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Fourth International, January 1942


L. Howard

Capitalist Economy Under Fascism


From Fourth International, vol.3 No.1, January 1942, pp.14-16.
Transcribed, Edited & Formatted by Ted Crawford & David Walters in 2008 for the ETOL.


Modern totalitarian war intensifies and speeds up enormously a process which was in evidence long before. Marxism foresaw that the capitalist state would have to step in to regulate and control industry more and more as competitiveindividualist capitalism gave way to monoply capitalism. The capitalist class resists this state interference in time of peace, but the state overrides all resistance in time of war. Since war is waged for the benefit of the ruling class, that class sees the need for enduring the dictatorial powers of the state in the period of extreme emergency.

The state uses its dictatorial powers to subordinate the entire economy to the war machine and its needs. But this is done within careful limits so as to continue production on a capitalist basis. Individual capitalists and specific sections of the economy may be sacrificed, but the system as a whole is maintained. War has always been the period for an enormous increase in profits.

War Economy Remains Capitalist Economy

However the war boom, far more than other booms, plants the seeds of its own destruction. The production and price structures of a war period have a specialized character requiring extensive readjustments at the end of the war. The reorganization of industry means of necessity changes in prices of commodities. This brings an inevitable depression immediately after the war. Inflation during the war makes this depression all the worse because the inflated prices fall all the more rapidly to their “normal” levels.

It has been pointed out that the needs of war production today bring about a tremendous dislocation of the entire economy. The ordinary forces of production deteriorate for lack of repair and replacement. As if to confirm our analysis, Dr. Carl Luer, recently elected president of the German General Motors Adam Opel Company, estimated conservatively in an address on the tasks of German industry in the future, that th accumulated value of replacements and repairs to the machinery and other equipment that had to be postponed until the end of the war, was five billion marks a year. Shortage of materials and labor prevented the undertaking of these necessary repairs. This staunch Nazi pointed out at the same time that this process of deterioration tends to rise in geometrical progression.

Furthermore he reveals by indirection that the masses will have to continue with a lowered standard of living after the war – in order to make up for this deterioration. The rebuilding of the forces of production must receive priority over the production of consumers’ goods. He might have added in fact that without the rebuilding of plants and equipment, the consumers’ goods cannot be produced in sufficient quantity. Luer does not reveal just how the forces of production will be revived in a devastated Europe.

Every war by its very nature obstructs and contravenes the usual functioning of capitalist production and circulation. In the normal process capital used in the productive process produces not only the necessary consumption commodities but also the commodities necessary for replacing used-up capital. Capital is a value which creates more value. War uses up and destroys vast amounts of capital without the possibility of replacing that which is destroyed. This fact alone makes utterly ridiculous the idea that a war economy can be a planned economy. War is rather the guarantor of disorder finally brought into production and circulation. This is true despite the fact that certain kinds of planning (the mobilization of industry for war) make a kind of “war socialism” mandatory. More properly, of course, this planning should be called state capitalism or state capitalist war economy.

“Planning” for War

Even the limited kind of “planning” for the war machine requires strict measures of control. It is strange that the very measures that fascist bureaucrats and “democrats” alike are forced to adopt by virtue of the existence of capitalism, are called anti-capitalist by those who consider fascism truly a “new order.” It is precisely the realization on the part of those who control the state that bureaucratic orders alone cannot work, that makes them take the measures they do. The attempt on their part to control wages and prices as part of the planning of war production, is clearly recognition on their part of the laws of value. True, they do not interpret these laws of value in the fetishist sense of the Macdonalds, as something completely outside of human intervention, as something quite mechanical and beyond control altogether. At the same time control which is based on recognition of the private ownership of the means of production, can at best be very limited and temporary in character.

The law of value is something independent of the individual capitalist. Monopoly capitalism, however, with its control of entire industries, acquires the ability, again within limits, of regulating the market and affecting the law of value in its own favor. The state, basing itself on monopoly capitalism, has’ considerable power to regulate and control industry when it steps in to do so. During the last war Lenin considered it highly important that the state was forced to intervene more and more in industry, even though what was involved was the planning of war production. Lenin looked on this as an object lesson to the working class. He writes in State Capitalism in the Imperialist State as follows:

“How ripe present society is for passing over into socialism, is proved precisely by the war, when the straining of people’s energies forced the regulation from above and from one center of the entire economic life of over fifty million people. If this is possible under the leadership of a handful of junkerlandlords in the interest of a few financiers, this is certainly no less possible under the leadership of conscious workers in the interests of nine-tenths of the population exhausted by starvation and war.”

