From the point of view of Big Business an economic depression such as this is not at all unwelcome. Provided it does not turn into a political revolution, a depression furnishes an excellent challenge in a domestic game in which Big Business must emerge the winner by an overwhelming margin.
Viewed historically, depressions have supplemented wars as the great opportunities by which Big Business has reduced its competitors to helpless futility, consolidated its power and strengthened control over government and armed forces. If wars have been called the locomotives of history carrying Big Business ever more rapidly forward, depressions may be considered bulldozers pushing and scraping Little Business into the pit for the historically outmoded and leveling the ground for better construction in the future.
The free market is the place where all values are tested as to the degree of their social necessity. Here is the place where are determined what stuff is needed and what is not, now much is needed and how much is not, what has been produced with better, average, or marginal efficiency and what should better have not been produced at all. Where else can the individual private producers find the necessary answers to these questions? Under a free enterprise system how else can society be selective and follow its goal of "excelsior"? The mere fact of sale or of purchase proves that the commodity is desired by others than the producer. The price is an indication of the relative value of a given article in its relation to all other articles on the market.
During periods of prosperity generally every producer is selling his goods at prices which allow him to continue his work. The demand for goods is high enough to allow a place even for the poor and inefficient producer. The more efficient make a higher profit than the marginal producer. With this greater profit the former apply their efficient methods even more widely until what was formerly the exceptional becomes the average. The marginal producer, still selling his goods at a profit sufficient only to keep him going, is unaware of the great changes that have gradually taken place on all sides of him. He still believes his products are needed and that he is at least an average producer. Prosperity is an opiate that lulls him to sleep, as it does even the most efficient, although to a lesser extent.
As an even greater stream of products come pouring into the market produced by the same quantum of labor, the pressure on the marginal producer increases. The supply of goods becomes weightier than the effective demand for it. Economy moves into the cycle of depression. For the first time, perhaps, the less efficient producer finds his stuff is no longer socially needed. His prices are too high; his costs are too high. His sales fall; prices fall. Circulation becomes sluggish. He can not collect his credits; he can not pay his debts. He screams for help in his distress as the bulldozer moves upon him dumping him into the pit. But why should Big Business care? And why should the country care?
In the deep capitalist sense, what is good for Big Business is indeed good for the country. Do the inefficient, the ignorant, the poorly managed little firms have any right to continued existence forever at the expense of science, of technology, of progress generally? What is the screamer's life, even improve his situation, without having to salvage the junk which is all that his little inefficient business represents in the social sense. Let us look at the picture objectively, unaffected by the screams of the little producer being pushed by the bulldozer.
Consider these figures: In 1953 the top 3% of all firms employed 14.6 million employees out of a total of 40 million then employed, or 36.5% of the national total employees. The very top group, representing 2/10ths of one percent of all concerns, employed 18% of the total employees. In 1956 there were close to 9 million corporate stockholders. These figures show the specific gravity of Big Business in our economy.
In 1954, in manufacturing, the 260,000 small plants, each having under 100 employees, had 4.1 million employees who added $25.2 billion in value. The 2,100 manufacturing plants employing 1,000 employees or more, on the other hand, had 5.3 million employees who added $43.3 billion in value. In the small firms the value added per employee averaged $6,146 that year, in the large firms $8,170.
These figures in themselves give us the basic story. The large firms employ 25% more employees than the small firms; each employee in the large firm produced about 30% more than each employee in the small firm. Economically speaking, of what great essential value is the small firm? Why should society be bound forever to the impotent past holding back all of us? We do not have to expropriate little business; the depression does it for us.
Even on the farms, only 2.7% of the total, those with 1,000 acres or more, possessed 45.9% of the farm land and 17.6% of the harvested crop land. The top 6.7% of the farms had 57.3% of the land and 33.1% of the harvested crop land, while the top 16.8% of the farms had 71.8% of the land and 56.5% of the harvested crop land. These were the ones who had really benefited from the enormous capital expenditures of the government. They were the end results of the industrialization, electrification, and mechanization of the countryside aided by the huge sums spent for development of power, paved roads and highways, irrigation, land reclamation, land conservation, special payments for non-production and guaranteed parity prices all supported by the general taxpayer.
How the bulldozer of history has cleared the ground in agriculture can be seen by the statistics issued by the United States Government. From 1929 to the end of 1956, although the general population and labor force increased by almost 37%, paradoxically, the agricultural employed labor force declined from 10.5 million persons to 6.6 million, or by 37%. Thus the agricultural employed group which had been 22% of the total civilian labor force employed in 1929 shrank to only 10% of that total by the beginning of 1957.
But this is not the whole story. Of the 4.8 million farms in 1954, only 27% of them, or 1.3 million, were commercial farms selling farm products worth $5,000 a year or more; the other 73% were either farms in name only, used merely as residences or by those working only part time on the farm, or were such poor family farms that they could not produce even $5,000 worth of products a year. Yet it is these rural slums and woefully inefficient "farms" that are supposed to be perpetuated and supported.
Those who scream loudest on the farm when the bulldozer of history moves on them during a depression are the ones who have recklessly wasted and destroyed the land and resources of the country. Let us not forget that while in other countries the peasant had to fight bitter civil wars to get even an inch more of land, here vast sections of land were to be had practically free of charge in the course of the settlement of the West. How did the inefficient farmer repay society for this munificence?
According to the Reports of the Land Planning Committee issued by the National Resources Board in 1934 and in 1935, of the total land area in the United States subject to wind and soil erosion, about one-third, or 400 million acres, had been totally destroyed, its top soil completely gone. Of the other two-thirds, between 25% and 75% of the topsoil was gone forever. Note: FOREVER.
Besides this terrible toll of erosion due to reckless uncontrolled farming, depletion of the fertility of the soil was going on at a rapid rate. At the present rate of such depletion, in 400 years our soil would be completely exhausted. The ability to destroy the soil of the country gives the "farm bloc" a golden opportunity to blackmail the people of the country into payments for what is really ineffective conservation.
