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From The Militant, Vol. 12 No. 15, 12 April 1948, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
By its war drive Wall Street is drastically changing conditions of economic life at home as well as abroad. A shift from a peacetime to a war economy implicit in the latest moves of Washington does not solve a single one of the basic contradictions of. capitalism, but it does alter the form in which these contradictions find expression.
Thus, the grave threat of an imminent collision, between expanded peacetime production and the constricting home market, which still confronts American capitalism, tends to fall away with the switching of production over into way channels.
Peacetime relations of capitalist markets drastically alter, not only in wartime but during the preparatory stages when a war economy is introduced. The capitalist state – and its war demands – then becomes the dominant economic factor. The state appears as the chief, and in many cases, the sole customer with unlimited buying powers. The problem of outlets is thus temporarily “solved.”
In place of existing or developing surpluses, there tend to appear, universal shortages in practically every nook and cranny of economic activity.
This is not to say that the shift from peacetime to war economy has already taken place. But the preparatory steps have already been made. The tempo can be stepped up arbitrarily, with the decision resting entirely in the hands of Washington. Therefore; barring an abrupt change in policy, this country’s economic life will, in the next period be dominated more and more by the war program.
Authoritative capitalist experts, like the editors of the Journal of Commerce, incline to the view that the economic measures already adopted will serve merely “as a cushion against any serious business decline.” They envisage an indeterminate period ahead in the course of which the country’s economy can keep rolling along at approximately the current peacetime levels – and prices.
Such an optimistic outlook is not justified. It centers attention only on those economic sectors – like inventories, sagging branches of industry, outlets for capital investment, etc. – to which the highly inflationary measures do indeed provide a “shot in the arm.” But it overlooks other key sectors of economy which are being subjected to enormous new pressures and which threaten serious convulsions in the course of transition to a full-fledged war economy.
To begin with, there is this country’s fiscal and credit system. The additional expenditures already projected, amounting to 4 billion dollars, were not provided for in the original federal budget. Coupled with the 5 billion dollar tax slash in federal revenues these huge sums mean additional deficit government spending.
As an inflationary force, such a development can easily overshadow all the other inflationary factors. Separate and apart from all other considerations, deficit government spending on any large scale, brings with it the, danger of runaway inflation, whose effects can be mitigated only through the imposition of rigid price controls, rationing and other regulatory measures. In the absence of such controls, the inflationary flames tend to leap higher and higher. Thus far, there has only been talk of re-imposing controls.
The inflationary conflagration is now being fed from still another source; namely, the billions stolen in the tax grab. The bulk of this 5 billion dollar tax cut represents not added consumer purchasing power, but additional capital, hungry for profits and eager for speculation.
The behavior of the stock market since Truman’s March 17 speech to Congress is a good illustration of the incipient flight of money into war speculation. This process will be speeded up as the tempo of war preparation is stepped up.
Even with the imposition of regulations and controls – which is by no means assured this year – Wall Street’s war drive is thus rushing headlong toward grave inflationary convulsions of this country’s fiscal and credit system, along with similar convulsions in the price structure.
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