Jean van Heijenoort writing as Marc Loris

Capitalist Economy in War

Fourth International, December 1941, pp.313-316, under the name“Marc Loris”.

The striking military victories of Germany and above all the collapse of France have engendered a host of improvised theories, which sprang up like mushrooms after a rain. These theories, diverse though they are, united in positing the birth of a new social system. The point of agreement among these innovators is that fascism is moving toward a social system which is no longer capitalism. While the changes in the political map of Europe explain psychologically the appearance of new theories, they are nevertheless incapable of providing them with a logical foundation.

A difference in military strategy manifestly provides little ground for inferring a difference in social systems. In reality, each social system has diverse strategies corresponding to the diverse stages of its development, or, more precisely, corresponding to the ability of the political and military leaders to adapt the science of war to each new phase of this development.

Aside from the new strategy, it is German economy since 1936 which furnishes the improvisers with their most fertile stock of arguments. Hitler has, you see, expropriated the capitalists, the old system is dead, etc. The method is simple. It consists in viewing present-day German economy entirely apart from what preceded it, and thereby its features are so distorted as to appear “non-capitalist,” and finally a sonorous name such as “bureaucratic collectivism,” or any other label that strikes the fancy, is pasted on the improvisation.

To solve a problem of such scope as the succession of two social systems it is imperative to avoid taking too brief a period of history. It is dangerous to determine a curve by simply extending a very short segment. To know where we are and where we are heading we shall begin by a brief review of the past. In particular, an examination of the first great imperialist war will teach us exactly what are the novel features of the present struggle.

A Brief Historical Review In 1914 the major powers entered the war prepared for a short conflict. The measures taken in the economic sphere scarcely exceeded the acquisition of stocks of boots and munitions. But the initial months of war brought two great surprises. First, the war refused to end quickly; and second, the consumption of armaments confounded the imagination—in a few hours munitions were exhausted which had required many months to store up. Confronted with a tremendously increased demand, industry soon found itself in a bottleneck. The entire economic organization threatened to collapse. The state had to intervene and issue rude commands in order to emerge from chaos. In all the chief belligerent countries the same phenomenon was manifested, in France, in England, in Germany.

But it was in the latter that it assumed the most finished form. The fundamental reason for this was the central geographical location of Germany: the difficulty of her communications with the world market in time of war, her lack of access to sources of raw materials in the colonies, and then, the British blockade. The country became a besieged fortress. In addition to raw materials the necessities of life soon grew scarce. Prices skyrocketed. The government fixed maximum prices and fought against speculation and hoarding, but met with little success and in a short time was forced to requisition all supplies and apportion them on the basis of individual rationing. Under state initiative and control corporations were formed for each food product; they bought up the entire output at a price fixed by the government and portioned syndicates, to promote new ones and later even to compel their formation (Zwangssyndisierung); and the government itself formed corporations for the allocation of certain basic industrial materials. Foreign trade became the function of a governmental bureau; foreign exchange was similarly controlled. Consumption of non-military nature was rigidly restricted. Middlemen and merchants in general saw their role diminish enormously. The Reichstag heard innumerable complaints from liberals frightened by this intrusion of the state, while social democrats, anxious to justify their submission to the imperialist state, saluted the arrival of “state socialism.”

With the end of the war the system of state regulation disappeared, in Germany as well as in the other countries. This does not mean however that capitalism emerged from the war in exactly the same shape as it had entered. Far from it! State intervention in economy took new forms on which we need not dwell here. The essential point is that the state mobilization of economy which had assured a formidable output of armaments proved incapable of surviving the war, let alone raising the level of the productive forces and leading capitalism out of his blind alley.

How does the war economy now reigning in Germany differ from that of 1915-1918? Four important differences appear: first, economy was put on a war footing toward the end of 1936, three years before the formal declaration of war; second, the German state apparatus is in the hands of the Nazi party; third, state control of economy is more thorough-going than in the last war; fourth, capitalism is twenty years older. Let us examine attentively each of these differences.