For example, in 1951 alone the cost to the Federal Government for soil conservation was $257 million, covering about 100 million acres. An investigation of these expenditure made at the time showed that a good part of the money received by the "farmers" was paid ostensibly to stop erosion but was used fore purely private purposes. From 1936 through 1951 the total spent for "conservation practices" alone amounted to $2.9 billion. If we include production adjustments and acreage diversion payments as well, we get a total of $5.3 billion. To this must be added the costs of the Civilian Conservation Corps established at the time.
As we write the epitaph on the grave of the American small farmer, let us give him the credit due him. He was induced to come to this country and take up farming with inadequate capital. Despite heroic sacrifices as pioneer, woodman, land clearer, and yeoman, he was constantly egged on to give his all to a cause in which he could not win. Free land and hard labor were not enough for the farmer, however. In a land of capital his inadequate capital was decisive for his future. He was sucked dry of usefulness and now can be discarded as a wrung-out rag. The allodial land given him proved after all to be on a lend-lease basis. The land, also greatly worn out, will now return back to the State from whence the farmer obtained it originally.
How much the country actually relied on Big Business can be seen during the war years. According to the estimates of the War Production Board, between June 1940 and September 1944, a total of $175 billion in prime contracts were awarded. Of this total, $117 billion, or about two-thirds were given to the 100 top corporations with the top 33 corporations receiving more than half, and the top ten getting 30% by value. During the Korean conflict the top fifty corporation were awarded two-thirds of the total government defense contracts, with the top ten getting 40%.
Such an outcome was natural, and even inevitable, given the situation that had developed in this country. Defense orders had to be concentrated in heavy basic industries already dominated by large corporations which controlled these industries. Small firms were totally unable to perform the work or produce the goods in time, in many cases. Government procurement was made more speedy and simple by dealing solely with the large firms who took upon themselves the job of sub-contracting and keeping in line the smaller fellow who cooperated. Besides, the large firms had their representatives right inside the government and lines of communication were easy.
How could the United States have possibly won the war under the given circumstances without firm reliance on Big Business? And this reliance holds true even more so today as an examination of the field of general research and of atomic energy shows.
Since 1946 a major part of research and development in the nuclear field had been carried on for the Atomic Energy Commission by a handful of private firms operating under contract. Funds provided by the Government between 1946 and 1952 have been estimated as amounting to $12 billion. The Du Pont Company operates the plant at Hanford, Washington, the General Electric Company operates the plant at Oak Ridge, Tennessee, and the Union Carbide and Chemical Company operates the plant at Paducah, Kentucky.
In research generally, in 1956, out of a total of $6.5 billion allocated for research of which 49% came from the Federal Government, industry made use of $4.9 billion, or 76%, while universities used 7% and the Government itself only 17%.
This last illustration shows only the most striking end product of a trend which has been long in the making. Long ago the individual inventor gave way to the collective laboratory working employed by the large corporation. Research has been, in the main, directed research, whether done by the corporation, the university financed by the corporation and Government, or by the Government managed by the corporation. The patents obtained by lone individuals are today practically insignificant. The very foundations of large monopolies today rest upon the nexus of multitudinous patents which have become theirs to exploit.
If the country relies on Big Business during wars, it also comes to rely on Big Business as a source of taxation. Sixty per cent of the total corporation taxes is paid by 3/10ths of 1% of all the firms, the very largest. In the field of mining and quarrying 5/10ths of 1% paid 51% of the tax, etc., etc.
During a depression this ratio of payment of the corporation tax by the largest corporations is greatly increased as the smaller corporation moves toward bankruptcy.
B. The historic function of Big Business is to expropriate smaller business.
Before entering into the program which Big Business will most likely espouse during the depression, we have two preliminary tasks to perform: First, we should outline the major features of the "normal" depression, although we must warn in advance that the present depression (1958) shows deep evidence of turning from a "normal" to an entirely deeper "abnormal" one. Second, we should show the uneven effects of the depression and how those uneven effects must affect any program supported by Big Business.
To the average person, the recognition of the advent of a depression comes with large-scale unemployment. In the last Great Depression of the 1930's the number of registered unemployed was around twelve million; in fact there were about twenty million looking for work in the depth of that cycle. In the "normal" phase of the present depression, what with the increase of population, the development of productivity, and the shrinking of the world capitalist markets under the impact of the People's Revolution, there should be at least double this amount, if the depression were to go on say, to 1960. Unemployment does not strike evenly, however, as we shall presently see, and this unevenness vitally affects the strategy and program of the various layers of the population involved.
Curtailment of employment is the result of curtailment of production which occurs during a depression. The mechanism of this curtailment may be explained somewhat as follows: If we divide the country's producers into two broad general departments, I) producers of the means of production (that is, fixed capital such as plant construction, durable equipment, machinery, etc., and circulating capital, such as raw materials, auxiliary materials, etc.) and II) producers of the means of consumption (that is, food, clothing, furnishings, etc.), we find that production is curtailed more sharply in department I than in department II. And this is for a very good reason. Stimulated during a period of prosperity by the possibility of selling larger amounts of goods, the owners of enterprises in Category II buy much new machinery and equipment and similar items from the owners in Category I, stimulating in turn a vast flow of goods in the form of machinery and producers durable equipment, and such, from Category I. Soon this huge amount of new equipment and producers goods has created such a flood of new consumers goods that the markets can no longer absorb it, despite credit, instalment selling, and other sales pressures. Capitalists in Category II then reduce their orders for durable goods and producers commodities. The capitalists of Category I who have enormously expanded their production must sharply curtail this production and unemployment takes place in steel, auto, basic metals, industrial chemicals, etc. The unemployed can no longer buy the same quantities of consumers goods from Category II and Category II must also experience some unemployment, although not as great as in Category I.
Together with the fall in production, therefore, there goes a fall in total sales and generally also a fall in prices. Sales volume of the necessities of life falls less than the sales volume of goods not needed for revenue consumption by wage-salary employees who now make up over 80% of the active civilian labor force. People must still continue to eat and clothe themselves even if they have to call on their reserves, or go into debt. But purchases that can be postponed are postponed or not made at all. Durable articles that do not have to be repurchased or which cost a lot to replace can be patched up if need be. Thus sales of durable goods fall harder than sales of non-durable goods, and relative prices fall accordingly.