Again he says:

“And war itself, putting a terrific strain on the energies of the peoples, leads humanity toward the only way out of this impasse, forcing it to make gigantic steps forward on the road of state capitalism, proving in practise how planned economy can and must be conducted in the interests of the masses now perishing from hunger and the other disasters of the war, under the leadership of the revolutionary proletariat.”

Lenin was here emphasizing the fact that socialism is the nearest or next step forward from monopoly state capitalism. He put it that socialism is nothing else but monopoly state capitalism taken over and directed for the benefit of the entire people – and insofar ceasing to be capitalist monopoly.

“The imperialist war is the eve of socialist revolution. And this not only because the war by its horrors gives birth to proletarian uprisings – no uprising will create socialism if it has not ripened economically – but only because state-monopolist capitalism is the fullest material preparation for socialism, is its ante-room, is that historic step between which and the step called socialism there are no intermediate steps whatever.”

Lest this be taken in any “inevitable” and mechanistic sense, Lenin was talking of a step forward, but did not necessarily exclude steps backward. The last war, as a matter of fact, contained the steps forward made in the Russian revolution, and the steps backward made in the more or less complete yielding back by the capitalist states of their powers over industry to the private hands of the capitalists.

Fascism was the result, as we know, of the failure of the workers to take over monopoly capitalism, through the state, in order to accomplish the real planning of production. Fascism is imperialist monopoly capitalism which has taken over and monopolized the state (the political power) just as it previously took over and monopolized the economic power. The existence of monopoly capitalism permits the state to regulate industry far more efficiently than would otherwise have been possible. But the planning instituted by state capitalism under monopoly control is stunted and tainted by the retention of the basic contradiction of capitalist society; namely, the fact that production is a highly socialized process whereas appropriation of the products of industry remains private, remains in the hands of the few. The simplest illustration of this fact is the way in which monopoly capitalism, through its control, extracts super-profits from the market at the expense of the rest of society.

It is necessary to bear this background in mind when we consider state capitalism. But it would be a mistake to think that the Nazis have merely taken up where the last war left off. Capitalism has undergone an organic process of decay in the period since then, and fascism carries this process of decay further. The conditions under which state “planning” is undertaken today are less favorable than they were in the first war. At the same time the demands on economy are far greater. The masses began suffering in this war at a level (relatively speaking) that was reached only after several years of the last war. In Germany this was aggravated by the terrible defeat inflicted on the working class by the Nazis before the war started.

The movement of wages in Germany in this period is important as a reflection of the limits of the ability of the state to set up its control over industry. Further on we shall attempt to analyze what role the law of value plays in the period of the building up of the forces of production under socialism in contrast to its movement under capitalism. Here we remind the reader that nothing illustrates better the fact that value is “a specific social relation between persons which is expressed as a relation between things,” as Marx put it. The class struggle plays an important role in determining the value of labor power or wages. Marx and Engels always insisted that without trade unions the workers would not even be able to obtain a bare subsistence, let alone to maintain a decent standard of living. Through Hitler, German capitalism was enabled to realize profits first of all at the expense of the working class. The Nazis “stabilized” wage rates in 1934 at the lowest level they had reached during the years of depression. This was the first result of the class relationship under fascism. This type of “planning” (not against but with and for the capitalist) worked quite nicely fora time.

Those who might object to the restoration of profits to big business by this method were answered in an article by a German “economist” in the Völkischer Beobachter:

“ Wages cannot possibly be increased because an increase would cause a demand for goods which are lacking. The wage level has no relation to the employers’ profits; but even supposing the latter should earn billions, wages could not be increased for the above reason.”

Behind this statement lay, of course, the curtailment of production of ordinary goods to build up the war potential.

