PAE

Philip Ferguson plf13 at SPAMit.canterbury.ac.nz
Tue Oct 3 21:53:33 MDT 2000


Tom O'L writes:

>Yes -- although I did foolishly paint myself into a corner by asking about
>Germany specifically. :-) There is undoubtedly room for both explanations,
>though. What I'd still like to pin down -- and I'm willing to be enlightened
>if I'm wrong -- is whether comrades really doubt that arms spending (or any
>massive increase in government expenditure) can TEMPORARILY create boom
>conditions.

No, arms spending cannot create boom conditions.  Arms spending is
*predicated* on their being masses of surplus-value to draw from.  Since
arms spending is a deduction from total surplus-value, it is difficult to
see any sense in the idea - except, of course, when the arms are being
overwhelmingly exported and thereby add to the total surplus-value of any
particular nation.

However, in the 1930s I doubt very much that Germany was making a fortune
selling abroad the arms made in its factories.  And I doubt that the US was
selling masses of weaponry abroad then either.  It was only after war broke
out that the US improved its world position by selling and leasing military
equipment to Britain and getting Britain in hock economically in a number
of ways.


>If so, then the rearmament drive in the late thirties would be
>an explanation for why the depression ended. If not, then many events need
>explaining.


Well, I am rather dubious about the notion that the depression really did
end.  I thought there was a quite widespread consensus that, while things
picked up after about 1935 or 36, there was another dip and the end of the
depression was by no means ensured.  It took WW2 to finally end the
depression.


>For example, it's generally assumed that the Vietnam war created increased
>growth in the late sixties/ early seventies -- even though profit rates were
>already coming under pressure by then.

Profit rates were falling in the US throughout the late 60s and into the
early 70s.  The 1977 OECD study shows this.  But there are probably
specific US studies which have more info.


>This boom cannot be explained by the
>smashing of workers' organisations, since industrial militancy was in fact
>rising dramatically. The boom came unstuck after an inflationary spiral, and
>I do not suggest that government spending can solve the problems of
>capitalism.


Are you arguing there were two different booms?  One after WW2 and another
under the impact of Vietnam War spending?

The reason that the postwar boom lasted so long was because of the *depth*
of defeat of the working class in the Depression and WW2, the *depth* of
the destruction of inefficient capital, the *depth* of destruction of
capital value, and the vast pools that opened up for extremely profitable
investment as a result after 1945.  It was virtually impossible not to have
a massive boom in those circumstances.  The boom, just one boom, continued
on into the early 1970s, because it takes years for the fall in the rate of
profit to become a problem.

But what was the result of the war spending on Vietnam?  Well, it was great
for the Japanese economy, even greater than the Korean War - because the
Japanese capitalists reaped huge profits from selling stuff to the US,
without having to spend huge chunks of their surplus-value on 'defence'.
But for the US capitalist class as a whole (as opposed to the arms
capitalists), the war spending was a disaster.  Deficit spending had to be
used to finance the war and the government's social programs, inflation
rose rapidly (eg loads of money going into the economy without extra goods
on the market, coz only governments buy arms), the rate of profit in the
arms sector falling even faster than in other commodity production, the
economic decline of the USA relative to Japan and Germany and so on.

What was the US government's response to this?  It wasn't to hack off even
greater amounts of surpus-value through government spending (which is what
arms spending comes under).  It was to do what capitalists are always
forced to do in these situations - attack the working class.  Drive down
wages.  Cut social spending programmes.  Let sections of capital go to the
wall.  Etc etc etc.

Philip Ferguson

PS, Tom I note that once again you are arguing something different from a
while ago.  You argued that arms spending slows down the rate of increase
in the organic composition of capital and therefore retards the fall in the
rate of profit and thus has an unintended consequence of prolonging a boom.
But here, and in your previous email, you are arguing that war spending
actually leads to booms.  I can see that there is a certain logic in the
first argument (eg that something that retarded the increase in organic
composition of capital wopuld also retard the fall in the rate of profit),
even though it's wrong (coz, for example, the organic composition of
capital increases massively in the arms sector itself and rates of profit
in the arms sector fall even faster than in other sectors because arms
don't cheapen labour-power or constant capital, which productivity gains in
other sectors do).  But I can't see any basis for the view that arms
spending by governments can bring about a boom, or even end a depression.


















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