INTERNATIONAL
ENGLISH • LANGUAGE EDITION OF THE THEORETICAL ORGAN OF THE
INTERNATIONAL EXECUTIVE COMMITTEE OF THE FOURTH INTERNATIONAL
THE DEPRESSION
OF THE CAPITALIST ECONOMY
The "recession" in the United States is now a the average at least 13% less than last year, ie, by business enterprises for the present year will be on $4,000 million.
FOURTH
Number 2 Editorial fact. Eisenhower, having lost the initial optimism which led him to minimize the economic slide backward observed since 1957 and to predict the reversal of the conjuncture in March, has even used already the graver term "depression.
The official hopes set on the March statistics have not been confirmed.
The "recession" continues to deepen, though to a less serious extent than in the previous months (January 1958 and December 1957). Since August 1957 industrial production has dropped 10%, or more than in the two preceding postwar "recessions," those of 1948-1949 and 1953-1954. For several months already industries have been working in reality at an average of 70% of their capacity. steel industry is working at only about 50% of
Total official unemployment, which was 5,200,000 in February, increased again in March, by about 25,000, representing a net between 200,000 further unemployed in industry, and 175,000 less in other
But both the trade unions and Democratic Senators like Douglas already estimate it at more than 10% of wage-earners, ie, already more than unemployed. particular raise the figure to about seven million already. There must furthermore be taken account the partial unemployment that arises from the reduction of working hours in the plants, the weekly average having dropped from before the recession to 38 hours at present.
Other indices are characteristic both of the extent of the "recession" and of its prospects. It is now confirmed the investment expenditures of
Spring 1958 a figure of more than $6,000 million. To this figure there must be added that arising from the decrease in wages as a result of total or partial unemployment, which is estimated at an average of $1,100 million a month since August, ie, another sum of more than $6,000 million already.
Taking into account a part of the wages lost or reduced that are covered by social security payments (2/5ths), we reach an approximate figure of at least $15,000 million, illustrating the losses of the American economy since August 1957 as a result of the diminution of production, investments, and salaries.
In face of these losses, what are the measures already adopted or under consideration in order to catch up again and inject a new stimulant into the American economy, which is obviously running out of wind?
The general line of the reactions of the American administration, seconded by the Democratic majorities in the House of Representatives and the Senate, is sketched out in the direction of "Keynesian" "New Deal" remedies, even though the Republican administration protests pro forma against such an "accusation': increased budgetary expenditure, elasticity of credit (the interest rate is reduced to 24%), decrease in taxes, budget deficit.
budgetary expenditure concerns above all the military field and that of public works. After the increase of the 1958-1959 budget by $2,100 million destined for the speeding-up of the programme for the manufacture of guided rockets. the Pentagon is on the point of obtaining another $1,700 million, ie, a total of new military expenditures of about
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To this there must be added about as much so far this year for different public works (buildings and roads); or a total of $8,000 to $9,000 million.
It is thus easy to observe that even this already. very important figure is far from equaling that of the approximately $15,000 million of losses of the American economy run up since August 1957.
Whence the clamor for new stimulants necessary first to stop the to-date continuous deepening of the recession on a "plateau," and then to bring about the reversal of the conjuncture, toward a new boom. These stimulants, which the Democratic opposition demands (for political reasons obvious in an election year) with noisy zeal, must be either new budgetary expenditures in arms and public works or a reduction in taxes, or a combination of the two.
For the moment it is possible that both Republicans and Democrats are heading for a tax reduction. It remains, however, to settle on the amount and the methods of this reduction. The AFL-CIO unions call for a cut of at least $6,000 to $8,000 million affecting especially incomes of under $5.000 a year.
Business circles, on the contrary, example the Committee for Economic Development, which calls for a sum of $7,500 million, would like a 20% cut in taxes irrespective of the income level which would not fail to favor especially very big incomes.
Thus the road is being taken toward the creation of a serious budget deficit, the result of both new expenditures and the reduction of receipts, which will be in the best of cases higher than $10 million.
It is this obvious inflationary prospect, as well as skepticism as to the value, as a stimulant for a weakening economy, of public tax cuts, which explains the administration's hesitation about going further along such a road.
Indeed, a quite special characteristic of the preent recession is the continuous rise in prices (apart from those of some durable consumer items).
The explanation of this phenomenon-which in its turn undermines the masses' purchasing power; and from that viewpoint aggravates the recession and delays the moment of a new upsurge-must be sought in the monopoly structure of the American economy and the very great importance of the service sector and luxury production.
The monopolies have much to do with the relative rigidity of prices.
