1956, and the Hungarian and Polish workers revolutions in the fall of 1956. After the Hungarian revolution had been drowned in blood, the dominant section of the Soviet bureaucracy was able to consolidate itself and able to say very bluntly and openly to the workers:

”We’ll make a deal with you. Don’t press for democracy now, don’t press for any more political rights than you have. We’ll let up on the terror. We won’t arrest people any more and we’ll see that your communism is well-buttered.”

What happened was the abandonment of the sixth five-year plan and the institution of the seven-year plan, which promises something like a 37 percent increase in the standard of living of the Russian people in the next seven years combined with a decrease in the work week from 48 to 40 hours.

This is a very, very big gamble that Khrushchev is taking. The reason it is a gamble is that he is planning to decrease the work week at exactly the moment that the empty classes, so-called, of the Russian population join the labor force; that is, those born in the years of the war, with huge infant mortality and a low birth rate.

TO keep his promise, rather cover his bets, Khrushchev has to rely on a very rapid increase in the productivity of labor and, at the same time, a rapid increase in agricultural productivity. The second can be gained only by increasing the material incentives available to the peasants, since most agricultural property in the Soviet Union is privately owned in the form of collective farms, in which production takes place for the profit of the individual peasants. Khrushchev has gambled on turning the machine tractors over to the Kolkhoz; he’s gambled in promising higher prices, greater latitude in production. What this means is that if the peasants don’t come through, don’t increase their production fast enough, the prices of agricultural goods will go up by the workings of the free market and the workers will have to pay for it. This at the very time that they’re being asked to work harder, to be more productive. Here Khrushchev is faced with the basic contradiction of Stalinism in the Soviet Union and the rest of the Eastern Bloc – the contradiction between the imperative need to develop the productivity of labor and the bureaucratic yoke upon the workers. By denying political expression to the workers the bureaucracy must deny workers control over production in the factory and every attempt to increase productivity from below.

This contradiction will increase over the next years. This is one of the most inevitable things that we can predict. Novels like Not By Bread Alone, which are concerned entirely with this problem will multiply. You can be sure that the coming crisis in the Soviet Union will break out over this issue.

Thus there is an imperative need from the point of view of Khrushchev for an economic agreement with the West that will allow a reduction of armaments if possible, some way to get around this crisis by making real concessions economically to the Russian people. Now fortunately for Khrushchev there are factors that lead the United States’ ruling class to similar conclusions.

Any temptation, on the part of the U.S., to invest seventy to eighty billion dollars a year in armaments production at a rate the Soviet Union couldn’t afford, has to be restrained because the American economy would crack first. It’s not a question, they discovered, simply of factories, simply of economic planning. They discovered they are operating a capitalist economy. To put on that type of war spending would involve such an enormous inflation that if uncontrolled it would lead to a collapse; if controlled, would require fascism: the smashing of the labor movement. Neither choice being acceptable, the alternative has been to hold the line on defense and to seek an agreement with the Russians to justify this. The result is that in the years of the Eisenhower administration the percentage of American gross national product going to war production has declined by 30%.

ONE point is incontestable: that the managers of the American economy today, the ruling executive committee of the capitalist class so to speak, the cabinet and the Federal Reserve system, have come to a very deliberate decision that the health of the system requires a limit of government expenditures and of war expenditures. And this openly and validly has been the reasoning behind their decision.

So here is the outline – a very schematic outline – a picture of the present situation. These things that I sketched show the reasons why the United States and Western capitalist powers must accept “coexistence,” must treat the Soviet Union as one of them, as a party to the settlement of international problems. But can the situation last?

There are three very powerful reasons why it cannot. It can last a certain period of time, but cannot last indefinitely. Permanent peace on this basis is a Utopian idea.

First of all, if, or rather when, the American economy reaches a breaking point, reaches a crisis roughly on the order of 1929, a choice would be so inevitable between fascism and socialism, that the whole world situation could explode. Why would it be inevitable when the United States went through 1929, after all, without a revolution, without fascism?

Today the American labor movement is the most powerful in the world. The American working class has never been defeated, has grown used to a decent or almost decent standard of living. Because it has gone through the experience of the depression, knows what it means, the demand for action would come very rapidly and a decision would be reached quickly. A quick decision could equally well be fascism or socialism. That depends, among other things, on us. It could be fascism though. A fascist decision would mean a probability of world war – I would think an inevitability. Because fascism would mean a stepped-up arms race against the Soviet Union, an attempt to hold the colonies by force and a multiplication of the risks of war, of accidental war, calculated risks and perhaps deliberate war. Multiplication so great as to amount to an inevitability.

That’s one factor which in itself should doom the idea of peaceful coexistence. But suppose we say, “Well, that’s an outdated Marxist idea that capitalism must enter into a major crisis. Maybe it can go along with only minor changes and avoid this crisis forever.”

All right, granting that, which of course we don’t want to grant for a moment, but granting that, there’s another fact that must be taken into account by the capitalists. This is that in the long historical view they are not going to be able to last very long. Above all they will not last very long in the colonial areas once they have been outstripped on their own terrain by the Soviet Union, once the Soviet Union passes them in living standards and total product and per capita product. While this is not an imminent prospect, it’s an inevitable prospect. During the past five-six years or more, the Soviet Union has been able to maintain growth at a rate of over 7 percent a year against an American capitalist economy that tends to fall below its normal growth of 3% percent.

Project these trends and it’s only twenty-five years, in the absence of any major depression in the United States, in the absence of a political revolution in the Soviet Union that would really unleash the productive forces – it’s still only twenty-five years before the Soviet Union has caught up with the United States.

Therefore it might be said that Western capitalism has a life expectancy of thirty years. And this is the kind of trap where the doors shut slowly; they can feel it drawing shut and they are already worried. And as time goes along they will be worried further; and faced with this kind of prospect anyone can see the temptation to act before it is too late.

AND the final explosive factor, very explosive, is as I sketched before, the hopeless contradiction in which capitalism finds itself in the colonial areas. The fundamental problem of imperialism is to find a solid base for capitalist growth in these countries. There is no such basis and no such basis can be found. The brutal fact is that there are not enough internal sources of capital. There are not enough skilled personnel available. There is not enough of an educational system for training them and population is expanding too rapidly.

The combination of these factors means that if the colonial countries are going to be able to grow at all – growth, of course, not being a mere physical thing but above all growth in the standard of living, growth in the cultural level, growth in per capita production – even if they continue to grow at all, they are going to continue to grow slower than the advanced capitalist countries of the West. The gap between the standard of living of the masses in the colonial countries and the general level of the advanced countries can only increase in size and an explosion from this cannot be delayed too long.

The conclusions that we draw from this, and this is the essence of this resolution, are two-fold and they’re simple:

  1. While coexistence represents a reality of the moment; as a political idea, as a program for peace, it represents a very false way. It could easily become disastrous because by tying the cause of peace to the diplomatic maneuverings of the Soviet Union, it disarms the working class movements of the world, strengthens capitalism, gives capitalism an extra lease on life and therefore greater latitude for the forces working toward war.
  2. While as socialists we oppose our capitalist government at every point, above all at those points where it is squandering the lives, health and money of American youth on war preparation, we never for a moment allow the struggle against war to become some kind of goal per se. “The enemy is war.” The enemy is not war, the enemy is capitalism. The avoidance of war and the creation of peace for us must be recognized as they are, as the by-products of the destruction of the capitalist system throughout the world.

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