Communist Theory and the U.S. Recession:
WOYTINSKY, W. S.
The Soviets are heralding 'the crisis of capitalism,' but our economy is set for another period of expansion Communist Theory and the U.S. Recession By W S. Woytinsky SOVIET PROPAGANDA rests on a...
...Contrary to their gloomy predictions, national income and industrial output in the United States continued to grow uninterruptedly, except for a short recession in 1948-49.until the middle of 1953 when a downturn occurred...
...Much will depend on the policy of the Administration, Congress, business and labor unions...
...What, then, is the lesson of the economic setback in the United States in 1954...
...Later, Marxian theory had to struggle for decades with the obvious contradiction between its postulate of the impending collapse of capitalism and the evidence of the internal strength of this economic system and its ability to grow...
...Though this readjustment occurred at a very high level of production and consumption, it was accompanied by the usual depression symptoms (unemployment, bankruptcy of small firms, and the like...
...The impact of the Korean War on our economy is no more than a ripple in comparison with the powerful stream set in motion by World War II...
...Nevertheless, the politicians and ideologists of the Kremlin hold tight to their old formula...
...1. The rapid increase in industrial production in the United States in 1950-1952 gave way to a contraction of output in the second half of 1953...
...Moreover, 1954 has been a year of prosperity and economic expansion in Western Europe, especially Great Britain, France...
...As soon as the readjustment is completed, the economy will probably return to its long-range trend, which can be described as the secondary postwar expansion...
...West Germany and the Scandinavian countries...
...Personal income" actually rose in the first nine months of 1954 as compared with the same months in 1953--from $284.4 billion, on an annual basis, to $285.3 billion...
...Producers were facing hard competition, while lucrative defense orders were cut down...
...After the middle of this year, employment began to rise in almost all industries, including lumber, furniture, stone and clay, metal fabrication, electric machinery, instruments, food, tobacco, textiles, apparel, paper, printing, chemicals, rubber and leather...
...On the average, the factory worker worked 39.9 hours in September 1953 and 39.7 hours in September 1954...
...The index of production of durable goods went down from an average of 151 for the second half of 1953 to 125 in September 1954, while the volume of production of nondurable goods remained practically unchanged...
...Social Security supports the purchasing power and consumption level not only of individual workers but of the total population...
...In October, unemployment declined to 2.7 million but remained about twice as high as a year ago...
...With the end of the Korean War, a new readjustment became necessary...
...At the same time, however, the total civilian labor force increased from 63.6 million to 65.2 million, that is, by 1.6 million...
...The only sure thing is that the development of the capitalist system in the last forty years, and especially in the last twenty, has been characterized by unevenly growing public control over both production and allocation of product...
...Under the impact of overproduction and increasing poverty of the masses, the United States must have closed its frontiers to imports...
...was as low as 123 in July 1954...
...The conclusion of this article reads as follows: "American imperialism represents today not only the exploiter and oppressor of the peoples of the world, but also a force that disorganizes the economy of other capitalist countries...
...All figures seasonally adjusted...
...This concept, clearly expressed by Marx in the 1840s, represented a synthesis of his observations during that and the preceding periods...
...2. The contraction of production was accompanied by a reduction of employment in manufacturing...
...The number of unemployed changed from March to September as follows (in thousands): 1952 1953 1954 March...
...The trend in July-September seemed to indicate that, by the end of this year, factory employment would approach the level of a year ago...
...unemployment is dropping...
...6. This pattern of unemployment is contrary to what would have been expected during a typical industrial crisis, or what would have occurred if the decline in production and employment were due to the lack of purchasing power in the population...
...To appraise these developments, three points must be considered...
...The remainder of this article is intended to summarize what actually did happen to the U.S...
...Here are the facts: U.S...
...The increase was from $1.90 to $1.92 (roughly 1 percent) in durable-goods industries, and from $1.63 to $1.66 (roughly 2 per cent) in non-durables...
...Varga hurriedly characterized that setback as a symptom of "rot in American capitalism...
