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Arne Swabeck

The Economic Crisis, the Unemployment
Situation and the Working Class

(June 1932)

From The Militant, Vol. V. No. 24 (Whole No. 120), 11 June 1932, pp. 1 & 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

With the passing of its two and half year mark, the economic crisis is still on its downward spiral. Now, however, the American government has moved much more actively into its orbit. It has created a number of auxiliary instruments, outstanding among which are the Reconstruction Finance Corporation and the Young Committee, the latter established by the New York Federal Reserve Bank and expected to be followed by like committees in other federal reserve districts. By this is provided a more harmonious blend of interests and purposes of monopoly capitalism and its executive organ at Washington, D.C. But because of its occurring within the framework of the strongest of the world imperialist powers, this mobilization of capitalist resources assumes special significance.

The sum and substance of the proposals made by this combination of forces is the “expansion “ of credits and the measures which flow from such an objective. The aims it holds in view are: First, to restore, within capitalism, the confidence in the continuity of the process of production, which is badly shaken by the prolonged crisis. Secondly, an endeavor to increase commodity prices in the hope of extending a contracting market. Thirdly, to neutralize, or at least check the fall In the rate of profit by restoring a rate which will make possible to resume the cycle of reproduction. This latter is to be accomplished essentially and most directly by increasing the intensity of exploitation and depressing wages below the value of labor power, or in other words, to reduce the whole standard of living of the working class.

How well these alms are being realized, or in the process of being realized, with the capitalist measures proposed, it is necessary for us to examine. But we must first of all bear in mind that this crisis, as well as other such crises in capitalism is essentially one of overproduction of capital – an overproduction of the means of production to the extent that they serve as capital, that is, serve for the exploitation of labor. The credit system itself is the main lever of overproduction because of its forcing of the process of reproduction to its extreme limit. Consequently the efforts for further expansion of what already constitutes a superabundance of credits, although largely idle, and regardless of its immediate results, will, without fail, resolve itself into more acute contradictions in the next historical stage.

This question we propose to take up in detail, but before that, let us take a look at the crisis and its present sweep, still moving downward. To elucidate, the restatement of a few fundamentals will be appropriate.

It is one of the laws of capitalist production, and which its development carries with it, that compared to the total capital which it sets in motion and compared to the constant part of capital (means of production and raw materials) there is a relative decrease of the variable part of capital (labor power). In other words, compared to the growing mechanization of industry the need for labor power diminishes relatively. The same number of workers can in the same time produce an ever growing amount of commodities. And, the number of employed workers are continually on the decline compared to the mass of the means of production and the commodities produced. It follows that that portion of living labor which is unpaid and represents surplus value is likewise on the decline compared to the value of total capital invested. This results in the fall of the profit rate. But the increase of the mass of the absolute surplus value appropriated by the capitalists, or the mass of profit, on the other hand, provides for the growth of the total capital – an ever growing accumulation of capital.

We have not figures available showing the actual relative growth of constant capital over variable capital. But the following figures, once before published in The Militant, illustrate the trend of the growing mechanization of industry:

From 1899 to 1929, in American manufacturing industry, the number of wage workers increased by 85.5 percent. While their nominal average wage increased 206 per cent, yet their share of the produce of their labor declined from 41.4 per cent to 36 per cent due to the fact that during this period the value added by the process of reproduction represented a 556 percent increase. Expressed in monetary form, in 1899 the value thus added amounted to $1,025 per worker. In 1929 it had increased to $3,624.

This clearly illustrates the growth of the intensity of production due to mechanisation of industry. But it also in a sense gives a picture of the accumulation of capital.

In the process of reproduction the Increasing mass of surplus value, or unpaid labor, appropriated by the capitalists, leave an ever growing part to be turned into additional capital. The capitalist mode of production accelerates the accumulation of capital. But with that also the specific capitalist mode of production develops. Accumulation leads to an increased concentration of the means of production and a growth of the domination over labor.

