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A. Roland

Deep-Going Effects of War Costs
on American Economy

(24 January 1942)

From The Militant, Vol. 6 No. 4, 24 January 1942, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

What the War Budget Means

All the warnings of the administration to the American people of the tremendous changes that will be brought about by the transformation to a full war economy, do not suffice to bring the realization of the deep-going cut in standards of living that will be experienced in a short time.

The administration itself has been forced almost every few months to revise its estimates concerning war needs. The latest revision, in which the President announces a budget for the fiscal year 1942–1943 of fifty-nine billion dollars, is actually too stupendous to grasp in its impact on the previous American way of life.

War expenditures in 1943 will be just about 90 per cent of total government expenses. Compare this figure with the puny eighteen and a half billions spent in the biggest year of the first World War. The public debt no longer has any ceiling, in view of the necessity for borrowing the major part of the vast sums required. In 1943 that debt will rise to over one hundred and ten billions of dollars, more than the entire national income.

The financial side of the war alone would require a total government control of the entire economy to mobilize these resources. But the money and credit side, involving the laying on of new taxes to drain every last cent possible from the masses, is not enough. The United States has been forced, like every other country engaged in the war, to resort to industrial planning on a scale never before contemplated. For the war will require the shifting of whole industries – not along the automobile industry – to war production, the mobilization of skilled labor, the strict allocation of materials of production.

That this will not be entirely effective with capitalist industry still in private hands, is a foregone conclusion. But America is now well on the way to the establishing of that form of “war socialism” which has misled some into thinking that a new kind of economy was coming into being – one that was neither capitalist nor yet socialist.

Depression Economy and War Economy

The strain on the economic system will not be reduced by the fact that purchasing power, potentially speaking, will go up at the same time that shortages of all kinds of goods will develop. Nobody has analyzed enough the contradictory anomalies of capitalism in this respect. Different parts of the system are at sixes and sevens; these different sides of economy seem totally unable to get into step with each other. – Think back for a moment to the period of the crisis following 1929. Then there was a super-abundance of goods – but the masses did not possess the money to purchase the goods, which therefore went begging. Goods were plentiful, money was scarce. Now a new kind of crisis develops: goods are scarce, money is too plentiful, relatively speaking.

It seems obvious that the entire system has no balance wheel and swings crazily from one extreme to the other. The kind of planning that the government devises, instead of alleviating conditions, brings new disproportions and new dangers. The danger now is inflation in its worst form. Even if purchasing power remained stationary, the shortages will tend to cause the bidding up of prices. The government is therefore forced to step in and attempt to fix prices to prevent the internal disruption of its war planning.

In the depression years; the object of government regulation was to try to restore purchasing power and to raise prices. Relief measures, such as they were, created a bigger market for articles of consumption needed by the masses of people. Regulation today is exactly the opposite. Its purpose is to take as much purchasing power out of the hands of the masses as possible, by taxation, by loans, by every means imaginable. Its purpose is to restrict the market for consumption goods, to cut that market down to the bone.

Differences Between 1917 and 1941

It is only as the government begins to tighten the screws on all the multifarious ways of regulating the market to eliminate competition between war requirements and civilian needs, that the masses will really begin to appreciate what the war means in their daily lives. The amount that the government proposes to spend in so short a time, means that American life will change at a tempo far greater than that of any other country.

Roosevelt is trying to achieve in one or two years what Germany and the European countries ip general did in a period of five or six years. The resources of this country may be vast, but even these rich resources will not cushion the effects of the changes to be wrought by the new war economy.

There is this great difference to be noted also between America’s entry into the first World War and its entry into the present war. The first world war had resulted in a stalemate in which both sides were op the verge of exhaustion, The entry of this country therefore tipped the scales decisively in favor of the Allies. The war did not last very long after this tipping of the scales, despite the fact that Russia had been knocked out of the war by Germany.

But the situation now calls for the mobilization of the resources and the man-power of the United States on an undreamed-of scale. The mere entry of the American colossus does not yet tip the scales in the manner of the last war. America has to supply the entire group of nations fighting Hitler with munitions. America has to face war on two fronts, in two oceans. The second World War strains United States production to a far greater degree than did the first war. All of this will be reflected in the standards of living of the workers and toilers.

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