As sales volume and prices fall and circulation of goods becomes sluggish, business men try to dispose of their inventory and buy only from day to day. They try to make their machinery and equipment last as much as possible without new purchases. They try to collect from their debtors, they are no longer free to extend credit, especially consumer credit, particularly instalment credit. Even should he banks have plenty of leeway to extend credit, they cannot do so when there is little prospect of doing business and collecting on the debts due.
The fall in domestic sales is usually more than matched in the fall in foreign trade, today more so than ever. A deep depression is apt to affect the weaker countries in the rest of the capitalist world far more sharply than the United States, although all parts reciprocally act on each other.
Here, then, is a brief outline of the major features of the "normal" depression as we have come to know it. Under such circumstances of falling incomes and the necessity of making every cent count as much as possible, one must admit it would be folly were society to permit inefficient, wasteful production, when the more efficient and economical producers have produced more than sufficient. Now is the time to clean house.
The depression, however, does not strike in all directions with the same force nor with the same effect. One outstanding factor we must note at the very start which separates Big Business from all other businesses, and that is that within the framework of continued capitalist society it is practically invulnerable to bankruptcy. Big Business can not be put out of business by its competitors. It alone has the capital and reserves necessary to stand the strain. It has the full and complete support of Government in any crisis. If Big Business goes, the whole economy goes. And so Big Business can not be allowed to go. On the contrary, it must have its way more and more despite the fact that, in some respects, it really may be the hardest hit of all during the depression.
We have already noted that in a depression the producers of fixed capital and means of production are affected more severely than the producers catering to the needs of the individual consumers. Yet it is precisely in these fields of steel, metals, machinery, chemicals, transportation, etc., that Big Business traditionally dominates. Wherein lies its invulnerability?
We have also noted that Big Business controls the decisive section of the active civilian labor force. It is, therefore, from Big Business that the main army of the unemployed is recruited. How can Big Business meet its great obligations?
Furthermore, Big Business, in the form of the top banks and insurance companies, has vast loans outstanding backed by mortgages on farms and homes, by collateral commodities which can not be sold to repay the loans, etc. After the mortgage are foreclosed, for example, and the commodities sold at auction, what then?
The very simple method Big Business adopts in order to succeed in a depression is to expropriate and swallow up all the other businesses. It does this directly by forcing others into bankruptcy, or by mergers and consolidations. It does this indirectly by its control over Government and society.
Let us take a look at the typical example of the smaller producer suffering severely during a depression. The given company has a considerable amount of unfinished stock, semi-finished articles in the process of being made, and finished stores to be sold. The owner has expanded his plant on the basis of bank credit given him when times were good and turnover active. He has also given credit to others. And now the depression arrives with greatly curtailed sales. He can only sell more if he can reduce prices, but if he reduces prices he must sell the material he has only hand below what he paid for it. He might be willing to sell at a loss if he could collect his credits, but his debtors cannot pay very well. They want an extension of time. Some are worse off than he, and may go out of business, since they need their little reserve to feed and clothe themselves. In the meantime the bank is on his neck for him to pay the loans they have made to him.
He puts great pressure on this wholesale and retail dealers to pay up or to collect from the consumer. The dealers report that they have, at considerable cost, recaptured the goods sold on consumers credit, but now that they have the second-hand damaged goods, what shall they pay him with? For them also costs are mounting and they, too, don't know what to do.
Finally, in desperation, the small producer decides to sell his goods at greatly reduced prices, even below costs, so as to clear the decks and pay at least part of his loans to the bank. Assuming he does so, he must now find customers for his new production. His customers may buy more merchandise at the new lower prices, but he finds that even if the raw materials he must use have also fallen in price, his plant and overhead expenses are far too heavy for his reduced volume of sales even at the lower prices. He finds the banks no longer willing to make the same loans to him as before, and not on the same terms.
He believes he may survive if he cuts wages, increases the intensity of labor, lengthens hours, employs child labor, worsens working conditions, etc., and he uses all these ways open to him as much as possible. But all the other little fellows are now doing the same. The market is glutted more than ever. There comes a time when he goes under.
Now let us take a look at Big Business. Big Business can cut costs not by simply cutting wages nor by worsening working conditions. A far better way is open to it: the way of science, technology, and engineering, the path of increased productivity, the improvement of the means and process of production, so that labor can produce much more than before with the same amount of energy in the same time and for the same wage. There is a limit to the working day or to the speed of the laborer; there is no limit to scientific progress. P Big Business is intimately interlocked in production sales and in finance. It controls the banks and financial institutions. It makes loans to itself, and, if necessary, the government will help it tide over any given situation.
During depressions, Big Business can take advantage of the bankruptcy of others. It can buy out the auctioned materials for a song. It can expand its chain and branch outlets and multiple stores. It can merge and consolidate the smaller firms to itself. If can break the back of any rival. If extends the concentration and centralization of capital to the point that it manages the projects of the government itself. Big Business, in control, throws the effects of the depression, where it can, onto the shoulders of all others.
But as it ruthlessly does away with all effective business competitors, Big Business must face the problems of taking care not only of its own employees, but of all the people it has expropriated. It has thrown off the burdens from its own back onto others but these others can bear only so much. The latter may be willing to lose their jobs and their property, but they are not willing to lose their lives. It is up to Big Business to give them an adequate living; otherwise look out! But this is put off as a problem for tomorrow rather than for today.
Here we have the picture of the power and the responsibility that face Big Business in today's depression. It is true the historic function of Big Business is to expropriate Little Business, but it also must inherit the consequences of such action.
C. Problems of Relief
The depression places great problems before Government. First of all, there are the problems of general, special, and unemployment relief. Second, there are the problems of resuscitation of business and the positive problems of maximum utilization of economic resources and forces. Third, there are international problems that must be solved.
On all these matters Big Business will have to take a position. Its program, on the whole, will be that of Government, at least until the program runs into insuperable difficulties; for no other group can effectively oppose Big Business; neither Little Business, now totally dependent on Big Business for its existence, nor the labor leaders who, now recognized by Big Business, take the position well characterized by the aphorism: "like master, like servant."
