THE POSTPONED DEPRESSION

...Japan now surpasses the United States in the production of steel and automobiles...

...These expenditures have provided an artificial and tenuous prosperity dependent on an increasing level of debt, since militarism produces neither consumer nor capital goods to generate further economic activity...

...But they have been caught in a bind from which there is no escape under present rules of the game: Militarism is the crutch that supports the economy, as well as a significant cause of inflation...

...The Great Depression of the 1930s was not cured...

...It isn't, though...

...Roosevelt gave America hope, but his program did not solve its problems...

...the assumption is that the rich will not spend their tax savings but invest them in industry and technology...

...What we have is the classic formula for an enduring depression...

...The "voluntary" guidelines are gone, but the Reagan Administration is continuing the Carter policy by other means...

...This process can go only so far without bankrupting the economy...

...The American economy can no longer support both welfare states: One has to go...

...If Reagan can win a substantial victory against the defenseless poor in these first months in office—during the usual "honeymoon" accorded a new President—his next target is likely to be the labor movement...

...in the 1970s Germany's share jumped to 40 per cent, while the U.S...

...Chrysler workers were compelled to give up forty-six cents of their hourly pay as a condition for Federal loan guarantees to keep the big corporation afloat...

...Nixon had such plans worked out in detail...

...It was a first in American history: Never before had a President proclaimed it to be national policy to reduce workers' real income...

...Compounding the problem of a contracting domestic market is international competition...

...What the Reagan Administration is attempting to do to the American economy, therefore, is not a product of sheer malice or incompetence, but a response, however inept, to the condition of our capitalist society...

...Furthermore, Reagan is expected to Sidney Lens, a veteran labor leader and peace activist, is a contributing editor of The Progressive...

...Since World War II, the domestic market has primarily been sustained by $2.3 trillion in military spending...

...The result is that we are likely to confront "second" revolutions in dozens of countries that made their first revolutions for national independence in the quarter of a century after World War II...

...The developed nations fought each other for markets, manipulating the value of money, raising tariffs, entering into bilateral trade pacts, engaging in territorial aggrandizement...

...The Government must continue to reduce living standards, for three fundamental reasons: First, the United States is losing its competitive edge...

...The United States emerged from that war in far better condition than any other nation...

...Productivity, which rose by 3 per cent a year in the 1950s, has been declining by 1 per cent a year since mid-1977...

...In per capita gross national product, the United States is now tenth in the world, behind most Western industrial nations...

...The attack came too swiftly...

...All it needed was markets, and it gained those markets by giving about $200 billion in economic and military aid to nations willing to join the "American system...

...Federal debt grew by $400 billion from 1970 to 1978 alone, and now requires annual interest payments of $90 billion...

...If the Left can see its role in broad perspective, it will win this fight...

...And our corporations would rather buy up existing firms—as Standard Oil of Ohio recently bought Kennecott Copper— than invest in better technology...

...Washington's intense pressure made it a virtual act of treason for unions to seek wage increases that would just keep pace with the cost-of-living index...

...Though the Reagan program threatens a substantial number of interest groups with a loss of benefits, they have been unable, so far, to mount a united resistance to the total program...

...On the contrary, what had begun as an internal economic crisis evolved into a worldwide military crisis...

...Ultimately, the Government may try to dilute or even abolish true collective bargaining by having official commissions make the final decisions on wages and working conditions...

...A majority of America's best scientists and engineers are involved in military production, leaving the private sector starved for new ideas...

...Third, the foreign policy defeats the United States has sustained in Vietnam and elsewhere have encouraged the oil producers and other Third World nations to stand up to American pressures...

...The new dimension Reagan has added to the Carter program is a savage attack on the poor...

...The system is in a permanent crisis that can no longer be mitigated through Keynesian ministrations...

...The comforts and conveniences of American prosperity have been bought at the expense of our children, grandchildren, and greatgrandchildren who will have to pay for them for many generations—but there is a limit to such speculations...

...Reagan's desperate gamble is to try to save the economy—or at least buy more time for it—by dismantling the welfare state for the poor while preserving the welfare state for the rich...

...But the New Deal provided no cure for the Great Depression...

...But the Left must also give America a vision of a better tomorrow...

...Prices for oil have gone up far more rapidly than prices for U.S...

...In 1939, they went to war—a war that ultimately cost fifty-two million lives and a couple of trillion dollars in wealth...

