Tom O'Lincoln red_sites at
Wed Oct 4 18:18:49 MDT 2000

Some replies to Phil;

>arms spending cannot create boom conditions.  Arms spending is
>*predicated* on their being masses of surplus-value to draw from.

Well the conventional view is that deficit spending can TEMPORARILY
stimulate demand. For example, you put people in uniform, they have more
money to spend, the shops make more sales, etc etc.  All my empirical
observations seem to confirm this, as does all bourgeois economic opinion
from "left" to right, and I always thought Marxists didn't dispute it as far
as it went. This pump priming does however soon create inflation, which
undermines the boom. Because, as you say, it's not real wealth creation; and
this is where Marxists disagree with bourgeois economics. Anyway that's what
I'm talking about in the current exchange. I take it you think this doesn't

>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

Yes, I agree in broad outline. The last sentence is exactly what I think,
and what I thought Hallas was arguing. But economically speaking, WW2 began
before the shooting started.

>>For example, it's generally assumed that the Vietnam war created
>> >increased growth...
>Profit rates were falling in the US throughout the late 60s and into >the
>early 70s.

I don't doubt this. Unemployment began to rise, as I recall. But then,
DESPITE the falling profit rates, US growth picked up again TEMPORARILY --
and the usual view is that this was because of the Vietnam War. This
TEMPORARY revival did of course lead to runaway inflation, culminating in
the oil crisis, which in turn brought the revival unstuck in the early
seventiesm, with the consequences you outline.

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

Yes. There was:

1. A longterm expansion of the system caused by the PAE, which was running
out of legs by the late sixties, as evidenced by declining profit rates -
and as predicted by Kidron and Harman.

2. An additional TEMPORARY and very unhealthy revival due to the "Keynesian"
effects of the Vietnam War.

It is true that the two phenomena overlap in practice, but they are
conceptually distinct.

You may ask why the Vietnam War didn't have a healthier effect along PAE
lines. The answer is the limitations to the PAE which Kidron identified and
which by the late sixties were making themselves felt.

>result of the war spending on Vietnam ... great for the Japanese economy

But obviously that had flow on effects for the world system, including the

>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 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.

Yes I don't disagree. It created a TEMPORARY revival but with disastrous
consequences later on, because of the factors you mention [all of which
Kidron foresaw - they are among the reasons he thought the PAE could not
work beyond a certain point].

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