Let us first take the problems of general, special, and unemployment relief. In Anglo-American tradition, general relief to the aged, the disabled, the helpless, the poor and the needy, has always been a function administered by local government. During the depression the numbers of the needy must greatly increase as the older workers find it more difficult to get or hold jobs, as special relief funds are exhausted for given individuals, and as entire families get into serious economic difficulties. This great increase in general relief can be met by local and state taxation or by loans. Since the local bodies already have a debt burden of about $50 billion, the principal ways, perhaps, of taking care of the general relief problem would seem to be through:
Big Business can very well go along with this program, since the burden must fall far more heavily on Little Business and on the people generally than on itself.
Let us take, for example, the retail sales tax. This is paid by the consumer, not by the producer. It is a regressive tax, that is, it weighs far more heavily, relatively speaking, on the lower economic orders and forces them to use up their reserves and renders them more dependent. As the volume of sales tends to drop because of the tax, the tax places Little Business closer to bankruptcy than ever and clears the decks for the extension of the chain store and branch outlet run by Big Business, which very often, is now decentralized and located in the smaller community which the new outlet can dominate.
As for the local income tax, as yet this is not prevalent and, where it is imposed, acts primarily as a wage tax that presses most upon the poorer workers.
Big Business need not object to the food, housing, and medical care projects which will need Federal support to make them effective. How the Federal funds will be raised for these projects is a matter we shall deal with later, but so far as the projects themselves are concerned, they will operate to free the country from the grip of artificial food subsidies and housing shortages and will render a greater part of the population more subservient and dependent on local and Federal government which Big Business will control. It is a good antidote to revolution, at least for the moment.
In the case of the mortgage moratorium, what this means is that Big Banks and Insurance Companies will have their mortgages guaranteed by the Federal Government and the interest on them paid on time. The government will be left holding the bag, not Big Business. Let us not forget that in 1956 the total amount in non-farm mortgages was about $135 billion. Of this about $100 billion was in 1 - 4 family houses covering about %50 of the 20 million owner-occupied dwellings. It is this vast total that will be guaranteed for Big Business by the government. To this may be added certain aspects of chattel mortgages and instalment recaptures.
Insofar as special relief is concerned, this has taken many forms and has been given many fancy names, but its purposes can be seen from its coverage. In 1955 there were 5.4 million persons on old-age and survivors insurance, 2.1 million on survivors benefits - not counting government special funds, 1.2 million on the veterans program, with 2.6 million veterans alone on disability payments.
The vast annual payments made to these funds by the Federal Government have been raised either through taxation or by increasing the national debt. And here it is necessary to say a few words about the attitude of Big Business toward taxation and the national debt in general.
The first and most important point to note is that today, when general heavy taxation is a universal necessity, Big Business can welcome it more than any other economic sector of the population for the following reasons:
1. The more Government relies on Big Business for its taxation source, the more dependent Government becomes on Big Business.
2. The heavier the taxation on general business, the sooner the smaller business and competitors to Big Business become bankrupt and go out of business.
3. The greater the taxation, the sooner Government becomes Big Government, controlled by Big Business dominating every phase of economic life with especially useful functions in the international scene.
4. The greater the funds collected, the greater the funds spent on sales and services supplied by Big Business. Big Business is the supplier of Government, as we have already noted, as well as the custodian of its research and economic secrets.
A similar rationale prevails in the case of a rise in the national debt to supplement the expenses not covered by taxation. A large and rising national debt favors Big Business in the following ways:
1. The bonds issued by the government are bought mostly by Big Business and renders Government more dependent on Big Business.
2. The bonds are translated into cash by Big Business financial institutions, so that Big Business becomes an ever-increasing money power, in effect controlling the currency and government monetary policies, including those of deliberate inflation or deflation.
3. Bond issues furnish a great opportunity for Big Business to invest its surplus reserves at good interest rates during a depression when ordinary market opportunities are constricted.
4. The heavy taxation, necessitated by the large interest payment on the bonds, presses heavily on smaller competitors and tend to drive them out of business.
5. The funds obtained are spent on goods, in the main furnished by Big Business.
The problem is not whether taxes should be raised, or the public debt increased, but rather who will contribute what share of the funds collected by Government and through whom and for whose benefit will payments be made. It is one thing if Little Business is in control of Government and wants to "sock the big corporation", it is another matter when Big Business controls Government, as it does and must under present-day circumstances.
Keeping in mind, then, this fundamentally new policy of Big Business towards the sorts of taxation mentioned and toward the national debt, we can return to the special problems of old-age and survivors insurance, veterans payments, and unemployment compensation payments.
So far as social security, pensions, and retirement payments are concerned, Big Business is ever so much more able to stand the tax strain than the other business groups. Furthermore, since its average pay per employee is higher than that of the other groups and often higher than the maximum pay base ($4,200) on which the social security tax is gathered, Big Business pays a less percentage of its payroll for social security than do the other groups. Furthermore, whole the workers in Little Business often have to continue working after sixty-five years of age, a greater proportion of employees in Big Business are retired promptly so as to make way for newer and fresher employees. In this way the percentage of insurance funds consumed by retired Big Business employees is greater than it otherwise would be. And this also holds true for the aliquot part of the government funds used for this purpose. Thus, for all these reasons, among others, the Social Security Tax weighs far more heavily on Little Business than on Big Business.
So far as veterans payments are concerned, Big Business can not be opposed to such because they are part of the legitimate costs of military defence and the overwhelming portion of the military budget is spent for stuff and services furnished by Big Business. The armed forces are peculiarly close to Big Business. How could it be otherwise?
Unemployment compensation is another form of relief that Big Business can not repudiate. For one thing, during periods of prosperity Big Business keeps going with little unemployment, save of the technological kind. Its contribution goes down as its unemployment rate remains low. Little Business, with a high rate of fluctuating employment, pays the highest rates possible.
Second, during depressions heavy basic industry is hit the hardest. Big Business lays off hordes of workers who draw the maximum amounts for the maximum time. Thus, on the over-all picture, Big Business puts in less than its share and draws out more than its share. Why should it be opposed to such a scheme?
During a prolonged period of depression, such as that experienced during the Great Depression 1930 - 1939, there is no question but that the unemployment compensation funds will run out. These funds were never meant to take care of very heavy mass unemployment for very prolonged periods of time, but only to act, at most, as a stop-gap and really only to handle technological cases.