Furthermore, the prices of the service sector and luxury production can for a whole period follow a distinct course, fed among other things by the inflationary revenues unproductively distributed by the state budget to a whole social stratum of "consumers" (arms makers, state bureaucracy, holders of government bonds, etc.).
The inflation that characterizes this recession is in the last analysis due, to a considerable extent,
FOURTH INTERNATIONAL to the extraordinary scope of budgetary expenditures.
Expenditures for publie works, apart from building, are considered to be a stimulant that has only a long-term effect. As for the reduction in taxes, this could in theory act immediately as a stimulant for new investments and greater consumption. the present climate of caution, however. which has got hold of both businessmen and ordinary consu mers, faced by the uncertain prospects of the American economy, nobody is sure that the reduction would not serve to strengthen savings rather than spending.
What conclusions are to be deduced from these data on the American economy?
First of all, that the present recession is more serious than previous ones experienced since the end of the war, from the viewpoint of both extent and probable duration. It is in fact evident. that this recession, even if stabilized at the March level, or slightly improved, threatens to last the whole of 1958 and beyond. Some even are saying that its effects will be felt all through next year and up into the beginning of 1960.
Next, that this recession, the result of a classic boom in capital goods, and in part even of durable consumers' goods (autos, television household appliances, etc.), has demonstrated better than the recessions of the past the organic ailment of the American economy as a capitalist economy: the still not overcome disproportion between productive capacity and the masses' purchasing capacity.
In fact, the present crisis is a classie crisis of overproduction • which was announced by a series this field which are well-known Marxists: accumulation of industrial and commercial inventories, fall in the prices of raw materials. reduction in the number of orders, a sharp drop in stock-market prices.
Private economists and the American government's economic advisers had in these last years boasted about their ability to foresee the evolution of the capitalist economy and about the means which the capitalist state supposedly had at its disposal from then on to avoid major crises. It can currently be brought up against them that their own empirical indices, interpreted from a Marxist viewpoint, were already sufficient to have enabled them already a year ago to foresee the present slump, but that they generally abstained from drawing such a conclusion.
imbued with conservatism optimism about the possibilities of the American "miracle."
for the "regulatory" means of the capitalist state, without their being negligeable, are not always able to intervene in time, in view of the anarchic and unplanified structure of the capi-
FOURTH INTERNATIONAL talist economy; and especially when the crisis of overproduction has been ripening in the depths, these means are, in spite of everything. incapable of just simply eliminating it. They can in the best of cases only prevent the recession from spread. ing in an abrupt and catastrophic way.
By casting a retrospective glance over the evolution of the American economy since the great 1929-1933 crisis, the following instructive observations can be
That crisis was genuinely overcome in reality only in and by There was a new relapse in 1937-1938 that lasted until 1941, the United States in 1940 still numbering more than 10 million unem-
Thanks to the enormous needs and destructions - caused by the war, the American economy, stimulated by the extraordinary wartime budgetary expenditures, could make an upsurge that lasted till about 1948. and since then chical deprion bodegre epression-boom-depres sion rhythm has been set up, which is characterized by the tendency of the depressions to get deeper and last longer, and the periods of boom to get
This permits us to conclude that the present depression, once stabilized at whatever level, and then surmounted, would be followed, after a relatively briefer lapse of time than in the past, by a new economic falling-off.
Another conclusion, under these conditions, is that the advance, at an uninterrupted rhythm, of the economic development of the USSR and the other workers? states has in fact become irreversible and that the gap between the Soviet economy and the American economy will be bridged in the coming years, and faster than had been thought.
Now let us examine the probable repercussions of the American recession on the rest of capitalist
For the moment, these repercussions are particularly felt in raw-material producing countries whose dollar reserves are already low. But soon, in case of a diminution of American imports, all industrial countries which in these last years have seen their exports to the United States increase might be affected by the aggravation of the dollar deficit. might thus be an interaction among the three exchange zones, raw-material producing countries, the United States, and European industrial coun tries and Japan, operating in the direction of a contraction in world trade, an aggravation of the dollar deficit, an exhaustion of reserves, and a still greater slowing down of the growth of production.
Then the recession reaching Europe and Japan would have repercussions on the United States, aggravating its own recession.
This process is already under way.
The underdeveloped countries of Latin America
3 and Asia are experiencing grave financial difficulties which' are causing a restriction of their imports of industrial products. The growth of production in European countries, with the exception of France, is continuing to slow down, while their deficits in both dollars and marks are increasing. Japan, closely dependent on trade with the United States and the countries of Southeast Asia, has already been affected by the recession. This threatens to be the case soon in Europe, first in England-where the signs of recession are already apparent-later in Germany, as well as in France, Italy, and other industrial countries.
