From Fourth International, Vol.7 No.5, May 1946, pp.140-144.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Significant world events occurring in any part of the globe can most often be listed under the caption of problems of American imperialism. Starvation and upheavals in Europe, rebellion in India, civil war in China, colonial butchery in the East Indies, curfew and arrests in Palestine or demonstrations in Buenos Aires and last, but not least, the gigantic strikes here at home, each may represent a different stage of intensity of capitalist contradictions; but all are part of the pattern of a thoroughly integrated and dialectically interrelated world.
Equally these events also become problems of the proletarian revolution, for the present epoch is revolutionary.
Imperialism became long ago a dominant and inseparable aspect of American economy. From competitive capitalism to monopoly capitalism to imperialism, in each case representing the transformation of quantity into quality. But in its social implication this transformation is of even greater significance. For,
“capitalism,” says Lenin, “became capitalistic imperialism only at a certain very high stage of its development, when some of the fundamental traits of capitalism began to transform into their own contradiction, when along the whole line there appeared and became apparent the outline of a transitory epoch from capitalism to a higher social economic order.”
Free competition has become transformed into monopoly capitalism. There is an immense socialization of the process of production; a complete organization on a social scale from the supply of basic raw materials through the process of manufacture and the distribution of products. The objective basis for a new social order is thus laid, however, with the old relations of production and distribution still prevailing. Control of this socialized organization is usurped by predatory finance capitalists who exploit it for their own purposes. While production has become social, appropriation remains in the hands of individual capitalists. Imperialism thus develops on the basis of a whole system of contradictions and it further vastly enlarges and intensifies these contradictions.
The rapid rise of the United States as an imperialist power was phenomenal. It has now reached full maturity. With its undisputed victory in World War II it aims to realize the fruits of this maturity. From this war it emerged as the one supremely dominant power, ready to exploit the entire world. At the same time, its preponderance renders American imperialism so much
more vulnerable to the decay and crises of the capitalist world system with which it has become completely integrated. This is what is new in our present epoch.
The interdependence of nations in the world economy is now a generally recognized fact. No national economy can extricate itself to any significant degree from world economy or from the world market. And, of course, the more developed its technology, the more extended its productive capacity and its capital assets, the more complete is the integration with the world market. In turn, the more directly does it also determine the course of world economy. Naturally, therefore, American economy, and its condition, has become the decisive factor in the further course of world economy and the world market. World economy stands or falls on this condition. Upon this condition all capitalist nations depend for their survival. This is how the interdependence of nations manifests itself today. American imperialist policy is only the political expression of this relationship.
Foreign policy, as we know, is an extension of internal policy. It springs from internal needs. And the outstanding factor in the American industrial and financial system today is an overproduction of capital which has assumed terrific proportions. It is now in possession of a vastly expanded industrial productive capacity. Gross production was running during the first half of 1945 at an annual rate of $206 billion. This is more than double the capacity of the peak year of the pre-depression boom. In 1929 total gross production amounted to only $94.4 billion. Estimates of productive capacity become even more concrete when expressed in terms of actual commodities. Thus, for example, the Auto Manufacturers Council has reported to the government that, when fully re-converted and all raw materials are available, it will be capable of an annual production of 7,600,000 cars and trucks; and it adds that it will be able to reach this output with 40 percent less labor than it employed during the war peak.
Additional illumination is afforded by facts concerning labor productivity, which is only another way of showing the increase in tools and machinery of production. Krug, the former Chairman of the War Production Board has estimated, on the basis of reports received from 42 industries, that post-war production can be 87 percent above the 1939-41 average with employment only 33 percent above that level. That would mean a gain of 40 percent in labor productivity. The CIO steel workers union estimates that during the six years of the war period labor productivity increased not less than 34 percent. 