With unemployment funds exhausted there could be created a really dangerous situation, especially for Big Business furnishing most of those entitled to receive payments. What to do? Raise the tax on the Big Employer? No, rather let the government step in and trough general taxes and loans extend the unemployment compensation payments but only for those originally entitled to them. Then what about the 20% of the unemployed not covered by unemployment compensation? Let them go on general relief so that the burden will be even greater on Little Business and help break its back!
Suppose, however, the economic crisis becomes very severe and prolonged so that the unemployment funds and even the social security funds are totally exhausted? Then all will have to be moved down to general relief, supported by general government funds as long as these last.
To sum up this part of the program, then, Big Business will not take the position of cutting down government expenses during the depression, at least at the start, especially since the burden will fall the heaviest on other sectors of the economy. It can not cut down the total for relief; it can not cut down on the military budget; it can not cut down on government employees themselves who must be under its increasing control and furnish a stable civilian army in its behalf.
D. Problems of Resuscitation of Business.
We come now to the second great set of problems involving the resuscitation of business and the maximum utilization of economic resources and forces. Big Business openly or covertly must take the position: Now is the time to modernize. Of course, Little Business will resist this policy and demand such measures as tax reduction and direct aid to help keep it going. But how can taxes be reduced when government expenses must so greatly increase? If any such tax reduction is allowed to occur it will only be a token reduction for a brief moment as part of an appeasement transition policy. Any benefit to Little Business will be illusory since it will have to use the tax gains most likely to pay its debts to Big Business. The refund will pass through the fingers of Little Business almost as rapidly as the withholding tax portion of his pay leaves the worker!
As a matter of fact, the tax rates in some cases may even have to rise rather than fall because the mass of tax payments will fall drastically during a depression and expenses drastically increase. Corporation profit tax payments will decline because there may be little corporation profit with even the dividend payments coming in part from corporate reserves. Excess profit taxes will decline even more drastically since there may be no such excess profits. Customs duties will fall to a fraction of what they were as general foreign trade diminishes to a trickle. Excise taxes will have to come under close revision if goods are to be kept moving. Sales taxes will drop as prices of goods and volume of sales drop. Income taxes will also be severely hit as the mass of unemployment increases.
Big Business need not be for the reduction of any of these taxes, except possibly two: the excise tax and the customs tax. The excise tax placed on railroad, airplane and other transportation is already a positive hindrance. It can quickly be removed for the benefit of Big Business which controls these industries as well as for the encouragement of business generally. In foreign trade, Big Business can legitimately come out for free trade with all nations that will give U.S. business the same rights and privileges which native firms enjoy.
What has Big Business to lose by the abolition of a high tariff? During a depression the tariff will bring in to the government very little revenue. Big Business is no longer the "infant industries" that need protection. On the contrary, Big Business presumptively can meet and beat all competition. By letting in foreign imports to batter down Little Business, Big Business can make a deal winning the foreign markets and investment fields to itself. Such foreign reactions as the British Empire Preference System created during the last depression can thus be avoided or at least disputed.
Of course, one does not have to run hog-wild. If there is a great flood of cheap cars from England, or Germany, or Japan, or refined oil from Asia, or prime metals from Africa, perhaps some adjustments in tariff barriers may have to be made. But by and large, U.S. Big Business will be in the driver's seat in any reciprocal trade agreements. On the other hand, it is Big Business that does the exporting and investing abroad. How can the indebted countries pay their debts if they are not allowed to export themselves? Besides, much of the imports to the U.S. may be from U.S. Big Business producing abroad!
There are some tax payments which Big Business may want to increase, for example, the sales tax, or the income tax, both operating on a regressive basis. This will be right in line with its general orientation.
So much for government income; let us now turn to government expenses. We have already seen that the chief items of relief, military and regular governmental expenses, and such, can not be opposed by Big Business. But some items Big Business will oppose, including those that cost so much during the last Great Depression, namely: agricultural subsidies and payments for non-production, and make-work projects.
The present depression must give a final blow to that old sacred American cow, the backward and petty business man on the countryside, the so-called "farmer". Rural highways, vast capital developments undertaken by the government, such as flood control, irrigation, reforestation, conservation, dams, reclamation, etc., make the small farmer a curious relic of the past.
We have already noted that of the 4.8 million so-called farms, only 27% are commercial farms producing as much as $5,000 worth of products a year. Why should the other 73% be treated differently than the small storekeeper, the petty artisan, or tiny factory owner employing one man? Did these farmers cry out when the poor Negro share cropper was driven off the land by the combination of cotton picking machine and land policy of paying the large land owner for restriction of production? Now the bulldozer reaches the fake farmer, the slum farmer, the woefully wasteful farmer. It would be crime to support his "business" any longer by government payments of any sort at the expense of the general population.
Here we must draw a sharp distinction between the farmer as a human being and his uneconomical "business" with which he tries to identify himself. It may be true that he himself and his family are entitled to a full life as much as anyone else and so he will be treated the same way as the bankrupt little storekeeper and the unemployed worker, no more, no less!
Basically, it must be the position of Big Business to end the pathetic farce of payments for crops or livestock not produced, for artificially raised price supports, for pseudo-conservation projects, etc. Nor is high tariff policy on agricultural imports justified when this can only lead to international and higher prices of necessities of life.
Strange as it may seem, it is now the turn of Big Business to advocate that prices should be uncontrolled and that competition should be allowed to prevail. Lower prices on food will allow the more efficient producer to prevail, will lower the cost of living, will allow nominal wages to be reduced, will increase the country's export pressures.
And this position can best be taken by Big Business since it is in monopolistic control in fact of many important articles of commerce, such as tractors and farm equipment, and need not lower the prices on these articles to the same degree as in the case of more competitive commodities. The end of the many billion dollar subsidy to the out-dated farmer will release equivalent funds for the unemployment compensation of workers discharged from Big Business. It will close up forever in the U.S. the gap between industry and agriculture. Thus, the U.S., in its own capitalist way, will try to accomplish what the Soviets and China are trying, the equalization of rural and urban industry.