...Under the "voluntary" wage guidelines applied during the last two years of the Carter Administration, wages lagged 5 or 6 per cent a year behind increases in the cost of living...

...The quid pro quo was the U.S...

...Much sooner, though, we may see attempts to impose severe restraints on the right to strike, and perhaps to abolish it entirely in the major industries...

...Second, the terms of trade—the relationship of prices for American goods to those of developing countries—are no longer favorable...

...All this instability reflects the burden of a staggering indebtedness...

...In the 1960s, for example, the United States and Germany each controlled one-third of world exports in metal-working machinery...

...In all, the United States lost 16 per cent of its share of world markets in the 1960s and another 23 per cent in the 1970s...

...The threat is one of economic hardship and political repression...

...Supplying more goods in a contracting market makes no more sense than boosting purchasing power when supply is stagnant...

...For more than a century, the terms of trade have been a means of draining wealth from the colonial nations and spheres of influence to London, Paris, Berlin, Washington, Tokyo...

...Certainly we must continue struggling for jobs, welfare benefits, health care, for closing down nuclear reactors, for reducing military spending...

...it disarmed opponents, leaving each group scrambling to save itself—if need be, at the expense of others...

...set a pattern for about fifteen million Government workers by granting only a substandard wage increase to Federal employes...

...The opportunity is one of proving to the American people that "free enterprise," even when propped up by militarism, doesn't work...

...In return, those nations had to accept the American dollar as the international medium of exchange and agree to "free" trade and investment— guaranteeing that the United States could penetrate their markets...

...The postponed depression Reaganomics continues a process that Roosevelt's New Deal interrupted Sidney Lens President Reagan's severest critics, no less than his most ardent admirers, like to depict his Administration's economic program as a dramatic departure from past policy...

...The Soviet Union surpassed the United States in steel years ago...

...And without the welfare state for the rich—subsidies and Government loans to business, tax breaks, accelerated depreciation, and the like—capitalism would have collapsed...

...Roosevelt boasted, quite accurately, that he saved America from revolution...

...America's balance of payments turned severely adverse...

...We bought a reprieve for a few decades through war ' and ever increasing military expenditures, but now the sidetracked depression is back on the main track and moving full-steam ahead...

...Japan, Germany, and a number of smaller industrial states have become more efficient in many key industries...

...The Federal pay raise, 9.1 per cent last year, is expected to run 5.5 per cent or less, and pensions and other benefits will also be adversely recomputed...

...Reagan knows his proposed rollbacks will not be fully enacted, but like a good collective bargainer he puts forth so many demands that even passage of only part of the package will represent a major victory...

...While American industrial capacity has grown phenomenally since World War II, so has that of our German and Japanese competitors, who are now taking markets away from the United States...

...goods, and the result is that many millions of dollars are flowing out of the United States into the bank accounts of Saudi Arabia, Nigeria, Iraq, and Venezuela, instead of flowing the other way...

...The alternative is a Reaganite form of the corporate state—a prologue, perhaps, to fascism...

...stake fell to 21 per cent...

...The Senate's best known critic of Government waste, William Proxmire of Wisconsin, told a television audience he would favor even larger budget cuts than those Reagan proposed, but a few weeks later told another interviewer that he favors more subsidies for his state's dairy industry...

...Should the United States suffer further foreign policy setbacks—as it almost certainly will—the effect on our economy will be extremely adverse...

...And democratic rights are likely to go with it, for it is inconceivable that tens of millions of people will give up benefits they have won over a half century without fighting back, and it is equally inconceivable that a government of the privileged few will not meet such resistance with police-state measures...

...In the 1930s, the Government was able to revive a stagnant economy by providing purchasing power and capital—without bankrupting itself...

...Reagan's team probably has similar, and even more oppressive, plans...

...What ails the American economy is not something episodic or ephemeral, but something basic...

...Hundreds of programs that have provided some relief to the poor for several decades are being scuttled...

...President Richard Nixon was forced to impose controls on wages and prices and to take the United States off the gold standard...

...Government debt has risen from $25 billion in the early Roosevelt years to $975 billion today, and the United States has an additional $800 billion floating around the world, backed by nothing more than a promise of redemption...

...In 1971, the delicate mechanism began to fall apart...

...Such divisiveness enables the Administration to dispatch its critics one at a time...