This American industrial empire was built up on the existence, within the forty-eight states, of the most important industrial raw materials. Productive labor applied to these strategic raw materials has assured for the United States its overwhelming preponderance. Here coal seams are among the richest and the actual production during the last three years preceding the war amounted to 40 percent of the world s output. Oil production was 60 percent, and iron and steel reached more than one-third of the total world output. At the peak of war production the output of finished steel increased further from 74 million tons annually to 93 million tons. The United States produced in the same period about one half of the world’s electric power. The comparative figures of coal mining here and in England tell the story with regard to production efficiency, although in this industry the comparison becomes perhaps the most extreme. Coal mining in the United States requires 1.7 man hours of labor per ton whereas in England it requires 7.5 man hours per ton. While the British merchant marine, formerly the world’s largest, lost during the war 10 million out of its 21 million tonnage and only succeeded in replacing about 7 million tonnage, the United States merchant fleet gained during the same period from 11.6 million tonnage to an estimated 57.5 million tonnage. And, of course, what counts much more heavily in backing up aggressive imperialist plans is the fact that the United States navy has now reached an estimated 3,900,000 tonnage, which is almost equal to the total combined pre-war naval tonnage of all the great powers. Finally there lurks in the background the terrifying power of the atomic bomb.
Capital ready for investment is likewise available in the hands of the Wall Street corporations in prodigious amounts. National income during the war boom reached the stupendous sum of $160 billion. Capitalist corporations received, of course, their more than generous share. From 1939 to 1945 net profits after taxes of US corporations totalled $42.7 billion. Their net working capital increased from $24.6 billion in 1939 to $45.5 billion in 1945, a jump of 85 percent. Current assets rose from $54.6 billion to $98 billion in the same period. The CIO Steelworkers Union estimates that during the six war years, profits of corporations rose by not less than 70 percent. With the repeal of the excess profits tax these corporations will be even more generously endowed.
It is estimated that savings for capital investment amount to about 20 percent of the annual national income. In other words, out of an annual national income of $160 billion not less than $32 billion would be available annually for capital investment. What this means over a period of time may be gathered from the fact that savings accumulated since 1940 reached a total of more than $121 billion at the end of 1945. We can be sure that only a very small fraction of this sum constitutes workers’ savings. In fact the overwhelming portion must be counted on as capital pressing for opportunities of profitable investments.
Among other factors that could be mentioned which exert a definite pressure on internal economic stability is an item of such importance as the huge national debt approaching the astronomical figure of $300 billion – a sum in excess of the total assessed valuation of the 48 states and the District of Columbia. Closely related to this is the enormous cost of the projected militarist program. The one item is the obverse of the other and the cost of carrying both will be saddled upon the masses, thus lowering further their living standard. The bulk of the national debt represents American capitalism’s investment in the war just concluded; loans made to the government at a fixed rate of interest. Victory means that the monopoly concerns begin to collect. At the same time the “carrying charges” operate to aggravate existing contradictions in two ways: Firstly, this greater mulcting of the masses can only render the boom period still more speculative and conversely deepen the effects of the unavoidable crisis. Secondly, the bulk of the “carrying charges” on the national indebtedness, amounting to about six billion dollars, which flow into the coffers of the monopoly concerns, represents an annual accretion of capital clamoring for profitable outlet.
On the whole these factors – the vastly expanded capacity of production and the huge volume of capital available – should be an expression of potential plenty, economic progress and prosperity for the nation.
Under capitalist relations of production, however, this turns out to mean the exact opposite. Capitalism always develops the forces of production more than it develops the forces of consumption. Because production is carried on by labor in return for wages which represent only a part of the actual wealth produced. The surplus values produced go to the capitalist entrepreneur in the form of profits. Wages always lag behind profits and wages always fall relative to output and profits. Monopoly capitalism only aggravates this process. It extorts higher profits thereby increasing the disparity between production and consumption, which further aggravates economic instability.
Monopoly capitalism constantly increases labor productivity by its ever increasing investment in more efficient machinery. This results in a reduction of labor power needed, thus placing further restrictions upon consumption. Although the mass of profits increases due to the greater rationalization, the rate of profit realized in proportion to the total capital invested tends to fall. Capitalism struggles incessantly to overcome this tendency and to increase the rate of profit. Profits always tend, nevertheless, to increase at a more rapid rate than do the opportunities for profitable investments. And this excess capital piling up over and above the available investment opportunities becomes surplus capital. It represents capital which industry does not need and cannot use without disturbing results.