In stressing the effect of lower prices on wage levels, we do not wish to be interpreted as meaning that Big Business stands in the forefront for wage-cuts. On the contrary, the higher the wage costs that can be enforced on all business, the sooner Little Business can be expropriated because Little Business will be less able to stand the strain of those costs. In this way Big Business can make an alliance with Big Labor Leaders against Little Business, since Labor is for higher, not lower, wages.
Following this line, we can assume Big Business will not be for the lowering of the standards set in the Fair Labor Standards Act, or the reduction of the one dollar an hour minimum wage, or the elimination of overtime payments over forty hours a week, or the elimination of child labor, or the let-down in safe and proper working conditions. On the contrary, as Little Business must try to do exactly these things, Big Business can turn the wrath of Big Labor against Little Business with telling effect.
A relatively high wage policy for those working, plus a very high acceleration of modernization of production, especially through the use of new capital equipment such as is illustrated in electronic automation and controls and calculators, make up not only a positive program for higher efficiency, but also a bulldozer program of terminating the burden of backwardness that handicaps the U.S. position, especially vis-a-vis the Soviet Union.
In this general drive against uncontrolled backwardness, Big Business must stand firm against the costly make-work schemes offered as panaceas in the last Great Depression. During that period under the Roosevelt Administration, a great hue and cry was raised against mere relief and for work projects to keep up worker's morale. But as the Russell Sage Foundation aptly pointed out:
"Despite all that is said about the importance of work as a means of preserving morale and self-respect, relatively little has been done to show specifically what there is about work that has this beneficent influence upon human personality and how it is that work helps one to maintain his personal integrity.
"A priori, it would not seem that a worker could find much dignity in a job that could be done better by a donkey, or very much more effectively by a donkey-engine."
During the last Great Depression over $11 billion was spent on these work projects in a few years. In most cases the workers were given few and inadequate modern tools and equipment for an efficient job and were paid wages just a bit higher than relief allotments. In the Civil Works Administration, for example, for every hundred workers put on the payroll, only twelve workers were estimated employed off the site of production, providing capital means of production. For the Works Project Administration sixty such off-site workers were needed; while those put on regular government projects needed one hundred off-site workers. When, finally, really heavy and more efficient construction was undertaken under the Public Works Administration, however, the ratio was two hundred off-site workers employed for every hundred workers.
Only this last type of heavily mechanized and efficiently operated project can possibly be favored, in the main, by Big Business. It is this type of project that can help resuscitate most the producers goods industries, especially the fixed investment production in which Big Business is so heavily vested and which is so hard hit during a depression. Such projects can be managed by Big Business, even if financed by the Government, as war industry was in World War II and during the Korean War. Indeed, these heavy projects can be linked closely to the military arm of the government in which Big Business is so closely interested.
Naturally, Big Business must be interested in an enormous improvement of the war machine; not merely the personnel, but the machine. Atomic power and application, intercontinental ballistic missiles, rockets, new power and fuel components and adequate apparatus, new metals and chemicals, better forms of heavy and speedy transportation, all these new developments must play right into the hands of Big Business. Furthermore, such projects supply with needed funds precisely those sectors of the economy which are the most effected by unemployment.
This does not mean that Big Business can not favor other projects which are not directly part of capital equipment, but which can further it. For example, slum clearance and city housing projects can be supported. These projects can be realized by the use of heavy equipment and need much heavy material. They have the further advantage of appeasing certain sections of the population that may give trouble. Similarly, with the construction of public institutions of all sorts. Incidentally, such institutional development deduces still further the weight of the "independent" professional and technician, such as the doctor, dentist, surgeon, pharmacist, nurse, psychologist, social worker, etc., and ties them closer to the State.
The field of education, especially higher education, has now become of vital concern to Big Business. The support of schools and universities, research laboratories and experiments of all sorts must be given full and adequate consideration.
From the point of view of Big Business the resuscitation of U.S. economy may also imply the end of the Sherman Anti-Trust Act. This Act, circumvented in a thousand ways, is a joke anyway. The drive for a realistic and efficient merger of railroads, airlines, and interstate bus systems, for example, must be greatly intensified especially as these companies may otherwise have to forego indefinitely all dividend payments. There is no reason why they will not ultimately be treated as public utilities, if only to save the investors.
Indeed, the old opposition to State ownership or State capitalism is bound to yield as Big Business increasingly takes over State control. It is no longer Big Business versus the State, but Big Business and the State, Big Business through the State, as well.
The question may very well be asked: If Big Business supports the path of extensive and rapid modernization during the depression, will all this not lead to greater unemployment? The answer is that modernization is the only path the country can continue to take. The problem of unemployment can not be solved by entrenching backwardness and ignorance. There lies the path of disaster.
In this respect it is interesting to compare the war periods and the depression periods which the economy passes through in its cyclical rhythms. During times of war there is feverish activity to expand the war power in every possible way through new technological inventions and improvements. At the same time, non-war industries are starved and remain relatively less developed. During the following period of peaceful prosperity, if there is any, the war improvements filter down and are applied to general industry. During the following depression there is feverish activity to discard the outworn and to stand on the basis of the new throughout the entire economy. In previous depressions it has even resulted in starving the war industries until war is seen as the only means to get out of the depression.
E. Critical International Economic Problems
During the present depression, four pressing economic international problems, all of them closely interlocked, are found to demand attention. They are:
Since the rise of Big Business, U.S. foreign trade has greatly changed. The export-import picture in 1957, even as compared with 1929, no longer showed the simple picture of trade in privately owned commodities. During World War II and the immediate post-war period vast sums of money and goods had been provided for the Allies of the United States, amounting as net aid to $65 billion, of which Lend-Lease alone was $47 billion. After the war, the U.S., in its support of the United Nations and of various foreign countries, spent from 1945 through 1957 the huge sum of over $43 billion in addition.
Exports, therefore, reflected this aid as well as sales. In addition, a large amount of the exports stem from loans made abroad, loans made on condition that they be spent on U.S. exports. In 1955 the total U.S. investments abroad were $45 billion, of which $29 billion were private, and about $16 billion were U.S. Government. Almost all were on a long-term basis.
