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Frank Demby

Arming for Boss War

(November 1940)

From Labor Action, Vol. 4 No. 32, 18 November 1940, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Who Pays?

“We have just begun to rearm. There must be a higher debt limit and new taxes.”

So said Secretary of Treasury, Mr. Morgenthau, two days after Roosevelt was re-elected for a third term. Conservative estimates indicate that the government will spend at least 20 billion dollars during the next year and a half. This is a lot of money, no matter how one looks at it. It amounts to about 30% of the of the current national income.

We know how Germany is financing the war – by increasing the working day to 12 and 14 hours, speeding up labor, higher taxes that fall most heavily on the masses of the people, by looting the occupied territories through a system of scientific stealing – in two words, by a system of forced labor. A totalitarian regime is well equipped for this method. The institution of an extremely rigid type of capitalist slavery is the fundamental reason why fascism came to power.

The Lesson of England

How is the war financed in England, a democratic capitalist country? Does England, which claims to be fighting a war for democracy, finance the war in a more democratic way possible, by having those most able to pay for themselves cost of the war (about 36 million dollars daily)? Are the standards of living of the English masses maintained? the answer is very definitely, no! The London Economist’s index of British prices on Nov. 5, 1940 was about 42% higher than at the outbreak of the war. In spite of higher taxes, the British capitalist is finding the war very profitable, aside from those whose plants have been destroyed by bombings – and these will probably be reimbursed by the government. Conservative bourgeois sources indicate that the average standard of living of the British worker (aside from those rendered homeless by bombings) has declined about one-third since the outbreak of the war. In both England and Germany, the masses are bearing the burden of World War II, thus destroying a lot of the fake pretexts given for the war. Must we expect the same sort of thing in this country? The opinion of London financial circles is very interesting, in view of the experience the British have had with this problem.

“It is felt,” says a dispatch to the New York Times, dated Nov. 10, “that the New Deal policies will be pushed into the background by more urgent requirements of rearmament and even larger United States backing for the British war effort. It is remarked by commentators in the financial press that the urgency of the production drive entails on Mr. Roosevelt the necessity of treating big business more gently than hitherto.”

Workers Will Pay

Comment on this is really superfluous. The British capitalists need not fear for their American brethren. Roosevelt does not need their advice. He has already taken the necessary steps to make sure that the American workers pay for the cost of rearmament. When the “defense” program was first projected earlier this year, Roosevelt indicated very clearly how he was going to handle the problem of paying for the cost of the program by broadening the base of the income tax, so that those in the lower income brackets, who have hitherto been exempt, will now pay an income tax. The rates have been stepped up so that the workers and lower middle classes will pay proportionately much more than previously. Special “national defense” taxes were levied on amusements, movies, gasoline, liquor and tobacco, which, of course, fall most heavily on the masses. Government employees will pay both a state and federal income tax.

Now that the election is over, the program is unfolded in all its reactionary splendor. Most of the money, it seems, is to be raised by increasing the national debt limit to $60,000,000,000 (it is now 45 billions). This, as Wall Street correctly interpreted, is a measure with inflationary tendencies. “I have no fear of inflation now that President Roosevelt is back,” says the eminent Secretary of Treasury, but just why Roosevelt should be any better able to prevent rising prices than Churchill, he does not indicate. Without the introduction of prices, which mean a lower standard of living for the masses, are inevitable.

The Tax Swindle

It is also indicated that a small portion of the money will be raised by new taxes. I have already indicated in a previous article, that the excess profits tax is a swindle and will raise very little. What new taxes are meant? The only one indicated is a proposal to tax government bonds, which are now tax exempt.