The internal market in the United States became insufficient long ago, both for absorbing the annual excess produced over and above the limits of home consumption and for absorbing the ever increasing amounts of surplus capital. This explains the inexorable drive for new and vastly larger markets and fields of investments which will yield a higher rate of profit. American imperialism is therefore impelled to assert its enormous economic preponderance more fully on a world scale.
But world economy is in a state of stagnation and paralysis due to war destruction, impoverishment and inflation. In fact in most parts of the capitalist world, outside of the Western Hemisphere, there exists practically total bankruptcy. It is clear, therefore, that before American imperialism can exploit the colossal financial and industrial potential it has accumulated it must first assume – alone – the leadership in rehabilitating in a measure this virtually bankrupt world economy. Such measures of rehabilitation require first of all in the United States a continued high level of production and income which, in turn, necessitate a high level of purchasing power by the masses – a constantly rising standard of living. This is only one aspect, but it is an important aspect of the problem of interdependence of nations today.
Loans and capital investments for the exploitation of labor of other nations and colonies undoubtedly do hold out glittering prospects of abundant returns for the Wall Street bankers. But world trade, based on commodity production, does not have the slightest chance of revival unless the United States is likewise in a position to absorb in ever increasing quantities the products, and especially the raw materials, of other parts of the globe. Obviously this could be accomplished only on the basis of high levels at home. Besides, only economic stability and political equilibrium in the United States could make such exploitation possible abroad. For any rehabilitation of world economy these would be the minimum prerequisites.
What are the perspectives for such high levels in the United States? We will most likely experience a relative boom, highly speculative and of short duration before we enter into the next depression. The fundamental laws of capitalist economy remain, however, in effect and continue to subject the whole system to the action of these laws. Number one amongst these laws reads that capitalist production is carried on solely for profits and that the capitalist system, moreover, depends for its very survival upon ever increasing profits. Actually to enlarge, or even to maintain the wartime scale of production for civilian needs would mean, in the first instance, to increase national consumption by increasing the purchasing power of the people.
But the policy pursued by the dominant corporations, motivated only by their lust for ever increasing profits, is the exact opposite. They fight with all the forces at their disposal against maintaining even the wartime wage levels. They seek to undermine and destroy the unions – the protective organizations of labor. Instead of raising they seek to lower the standard of living. This policy stimulates further the growing disproportion between the expanded productive forces and the increasing limitations upon consumption.
Already the result is an intensification of the class struggle in the home fortress of American imperialism. Gigantic strikes are the expression today. Turbulent political conflicts will follow on the morrow. What else does this prove but that neither internal economic stability nor political equilibrium is attainable in capitalist United States?
Granting a relative and short-lived boom, as soon as the limited capacities of the market are saturated, the economic crisis is inevitable. For the further course of capitalist world economy this perspective is as decisive as it is devastating.
American imperialism seeks to solve these internal contradictions on a world scale. However, as it advances in the world economic and political arena, it reproduces and extends these same contradictions, only in a much more intensified form and on an infinitely enlarged scale. Every imperialist advance means the international extension of its own inner antagonisms.
It is tacitly recognized everywhere that world economy is virtually bankrupt. This was formally recognized in the proposals growing out of Bretton Woods for the International Monetary Fund and the International Bank for Reconstruction and Development. Ostensibly the former is intended as a means of fixing the post-war structure of monetary exchange rates and promoting exchange stability. The latter is presumed to aid in the reconstruction of war devastated nations as well as to promote economic development in backward countries. But these very proposals also acknowledged publicly the world hegemony of American imperialism.
In reality the Bretton Woods proposals are designed as instruments whereby the Wall Street bankers intend to wield financial control of the world market. And Wall Street’s ally and “friend” – Great Britain – is the first to feel the sting of this hegemony. For, while American imperialism proceeds with the complete elimination of its former enemy rivals it is at the same time reducing the ration of the British empire in the world market to meet its own increased productive capacity and appetite. That is the significance of the terms of the loan to England.
On its positive side the loan offers some relief for the hard pressed British imperialists. It affords them an opportunity to buy much needed goods in the United States and a means of staving off an immediate social crisis in England with its potential serious repercussions elsewhere. It represents also an attempt on their part to have the United States underwrite the security of the empire which is now facing volcanic eruptions.