It can be foreseen that the rebound of the situation created by the development already reached by the recession in the United States will inevitably be felt, in varying degrees, toward the end of the present year, by all European countries and by world trade as a whole.
The United States has two ways of facing up to this situation, whose political consequences, disastrous for capitalism in general, cannot be minimized: either to try, as it were, to export its own crisis by limiting its imports and concentrating all its efforts on an increase in its exports (at present in a notable slump for several months already), or else to promote a vast "Marshall Plan' on the international scale in order to support world trade, threatened with asphyxiation for lack of dollars.
In reality, both for internal reasons which depend on the proof that the US market is at present relatively saturated (compared to the productive capacity of American industries) and for reasons of the survival of capitalism, the only real United States has at its disposal for getting out of the present crisis without definitively resorting to war, is such a "Marshall Plan."
The hour of choice for the United States must not be put off very much longer.
The present recession which threatens to involve the whole of the capitalist world is taking place under exceptional historical conditions, in the face of an important sector of the globe where a statified and planified economy is being built.
The decisive test between the two systems, including on the economic plane, has already begun. It is plain that if the recession reached the whole of the capitalist world and deepened, it would create a revolutionary situation, including in the European industrial countries, which would threaten to complete the final defeat of capitalism without a battle, as it were.
This recession is an important psychological defeat for capitalism because it destroys the illusions, created by the boom, of a capitalism which from then on would supposedly flourish and had overcome the crises of the past. And because it also forces comparisons, disastrous for capitalism. with the uninterrupted development of the USSR and the
4 workers' states, and their spectacular achievements in certain fields of vanguard industry such as interplanetary
It is difficult to admit that capitalism, and in the first place US capitalism, would stand passively by at such an ordeal. For the moment its reactions are not in the direction of promoting such a "Marshall Plan" but rather of an increased preparation of atomic war by generalizing the atomic armament of the NATO nations and Japan. Other measures, such as the unification of military command in the United as the recommendations of the Rockefeller Commission sketched out, lead in the same direction.
But at the same time the positions of capitalism become daily more vulnerable, thanks to the diplomatic initiatives of the USSR, to the extension of the colonial revolution, and to the reactions of the masses in several important countries like England and Germany.
The USSR's decision for unilateral suspension of atomic arms tests strengthens everywhere the mass movements begun in England and Germany for unilateral atomic disarmament.
Beginning with that, a more effective fight can be engaged in against the manufacture of atomic weapons, for the destruction of present stocks thereof, against atomic bases and launching ramps, under international workers' control.
The colonial revolution, on its side, continues to advance. In Indonesia, imperialism must soon decide on a more serious intervention on the side of the rebels if it wants to avoid a defeat that would bring about a new upsurge of the Indonesian revolution. Such an intervention is, naturally, not wholly excluded, but in that case it would surely provoke a parallel intervention on the part of China, backed up by the USSR.
The economic situation in the United States may push Washington, in the absence of a major war, into Editorial Notes
FOURTH INTERNATIONAL looking for a new "War of Korea," and in this case the Indonesian archipelago is naturally quite indicated.
American imperialism, based on Bourgiba and the King of Morocco, is at present trying, in alliance with the fraction of the French bourgeoisie that has been won over to the idea of a Franco-African Federation, to force the F LN to agree to such a solution, with Algeria winning only autonomy within the framework of such a structure. This would offer imperialism the advantage of avoiding contamination by "Nasserism" of at least part of the Arab world.
The sealing-off of the Tunisio-Algerian frontier by UNO troops, toward which the "good offices" are heading, would be obviously only a measure aiming at breaking down the present "intransigence" of the F L N, a major obstacle for "a solution" in Algeria. In Latin America, finally, after the victory of Frondizi in Argentina, after the failure of the Siles offensive against the miners in Bolivia, and after the popular victories brought off in Colombia and Venezuela, it is the turn for the Cuban Batista, Washington's straw-man, to yield to the growing popular revolution.
In Europe itself, another bastion of Washington is once more showing signs of a crisis which may not take too long to bring, in one form or another, the end of the dictatorship : Franco Spain.
Thus there are being created, amid the recession which little by little is enveloping the capitalist world, conditions and situations that are eminently favorable for new victories capable of further isolating and weakening American imperialism.
In the United States itself a prolonged recession threatens to create a new situation in the labor movement, and not only in its trade unions. Propaganda for a third party, a labor party based on the trade unions, may in this new conjuncture reach this time a victorious conclusion.