State Intervention in 1915-1918 The introduction of war economy (Wehrwirtschaft) in peacetime, as early as the end of 1936, is quite an important political problem. But it has been clear from the beginning that the war was the sole object of the Wehrwirtschaft. In war it has found its logical continuation and without war it would have been inconceivable. Consequently when the issue involves so fundamental a question as the nature of a social system, this difference from the first World War takes on an episodic character, especially if one keeps in mind the fact that the Europe of 1936-1939 was in a latent war stage. Consciously or unconsciously, the gospel of a “new order” in Germany owes much of its popularity to the wielding of state power by a fascist party. Anti-capitalist declarations were not lacking in the jumble of Nazi demagogy before 1933. Would not the “revolution” of the middle classes which carried Hitler to power have an economic basis? And is not this “revolution” precisely the regimentation of capital by the state which we are now witnessing in Germany? Even a cursory examination of German economy from 1933 to 1941 deals an irreparable blow to this fable. The concentration and centralization of capital have proceeded apace since 1933. The large corporations have grown at the expense of the small. Retail trade remains in the condition of a man sick with galloping consumption. The Nazi state has intervened actively to accelerate economic evolution, for example, by hastening the transformation of thousands of handicraftsmen into factory workers or soldiers. But aside from such direct measures the entire state control of economy acts in favor of the big as against the little capitalist. The Nazi bureaucracy acts far more arbitrarily and independently toward the small capitalists (not to mention the handicraftsmen) and is far more “accommodating” in the presence of the big ones. The regulation of foreign trade has greatly favored the big companies and has enabled them to crush their small and middle-sized competitors in this field. State centralization has been combined with economic centralization—the same phenomenon which was to be observed during the first imperialist war. This process is a direct refutation of Nazi “anti-capitalism” which supposedly was to profit the middle classes who brought the party to power. Under the cover of demagogic phrases the Nazi bureaucracy plays the same role as did the traditional bureaucracy of the bourgeois state.

Other improvisers depict differently the origin of the “new order”: The Nazi party, financed and called to power by big capital, has freed itself from its master just as the broom did from the apprentice-sorcerer. Nazism has undertaken to eliminate the capitalist bourgeoisie in favor of its own aggrandizement. It “controls” the property of the latter, which means that in reality it disposes of that property. Here the basic flaw in the method of improvisation stands out most glaringly. The improvisers take private property as it is legally defined, jus utendi et abutendi, the right to use and abuse, and they oppose this definition to the actual situation. The divergence is so marked that they rush to conclude that private property has been abolished. In reality all property is social in character, and capitalist property more than any previous forms. A capitalist can “use and abuse” his capital not as his whim dictates but in a certain well-defined manner, otherwise he is liable to an immediate penalty, namely, bankruptcy. He cannot use his profit as he likes. He must accumulate to improve his equipment and expand his enterprise. Otherwise he loses not only his profit but also his original capital. At a certain stage competition forces him even to abandon the individual ownership of his business and to enter into a corporation, and later into a cartel. Finally, he is compelled to wage war, to devote to that purpose an increasingly larger portion of his profits and to endure the haughty intervention of militarists and bureaucrats. All this proves that capitalist property is a contradictory phenomenon, self-devouring in character. And this we have known since the time of Marx. In a war economy the contradictions of capitalist property appear in their most aggravated form, but capitalist property is by no means abolished thereby: the clearest proof of this is the war itself.

We now come to the third difference from the first imperialist war. Does not the present state control constitute such a difference in degree as to justify the conclusion of a difference in kind? Such an inference is entirely groundless. In the production of consumers’ goods, food in particular, state regulation in 1918 was hardly less rigorous than now. In heavy industry (armaments and means of production) the current methods of control avoid such nakedly violent measures as the requisition by seizure of certain factories in Germany which were imposed by the army in the last war. Thanks to past experience and to long preparation the activities of the state now penetrate economy in a more organic, and on the whole, more thorough fashion than in the last war. Finally, it does seem that in the sphere of credit, state control has made measurable progress. But while the Nazis have perfected the technique of control, they have not made any great innovations, and it is manifestly impossible to infer the birth of a new social order unless one is prepared to recognize that this order was already born in Germany in 1915.

