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Frank Demby

American Capitalism Gets an Outline of
Its Economic Program for the War

(January 1941)

From Labor Action, Vol. 5 No. 1, 6 January 1941, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Ever since the last war, the intelligent capitalists of this country have been analyzing the experiences of World War I in preparation for the inevitable outbreak of World War II. These analyses involve not only military preparation, but also economic preparation. The fruits of the economic investigations are to be found in a little book, called Wartime Control of Prices (written by Charles O. Hardy and published by the Brookings Institution, Washington, B.C. in September 1940 – price $1.00). Mr. Hardy proposes a very simple program – rigid control of prices. This includes all prices, not only the prices of the commodities which we have to buy and which the Government must buy in order to carry out the military program, but wages and rents as well. The only exception to this program is profits. In order to concentrate all energies on the war effort, all restrictions on the efficient (cheap) mobilization of both human and natural resources must be abandoned – at least, for the duration of the “emergency” period.

Reforms Go First

That this is the real program of the American capitalists can be readily seen from a few comparisons of what is recommended by Mr. Hardy with what is actually going on now. Mr. Hardy proposes that the “Walsh-Healey Act be suspended for the duration of the war emergency.” The Navy Department has recently made this proposal, because it has made more difficult the letting of contracts by the Navy. In other words, one of the key reforms of the New Deal – that companies serving the Government should maintain “adequate” standards of pay and working conditions – is to be thrown into the waste paper basket because capital is insisting that the sky is the limit for profits. What a commentary on this Second World War for Democracy! Mr. Hardy, in effect, is for outlawing strikes in “national defense” industries. This has not as yet been enacted into law, but what a campaign the capitalists and their agents are putting on to accomplish this. Only the conscious and determined opposition of organized labor can prevent this undermining of one of the fundamental and hard-won democratic rights of labor. Similarly, for the 40 hour week, time and a half for overtime, WPA, relief and virtually everything else that can possibly be considered progressive. If the workers permit the capitalists to carry out their program, all of these will be abolished.

The experiences of World War II to date shows that in many ways the civilian population (if one can speak of a civilian population as separate and distinct from the armed forces) plays a key role in the maintenance of national morale. When prices rise substantially and the real income of the population declines, the capitalist understands that it is more difficult to convince the population at large of the justness of the war. Fragmentary reports that have reached us so far indicate that, on the average, prices’ have risen 50% and the standard of living has declined by at least one-third in all belligerent countries.

To be sure, the cost of the war must be borne by the people in the form of declining standards of living, for from an economic point of view, war is sheer and unadulterated waste. The problem, however, is to sugar-coat the declining standard of living so that it appears not to be as great as it is. This is made especially necessary by the experiences (still within the living memory of many adult citizens) that every belligerent country experienced during and after the last war with inflation, catastrophic declines in living standards – a few making millions in sharp contrast to the remainder of the population – and the general economic breakdown which is the inevitable aftermath of war.

To all these considerations, there is added another, which makes the current problem of price control even more fundamental than at any in the history of capitalism. Capitalism has clearly entered upon its period of decline. Discussion of what the new order of things will be after this war is unavoidable. The ruling class, as a whole, is keenly aware of the impact of the war upon their established order of society. They wish to make as certain as they can that any controls introduced – in fact, any governmental measures of any type whatsoever – shall not alter the basic foundations of capitalism.

A Blueprint for War

During the First World War, the cost of living rose some 60% in the United States. Certain commodity prices, such as sugar, butter and meats, rose between 100% and 200%, and in some of these cases rationing was required. In all the warring countries today, on top of the substantial price rises and inferior quality of many commodities, rationing of many essentials is already in effect. The Government is not only interested in this problem from the point of view of its effect on the standards of living and, therefore, on civilian morale, but in the most direct way it is concerned with the cost of the war effort.

The more prices rise, the greater is the cost of the war to the Government. The greater the cost of the war, the greater the necessity for increasing taxation of all sorts. Increased taxation is always a difficult measure for any popularly elected government to resort to, because it is sure to raise a storm of protest from one or more sections of the population. Hence in a very practical and direct way, the government is interested in such a study as Mr. Hardy has made from the point, of view of cutting down the cost of war to it.

