Why America Needs War

September 30, 2016

 A timely question . Why Does Hillary Want War… ? And why do people support her? 

Wars are a terrible waste of lives and resources, and for that reason most people are in principle opposed to wars. The American President, on the other hand, seems to love war. Why? Many commentators have sought the answer in psychological factors. Some opined that George W. Bush considered it his duty to finish the job started, but for some obscure reason not completed, by his father at the time of the Gulf War; others believe that Bush Junior expected a short and triumphant war which would guarantee him a second term in the White House.

I believe that we must look elsewhere for an explanation for the attitude of the American President.

The fact that Bush is keen on war has little or nothing to do with his psyche, but a great deal with the American economic system. This system – America’s brand of capitalism – functions first and foremost to make extremely rich Americans like the Bush “money dynasty” even richer. Without warm or cold wars, however, this system can no longer produce the expected result in the form of the ever-higher profits the moneyed and powerful of America consider as their birthright.

The great strength of American capitalism is also its great weakness, namely, its extremely high productivity. In the historical development of the international economic system that we call capitalism, a number of factors have produced enormous increases in productivity, for example, the mechanization of the production process that got under way in England as early as the 18th century.

In the early 20th century, then, American industrialists made a crucial contribution in the form of the automatization of work by means of new techniques such as the assembly line. The latter was an innovation introduced by Henry Ford, and those techniques have therefore become collectively known as “Fordism.” The productivity of the great American enterprises rose spectacularly.

For example, already in the 1920s, countless vehicles rolled off the assembly lines of the automobile factories of Michigan every single day. But who was supposed to buy all those cars? Most Americans at the time did not have sufficiently robust pocket books for such a purchase. Other industrial products similarly flooded the market, and the result was the emergence of a chronic disharmony between the ever-increasing economic supply and the lagging demand.

Thus arose the economic crisis generally known as the Great Depression. It was essentially a crisis of overproduction. Warehouses were bursting with unsold commodities, factories laid off workers, unemployment exploded, and so the purchasing power of the American people shrunk even more, making the crisis even worse.

It cannot be denied that in America the Great Depression only ended during, and because of, the Second World War. (Even the greatest admirers of President Roosevelt admit that his much-publicized New Deal policies brought little or no relief.) Economic demand rose spectacularly when the war which had started in Europe, and in which the USA itself was not an active participant before 1942, allowed American industry to produce unlimited amounts of war equipment.

Between 1940 and 1945, the American state would spend no less than 185 billion dollar on such equipment, and the military expenditures’ share of the GNP thus rose between 1939 and 1945 from an insignificant 1,5 per cent to approximately 40 per cent. In addition, American industry also supplied gargantuan amounts of equipment to the British and even the Soviets via Lend-Lease. (In Germany, meanwhile, the subsidiaries of American corporations such as Ford, GM, and ITT produced all sorts of planes and tanks and other martial toys for the Nazi’s, also after Pearl Harbor, but that is a different story.)

The key problem of the Great Depression – the disequilibrium between supply and demand – was thus resolved because the state “primed the pump” of economic demand by means of huge orders of a military nature.

As far as ordinary Americans were concerned, Washington’s military spending orgy brought not only virtually full employment but also much higher wages than ever before; it was during the Second World War that the widespread misery associated with the Great Depression came to an end and that a majority of the American people achieved an unprecedented degree of prosperity.

However, the greatest beneficiaries by far of the wartime economic boom were the country’s businesspeople and corporations, who realized extraordinary profits. Between 1942 and 1945, writes the historian Stuart D. Brandes, the net profits of America’s 2,000 biggest firms were more than 40 per cent higher than during the period 1936-1939. Such a “profit boom” was possible, he explains, because the state ordered billions of dollars of military equipment, failed to institute price controls, and taxed profits little if at all. This largesse benefited the American business world in general, but in particular that relatively restricted elite of big corporations known as “big business” or “corporate America.”

During the war, a total of less than 60 firms obtained 75 per cent of all lucrative military and other state orders. The big corporations – Ford, IBM, etc. – revealed themselves to be the “war hogs,” writes Brandes, that gormandized at the plentiful trough of the state’s military expenditures. IBM, for example, increased its annual sales between 1940 and 1945 from 46 to 140 million dollar thanks to war-related orders, and its profits skyrocketed accordingly.

America’s big corporations exploited their Fordist expertise to the fullest in order to boost production, but even that was not sufficient to meet the wartime needs of the American state. Much more equipment was needed, and in order to produce it, America needed new factories and even more efficient technology. These new assets were duly stamped out of the ground, and on account of this the total value of all productive facilities of the nation increased between 1939 and 1945 from 40 to 66 billion dollar.

However, it was not the private sector that undertook all these new investments; on account of its disagreeable experiences with overproduction during the thirties, America’s businesspeople found this task too risky. So the state did the job by investing 17 billion dollar in more than 2,000 defense-related projects. In return for a nominal fee, privately owned corporations were permitted to rent these brand-new factories in order to produce…and to make money by selling the output back to the state.

