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Frank Demby

A Capitalist Looks at the Economics of War

(November 1941)

From The New International, Vol. VII No. 10, November 1941, pp. 283–5.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

American Industry in the War
by Bernard M. Baruch
New York, Prentice-Hall, Inc., 1941. 498 pp.

ALONG LAST, Mr. Baruch, Wall Street speculator, big business man, financial advisor to the duPonts, formulator of the “M-Day” plans and one of the outstanding representatives of the American bourgeoisie, has set forth his views on war economics. It is not a book intended for mass consumption. The circulation of American Industry in the War will undoubtedly be limited to libraries, serious economists, a few Washington bureaucrats and perhaps a handful of Marxists. This is not to say that Mr. Baruch’s book is not deserving of wider circulation. It is. First of all, it is a useful reference book concerning some phases of America’s economic mobilization during World War I. Secondly, and above all, it contains Mr. Baruch’s program for the administration of the American war economy during World War II.

The book is invaluable as a class-conscious presentation of the point of view of the bourgeoisie. Just how representative of the opinion of the big bourgeoisie Mr. Baruch is, is difficult to say. But it is not without significance that the newspapers continue to report Baruch’s visits to Roosevelt, that the Canadian plan for preventing inflation, involving the freezing of all prices, including wages, is openly referred to in the American press as an experiment to determine the validity of Baruch’s ideas, and that Representative Gore’s plan, which also involves an overall ceiling on prices (wages included), is admittedly inspired by Baruch.

Baruch starts with the assumption that war, especially modern war, is a very serious business. He says in his foreword:

Total defense must plan to fight, to win and above all to survive war. This means some plan along lines similar to the experience tested by the United States War Industries Board of 1917 and 1918. It must mobilize men. money, materials, morale – all resources – to give to the war-making agencies and those allied with them, such as shipping and blockade, what they want when they want it, without unnecessary deprivation or exploitation of civilians.

Thus Baruch knows, and the experiences of the last war and of this one to date confirm him, that capitalist imperialist war in the epoch of the decline of capitalism necessarily involves totalitarian economic and political forms – that is, if the war is to be prosecuted successfully. Everything must be at the service of the state. The employment of all resources, material as well as human, must be planned. “Business as usual” must give way to “all-out” defense. To be sure, exploitation as usual will remain, but it must not be insensate and too grasping. Moderation, centralized direction, efficiency – that is the only way to preserve capitalism.

This thesis runs through the book from the very first page to the last. That it involves a lower standard of living for the masses, increased power for monopoly capital, and complete control of all aspects of life in the hands of an all-powerful administration in Washington is perhaps regrettable. But, and Mr. Baruch is 100 per cent correct, reasoning from the basic premise of preserving capitalism, this is inevitable. Mr. Baruch does not use the famous phrase adopted by Marxists from the German general, von Clausewitz: “War is a continuation of politics by other means.” However, he clearly understands the content of this expressive sentence. He is trying to convey its meaning to his fellow-capitalists, to persuade them, in other words, to continue their politics, their exploitation of the workers, by methods adapted to the war.

“Taking Profit Out of War” – A Deception

Baruch calls his plan, written in magazine form as long ago as 1931: “A plan to mobilize effectively the resources of the nation for war which shall eliminate war profiteering, prevent wartime inflation, and equalize wartime burdens.” To mobilize the country’s resources, Baruch would extend and improve upon the methods used in the last war. On the subject of eliminating war profiteering – that is, on how to accomplish it – he is delightfully vague. But we shouldn’t be too harsh. After all, it sounds nice. In fact, Mr. Baruch originally entitled his plan: Taking the Profit Out of War. It is enough that a representative of finance capital realizes the necessity for keeping profits down to a respectable level. On page 380, for example, he says: “The inflationary process affords opportunity to individuals and corporations to reap profits so large as to raise the suggestion (sic!) of complacency if not of actual hospitality toward the idea of war.”