Repetition does not at all signify identity. The capitalism of 1941 is no longer that of 1916. It had passed through the first war, the shocks of the post-war epoch, the great depression. Herein lies the sharpest difference between the two wars. Concurrently, the present conflict imposes still more profound demands on the economy. Every country, victor and vanquished alike, will emerge from the slaughter with their economic systems much more debilitated than was the case in 1918. Can one expect an appreciable upsurge of the productive forces to follow the war? Until now at any rate no indication permits us to entertain such a hope. State intervention in German economy is fulfilling the same task as before: it mobilizes all the national forces for the duration of the struggle only to leave the economy all the more feeble and prostrate. With the exhaustion of all society it is quite possible that after this war forms of state control which disappeared at the end of the last war may be perpetuated. But it is clear that this can be only the means of organizing mass misery. What we have before us is not a new system capable of carrying humanity forward but a form of stagnation and decline of the old capitalist system.

What Is the Nature of German Economy? To determine the actual condition of German economy we must do more than oppose to it the serene tableau of a perfect (and unreal) free-trade economy. Above all we must delineate the forms and character of state intervention. German economy is a war economy, designed for war and engaged in war. Its cardinal command is “Guns instead of butter.” Curtailment of consumption is a fundamental trait of the Wehrwirtschaft and in Germany it has been pushed to the extreme. This is directly linked with the limitation of new investments. The object of these measures is to divert all the resources of the nation (capital, labor power, raw materials) from the production of consumers’ goods and to direct them into the production of war materials. The state is, at the same time, enabled to mobilize by loans all the purchasing power which remains unabsorbed because of the lack of consumers’ goods. War which cut off economy from the world market imposed an additional restriction. Autarchy originally engendered by the crisis was transformed directly into military autarchy.

If we examine these measures, they appear in and of themselves, as well as in their translation into the language of decrees and regulations, to be restrictive and negative rather than constructive and positive. The state imposes certain limits on economic activity, these limits being dictated by the necessities of war (or by the preparation for war). But within these limits capitalist profit still retains its motive force. One need only pick up one of the official Nazi economic reviews to encounter innumerable references to capitalist initiative. This is no empty rhetoric. If tomorrow Hitler were to state-ize industry, that is to say, sever the bond called property between the capitalists and the means of production, and undertake to run the economy with the aid of state employees, the quantity and quality of armaments production would immediately decline.

An important characteristic of German economy is its system of price control. At the end of 1936 prices were “frozen” by the government. This measure was a direct consequence of the need to finance rearmament. Without it inflation was but a step away. At bottom it represents a new manipulation of money rather than an attack on the capitalist character of the economy. The latter moreover did not fail to make its presence felt. The quality of merchandise, particularly consumers’ goods, began to deteriorate at a rate which quickly approximated a rise in prices of 40 to 50 per cent. Prices themselves have not ceased to rise slowly. But even without taking these manifestations into account, one can say that this regulating mechanism did not shatter the framework of private profit. The high priests in charge of price regulation often repeat that “Costs are not Prices” (Kosten sind keine Preise). They mean by this dictum that the prices fixed by the state cannot be determined by the cost of production, nor by the cost of production plus a percentage of profit. This statement is interesting because it recognizes, first, the existence of profit; and second, the absence of any official and automatic rate of profit. Prices (and profits) rise with official sanction, as the demand markedly increases. But it is still more important to understand the justification of this principle by the official commentators. One of them declares:“If the entrepreneur is guaranteed his costs he is no longer forced to seek out and introduce more efficient methods to lower the expenses of his business with respect to wages and raw materials and he is no longer forced continually to invest new capital toward this end” (Weltwirtschaftliches Archiv, 1940). Here, clearly expressed, is the entire difference in the views of the capitalist entrepreneur and the state functionary.