...economy in the last year, and how the American recession did affect the populations of this and other countries...
...Using the average level of industrial output in 1947-49 as a base (100), the volume of production was 108 in 1950, 119 in 1951, 120 in 1952...
...During the inter-war period, he was associated with the League of Nations and the U. S. Government...
...economy had not been exhausted by the end of 1953...
...After a brief setback in 1949 which marked the readjustment of the economic system after the feverish inflationary expansion in 1945-48, the nation had entered a long secondary postwar expansion, which could have lasted a decade or two...
...8. Finally, a few words about the effect of the U.S...
...For many years, it kept disorganizing the economy of other countries by bringing them under its power...
...Labor in the United States, and Earnings and Social Security in the United States...
...The antinomy between collective production and individualistic allocation has been replaced by a complex combination of private initiative and public controls...
...Developments in the last two or three months suggest that the setback resulting from the readjustment from war to peace economy is approaching its end...
...But the growth of the peaceful economy was interrupted by the Korean War...
...It is true that this period has also been marked by increasing misery in Czechoslovakia, Hungary, Poland and East Germany, areas occupied and looted by the USSR...
...Production and employment are rising...
...Unemployment is greatest in the metallurgical, automobile, machine and coal industries...
...True, benefits are smaller in other states...
...With economic development, profound changes have taken place within both production and the allocation of products...
...Each depression is a separate phenomenon in the economic history of a nation, and, as a historical phenomenon, each setback can be explained only in connection with other historical facts...
...The universe described by Marx was a place without steam transport, without electricity and petroleum, without motor vehicles and airplanes, without telegraph and telephone, even without iron and steel...
...Their effort to obstruct the postwar economic reconstruction of Europe was dictated not only by political but by ideological considerations...
...Last year brought forth one of the first fruits of this work, an authoritative volume on Employment and Wages in the United States...
...The recent economic setback developed eight years after the end of World War II and immediately after the end of the Korean War...
...At the end of January 1954, Pravda printed another Varga article, in which he described the economic crisis in the United States as a feature of the general crisis of capitalism...
...The end of inflationary pressure and stabilization of prices were bound to result in increasing unemployment.The second point is that unemployment has been steadily declining since March 1954, and this decline has not been wholly accounted for by seasonal factors...
...All he can say is that the economic system of the United States--the modern version of the "free enterprise" or "capitalist" economy--is full of vigor and dynamism, able to expand and grow, and is better protected against sudden shocks than the "classical" capitalism studied by Marx in England after the Napoleonic Wars...
...The Federal Reserve Board regulates the flow of credit in the country, shifting from a "hard" to a "soft" policy and vice versa...
...precisely the same as in September 1953...
...Although Lassalle was forced to introduce corrections into his "iron law of wages," Marx himself made no basic corrections in his doctrine...
...Woytinsky is also the author of The World in Figures, seven-volume encyclopedia of statistics...
...What is characteristic of modern capitalism is the combination of highly developed public control over distribution of income with only partial or sporadic Government intervention in production...
...Changes in the capitalist system have been particularly far-reaching in the most advanced countries--the United States, the United Kingdom and some British dominions...
...The "stabilizers" within the modern capitalist economy showed their full force...
...New hiring before the end of the year was announced in iron and steel and in the automobile industry...
...the standard of living of their peoples must fall lower and lower...
...In the interaction of forces that make the world economic crisis ever more acute, the leading role belongs to the economy of the United States...
...Employment in these branches of manufacturing declined by 1.2 million (from 8.2 to 7 million), while in non-durable-goods industries only 300,000 jobs were wiped out...
...In fact, the lack of money would have caused contraction in production of consumer goods and lay-offs in corresponding industries...
...Recession By W S. Woytinsky SOVIET PROPAGANDA rests on a definite concept of a long-run trend in the world economy...
...Currently, the volume of industrial production is 6 per cent below the average for the second half of 1953...
...An economist cannot predict political decisions...
...the number of failures and the amount of their liabilities are receding...
