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From Socialist Appeal, Vol. III No. 30, 5 May 1939, p. 4.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Senator Robert Taft, whose hat is well out in the ring for the Republican Presidential candidacy in 1940, last week repeated the familiar charge that Roosevelt is playing up the foreign situation in order to hide the failure of the New Deal at home. This charge, as an editorial in the Appeal pointed out at the time, is unquestionably true; but it is true in a sense far more profound than that intended by the Republican Senator.
Taft’s differences with Roosevelt are 99% superficial, at bottom little more than a dispute over which set of office-holders shall draw down public pay. But the internal failure of the New Deal is not at all superficial. It represents not the ineffectiveness of the Democratic Party but the chronic, incurable malady of American capitalism. After all, Hoover had three and a half full years after 1929 to demonstrate that the Republicans are every bit as ineffectual as the Democrats. For Roosevelt to concentrate on the “foreign situation” – that is, the war crisis, is no doubt from one point of view a clever party political maneuver. But it is a maneuver that corresponds not merely to factional needs but to the imperative requirements of the American bourgeoisie.
American capitalism is not working. During the past decade, nearly every sort of internal repair job has been tried, and the machine is more creaky and halting than ever. The only chance that the bourgeoisie now sees is an external device – is the war.
Moreover, Roosevelt is succeeding in his maneuver. He is actually turning the eyes of the people away from internal conditions; and no bourgeois opponent is hampering him to any degree, since they all fundamentally share his perspective.
In the latter half of 1937; the business cycle turned downward. This was most alarming to the bourgeoisie, since the upturn preceding had been brief and had failed by a long shot to equal the 1928–29 level. And the rate of drop in 1937 was twice as fast as the rate in 1929.
The economists and publicists took refuge in magic. They thought they could wish the renewed crisis away by calling it a “recession” instead of a “depression”.
They figured that it would last only a couple of months, and would be followed at once by a much longer; steadier upward movement. Instead, the curve kept going down for almost a year.
With a sigh of relief they watched it turn up again last Spring. Now the predictions were all for a number of years of expansion.
In December the Federal Reserve Board index figure, the key number for the government economists, based upon a weighted analysis of production, prices, purchases, credit turnover, etc., reached 104. The almost universal expectation was that the 1939 average would be well over this level: the government experts themselves predicted a slight fall in January and February, with a rise from then on to a level of from 108–112 in December 1939.
Nothing of the sort has happened. The estimate for the April figure is 94, a drop of nearly 10% from December.
Other important indices show the same trend. The Times index, which is derived from the extremely interesting theory of R. Dana Skinner and based chiefly upon the rate of money and credit turnover, has since the beginning of the year dropped about the same percentage as the F.R.B. index. The Herald-Tribune index has gone from 85 to 73. Stock prices have dropped sharply (from a high for the year, in the Times average, of 107 to a current 92).
The state of health of capitalism is revealed most directly by the amount of “new” financing (as opposed to refunding operations) that takes place, and particularly by the amount of such new financing that goes into capital goods. Never since 1930 has new financing risen to even half of the 1926–29 average and it has for the most part been held to a sixth or a seventh. The credit lies yawning and idle in the great banks and can be used only to buy the government bonds which try to fill in the empty gap left by the absent new enterprise.
Production, purchases and even employment, though declining, are still running substantially, higher than the extremely low levels of the corresponding weeks last year. But new financing is averaging considerably less than even the impoverished rate of 1939. So far, the average in 1939 has been only $27,000,000 monthly as against $36,000,000 during the same months last year. And, though the statistics have not yet been compiled, the percentage of this meager sum going into capital goods is apparently very low.
All this is happening in spite of the fact that the renewed program of government expenditures, voted last year after the period of curtailment, is just now getting into full effect on the market. The pump no longer primes.
In short, as every serious business man knows, the situation on the internal front is hopeless.
Therefore every serious businessman is lifting his eyes from the internal front. During recent weeks, all the “business services” have been returning again and again to the theme: how to get your business ready for the war.
The Tax Research Institute of America, to take a single example, is pushing its new encyclopedia, Adjusting: Your Business (for the war) by direct mail advertising on most handsome engraved stationery.
“How will your business be ‘utilized’ for wartime needs?
“To enable your business to function during a war emergency, the Institute has prepared an analysis to show you precisely what to do.
“This analysis of business during wartime will be ready next week, and it will help you prepare right now for problems such as these –
“... (2) how can government contracts be secured during wartime?
“(3) what will happen to labor costs, wage demands, unionization, strikes, and collective bargaining? ...
“Few executives realize that the Industrial Mobilization Plan is ready, to go into operation almost overnight, if a war is declared ...”
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