Wages Under Fascism

The introduction of the war plan, however, caused this “iron law of wages” to strike a snag. It was pointed out that war economy demands not only reduced investments in unnecessary forms of capital (new or old) but reduced personal consumption. This was carried to such an extent in Germany that it came into conflict with the demand for increased production in the war industries. The terrible strain of hard work and poor rations actually brought about a decline in labor productivity. The bosses were forced to raise wages. With the war boom in full blast, an actual shortage of labor developed. The competition for labor became keen. All the laws and agreements among the bosses went for nothing (just as in other capitalist countries) and wages in the war industries had to be bid up to secure labor – and to prevent slowdowns!

The average monthly wage was 135 marks in 1929. By 1935 this had dropped to 104 marks, this average including 55% who got less than the average. Thus under fascism the average wage fell below the subsistence level. In the armaments industries wages have again risen above the 1929 level, but in ordinary production, where business has declined and even the hours of work have gone down, wages have not risen very much. In the case of foreign labor from the occupied countries, exploitation is far worse since these workers receive only half as much as German workers. Wage control has been only partly effective, and the effect has depended above all on the decimation of the independent working class organizations by fascism.

It is in the sphere of price control that the Nazis make their greatest claims to success. The need for price control in war time rises out of the state’s position as almost sole buyer on the unusual market. Demand outstrips supply and if the state’s financing is not to be thrown completely out of kilter by inflation, price controls must be utilized. The idea that price control is for the purpose of cutting profits that go to the capitalists, and is therefore anti-capitalist, ignores its true meaning. Its sole purpose is to keep the war machine functioning smoothly. In the United States it is the banker Baruch who demands the strictest kind of price control. The capitalists are vitally interested in the conducting of the war. It is their war. The expenses may be heavy, but they are considered as necessary expenses for achieving the possibility of extracting surplus value out of a larger domain. The capitalists see to it, besides, that the heaviest burdens of the war are placed on the backs of the masses.

Even the Nazis claim no more for price control than that it has prevented a too rapid rise in prices. But what is of interest here is to go back of the figures of price control (we have already quoted Brinkman on their unreliability). What happens after prices are set? Do these prices actually hold on the market? Deutsche Volkswirtschaft, economic organ of the Nazis, complains bitterly against all the forms of evasion practised by the capitalists. (Incidentally all these practises have already been taken over by United States capitalists.) New forms crop up as fast as old ones are prohibited. Here is one list mentioned in this organ:

  1. Alterations by manufacturers and traders of the quality of goods to which regulated prices apply. This is in reality a rise in price.
  2. Koppelgeschäft – the consumer, in order to get the article or goods he wants, is forced to buy one or more other items that he doesn’t want at all, at a high price.
  3. Refusal to sell, except in small quantities, in order to get the higher price permitted for small sale.
  4. Premiums taken for prompt delivery.
  5. Offer of less favorable terms of credit to make up for price.

How do the Nazis themselves look upon their “planning”? Not when they are attempting to gull the masses, but when they face towards the capitalists. The Schwarze Korps, organ of the Elite Guards, says in its August 18th, 1938 issue:

“Broad sections of the population have already come to the conclusion that the aim of national socialism is to plan and organize the whole economic life of the nation. This, it is held, would not amount to the subjection of capitalism, but to a completion of its work. A nation with great organizing ability, a nation which has always expected everything from the state, easily falls into the mistake of overrating the value of organizations in the economic field. We must, however, consider the present economic conditions as an emergency situation. The breakdown of world economy, which compelled us to carry out the four year plan, was an emergency, and another emergency was the prohibition against rearming, under which we lived for fifteen years. This emergency situation, if it is to be conquered, makes necessary government regulation which must concern itself even with details. However, this is no reason why we should come to regard emergency measures, compelled by emergency conditions, as an ideal state of things. Let us not imagine that the strict government control of all available material and human forces is the final form of economy in the Third Reich.”

This is a promise to the capitalists that the state will withdraw from its controls and regulations after the war, or at least its efforts will be in accord with the desires of monopoly capitalism. Not that there is any real conflict between the state and monopoly capitalism during the period of emergency. Quite the contrary, the moment any country is conquered by the Nazi hordes, the big monopoly capitalists are invited to set up offices and companies in the new lands to begin exploitation at once. Funds are advanced by the state for this purpose. Often enough the German state receives these funds from the conquered people. These funds, forced out of the French, the Danes, the Belgians, the Poles, are imposed by the conquerors on the conquered.

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