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David Coolidge

New Crop of Star-Spangled
Millionaires Is Being Born

(27 March 1944)

From Labor Action, Vol. 8 No. 13, 27 March 1944, p. 1 & 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Eugene G. Grace, president of Bethlehem Steel Corporation, reduced his 1943 “incentive compensation” by fifty-eight per cent. The United Aircraft Corporation of Connecticut turned back $286,000,000 to the government. Company officials said that they were ashamed to take the money.

Some Facts – But Don’t Draw Conclusions Yet

The War Department announces that the government is paying twenty per cent less for equipment and supplies than two years ago. A bomber that formerly cost $238,000 now costs $137,000 – from the same company. A company that got $510 each for a .50 caliber machine gun now charges the government only $200. Light tanks that formerly cost $45,000 each, now are sold for $22,564. A radio transmitter that was given to the government two years ago at the bargain price of $3,194 is now bought from the same manufacturer for $1,302.

These figures are in a recent report by General Browning, director of purchases for the War Department. A total saving of nine billion dollars has been effected by the government in the last two years. But in addition to these nine billions, the War Department says that over twelve billions of savings had previously been effected in reductions in the estimated costs of equipment and supplies made by the department and in savings due to changes in contract prices after the contracts were let.

From these two sources alone, then, the government claims savings of twenty-one billion dollars. The manufacturers of war equipment and supplies got twenty-one billion dollars less than they would have if the prices had remained as of two years ago, and if there had been no change in budget figures or in the approved contract figures.

This is for the War Department alone and does not include the Navy Department, which also spends billions of dollars for war equipment with the same corporations.

These same corporations have also paid millions and millions of dollars in taxes the past two years. It is their constant claim that taxes are so “burdensome,” as is alleged in the case of the railroads, as to “not only deprive the carriers of a reasonable return on their investment but also menace the future of the industry.”

Perhaps the reader will conclude from all this that the capitalists – those staunch defenders of “free enterprise” and the “American way of life” – are in great difficulty, and that a “socialistic” government is about to put them into overalls, or hurl them into the breadline.

This would be a sad mistake. Capitalism still lives. It is in no danger from the government – from its government. While it is true that Mr. Grace reduced his “incentive compensation” fifty-eight per cent for 1943, he still had $42,546 remaining after he paid his income taxes.

It is true that the United Aircraft Corporation got “ashamed” and gave $286,000,000 back to the government. But it is also true that this corporation had $17,006,000 in net profits left after paying millions in taxes and putting “a little something” away for “unforeseen contingencies.” Before the war the highest net profit of this company was $5,000,000.

“Incentive pay” is working well on all fronts for the corporations, their officers, stockholders and bondholders. Big profits, fancy salaries, huge dividends and juicy interest checks to chronic loafers who hold the bonds are the order of the day.

The Securities and Exchange Commission, in its latest report on profits, tells a story that should make every worker ponder over the no-strike pledge and the labor leaders who insist that the pledge be kept.

A Mere 100 Per Cent of Profits on Investment

Six corporations in the heavy industries classification made profits in 1942 of over 100 per cent on invested capital after payment of taxes. Consolidated Aircraft made a profit of 117 per cent AFTER taxes. Of course, this corporation is among the howlers about taxes being too high, but its profit before taxes was 578 per cent!

The whole aircraft industry had the highest profits: 37 per cent after the payment of taxes. About two years ago it was reported that aircraft profits were to be limited to 15 per cent. Right behind aircraft was metal-working machinery with a 25 per cent profit, and screw machine products with 30 per cent. This is the “American way of life” in operation. This is the “free enterprise” system. One aircraft company came very near going broke in 1942. In 1941 its profit after taxes was 421 per cent, but in 1942 profits had been reduced to the starvation level of only 42 per cent. North American Aviation managed to squeeze put a 65 per cent profit after taxes. If there are any workers at North American who were there at the time of the strike they will remember that Roosevelt gave the Army its first combat experience against them before it was sent overseas. The International Machine Tool Co. made 89 per cent after taxes; Cleveland Tractor, 34 per cent; Vultee Aircraft, 47 per cent; Beech Aircraft, 153 per cent; Jacobs Aircraft Engine, 175 per cent.

Star-Spangled Millionaires Are Being Born

When these huge profits are approached in another way, it can easily be seen that the biggest crop of brand-new star-spangled millionaires ever known in history is being born today. Randolph E. Paul, general counsel of the Treasury, said that even if the war ended right now, present tax laws would give the big corporations a “windfall” of forty-five and a half billion dollars. This windfall is called a tax refund to be used for “conversion to peace.” The truth of the matter is that this so-called refund is a government subsidy to big business.

Workers’ wages are stabilized, the cost of living rises forty-five per cent, labor leaders chant their no-strike hymn, while the government gives a gift of forty-five and a half billion dollars to big capitalist monopolists to be added to their huge profits, salaries, dividends and interest. This is the “American way of life,” the “system of free enterprise.” This is the capitalist system.

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