The merchandize exports in 1956 totalled $145 million monthly in the form of foreign aid, and $1,590 million in unmarked shipments. In comparable prices, this marked an increase in regular exports of 97% in 1929 terms. The difference between U.S. exports and U.S. imports, as between 1929 and the beginning of 1957, jumped 214% in comparable prices, and if we add the $148 million a month foreign aid grants, by 327%. Thus, it can be seen, the trade gap in favor of the U.S. had enormously increased. The dependence of many foreign countries entirely upon the U.S. had become complete. Economically, these countries were now reduced to mere satellites.
The character of American exports and imports had also dramatically changed. In the first decade of the 20th century only 26% of U.S. exports, but 56% of U.S. imports, were in finished goods; whereas, as far back as the end of World War I, U.S. exports had changed from mainly raw materials to mainly finished and semi-finished goods. In 1956 only 26% of U.S. imports were in the form of finished goods.
Immediately after World War II, the great flood of U.S. exports, substantially composed of machinery and durable goods products, were directed to devastated and ruined Europe. With the depression these exports will have to take an entirely new direction, to underexploited and underdeveloped countries badly in need of industrialization. It is for this reason that the U.S. in its foreign policy must desperately try to fill the vacuum left by the shrinking of the power of France, England, Italy and other former great capitalist powers over their former areas of control and spheres of influence.
Since the industrialization of these former backwards areas of the world, whether in the form of modern means of extraction of raw materials and resources of the earth, or in the form of vast power improvement projects, or in the form of the further development of transportation and mechanization of modern industry, of large State capitalist projects, such as irrigation dams, etc., is immediately of concern to Big Business, it is most natural that Big Business should formulate the foreign policy of the U.S. in that regard.
It is precisely at this moment that these main international obstacles block the path of Big Business of the United States. First is the opposition of the former large capitalist powers of Europe who object to being displaced so brutally in their former areas of control; second, is the national communist offensive in the areas formerly completely in control of capital, and, third, is the extension of the areas of the world market completely dominated by national communist methods of production in deadly war with the aims and methods of U.S. Big Business.
So far as the first obstacle is concerned, the opposition of the former capitalist powers of Europe, such as France and England, would not, in itself, create much anxiety in the U.S. What could these relatively second-rate powers do but let the U.S. take the lead, being satisfied, themselves, with the crumbs from the table?
But the reduction of a first-class power to a secondary satellite of another can not be accomplished without great internal convulsions. In these internal convulsions there is always the possibility that the working class may speak out on its own, refusing to play the game any further. Ordinarily, such a situation would lead to civil war whereupon the big power would step in to dominate the scene in one form of another. But today the big power, that is, the United States, can not easily intervene without the danger of international war, which danger might annihilate the big power itself. There's the rub. The big danger that France, or Germany, or England, or Italy might turn "neutralist" and refuse to play the game of Big Business would throw U.S. Big Business into violent tremors.
When the bolsheviks first took power in Russia, the Soviet Union represented about 4% of world economy. The loss of this market, large as it was, was not definitively decisive for the rest of the world. There was always the hope of national communist containment, and ultimate defeat. The situation, today, however, is quite different. The national communists have torn a chunk out of the world market that is perhaps 25% or even more of the world total. This market is closed to Big Business. Deals with national communists can be only on their terms in which they emerge stronger than ever while the profit system is weakened throughout the world. Large-scale trade, while it may postpone the death of Big Business, makes that death even more inevitable.
Nor are the national communists satisfied merely to remain in their own countries, removing their markets from the capitalist orbits. They are now in a great economic offensive of their own, especially in the very areas where alone U.S. Big Business has any chance of real development. In return for aid to Egypt, for example, the national communist can agree to take on excellent terms all the long-staple cotton that Egypt can produce. Such an agreement kills many birds with one stone: it wins over Egypt to the national communist bloc; it deprives U.S. Big Business of its opportunities and markets; it develops the basic industries of the national communists; it makes Egypt more industrialized and throws it against the other capitalist powers, etc. And the example of Egypt can be repeated in Syria, Africa, Indonesia, India, and else where throughout the underdeveloped world. Now it is no longer a case of U.S. putting Europe on rations, but a case of national communists putting the U.S. on rations.
Here is a most dangerous situation for the U.S. Bib Business, actually its achilles heel, the area where it can most easily be destroyed. What program can Big Business offer in this field?
First of all, Big Business can offer favorable terms for loans and for capital investment. Therefore it must come out most strongly for a large-scale foreign aid program by the U.S. on condition that this aid be used to buy stuff and services from Big Business. But these underdeveloped countries can pay only through being allowed to sell their own produce either in the U.S. or abroad. It is for this reason that Big Business must come out for free trade and for a very low tariff system in the U.S., even if other businesses may suffer greatly thereby.
If the markets of the U.S. and of its satellites can absorb the entire export production of the underdeveloped country, it is possible that U.S. terms may be accepted. But suppose this is not possible? And suppose the Soviet Union, not affected by unemployment and fluctuations of production on this score, does offer to take the entire product steadily and consistently, and suppose the Soviet Union puts no political conditions to its offers, being content merely to get the goods and to drive out the U.S.?
Up to now, whenever two capitalist powers have clashed in desperation over the world market, the results have been war to determine which would take the spoils. Today, with the kind of military machine the national communist have developed, such a clash becomes an exceedingly risky business for U.S. business to engage in. Nevertheless, Big Business, under great pressure, will have to provide the drive for a big military machine and to engage in adventures that can bring the world to the brink of annihilation.
Perhaps Big Business can make a deal with the Khruschevs. If the Khruschevs will abandon the workers' revolutionary movement in Europe, which is the most threatening possibility facing Big Business today, and will allow Big Business to continue in Western Europe, the Khruschevs can have the Egypts and Algerias and such for the moment. The Khruschevs may be more than willing to make such a deal since these national communist bureaucrats know that the rise of the workers in Western Europe means their end as well. But such a deal would still provide only a stop-gap solution for a situation that has no favorable outcome for U.S. Big Business.
In spite of its dangers, war will help Big Business solve two of its most pressing problems, namely: 1) what to do with the tremendously increased relative surplus population no longer needed by Big Business and now supported by it; and, 2) what to do with the great mass of stuff designed for individual or productive consumption but which can not be sold.