Of course, the Wall Street bankers know very well that imperial Britain has lost its comfortable economic margin which contributed so much to its glory, power and privileges of the past. They are aware of its proclaimed effort to increase its production for export by more than 50 percent above the prewar volume. Hence the harsh terms of the loan designed to curtail Britain’s competitive powers in the world market. Within one year, according to the loan “agreements,” Britain must break up her “sterling bloc” and abolish her “empire preference system” of trade and “remove all restrictions” on American imports to the homeland, dominions, colonies, mandated areas, etc. Thus, despite the vehement protestations once made by Churchill against any attempt to liquidate the empire, its doors have now certainly been thrown wide open.
The British imperialists have made another retreat. At the conclusion of the war they projected the “Western European Bloc,” a closed economic sphere under British tutelage, to be based on the resources and machinery of the triangle stretching from Birmingham through the Seine estuary, the Briey basin and including the Ruhr valley. This they had conceived as a counterweight to the colossus across the Atlantic and a bulwark against the dreaded Soviet power. However, their own position in relation to the United States forced the British to retreat. So far as the European continent is concerned, the Washington policy of occupation prevailed. And American “aid in reconstruction” of the war-devastated continent reached the heights of brutal savagery.
European economy has remained in a state of paralysis ever since “liberation.” For Germany it is perhaps more exact to say that her economy is pulverized. It lies prostrate under military occupation. Throughout Europe the capitalist social equilibrium is destroyed. While there can be no doubt that the objective conditions remain revolutionary, it is clear that the re-orientation and regroupment of the proletarian forces – the building of the revolutionary mass parties – will take some time.
By itself the European bourgeoisie is utterly helpless. Today it constitutes the weakest link in the capitalist chain. This accounts for the American imperialist military occupation policy. While this policy pursues the destruction of competition from the German, or from any other European industry and finance, it also includes certain relief measures, paupers’ concessions, loans hedged by definite restrictions, etc. For the United States must now attempt to restore some sort of class equilibrium in Europe. It is the sole reactionary power in a position to assume the role of defending the decaying capitalist system on a world scale against the coming proletarian revolution. Its military occupation in Europe also forms one claw of a gigantic pincer against the Soviet Union.
Political implications flowing from this intervention develop their own logic. Nevertheless the economic basis remains decisive. After World War I the United States intervened in Europe to restore partially its economic equilibrium. Such restoration is not now on the Wall Street agenda. On the contrary. Caught in the vortex of decline and decay of capitalism Wall Street is neither willing nor able to do so. That is why it must undertake to destroy even the possibility of future economic rivalry from Europe.
Let us illustrate this in concrete terms. The Allied Control Council has decided to allow Germany to retain an annual steel producing capacity of 7,500,000 tons. Maximum annual production, however, is not to exceed 5,800,000 tons. This compares with a war-time capacity of 23 million tons and it approximates Germany’s output at the trough of the depression in 1932 when its totally unemployed workers numbered 6 million. Steel, as we know, is basic to all modern industry. These figures therefore become symptomatic. They illustrate in concrete terms the effort to maintain that permanent depression level for Germany. Her people now face starvation and her industrial workers are condemned to become pariahs.
But Germany is Europe’s workshop, supplying especially heavy tools, instruments and machinery of production. Production of this tool industry, according to the Allied Control Council’s decision, is to be reduced to less than 12 percent of prewar output. What will be the consequence? Further crippling of German industry, which in the wake of war destruction, will inevitably result in a lowered standard of living in all Western Europe. The occupation policy spells Europe’s Balkanization – in the political sense of having to depend on a “protector” (the United States) as well as in the economic sense of low living conditions.
Although the military occupation has served to postpone the inevitable reckoning in Europe, the general conditions created by American intervention render all the more certain the final proletarian victory. For every step taken toward reducing Europe to a still lower economic level must of necessity strengthen the revolutionary forces. The peoples are left no alternative but revolution.