This explains why the banks and big corporations have been getting rid of their government bonds during the past few months. Some money will undoubtedly be raised by this method, but we can expect that it will be chiefly through another Liberty Loan campaign, which means that the lower middle classes and higher-paid workers will bear the brunt of the patriotic salesmanship pressure. Other taxes, since present measures are obviously inadequate to cover the cost of the program, will most likely be forthcoming. Our experiences to date, however, indicate that it is “we, the little people,” who will pay for them. Since the squeeze on the government’s finances will become tighter and tighter, no matter how much the normal revenue from taxation is increased due to a higher national income, we can expect also that very shortly Roosevelt will begin to listen to Senator Byrd and others who propose that “we should at once economize on non-essential peacetime spending.” By “non-essential” spending, these people, of course, mean WPA, slum-clearance and the like. As long as Roosevelt refuses to make those who can afford to pay for the “defense” program, it’s a cinch that the workers and broad masses will bear the brunt of the rearmament program. And why, indeed, should it be any different here than in England or Germany?

Who Profits?

“The profits of twenty-eight steel companies for the first nine months of 1940 were $169,919,408, compared with $54,606,254 in the same period in 1939, despite the fact that tax appropriations for the current year were virtually double those in the comparable period. The increase amounts to 211% for the nine months.”

The above quotation, from an article in the financial section of the New York Times on Nov. 10, gives the answer to our question. It merely gives actual figures for a generally-observed situation. Business is booming. Production levels will probably exceed 1929 levels for 1940. Profits will be very close to 1929 profits.

It is estimated that profits for all industry will reach the total of 10 billion dollars in 1940. (Why not just take all of this – if rearming is what the bosses want!) America has definitely entered upon an armaments boom, which will be much, much greater during 1941 than even during 1940. The only difference between the present boom and the 1929 boom, aside from the fact that an armaments boom is never very sound or lasting, is that most of the big profits are made by even fewer of the big corporations. In the case of the steel profits cited above, for example, 12 steel leaders made net profits of $157,341,000 during the first nine months of 1940. The other 16 steel companies made only 12½ millions – enough to keep the wolf away from the door, but chicken feed compared to the money made by U.S. Steel, Bethlehem, Republic, Weir’s National Steel, and the other big steel corporations.

Prosperity for Rich

The same story is true in auto, rubber, oil and the other mass production industries. Prosperity has arrived for America’s 60 families and their friends. Chemical, aviation, shipbuilding and munitions factories are working 24 hours a day. Orders are piled up for a year or two in advance. And most of this increase in production is being accomplished with relatively little increase in the number of workers hired. The investments in plant and equipment are so large that most of these industries will pay hardly and excess profits tax. Anti-trust laws and prosecutions against big business monopolies are being suspended in the interests of “national defense.”

Labor’s Opportunity

Here it would seem, lies the big opportunity for America’s trade unions, especially the CIO, which has most of the unions in the mass production industries, to demand substantial wage increases. Industry cannot justifiably raise the argument that it cannot “afford” higher wages and better working conditions. The figures show otherwise. Moreover, in spite of the organization drives of the CIO, these industries are still largely unorganized. Those that are organized, however, are making just as big profits as those that are unorganized. Just compare U.S. Steel, which is organized, with Bethlehem and Little Steel which are unorganized. Or, General Motors with Ford. Or, the independent oil companies with Standard Oil.

This is labor’s big opportunity. Failure to take advantage of it, however, will mean not only the death of certain unions, but it will mean that big business with its reactionary social program, will be more firmly in the saddle than ever. Wartime prosperity has, in the past, usually been accompanied by increased labor organization and the growth of the trade union movement. But that was in the period of expanding capitalism.

The present period, in spite of the war-time boom, is a period of declining capitalism. The bosses will fight even more desperately, therefore, against any attempts at organization by labor. The union movement, under pressure from the unorganized workers and the rank and file of labor, in general, will be compelled in the interests of self-preservation to widen and strengthen its efforts at organization. It will run smack up against the cry, “If you strike, you are interfering with national defense.” And this, at a time when big capital is writing its own ticket as to the terms on which it will cooperate with the rearmament program. The battle to organize the mass production industries, especially the key “defense” industries like aviation, chemicals, munitions and ship-building, will, through its outcome, determine in large part the future of this country.

If the unions fail to measure up to the responsibility that is theirs, even such labor standards and unions as exist now will be destroyed. If, on the other hand, the unions succeed in defending and advancing the basic economic rights of labor, then we will have taken a long step forward in the struggle to maintain our elementary rights, and, ultimately, to advance towards a socialist society.

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