Many improvisers invoke Hitler’s second four-year plan to discover a “planned” economy in Germany. Manifestly this is to follow the Nazis in their abuse of language. The difference between the Soviet Five-Year Plans and Hitler’s four-year plan is apparent at a glance. The Soviet plan undertakes (more or less capably) the construction of the whole economy. Hitler’s plan is not a plan in the precise sense of the term but a program, and, besides, rather a vague one, as much political as economic. The first measure was to centralize state control of economy in the hands of Goering, who proceeded to promulgate, since the end of 1936, decrees which are in general restrictive and prohibitive. Whenever the situation in this or that branch of industry became particularly grave, the state made its authoritative voice heard. This is not a planned building of economy but a kind of police supervision which terminates with a club the first conflict that threatens to stop the functioning of a machine geared to the limit of its capacity. All of Goering’s regulations are not constructive and positive but essentially negative in character. This characteristic of the Nazi “plan” is especially clear in the field of investments. The state restricts investments in certain branches in order that funds may flow into others. The state has a positive and detailed plan only for financing a few infant industries which represent a negligible fraction of the national economy, and this has always been one of the functions of the capitalist state.

Present-day German economy can by no means be characterized as “planned” economy. The Nazis themselves quite frequently employ the expression “gesteuerte Wirtschaft” or “guided economy.” This is far closer to the truth. The state orients all the national forces in a single direction: the military struggle. Incontestably this imparts to economy certain specific characteristics. But private initiative, channelized into the dikes of state control, still plays far too great a role to even talk of planning. Finally, the idea of planning implies a harmonious development of the productive forces, whereas the military orientation of German economy creates major disproportions. It is also necessary to call attention to a point which the improvisers often pass over in silence. This orientation of the economy is determined in the long run not by the form of political power but by the nature of the economic system itself. Unless one subscribes to the “bad man” theory of history, the explanation for the war lies not in Hitler’s evil character but in the fact that the contradictions between the developed forces of production and the outmoded productive relations, in the absence of proletarian revolution, find their only outlet in war. The state merely aids in the attempted solution of this task imposed upon it by forces beyond its control.

The Formulas of the Improvisers Among the improvisers who seek to deny the capitalist nature of German economy, a few have hastily read Marx in order to cull from his works some definition of capitalism which is no longer applicable to the Third Reich. In the main their procedure comes down to defining capitalist economy as a “market economy.” Then they conclude: Since prices in Germany are determined not by the automatic laws of the market but by state decrees, therefore the economy is no longer capitalist. To be sure, the intervention of the state into the sphere of circulation affords certain supplementary channels for the manipulation of prices. But there is essentially nothing new in this. For almost half a century monopolies and cartels have precisely set themselves the task of converting free trade into its opposite. Are monopolies then “non-capitalist” enterprises? The formula of the improvisers is false because they attempt to define capitalism by seeking its essential characteristics in the sphere of circulation.

Marxism teaches us that a correct definition of capitalism can be established only by seeking out the essential relations in the sphere of production, which, in turn, determines those in the sphere of circulation.

To what extent is it correct to speak of “fascist economy”? If this is intended to establish an all-inclusive correspondence between fascism and the type of economy existing in Germany, then the expression is erroneous. Fascism is essentially a political phenomenon. The economic measures applied by fascism have their parallel elsewhere. Under its heavy feudal shell, the Japan of the Mikado is far closer in its political regime to the Russia of the Czars than it is to Hitler’s Germany. Yet Japan approaches the Third Reich more than any other country in her state control of economy. On the contrary, Franco’s Spain, fascist in the proper sense of the term, by no means follows Germany in the economic field. Finally, the “democratic” United States, not to mention Great Britain, is building her war economy by adapting to her own needs Hitler’s methods. It is clear that war economy adjusts itself most readily to the totalitarian political regime which fascism brings it. Conversely, war tends to render all regimes totalitarian. But fascism remains a specific political phenomenon. The expression “fascist economy” which in effect identifies the political superstructure with the economic foundation can produce only misunderstanding and confusion.