Contradictions such as these, with their explosive possibilities, are not peculiar to Europe alone. They are bound to arise and multiply wherever American imperialism advances. And advances are being furiously prepared. Wall Street’s most enthusiastic spokesmen propose to start out with an immediate tripling of American pre-war exports. But even if quickly attained, such a figure, in view of the productive capacity available, would not be very high. It would reach only half of the war-time level. During the period of 1930-39, for example, American exports averaged just slightly over three billion dollars annually, whereas the war period, due to Lend-Lease, brought this figure up to an annual rate of eighteen billion dollars. And right here an important consideration must not be overlooked. Under monopoly capitalism the export of commodities tends to become subordinated to the export of capital. This again acts to bring down home production, placing limitations upon employment, wages and restricting the consuming ability of the masses.
Foreign capital investments have always returned a golden harvest to the investors. The classic example in this respect is the lucrative field possessed by the British imperialists. However, their American cousins did not lag far behind. Now they are the chief exporters of capital, the world’s bankers. From a mere $2,625 million in 1914 their foreign investments, exclusive of government loans, rose to $17,967 million in 1932. Returns on these investments from 1920 to 1929 brought the magnificent sum of $7,896 million.
Latin America furnished a heavy share of these returns. Since the completion of the Panama Canal Wall Street has considered these republics to the south as its private preserve and made rapid strides toward the elimination of all other imperialist competition. These supposedly sovereign nations furnish an object lesson of the purely imperialist purposes of the export of capital, shown in Yankee financial and political overlordship almost throughout the Central and Southern Hemisphere with its support of corrupt, reactionary, totalitarian regimes and bitter exploitation of the native population. The countries receiving these investments remain impoverished.
Wall Street may not yet be too greatly worried about the increasing appetite of the Latin American bourgeoisie and their increasing apprehension concerning the encroachments of the Yankee dollar. It may not yet feel too greatly alarmed about the workers in the republics to the south becoming more articulate and militant. The fact that 66 per cent of Latin American bonds issued in the United States were in total or partial default by 1938 can probably still be remedied. There remains the important consideration that the economies of the two parts of the Hemisphere are in many respects competitive rather than complementary: especially in regard to agricultural products and raw materials. Again and again this poses the problem before the American monopolists of capital investments and subsequent expansion to the south versus their own home market.
Moreover, the combined annual national income of the 20 Latin American republics, comprising a total population of 120 million, is estimated to be no more than $15 billion. More than half of the population subsists on an annual family income of about $100. Only a small percentage reach $1,000 and upward. These are the serious limitations upon large scale expansion of the Latin American market. After all, such an expansion, under modern economy of commodity production, requires, as its essential prerequisite, a rising level of purchasing power. Neither the Latin American bourgeoisie nor the Yankee imperialists have any intention of bringing this about.
Monopoly capitalism and imperialism sets in motion and constantly strengthens a tendency toward economic stagnation both at home and abroad. England and India furnish the best examples. Another example is Latin America which has served up to now as the main laboratory for the rise of American imperialism. As imperialism develops it puts limitations even upon the export of new capital and goods because of the increasing export of interest on existing investments. This does not bring about any activity within the home economy, neither of added employment, wages, nor of added mass consumption.
With the huge reserve of surplus capital pressing inexorably for profitable fields of investment, Wall Street is turning its attention chiefly to the fabulous riches of Asia, in the first instance, to China. The United States remains in occupation of Japan and half of Korea. American diplomats are well entrenched in Chungking and thousands of marines stand armed on the Chinese mainland. As a result the Wall Street bankers have shut out virtually all imperialist competition from China. By the terms of the British loan they aim to surround Singapore and Hong Kong via London.
Although China is not more than one-third explored geologically, it is known to possess immense coal reserves and large iron ore reserves (estimated at 2 billion tons). It is the world’s leading producer of tungsten and antimony, a considerable supplier of tin (the latter two being strategic war materials not available in the United States), in addition to copper, magnesite, molybdenum, mercury, etc. But these assets, are, no doubt, viewed by the imperialist bandits as merely supplementary to the huge reservoir of exceptionally cheap labor power.