We shouldn’t expect him to propose a practical plan (like a 100 per cent excess profits tax, or government ownership of all war industries) for achieving this admittedly desirable aim. Nor should we be surprised that Mr. Baruch didn’t find his conscience plaguing him when he advised the duPonts to take their millions of dollars of war profits and buy 10,000,000 shares of General Motors common stock. In other words, for purposes of preserving popular morale, the bourgeoisie should not be too greedy. Otherwise, the masses may begin to suspect the truth. “These people actually favor war because they profit from it,” the workers will be saying to themselves; and such thoughts are what the Japanese would characterize as “dangerous” thoughts. Says Baruch:

Our plans should eliminate war profiteering and they ought to provide that each man, thing and dollar shall bear its just proportion of the burden. They should be designed to avoid the prostrating economic and social aftermath of war and, finally, they should be laid with full recognition that modern war is a death grapple between peoples and economic systems rather than a conflict of armies alone, and to that end we should merit for industrial America something of what Field Marshal von Hindenburg in his retrospect of the World War had to say of its efforts in 1918: “Her brilliant, if pitiless, war industry had entered the service of patriotism and had not failed it. Under the compulsion of military necessity a ruthless autocracy was at work (my italics – F.D.) and rightly, even in this land at the portals of which the Statue of Liberty flashes its blinding light across the seas. They understood war.” (Page 377)

The purposes and methods of capitalist war are clearly understood by the bourgeoisie, German as well as American. Would that they were as clearly understood by the workers! That would truly succeed in abolishing war.

The Nazis Adopt American Plan

This profound respect and admiration that Baruch has for German bourgeois and military opinion is seen in another connection, which is more revealing of what the American war economy has in store for us this time than any other single sentence from anyone’s pen. In his foreword, after pointing out that France fell because she lacked real economic mobilization, and that England is having difficulties because she is only partially mobilized, the author says with considerable triumph: “German military experts have said, ‘Except for a few minor changes, the German economic mobilization system was conscientiously built in imitation of the similar American system.’” (My italics – F.D.) What happened, apparently, was that the lectures that Baruch and others gave to the American War College in the period around 1931 were later formulated as the “M-Day” plans and published for the edification of American bourgeois and military opinion. The Nazis, never loathe to borrow an idea which they could use to advantage, borrow the American mobilization plans in toto. Perhaps this explains the eager, and yet wishful, manner in which the American General Staff follows the progress of the German armies. One begins to suspect that is more a matter of the author’s pride than of advancing American military science. Be that as it may, a system which is good for the Nazis cannot be very good for the preservation of the democratic way of life!

“War is economically the greatest and most scandalous of spendthrifts” (p. 74). “This sapping of economic strength will, in future wars, be the determining cause of defeat” (p. 380). “In modern war, administrative control must replace the law of supply and demand” (p. 382). Here, in three brief sentences, is expressed all the wisdom of the bourgeoisie and, at the same time, their complete bankruptcy in the face of social problems that have outgrown the confines of private ownership of property and production for profit. The capitalist class, in the interests of its own self-preservation, is compelled to waste the “blood, sweat and toil” of the masses. It dooms humanity to incalculable exhaustion. No one can predict how many years it will take to recover from the devastation wrought by World War II. One thing is certain, however: the law of supply and demand (free, competitive capitalism and its political superstructure, bourgeois democracy) is doomed. It is not merely a question of its temporary suspension during the war. The World War, which is now threatening to make the last war appear as a localized incident, will bring in its wake proletarian revolution on an international scale and the tremendous leap forward toward socialism, or totalitarian state monopoly capitalism (fascism). Mr. Baruch has a premonition of this, although, of course, he cannot bring himself to say it clearly and openly, when he says (on page 104): “This legislation (anti-trust legislation – F.D.), while valuable for immediate purposes, represents little more than a moderately ambitious effort to reduce by government interference the processes of business so as to make them conform to the simpler principles sufficient for the conditions of a bygone day.” (My italics – F.D.)

