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Frank Demby

Economic Notes

(August 1941)

From Labor Action, Vol. 5 No. 32, 11 August 1941, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Dividends on stocks listed on the New York Stock Exchange were 8.2 per cent HIGHER in the first halt of 1941 than in the first half of 1940. Not bad, considering that 1940 was the most profitable year since 1929. But look at the increase in the war babies. Aviation stocks increased their dividends by 104.6 per cent in this period. The shipbuilding industry came next with a vise of 94 per cent, followed by the steel industry with a rise of 74 per cent.

All told. 543 listed common stocks yielded approximately $956,705,000 in dividends in the first six months of 1941. This suggests that those industries that have granted wage increases due to the fighting power of the workers not only can easily afford it, but can afford much more. This conclusion is heavily reinforced when it is recalled that most of the profits nowadays are not being paid out in dividends, but are being salted away as war chests in surplus accounts as well as being paid out to officers in the form of bonuses. The argument that was made by the steel companies, for example, that a 10 per cent wage increase would bankrupt them unless they raised prices a corresponding amount is thus shown up for the fraud that everyone knew it to be at the time.

Also, it is worth pointing out that the fears of the companies that higher taxes would eat up all their profits have likewise proved to be groundless. If the government is looking for more money from taxes, it seems to us that

the logical thing to do is to raise corporation tax -- not the 5 per cent proposed, but SUBSTANTIALLY. This, plus a 100 per cent excess profits tax, would raise, more than enough money so that there would be no necessity for increased excise taxes on necessities, or for cutting off 700,000 workers from WPA. For higher taxes on industry, and higher wages paid by industry!


The excess profits tax proposed by the House Ways and Means Committee remains a fraud in spite of the additional levy of 10 per cent. In the first place, a tax running from 35 to 60 per cent on profits in excess of “normal” is hardly one which will prevent the accumulation of huge fortunes from war orders. Further, the rejection by the committee of the President’s proposal to eliminate the average earnings method of computing excess profits means that corporations still retain the choice of this method or the capital investment method. The latter method, at least, would consider all profits over 8 per cent of the capital invested as excess. The average earnings method, it will be recalled, considers profits above the average earned from 1936 through 1939 (with some “liberalizing” amendments already passed) as excess. For many of the big corporations, who have most of the “defense” orders, the average earnings method allows them a “normal” profit far in excess of 8 per cent! The real indication, however, of the fact that Congress has no intention of passing a real excess profits tax is the inclusion of a provision which adds 25 per cent exemption – to the existing 100 per cent exemption – on new capital invested by corporations. Previously, it cost a corporation absolutely nothing to build a new plant, on which, of course, it would make its customary profit. Now, corporations are to be paid, in reality, to build new plants or expand old ones!


Ten days after American exporters charged the British with re-selling American Lend-Lease materials to Latin America, the British agreed to restrict their trade competition with the United States. The incident furnishes a revealing sidelight on how imperialism conducts its war for “democracy.” American exporters have repeatedly complained that they have been meeting with increasing British competition in the South American market, particularly in such lines as steel, machinery, rubber, paper and textiles. In most cases, the items were those in which the British are reported to have a shortage and which they have been importing from the U.S. under the Lend-Lease Act.

The Americans claimed that the British were either re-exporting these American-made products or were using the American products and shipping an equivalent amount of British products. The Americans didn’t at all like the idea of the American government financing their rivals, even if they were allies. When private complaints brought no results, they decided to make the matter public.

“The crowning blow in the succession of incidents, according to exporters, came three weeks ago when a company in Buenos Aires which was on the British blacklist entered the market for quantities of paper. According to exporters, the order was substantial and at the insistence of an English supplier the name of the Buenos Aires buyer was removed from the blacklist long enough to enable the British company to bid for the business, and get its money, whereupon the company was put back on the blacklist again.” – (New York Times, July 6)

Comment on this would really be superfluous, but we suggest, in the interests of free trade for American capitalists, that perhaps the President ought to include British firms on his export blacklist.


General Robert E. Wood, chairman of the board of Sears, Roebuck & Co. and national chairman of the America First Committee, has resigned as chairman of the Economic Policy Committee of the National Association of Manufacturers. This resignation, “caused by inability to find time to devote to his duties as chairman of the NAM committee,” was made about a month ago but it was not announced until the committee meeting of July 11 when Thomas E. McCabe, president of the Scott Paper Co., was chosen as General Wood’s successor. In announcing his acceptance of the chairmanship, Mr. McCabe said:

“The impact of guns, shells, tanks and planes upon our heretofore peaceful butter-and-egg economy may have greater repercussions than any bomb deliberately fabricated to create havoc. It is not at all improbable that hundreds or even thousands of manufacturing plants will be shut down within the year unless they are able to convert their production to defense work.” (Emphasis mine – F.D.)

The chairman of the most important committee of all American industry thus sees as the only alternatives for the consumer goods industries – either stopping production, or shifting to instruments of war. Out of their own mouths the capitalists stand convicted as the bankrupt managers of a bankrupt social system.

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