Workers World, Vol. 20, No. 12
March 17 – Scarcely a day goes by without the capitalist press wailing about the decline of the dollar on the world money market. The bourgeois press is full of apprehension about the continuing struggle between the U.S. and its two principal imperialist allies, West Germany and Japan, in what amounts to a virtual currency war.
Bourgeois economists have literally used up tons and tons of ink and paper with their various explanations for the decline in the value of what was once regarded as the most stable currency in the capitalist world. Oil imports, excessive taxation, the huge budgetary deficit – all are given as principal causes of the decline.
But rarely if ever do the apologists for capitalism touch on the fundamental causes.
One thing they avoid like the plague is putting the dollar decline in the historical perspective of the rise of the U.S. military establishment.
In his classic work, “The State and Revolution,” Lenin quotes Engels in great detail on his exposition of the nature of the capitalist state. “The centralized state power,” says Lenin, “that is peculiar to bourgeois society came into being in the period of the fall of absolutism. Two institutions,” he says, “a most characteristic of this state machinery: the bureaucracy and the standing army ...
“The bureaucracy and the standing army,” he continues, “are a ‘parasite’ on the body of bourgeois society – a parasite created by the internal antagonisms which rend that society, but a parasite which ‘chokes’ all its vial pores.”
Lenin, however, also points out as Engels did that “sometimes, for example in certain parts of North American [meaning the U.S. and Canada], this public power [the state] is weak ... but generally speaking, it grows stronger.”
But why was it weak in the United States and Canada? Because of the absence of the standing army and bureaucracy on the scale which had already long prevailed in Europe. That was the period of so-called progressive competitive capitalism, before the imperialist epoch. The standing army and the bureaucracy were relatively weak – so much so that even after Marx’s analysis of the Paris Commune in which he said that it was necessary and inevitable to smash the capitalist state apparatus in order for the proletariat to seize power and establish their own class rule, America was still thought to be an exception to Marx’s general formulation, precisely because of the weakness of the so-called public force.
That was also the period when the dollar was the strongest currency in the world, notwithstanding the fact that sterling was the basic monetary medium in the world’s money market. Capitalist relations in America were more stable than in Europe. In general, class antagonisms here were diffused by successive waves of immigration, by the brutal acquisition of neighboring territory, and by the relentless subjugation of the Native population and the continuation of the semi-slavery of the Black people. Indeed, the monstrous growth in militarism engendered by the leading imperialist powers which Lenin refers to was indeed very modest in the U.S. by comparison with Europe.
The fact that North American capitalism was protected by two vast oceans from invasion by imperialist armies was no small factor in the existence of a weak standing army and bureaucracy. The expenditure for the military establishment in relation to the gross national product at the time was relatively insignificant by comparison to the European capitalist powers.
The weakness of the military establishment was in no way due to any pacifist or progressive sentiment based on humanitarian considerations. It was simply an outgrowth of the surrounding social circumstances of the time.
How the situation has changed! Today the U.S. has become the principal “parasite” state. The vast expenditures to maintain the military and other repressive forces of the state have become utterly uncontrollable and account for the growing instability of the dollar.
The military expenditures for the current fiscal year will exceed $115 billion. In the days when the imperialist powers were developing, huge expenditures in military equipment and procurement were compensated for, certainly to the victorious imperialist powers, by winning huge sources of raw materials and markets and by outright seizures of territory. Today it is altogether different. The growth of increasing numbers of weapons systems and planes, tanks, and missiles, cannot compensate the ruling class as a whole by brining within the orbit of U.S. imperialism enough sources of raw material, markets, or the naked conquest of oppressed peoples and the annexation of territory.
From a broad economic point of view, the building of an aircraft carrier or a nuclear submarine may well compensate for itself if in turn it enables the U.S. finance capitalists to grab new markets, win new fields for exploitation or basic raw materials, or appropriate new sales territories from competing rivals on the world arena.
But it is altogether different when, after the Pentagon spent close to $100 billion in the prosecution of the Korean War, it got in return 50,000 dead GIs and billions of dollars worth of lost equipment. To this should be added the billions that have been paid out in military pensions, and are still being paid. If the Korean War cost $100 billion, the Vietnam War certainly cost almost three or four times as much. And the return on this “investment” was more dead GIs, many more wounded, and a staggering bill in the form of pensions and other expenditures resulting from the war.
In the earlier days of capitalism, military interventions and the buildup of the military aided the development of the productive forces. But under capitalism the development of the productive forces must over a period of time result in the realization of surplus value, that is, there must be a profit at the end of the cycle of capitalist production and exchange.