...Total employment had declined from 62,306,000 in September 1953 to 62,144,000 in September 1954...
...Moreover, the normal work week in some industries is less than 40, in some cases only 35 hours...
...True, the population increased faster than personal income, so that the per capita income in 1954 was slightly less than in 1953...
...Even this formula requires qualifications...
...At the same time, American capitalists, suffering from a shrinking domestic market, must have dumped their goods on foreign markets, disposing of them at less than production cost (though still earning surplus profits by shameless exploitation of the workers...
...Since Soviet writers ascribe a special significance to the index of stocks and Varga has emphasized the fall of stock prices in the United States between January and September 1953 as evidence of the burgeoning crisis of capitalism, we should also mention that the stock index climbed from 181.7 in October 1953 to 243.3 in the same week in October 1954 --an increase of 34 percent...
...in 1949, that local setbacks did not portend national depression...
...All in all, labor earnings declined approximately 1 per cent in comparison with the preceding year, but remained 6 per cent above the 1952 level and 15 per cent higher than in 1951...
...7. How has the "depression" affected the workers' earnings and the total national income...
...Its characteristic is that it is distributed very unevenly among different branches of industry and different parts of the country...
...Industry answered the easing of inflation by increasing investments for rebuilding and modernization of plants...
...There can be different opinions about the timeliness of this or that measure taken by the Board, but it is hardly possible to doubt the stabilizing influence of its policy on the economy...
...Essentially, this is what distinguishes the modern economic system from the capitalism of Marx's time...
...In different forms and combinations, they are observed in all the nations of advanced capitalism...
...On the average, the factory worker earned $1.79 an hour in September 1953 and $1.81 in September 1954...
...Thus, the United States exercises a dual influence on world capitalism...
...It fell in the latter part of that year and the first part of 1954...
...Total wage and salary disbursements amounted to $16.3 billion in August 1954, as compared with $16.7 billion in August 1953...
...J. Kronrod developed the same idea in the Soviet periodical Economic Problems, in a long article with an awkward title: "Special Features of the Growing Economic Crisis in the United States Under Conditions of War Economy...
...The loss amounted to $400 million (2.5 per cent), but part of it was compensated by unemployment insurance or offset by gains in fringe benefits...
...Nevertheless, workers' total earnings have declined, though not to the extent described in Soviet publications...
...The reduction in weekly hours of work was limited to durable-goods industries (a reduction from 40.6 to 40.1 hours per week...
...Manufacturing and mining employed 18.3 million persons in September 1953 and 16.7 million in September 1954 (a dip of 1.6 million), while the corresponding figures for agriculture were 7.3 and 7.5 million, and for all other pursuits (including self-employment) 37 and 37.9 million...
...It is the theory of an inevitable collapse of capitalism as a result of the development of its inherent contradictions...
...social conflicts within them must become sharper and sharper...
...This growth in labor supply, combined with the slight decline in available jobs, resulted in the rise of unemployment from 1.3 million to 3.1 million...
...Many observers of American business tended to exaggerate these symptoms and forecast economic troubles which did not materialize...
...What that effect must have been, according to Soviet economic doctrine, is well known...
...First, unemployment was considerably lower in September-October 1953 than the level which corresponds, according to American experts, to the concept of "full employment" under conditions of collective bargaining and freedom to shift from one job to another...
...To us, this is a world of the remote past, the infancy of capitalism...
...in others (like textiles), wage-rates were frozen at 1953 levels.In addition to straight wage raises, the workers obtained various "fringe benefits...
...According to the new, more elaborate index, industrial production reached its peak (136-137) in July-August 1953...
...The Soviet press reported that, in view of general overproduction and the poverty of the population, prices in the United States "already" collapsed at the beginning of 1953 and have continued to "collapse" ever since...
...Transformation of previously sovereign states into United States satellites, Marshallization, the military aid given by the United States to the Atlantic countries, the deep penetration of American monopolies into the British, French, West German and other capitalist markets--all this leads inevitably to intensification of the world economic crisis...