The conservatives ruling in capitalist countries have long been plagued with the problem of overpopulation of the poor. They have preached sexual continence, they have tolerated the French-Greek Catholic way of perversion, the protestant West-Europe way of birth control and contraceptives, the white American way of cutting out unnecessarily the wombs of Negro women, the Italian way of forced emigration of the workers, the general capitalist way of destruction by disease and poverty, the special Nazi methods of racial minority destruction, and the ubiquitous modern methods of destruction through war. We can assume all of these methods will be intensified during the depression wherever possible. The only trouble is that the damned fertility of the poor plus the even increasing diminution of the employed working force constantly makes the relative overpopulation of the workers greater. Of course, there is never a question of overpopulation of Big Businessmen, womb-cutting white surgeons, preachers who preach continence, or great Italian grandees complaining of how Italy must get rid of 400,000 Italians annually.
Of all of these methods of getting rid of the relative overpopulation, the most effective by far is the one now generally used, namely war. We will later see how nicely enmeshed such a program is with getting rid of the surplus commodities and raising the rates of profit, but for the moment let us confine ourselves to the question of getting rid of the unemployed.
If the unemployed are put in the army this changes a potentially dangerous and negative force into a very positive one. Those in the army can be separated from the general population and given special and intensive conditioning to which they become more receptive as their living conditions become better than those at home. The army can be used to put down any demonstrations made by their former fellow workers. This training is invaluable in telling the soldiers to fight the other national enemies the more.
Of course, merely transforming the unemployed into soldiers does not solve the problems of relative overpopulation. In fact, it may only intensify the problem since, for one thing, the women can continue to breed like mad. The problem is not really so much to get rid of the men, but of the women, these fertile breeding nests.
Modern war offers a rare and most effective opportunity to do so. For the first time in history war has become so effective that it can kill more in the rear than at the front, more civilians than soldiers, more homes than barracks, more women than men. Furthermore, it is no longer merely a matter of diminution of the unemployed, but of their veritable annihilation, so powerful have the forces of destruction become. Big Business can have a "final solution" not only for the Jews, it seems, but also for the unemployed!
There are two obstacles, however, which stand in the way of the complete endorsement of this method by the conservative wealthy. The first is the fact that the annihilation may become so general as to include them also. The second is that the only such war possible is the war against the Russians and the Russians may be ahead of Big Business in this particular game. These two obstacles, however, are not at all fatal and one must not be too pessimistic.
In regard to the matter of general annihilation, it is always possible to try to save the few thousand really powerful leaders and their immediate families who run the country. Already plans have been laid and on the road to realization for the protection of these few. Surely, if corporations can give to their executives, all free of charge, such items as private planes, yachts, hunting-fishing lodges, special homes, scholarships for their children, etc., they can also provide for underground shelters where these worthies may be saved, no matter who else perishes.
In regard to the warlike advances of the Russians, every method will be used to reverse this threat, with the active support of Big Labor. Despite all such measures, however, it is possible that we shall not be able to catch up in time. Let's have the war anyway - What the hell! you can't win without some risk. And you can't lose all without a fight!
Now we come to the second great factor, the terrific overproduction of goods, goods which can not be sold or further worked on, goods and machinery which must rot or deteriorate when not in use. Overproduction is the typical capitalist phenomenon not known in previous economic worlds. In the old days of slave owners and feudal landlords when there was a surplus of goods, the surplus was squandered in conspicuous individual consumption of the owner. Indeed, conspicuous wasteful consumption is still the old-fashioned way of the very wealthy. But, alas, no matter how much the wealthy consume the product of modern technology, modern overproduction is still too great for them to get rid of in this fashion.
Of course, one can always dump surplus milk down the sewers until they are clogged and the fish in the waters are killed, or one can burn up mountains of surplus coffee beans or sugar cane, or let the surplus wheat rot on the ground, but this is not a socially effective way and only stirs up a great deal of indignation. Or one might try the more modern way of export dumping of surpluses, but this, too, is not so good today.
The best way to consume the surplus products is in war. As a matter of fact, the mere building up of a huge military machine and budget means that war industry can become so dominant as to consume the greatest part of the surplus product by converting ordinary means of consumption into military machines and explosives. Our present military budget of $43 billion a year is a good start in this direction.
As in the case of the unemployed being drafted into the armed forces, this can only shift the problem and can only be a temporary measure until war actually breaks out. Then we can have the pleasure of the positively unlimited destruction of the wealth of the world. This will not only remove the present surplus but so eradicate the means of production that it would take a relatively long time for civilization even to reach the old levels existing before the war began. If wealth can be destroyed at a faster rate than the unemployed so that despite the death rate there will be relatively plenty of labor to be hired, then things will still be dandy!
Summary of the Program of Big Business During "Normal" Aspects of the Depression
STATE AND LOCAL
1. Extension of regressive retail taxes;
2. Extension of regressive real estate taxes;
3. Extension of regressive local income taxes;
4. Free distribution of surplus food to needy families, institutions and school children;
5. Extension of housing projects with rents paid as part of relief payments;
6. Extension of free medical and institutional care as part of relief program;
7. Mortgage moratorium, when required, with payments guaranteed by the State;
1. No opposition to heavier general taxation, of regressive nature, as needed;
2. No opposition to increase in national debt as needed;
3. Continuation of special, general, and unemployment relief as needed;
4. Increase in general government budget;
5. Increase in general government budget;
6. Reduction of excise tax, especially on communications and transportation;
7. Opposition to "make-work" projects;
8. Opposition to agricultural subsidies, special benefit payments for non-production, "parity" prices, etc;
9. Measures to lower the cost of living;
10. Opposition to inefficient government projects;
11. Continuation of Fair Labor Standards Act (including minimum wage and extra overtime payments);
12. Research and Higher education projects;
13. Elimination of Sherman Anti-Trust Act;
14. Opposition to the outright support of Little and Medium Business;
15. Alliance with Big Labor as against Little and Medium Business;
1. Aggressive international action placing the U.S. on the brink of war;
2. Some sort of working alliance with Russian Khruschevs to curb revolution abroad;
3. Greater fusion of Big Business with the State;
4. Low tariff on a reciprocal basis;
5. Continued large scale foreign aid; *********************