The credit system which at first served as a modest helper of accumulation has now become transformed into an immense social mechanism for the centralization of capital. It caused an enormous extension of the scale of production and of overproduction of capital. The general process of capitalist production brings forward ever more its antagonisms of monopoly, developed productive forces and the poverty and restricted consumption of the masses. In this process, the credit system accelerates the violent eruptions of these antagonisms, the crisis.

“The stupendous productive power developing under the capitalist mode of production relatively to population, and the increase, though not in the same proportion, of capital values (not their material substance), which grow much more rapidly than the population, contradict the basis, which, compared to the expanding wealth, is ever narrowing and for which this immense productive power works, and the conditions, under which capital augments its value. This is the cause of crises.” (Marx, Capital, Vol. III, page 313)

In the light of the above it should now prove interesting to examine the present level of percentages of capacity production reached after two and a hall years duration of the crisis. The New York Times index for the first quarter of 1932 gives the following results:





Pig Iron production




Steel Ingot production




Electric Power production




Bituminous Coal production




Automobile production




Boot & Shoe production




Zinc production




Cotton Consumption




Freight car loadings




For the combined business index, of which the estimated “normal” is 100, we get the following figures:

Combined business




Truly, the stupendous productive power developed under the capitalist mode of production contradicts the basis, and the conditions under which capital augments its value. And it is not altogether unnatural that the New York Times comments cynically in an editorial, of Sunday, June 5th, entitled – This Crisis and Others:

“The break-down is permanent. The sharply curtailed consumption today is not primarily a reflex of a distress cut in income but a return to the ‘natural’ level (sic!). The unemployment figures of today are not emergency figures. They register the permanent effect of our triumphs in industrial efficiency, in methods and machines (hear, hear). Taking care of perhaps 8,000,000 persons out of work is a big problem, but one that can be solved if it is a temporary problem. But what the country must now look forward to is this huge mass of idle workers as a permanent feature of our economic life. Such is the fatal difference ‘in kind’ today.”

Yes, this is the salient point of the crisis today and for the future prospects. The New York Times wants to warn its bourgeois readers. We must similarly warn the working class to draw its own conclusions.

We would not accept the above unemployment figure as accurate. In reality it is surely a good deal larger than that. Exact figures are not available. The bourgeois government fears to have such a computation made. But the index figures published by the Department of Labor give us somewhat of an idea. Its index figures are based upon returns from eighty-nine industries since the end of 1930 and on fifty-four for the earlier dates given. They compare as follows for April this year with April of previous years, with the average for the full year 1926 reckoned as 100:

April 1932



April 1931


April 1930


April 1929


April 1926


April 1923


In this connection it will be well to also note the fall in the total payroll from the same index, covering the same industries and the same months. It will be useful for our further analysis. The payrolls for April compare as follows:

April 1932



April 1931


April 1930


April 1929


April 1926


April 1923


There is shown here an ominous disparity in the much greater drop in total payroll when compared to the drop in employment. This is indicative for the future working class prospects. A permanent, huge unemployed army and a reduced standard of living. But what the working class will do in this situation still remains the decisive question.

The return to the “natural” level, as the New York Times so cynically puts it, embodies these prospects for the American working class. The return aims to restore confidence, within capitalism, in the continuity of the process of reproduction, to extend the market and to restore a rate of profit on existing capital on this “natural” basis. But capitalism produces for an unknown market. And, the contradictions between the expansion of capital and the market limitations leads to ever deeper crises.

Capitalist production, as a continuous connected process, first of all produces and reproduces the capitalist relations. Henceforth these will be the relations of yet greater concentration of capital – means of production which serve as capital, serve for the exploitation of labor – with greater intensity of exploitation and with an ever growing section of the workers in enforced idleness.

“The real barrier of capitalist production is capital itself. It is the fact that capital and its self-expansion appear as the starting and closing point, as the motive and aim of production; that production is merely production for capital, and not vice versa, the means of production mere means for an ever expanding system of the life process for the benefit pf the society of producers.” (Marx, Capital, Vol. III, page 293)

(Note: Another article on the Crisis, Unemployment and the Working Class, particularly dealing with the present efforts for expansion of credits, will appear in the next issue of The MilitantEd.)

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