...it is merely the second phase of a Government-managed reduction in American living standards that was begun under Reagan's Democratic predecessor, Jimmy Carter...

...The biggest danger it faces lies in narrow vision, in concentration on a host of limited goals to the exclusion of the ultimate goal...

...it is in disarray itself...

...If the Government intends to continue cutting living standards, it must weaken the most highly organized force, the unions, so that they will offer no resistance...

...International debts have piled up to an incredible $500 billion, and some countries are bankrupt (Zaire) or on the brink of bankruptcy (Brazil...

...Consumer debt has tripled— from $400 billion to almost $1.2 trillion—in the decade from 1969 through 1978, and real wages have been declining since the mid-1970s...

...Obviously, the Reagan program, with its traditional "trickle-down" notion, offers no solution...

...Such "supply-side" economics are no more effective than "demand-side" economics in significantly increasing the purchasing power of most Americans...

...The major difference between the 1980s and the 1930s is that the current downturn is being "managed"—living standards are being manipulated to drop in an "orderly" fashion rather than in a free fall...

...That limit was reached a decade ago, though we have only recently become acutely aware of the fact...

...That is why the Reagan Administration's tax cut is scheduled to go primarily to the rich...

...without the welfare state for the poor—welfare, Social Security, unemployment compensation, and similar benefits—the strikes and demonstrations of the 1930s would have culminated in revolt...

...This was implicit in Carter's policy—there was talk, for instance, of changing the formula for adjusting Social Security for inflation—but Reagan has made it explicit and blatant...

...The fight for jobs and peace will inspire Americans only if it is coupled to a program for democratic socialism—for economic planning, for social ownership of certain basic industries and social control of others, for extensive welfare measures, and above all for decentralized popular control of both government and the economy...

...it was merely postponed...

...That is why both the Carter and Reagan Administrations have emphasized the need to reduce Government spending and balance the budget...

...Wages must not be raised, new social programs must be curtailed, and other sacrifices must be demanded of people living on the edge of subsistence...

...Ford exacted an even larger give-back than Chrysler from its steel workers, and many other corporations are following suit...

...Franklin D. Roosevelt's New Deal saved the system by establishing two welfare states—one for the poor and one for the rich...

...All of this will certainly affect state and local government employes, and ultimately the entire economy...

...But since the Yom Kippur war of 1973, the terms of trade in at least one key commodity— petroleum—have turned sharply against the West...

...Unfortunately, the Third World, except for the oil countries, is also in desperate straits...

...Given the present condition of American capitalism, such draconian measures are necessary if the system is to survive...

...For the Left, Reaganomics offers both a threat and an opportunity...

...Still, Germany's economy is currently also in a slump, and one that seems likely to endure—especially if conditions in the United States remain depressed...

...Dairy farmers, for example, insist on retaining their subsidies, but are quite willing to endorse cuts in benefits for organized labor and consumers...

...Given today's staggering national debt, however, "compensatory spending" can only cause more inflation and threaten economic collapse...

...The rate of unemployment, 25 per cent in 1933, fell only minimally, to 20 per cent, by 1939...

...Union "give-backs" are, in fact, rapidly becoming a national disease...

...expenditure of more than $2 trillion on a military machine to protect those countries and leaders who joined the American system, and to ward off those who challenged it—most notably the Soviet Union...

...We confront, once again, the old question of markets...

...The dollar fell in value as the price of gold soared from $35 an ounce to as much as $800 (it is now near the $500 mark...

...Such countries are kept afloat by additional loans from the International Monetary Fund or private Western banks, or both—but only on condition that they impose severe austerity on their people...

...The United States is no longer the kind of prop to the world economy it was after World Wars I and II...

...It was this vast commitment to military spending that created a full-employment economy from 1946 to 1971, but it also eventually undid the American prosperity...

...After a few months of Budget Director David Stockman's relentless barrage, many Americans will feel relieved if only 80 per cent of the Administration's take-aways win Congressional approval...

...If the United States responds to these second revolutions in the same heavy-handed way it handled Vietnam or is now handling El Salvador, we are certain to see further reverses for American foreign policy— and a further need for economic retrenchment at home...

...It had doubled the capacity of its heavy industry...

...they were derailed by Watergate...

...The current crisis can best be understood in the context of the Great Depression of the 1930s, when American capitalism was on the brink of extinction...