But what do we have today?
Take for instance the General Dynamics Corporation, which is a giant defense contractor for the U.S. government. It has under contract with the government the construction of 16 nuclear-powered attack submarines at its Electric Boat division in Connecticut. Sixteen attack nuclear submarines! This will run into close to $30 billion, according to some estimates.
Assuming that they are all built according to the original designs and cost calculations, what will be their function? To prowl the seven seas and consume more fuel than can heat a half a dozen of our large cities. Even when they stay in mothballs, they are an extraordinary drain on expenditures. In totality they have no economic value to the ruling class as a whole unless they are actually used in a war of aggression from which the U.S. comes out victorious or is able to intimidate parts of the world into surrendering their economic resources and well-being to the mercies of U.S. finance capital – a most unlikely development.
However dim the prospects for the ruling class to make a profitable venture out of the construction of these nuclear ships, there is still a further element which shows that the expenditures for the submarines are beyond control. We showed earlier that the issue of cost overruns has become so critical in the defense establishment that the ruling class itself is becoming alarmed about it and the Wall Street Journal was obliged to publish an article by the chief executive of the Northrop Corporation, a medium-sized defense contractor, to call this to the attention of the industry in an effort to arrest its development. He did not name any names, but it is well known that there have been plenty of cost overruns, particularly by the Lockheed Corporation on its C-5 cargo plane.
Today, however, General Dynamics Corporation is deep in a dispute with the Navy over cost overruns which run in excess of $544 million. Is it mere greed, corruption, or avarice which permits such a development in the light of all the urgent needs for housing, medical care, and social services generally? Not at all. The process of cost overruns is uncontrollable for two reasons.
The first is that, as we stated earlier, “It takes a long, tedious and complicated process for a military appropriations bill to go through. First come endless committee hearings, then a vote in both houses of Congress, next a conference committee works out a compromise bill that can be accepted by the full Congress, and finally it will be signed by the President. But when contracts are finally awarded ‘both sides,’ says Thomas V. Jones, head of Northrop Corporation, meaning industry and the government, go on ‘to make changes in the program before the ink had dried on the contract, without defining the scope of those changes and negotiating their effect on the terms of the contract.’
“In other words, if the money is appropriated for a certain military program, be it the neutron bomb, the ABM, the B-1, or the Trident submarine, the government and the prime defense contractor on their own continually make substantial changes in the terms and even in the ultimate product produced as to make it ultimately almost unrecognizable!”
This is precisely what happened between the General Dynamics Corporation and the Navy. General Dynamics says that the Navy requested something like 35,000 changes in design and construction which in turn caused General Dynamics to increase its cost overruns.
Both the Navy and General Dynamics are driven by uncontrollable forces. In its race with the Soviet Union, the Navy as a military institution seeks of course to be “first” in scientific and technological development and its application to the ships. The advances of technology are so rapid that a ship whose design was made a couple of years ago could become outmoded before it is even halfway built.
The corporation, on the other hand, knowing that it has the power to run costs up to practically unlimited proportions under the terms of the awarded contract, naturally will go whole hog. Thus things came to such a pass that the Navy threatened to take over the General Dynamics Corporation’s building of the 16 nuclear subs unless it settled some of its cost overruns, while secretly offering the corporation a settlement of well over $500 million.
But this is only one example out of many showing the utterly inordinate amount of money, materials, and human labor which are diverted from the general economy and on which the capitalist class as a whole cannot count for profits, in the classical sense of the term.
The dollar thus has become the victim, at least in one fundamental respect, of the colossal character of military expenditures, of which the most modern weapons systems require the greatest portion of the military budget. The value of the dollar has moved in inverse proportion to military expenditures. This is the greatest source of inflation.
This inflation is also fueled by the nature of monopoly capitalism in general, which has nurtured and fostered monopoly prices, particularly in the fields of heavy industry, such as steel and aluminum, and later in electronics.
When the capitalist state becomes the chief purchaser of some of the most important manufactured goods and raw materials, and when bidding, where it still exists, is only by a handful of competing monopolists, it is plain that the very prices the capitalist state is charged become highly inflationary.
All these contradictions are mirrored in the military-industrial complex, which is the social and political grouping directly integrated with the capitalist state. This more than anything else explains why imperialist war is inevitable. Sixteen nuclear attack submarines to be constructed at overwhelming cost and then to be prowling the seven seas! Is it conceivable that they will remain idle?
Not if the decisions are to be made by the Pentagon. Only the intervention and revolutionary struggle of the popular masses can reverse the situation.
Last updated: 11 May 2026