...Now, when the crisis hits the United States, it leads into the abyss those countries that had tied their fate to it instead of choosing to prosper as sovereign and secure countries under the protective arm of the Kremlin...
...It may be worthwhile to examine the roots of the Marxian concept of the inherent contradictions of the capitalist system...
...crisis" on other capitalist countries...
...Perhaps it is now on the ascending slope that will bring it eventually to the trend line characterized by an annual growth in national income by about 3 to 4 per cent...
...The United States in 1950 was in a phase of rapid economic growth stimulated by World War II...
...The gains, however, were very unevenly distributed: Workers in some industries gained a raise of 2.5 to 3 percent...
...and has inched up to 124 since then...
...4. As the preceding figures show, total employment in September 1954 was 162,000 below the level of a year ago--a loss of about two-tenths of 1 per cent...
...The phase of economic history which Marx had regarded as the approaching end of capitalism proved to be, in reality, the beginning of an expansion of the free-enterprise economy throughout the world...
...a year ago, that termination of the Korean War would involve readjustment but no serious crisis for our economy...
...What did happen, however, was contraction in a few branches of heavy industry and, most of all, in munitions industries...
...he deals solely with economic facts in their relation to each other and external conditions...
...From that all-time peak, the number declined to 12.2 million in July 1954 and recovered to 12.6 million in September...
...Therefore, the average work week of 39.7 hours does not mean that the worker is losing, on the average, .3 hours of normal week work...
...Thus, the number of employed production workers in September 1954 was 1.5 million below the mark in September 1953...
...Some unions have a fifth of their members unemployed...
...What next...
...W. S. Woytinsky has been comparing economic realities with the doctrines of Karl Marx (cut at left) for five decades...
...In Communist theory, economic crises, the struggle of capitalist countries for markets, colonialism and imperialism, the growth of exploitation and poverty in the world--all these are hut the results of capitalism's original sin: the combination of a collective system of production with an individualistic system of allocating products...
...During World War II, he compiled long-range estimates of Social Security costs for the Federal Security Administration...
...This led to a production cut in heavy industry and a revision of production programs in light industry, with a general tendency to technological improvements (automation) and higher labor productivity...
...The decline was trivial...
...but the U.S...
...It is amusing to read a book that has all the appearances of erudition and yet contains not a single sound statement or generalization which is based on real facts...
...In recent years, he has been at Johns Hopkins University, working on a Twentieth Century Fund project entitled America in the Changing World: Survey of Economic and Political Trends...
...In 1943, he predicted that there would be no runaway postwar inflation...
...It is also possible that part of the expansion of production in the summer of 1953 was due to internal political factors (the change in administration and upsurge of optimism in Big Business...
...In 1954, benefits have been raised in many states and the labor unions insist on a further increase, but even where unemployment payments amount to only $20 a week an unemployed American receives more than the great majority of skilled workers in the Soviet Union...
...Briefly, the economy had to readjust itself from a small war to an insecure peace, from a seller's market to a comparative balance between supply and demand...
...5. Nevertheless, the present level of unemployment is a serious matter in the social life of the United States...
...imports amounted to S6.1 billion in the first seven months of 1954, as compared wtih S6.5 billion in the same period of 1953: the corresponding figures for its exports are $9 and 89.4 billion...
...As a description of the second quarter of the nineteenth century in England, Marx's theory was essentially correct, but new factors and tendencies appeared in the second half of the century...
...Collective bargaining not only prevents the fall of wages but aften insures a further raise in hourly rates, despite unemployment...
...The outlook for 1955 is good...
...An early associate of Lenin in the Russian Social Democratic Labor party, he broke with him during World War I to pursue the career of a professional economist in Western Europe and the United States...
...According to the Bureau of Labor Statistics, the number of factory workers increased from 13.1 million in September 1950 to 13.2 million in September 1951, 13.5 million in September 1952 and 14.1 million in September 1953...
...If this does not happen, something is wrong with the Marxian theory...
...It began with a blunt statement: "Symptoms of an economic crisis in the United States resulting from overproduction have become so evident that they are openly spoken about...