China is for Wall Street the first ripe fruit of the war victory, an unlimited source of raw materials, an outlet for the superabundant American products, and a field for investment of new capital. And therefore, throwing their full support to the reactionary Kuomintang regime, the American imperialists are preparing the ground to harvest the anticipated returns. Their first concern was to end the civil war and to “stabilize” and “normalize” the existing turbulent class relations. The independent existence of the Yenan Stalinist forces constituted a threat to their imperialist plans of exploitation and a potential source of new mass rebellion. And so, under the usual “democratic” cover of peace, the Wall Street Ambassadors were successful in obtaining a temporary pacification. This was facilitated by the Stalinists who were only too eager to prevent further mass rebellion.
Already in 1937 they had issued a manifesto setting forth their policy of liquidation and subservience to the reactionary Kuomintang regime. Point five of this manifesto declared:
“The policy of insurrection which aims at the overthrow of the Kuomintang political power, the policy of land confiscation, and the policy of Communist propaganda shall all be disowned and discontinued.”
The possibility of “unification” was facilitated also by the Sino-Russo treaty, signed at the height of the civil war, in which the Kremlin pledged Soviet moral and material aid exclusively to the National Government (of Chungking). Viewed in retrospect, all this conniving stands out clearly as a united conspiracy to crush the revolutionary movement of the Chinese masses. This is about the only real unity attained in China so far.
The American imperialists visualize China as a strategic base to establish their control of the Far East. But China is primarily a backward peasant country. Almost four-fifths of her population subsists on a meager peasants’ lot; 65 percent of these are entirely landless. It is estimated that 81 percent of her cultivable land is owned by only 13 percent of the rural population. Among the latter is the powerful landed gentry. The peasants are landlord-ridden. As a result the Chinese internal market has become increasingly impoverished. The poverty-stricken peasants have no purchasing power. The landed gentry have always been hostile to industrial expansion, fearing that this would attract the landless pariahs away from the land. This gentry form the primary base of the reactionary Kuomintang regime.
Moreover, large scale capital expansion, in the sense of industrialization of China, is impossible unless the peasant is freed from the crushing burden of the medieval economy. But this would carry all the implications of a revolution. Neither the
Chinese urban bourgeoisie nor the Wall Street agents will encourage such a step.
What I said in a previous article on the World Role of US Capitalism will bear repetition here:
Any advance in industrialization by a victorious American capitalism penetrating colonial or semi-colonial spheres in Asia or Africa would bring its own deep repercussions. Instead of allaying the once awakened nationalist independence aspirations of the native populations it would add new fuel to the smouldering fires. Instead of suspending their struggle against imperialist exploitation it would lead this struggle to new heights of intensity.
Capitalism came into being as a progressive force to develop the productive powers of society. Based on its inherent necessity of constant expansion and exploitation its whole system is in decline and decay long before it succeeded in actually developing the productive forces of the largest and economically most backward areas of the world. Although the United States is the latest and the most powerful among great nations aspiring to a redivision of the world, its aspirations are no less unrealizable. It cannot reverse the process of capitalist decay. By its very powers it further aggravates this process and speeds along the revolutionary epoch toward its culmination.
This is how the problem of imperialist expansion in Asia presents itself from the long term perspective. It also produces more immediate repercussions. Already the potentialities of serious revolutionary upheavals exist in Asia no less than they do in Europe. And this, to be sure, is one of the important reasons for the American occupation of two continents. Yet the military occupation holds out an even more terrifying perspective, fraught with deadly consequences for the whole of mankind. Wars and colonial exploitation are equally inseparable aspects of imperialism. And without a doubt, the imperialist penetration of China constitutes the second arm of a gigantic pincer thrown around the Soviet Union. This penetration includes the American training and rearming of the Chinese nationalist army. In other words, American imperialism is attempting to consolidate its power in preparation for World War III.
Such are the major considerations determining the policy of occupation. Economics, politics and military force are here completely integrated. Democratic shields, charters intended to be forgotten and deceptive proclamations of freedom and self-determination receive their real meaning only in terms of this imperialist integration.
1. Statistical data often differ somewhat depending on the scope and the method of compilation. Since, however, all statistics appearing here are mainly used for the purpose of indicating the general trend, I have dispensed in most cases with citing the source.
Last updated: 9.6.2005