What emerges as outstanding in Mr. Hardy’s discussion is that although he is speaking about controlling prices during the present period – that is, one of national “defense,” when formally speaking, the country is not at war – he himself makes the admission that the problems which confront the organization of the “defense” effort are substantially the same as they would be if the United States were actually engaged in war. So what we have is a primer or a blueprint of what is in store for us during the next five years – which is the legal limitation at present of the “emergency” period. The second outstanding fact that Mr. Hardy, and we may be sure the members of the government as well, realizes is that: “The problem of economic organization in time of war differs from that in time of peace in that it is essential to concentrate productive energies on an abnormal emergency objective – that of winning the war.” All energies must be devoted to this end. Everything else is secondary, including to be sure, the preservation of those democratic rights, for which, presumably, the war is to be fought.

Sees Tight Control

Since controls were required during the last war, Mr. Hardy correctly assumes that even more extensive controls will be required this time. The only question in his mind is the character of these controls and the efficacy of some of these controls as compared to others. The conclusion implicit in the book is that far more extensive controls will be required this time than last. While the author does not say so directly, in view of the criticisms he makes of the methods used during the last war, the implication is clear that such far reaching controls will be required this time that the difference between the economic setup in the United States at war and that which prevails in totalitarian countries will be very slight indeed.

Another outstanding feature of the study is that no matter what proposal is discussed or proposed, there is always a conscious emphasis on the necessity for maintaining profits. Even in discussing the price-ceiling plan of Mr. Bernard Baruch, who was Chairman of the War Industries Board during the World War and also a member of the Price-Fixing Committee, the necessity for establishing such prices which will yield profits even to the high-cost producer is made quite clear. This, in spite of the title of the book (privately printed) in which Mr. Baruch presents his views – Taking the Profits Out of War. For example, in summarizing the lessons of the last war, Mr. Hardy states: “There was undue reliance on the excess profits tax to correct unnecessarily high prices paid by the government.”

From a technical point of view one of the few shortcomings of the book is that it omits any real discussion uf profits and their control during wartime. But what else can be the meaning of the passage quoted than a defense of the necessity of industry making profits in order to organize a war effort “most efficiently?” And, of course, the experiences of the last war and the present war to date show very clearly that war is a profitable undertaking for the capitalist class, or at least for the most powerful sections of it, even if it means untold misery and privation for the masses of the population.

Labor Takes Rap

That the plans discussed in this book are thoroughly reactionary from the point of view of labor and the mass of peoples is not surprising. But what is surprising is that the entire reactionary program of the war department should here be set down in black on white for all those with eyes to see. First of all, the author advocates “compulsory labor at wages which the worker is not free to reject” for those directly employed by the government. It should be obvious that the number of people

directly employed by the government represents a far larger proportion of the total population this lime than in the case of the last war. Since the conception of the war effort which Mr. Hardy has, in common with the rest of the capitalists, is that all that matters is winning the war – not how the war is won and what the effects of the various methods will be, he quite logically proposes, for example, the suspension of the Walsh-Healey Act If one has any doubt of the intentions of big business, just read very carefully the following excerpts from Mr, Hardy, which clearly speaks for them:

To take the position that labor should make no contribution toward carrying the economic burden of the war would be indefensible ... If labor is to make any economic contribution to the cost of the war. the cost of living must rise more than the wage rates.”

Again, “Unemployment benefits should sot be permitted to act as drag on re-employment.” Hence out of the window with WPA, relief – and perhaps even with unemployment insurance.

Since Mr. Hardy, (erroneously) attributes the 1937 collapse to increases in wages, it is only natural that he is against any wage increases during the war period, except in a few exceptional cases. The Government would be given by Mr. Hardy the authority to review and decide all collective bargaining agreements now in effect. “All restrictions on hours of labor, except those that serve a bona fide purpose of protecting workers’ health, must he abrogated.” Compulsory payments of time and a half for overtime must be abolished. By not-too-well-concealed implications, Mr. Hardy is also for the outlawing of strikes. Shades of Hitler! This is the real program of the capitalist class, for which the workers of America will be told to lay down their lives.

This investigation of the experiences of American imperialism in controlling prices during the First World War, with recommendations for price control during the Second World War, was undertaken at the request of the United States War Department. Therein lies the tremendous significance of the book. It represents the policies which the capitalists are considering and proposing in relation to the economic control of the nation. It goes without saying that labor cannot look to its own defense unless it knows and understands the plans of the Government. The book should really be compulsory reading for every trade unionist – indeed for everyone who does not live off the fruits of other people’s labor.

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