...The latter was a minor war in comparison with World War II, whose impact on the U.S...
...Actually, the American press has been discussing these symptoms continuously for a decade...
...Probably there will be a spell of catching up, with a growth at a higher rate than the long-range average annual one...
...As early as October 1953, Pravda published a long article by Varga on the American recession...
...This pattern was characterized by inflationary pressure, more-than-full employment, retardation in the rise of productivity, and abnormal expansion of durable-goods industries (especially iron and steel production) in comparison with the manufacturing of non-durable goods...
...1,804 1,674 3,725 September...
...It is no longer possible to speak of the antinomy between individualistic distribution and collective allocation of product in countries where wages are regulated by collective agreements, social security aims at insuring stability in workers' income, and employers' profits are taxed up to 80-90 per cent...
...These features are characteristic not only of the United States...
...The index of wholesale prices "collapsed" from 110.2 in the third week of October 1953 to 109.7 in the same week of October 1954...
...The index of 22 particularly sensitive commodities rose during the same period from 86.1 to 90.3...
...366 -428 -626 The third factor, not mentioned by the Soviet economists, is unemployment insurance in the United States: Thanks to that system, the unemployed receive weekly benefits up to $30 in New York, New Jersey, Pennsylvania and Minnesota, and from $35 to $40 in Michigan, Kentucky, Ohio, Nevada, Wyoming and Maryland...
...Finally, the Government has learned to adjust taxation to the requirements of a balanced economy...
...In non-durable-goods industries, weekly hours of work averaged 39.1 in September 1954, as compared with 39 hours a year ago...
...Such is the theoretical cliche...
...Depressions differ from one another not only by the degree of contraction in output but by the origin, distribution and timing of contraction in various fields of production, and so on...
...The existence of these "stabilizers" seems to be unknown to Soviet economists, and this is one of the reasons for their inability to understand recent economic development in the United States...
...A depression in the United States has by now become an integral part of this scheme...
...The latest book of Eugene Varga, the Kremlin's chief expert on the world economy, Basic Economic and Political Problems of Imperialism After World War II, is a striking example of this propagandist approach...
...Hourly earnings continued to rise, despite the reduction of overtime with its higher wage-rate...
...His was a very small and primitive universe consisting of cotton mills, coal mines and the London Stock Exchange...
...They regard prosperity in countries of the free-enterprise system not only as a potential threat to Soviet military expansion but as a challenge to their concept of economic development: The capitalist countries, and primarily the United States, must experience crisis after crisis...
...All losses were concentrated in manufactures of durable goods, especially in munitions production...
...recession can hardly be blamed for their predicament, and the continuous flow of refugees from these countries can hardly be interpreted as evidence of the crisis of capitalism...
...In fact, the immediate post-Napoleonic period in Europe was characterized by increasing poverty at one pole of society and the accumulation of great wealth at the other...
...The nation returned to a mixed economy--neither a peacetime nor a wartime pattern, but a combination of both...
...The declining manufacturing production has resulted in reduction of overtime work and forced various establishments to work at less than full-week time, but the changes were not very great...
...The loss was concentrated in durable-goods industries, including munitions factories...
...1,438 1,246 3,099 Change...
...Yet, the retail price index (the average for 1947-49 = 100) was 115 in September 1954...
...It is from this viewpoint that the Soviets examine the current recession in the United States, to which they have devoted considerable attention...
...The effect of the "depression" on the national income was not very disastrous...
...Inflationary forces receded...
...On the average, the weekly hours of work for all manufacturing industries may now be very close to the full normal week...
...The paradoxically low level of unemployment was due to inflationary forces still operating in the economy at that time...
...The demand for iron and steel shrank...
...3. Contraction of employment after September 1953 was limited to manufacturing and coal mining...
...But the depression "spiral" could not develop, because the forces of depression met three obstacles: The cut in operations of heavy industry came at a time of flourishing building construction...
Vol. 37 • November 1954 • No. 48