A precise definition would read that it is a capitalist war economy in the epoch of decaying imperialism. If this definition seems less “original” than that of the improvisers, it has the inestimable advantage of being scientifically exact, and providing a reliable guide to our action.

The improvisers either imply or flatly declare that the state control of war economy in Germany represents a certain progress, just as the trusts and cartels of a few decades ago were progressive. They forget a trifle. The concentration and centralization of capital which reached its peak in the form of cartels, trusts, etc. led to a colossal development of the productive forces, and, literally, brought society to the very threshold of socialism. State control represents nothing of the sort. In wartime it pushes the national productive forces to their extreme limit, only to leave the country devastated and ruined in the end. What country’s economy will emerge stronger from this war than it was before the war? Where then is “progress”?

Lenin paid the greatest attention to the intervention of the state in economy during the last war. He termed this phase of capitalism as state-monopoly imperialism. He demmonstrated its continuity in the development of imperialism, and underscored that it constituted the aggravation, in a sense, the culmination of all the tendencies of the latter. In 1916, he pointed out certain progressive features in this phenomenon. Regulation of economy was of enormous educational value for the masses. It foreshadowed, to a greater degree than did the trusts, the future socialist organization; it represented the peak of the entire process of centralization of capital, and was a direct invitation to the proletariat to take into their own hands the direction of economy.

But we are no longer living in the year 1916. Since then, society has passed through the Russian revolution, the post-war crisis, the great pre-war depression, the Soviet planned economy, and finally entered the second World War. The methods of control employed in Germany and other countries teach us nothing new after the experiences of the last war and especially after the Soviet planning. The application of these methods far from having any salutary effects on economy, lead directly to vast disproportions and result in the end in a frightful destruction of the productive forces. Finally, we must underscore again the profoundly degenerate character of our epoch. Capitalism has passed its zenith. The defeats of the proletarian revolution, due to the betrayals of the Second and Third Internationals, and its consequent tardiness have not opened any new roads for capitalism but merely extended its period of decay. Society is not only ripe for socialism, but overripe and has begun to rot because of the delay. State intervention no longer appears as the culmination of the dynamics of the preceding development but as the reactionary reorganization of a declining society. That is why it is unpardonable to speak today of its “progressive” character.

Occasionally it is stated that the Nazis are building a “transitional” order. Historical materialism has long ago taught us that all regimes are transitional. To invest this statement with any meaning it is first necessary to specify the starting point and the destination of the transition. What the improvisers really mean to say is that present-day Germany constitutes a transition between capitalism and socialism. Is fascism a transition to socialism in the political and social sense? One can reply only in the negative, unless one accepts Nazi ideology. Does the affirmation carry more weight in the strictly economic sense? State intervention in economy, in and of itself, is by no means a socialist tendency. In the march to socialism, economy must necessarily pass through state-ization. But this does not at all mean that every state-ization is necessarily socialist in character. It is still necessary to answer two more questions: Who carries out the state-ization? And for what purpose? Furthermore, it should be borne in mind that German economy is far from stateized. Control of economy by the imperialist state, in itself and in its consequences, cannot carry the productive forces forward but can only plunge them into ruin. Far from being a transition to socialism it represents a retrogression into barbarism.

All improvisations on the subject of the “non-capitalist” character of German economy, the progressive aspects of Nazi regimentation, its being something “new,” etc., etc., only represent in the last analysis a capitulation to Nazi demagogy. They are one of the by-products of our period of reaction which has taken its toll in destruction not only of lives and material values but also of men’s capacity to think.

November, 14, 1941