Moreover, when the war was over and Washington decided to divest itself of these investments, the nation’s big corporations purchased them for half, and in many cases only one third, of the real value.

How did America finance the war, how did Washington pay the lofty bills presented by GM, ITT, and the other corporate suppliers of war equipment? The answer is: partly by means of taxation – about 45 per cent -, but much more through loans – approximately 55 per cent.

On account of this, the public debt increased dramatically, namely, from 3 billion dollar in 1939 to no less than 45 billion dollar in 1945. In theory, this debt should have been reduced, or wiped out altogether, by levying taxes on the huge profits pocketed during the war by America’s big corporations, but the reality was different. As already noted, the American state failed to meaningfully tax corporate America’s windfall profits, allowed the public debt to mushroom, and paid its bills, and the interest on its loans, with its general revenues, that is, by means of the income generated by direct and indirect taxes.

Particularly on account of the regressive Revenue Act introduced in October 1942, these taxes were paid increasingly by workers and other low-income Americans, rather than by the super-rich and the corporations of which the latter were the owners, major shareholders, and/or top managers. “The burden of financing the war,” observes the American historian Sean Dennis Cashman, “[was] sloughed firmly upon the shoulders of the poorer members of society.”

However, the American public, preoccupied by the war and blinded by the bright sun of full employment and high wages, failed to notice this. Affluent Americans, on the other hand, were keenly aware of the wonderful way in which the war generated money for themselves and for their corporations. Incidentally, it was also from the rich businesspeople, bankers, insurers and other big investors that Washington borrowed the money needed to finance the war; corporate America thus also profited from the war by pocketing the lion’s share of the interests generated by the purchase of the famous war bonds.

In theory, at least, the rich and powerful of America are the great champions of so-called free enterprise, and they oppose any form of state intervention in the economy. During the war, however, they never raised any objections to the way in which the American state managed and financed the economy, because without this large-scale dirigist violation of the rules of free enterprise, their collective wealth could never have proliferated as it did during those years.

During the Second World War, the wealthy owners and top managers of the big corporations learned a very important lesson: during a war there is money to be made, lots of money. In other words, the arduous task of maximizing profits – the key activity within the capitalist American economy – can be absolved much more efficiently through war than through peace; however, the benevolent cooperation of the state is required.

Ever since the Second World War, the rich and powerful of America have remained keenly conscious of this. So is their man in the White House today [2003, i.e. George W. Bush], the scion of a “money dynasty” who was parachuted into the White House in order to promote the interests of his wealthy family members, friends, and associates in corporate America, the interests of money, privilege, and power.

In the spring of 1945 it was obvious that the war, fountainhead of fabulous profits, would soon be over. What would happen then? Among the economists, many Cassandras conjured up scenarios that loomed extremely unpleasant for America’s political and industrial leaders. During the war, Washington’s purchases of military equipment, and nothing else, had restored the economic demand and thus made possible not only full employment but also unprecedented profits.

With the return of peace, the ghost of disharmony between supply and demand threatened to return to haunt America again, and the resulting crisis might well be even more acute than the Great Depression of the “dirty thirties,” because during the war years the productive capacity of the nation had increased considerably, as we have seen. Workers would have to be laid off precisely at the moment when millions of war veterans would come home looking for a civilian job, and the resulting unemployment and decline in purchasing power would aggravate the demand deficit.

Seen from the perspective of America’s rich and powerful, the coming unemployment was not a problem; what did matter was that the golden age of gargantuan profits would come to an end. Such a catastrophe had to be prevented, but how?

Military state expenditures were the source of high profits. In order to keep the profits gushing forth generously, new enemies and new war threats were urgently needed now that Germany and Japan were defeated. How fortunate that the Soviet Union existed, a country which during the war had been a particularly useful partner who had pulled the chestnuts out of the fire for the Allies in Stalingrad and elsewhere, but also a partner whose communist ideas and practices allowed it to be easily transformed into the new bogeyman of the United States.

Most American historians now admit that in 1945 the Soviet Union, a country that had suffered enormously during the war, did not constitute a threat at all to the economically and militarily far superior USA, and that Washington itself did not perceive the Soviets as a threat. These historians also acknowledge that Moscow was very keen to work closely together with Washington in the postwar era.

Indeed, Moscow had nothing to gain, and everything to lose, from a conflict with superpower America, which was brimming with confidence thanks to its monopoly of the atom bomb. However, America – corporate America, the America of the super-rich – urgently needed a new enemy in order to justify the titanic expenditures for “defense” which were needed to keep the wheels of the nation’s economy spinning at full speed also after the end of the war, thus keeping profit margins at the required – or rather, desired – high levels, or even to increase them.

It is for this reason that the Cold War was unleashed in 1945, not by the Soviets but by the American “military-industrial” complex, as President Eisenhower would call that elite of wealthy individuals and corporations that knew how to profit from the “warfare economy.”

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