Inflation and the War Economy

As for preventing inflation, all that can be said for Mr. Baruch is that he at least recognizes it as an inevitable accompaniment of capitalist war. His plan to prevent it is thoroughly reactionary and, in the long run, will not succeed in preventing inflation. The Baruch plan, known as the overall price ceiling, would simply freeze all prices as of a certain day and use the government’s powers of compulsion to enforce this 100 per cent totalitarian idea. In his own words (page 473): “When industry has reached full capacity and price-fixing is admittedly necessary, this ceiling should be clamped down, and all prices, wages, rents and other forms of remuneration limited to the highest levels obtaining on a certain specific day.” This, of course, involves freezing existing inequalities, accepting the capitalist concept of full capacity as the most effective economic organization possible, and instituting such far-reaching totalitarian controls as to make present-day Germany look like a democracy. But it will not prevent inflation. It will create a huge governmental bureaucracy and possibly slow down the rapid drive toward inflation, but as long as private appropriation of the fruits of other people’s labor remains (that is, while the capitalist system remains), it can only result in a concealed inflation, as Germany has discovered. Rapidly rising prices will give way to rapidly deteriorating quality in merchandise, to vast (and, unofficially, government-organized) “black bourses” or bootleg markets, where capitalists and government bureaucrats, who have the fat pocketbooks, can still live off the fat of the land. It will mean widespread corruption, such as to make the carpet bag era following the Civil War a model of virtue and restraint.

As for equalizing wartime burdens, Mr. Baruch expresses an admirable sentiment when, in the only place where he expatiates on this point, he says (page 469): “The need for preserving civilian morale forbids that necessities should be given only to those with the longest pocketbook. For this reason, food, clothing and all other vital elements that go to make up the cost of living, if they become scarce, must be rationed equitably among all consumers. The most satisfactory method is a system of ration cards together with the licensing of wholesale and retail distributors.” True, but you can’t make capitalism equitable, by decree or otherwise. However, Mr. Baruch is not particularly serious about this, or, if he is, he has his own, or capitalist, concept of social justice. For the major part of his book is devoted to a report of the War Industries Board, submitted in 1921, where Baruch cites with approval virtually all the experiences, dealing with virtually every commodity, of the Board, of which he was chairman. And, as every schoolchild knows, the conduct of the American war economy in World War I by the War Industries Board was hardly distinguished by its fairness and equal distribution of wartime burdens.

The Warning to Labor

It is when he comes to labor that Baruch, the industrialist, loses some of his objective pose. The mailed fist inches out of the white kid glove. Strikes, of course, are taboo, but the capitalists “shouldn’t take advantage of labor.” (That is, they should stop being capitalists.) Conscription of labor is not to be countenanced (Messrs. Bevin and Hillman, please take note!). The argument is rather interesting. “As long as our present industrial organization maintains, industry is in the hands of millions of private employers. It is operated for profit to them. The employee therefore serves in private industry operating for gain. Enforced and involuntary service for a private master is and has been clearly and repeatedly denned by our Supreme Court as slavery inhibited by the Thirteenth Amendment to the Constitution of the United States” (page 471). But, if the capitalist state drafts industry, as it has the power to do, and as is proposed in the “M-Day” plans, which Mr. Baruch inspired, won’t the state then have the “right” to conscript labor?

Mr. Baruch can never forget that he is a class-conscious bourgeois. Time and again it creeps out and destroys his “impartial, patriotic” approach. No better illustration is needed than the following: “The war had scarcely begun when the IWW, stimulated no doubt by the enemy, appeared as a menacing factor, particularly in the mountain regions and on the Pacific Coast” (page 88 – my italics – F.D.). How long will it be before government officials openly substitute the letters CIO for IWW?

American Industry in the War will be studied carefully by those who wish some factual information concerning the last war (the book, incidentally, has some valuable appendices) and by those who want to obtain first-hand the mature opinion of the most advanced sections of the American capitalist class. It will be ignored by those who wish to preserve their illusions concerning the “democratic” organization of a capitalist war economy.

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