By Glenn Stehle
What drove that growth? Solidarity and organized national purpose. Americans worked together as a team during the war, and that solidarity continued into the postwar decades, behind an engaged and economically pro-active government.
–DAN KERVICK, “Market Myths and the Real Drivers of American Progress”
There’s nothing like an existential threat, such as the prospect of complete annihilation of one’s own group, to motivate behavior and focus one’s mind. Kervick’s quote reminded me of this:
Many Russians greeted the Nazi invaders as friends come to free them from Stalinist oppression. Had the Germans fostered this initial good will, they might have won Russian support against the Communist regime, but in Nazi philosophy, with its fantasy of a master race, the Russians were Untermenschen – subhumans – fit only for slave labor. Hitler had ordered a completely ruthless campaign – and he was not disobeyed. Russian good will turned to hate.
–C.L. SULZBERGER, World War II
One must also wonder what effect the master race doctrine had on the war effort inside Germany. It provoked, for instance, what is probably history’s biggest brain drain, the emigration of primarily Jewish Europeans during the era of Nazi Germany.
And according to C. Wright Mills, National Socialism was no picnic for labor either:
In contrast with the profits and the self-manned organizations of business, labor’s wages are near-stabilized, and it has no organizations of its own. From 1932-1938 wages and salaries rose 66 per cent, whereas “other income” rose 146 per cent; at the same time production nearly doubled…. The labor market is authoritatively controlled to the limit of human recalcitrance. The working class is regimented and fragmented in order to prevent any common basis for movements, and the individual workman is isolated and terrorized. The “interference” of the party and the “State” in “economics” has again helped old dreams to come true. Not only has the prevailing class structure been accepted; in the process of the ruling elites’ consolidation, it has been riveted and clinched from the upper side.
If we compare this to the way the United States approached the war effort, it is like night and day. The US’s leadership class asked, and received, the full cooperation of working-class Americans. It also asked, and received, the full cooperation of America’s racial, ethnic and religious minorities. As David Montejano explains in Anglos and Mexicans in the Making of Texas:
Social conflict and national crises provided the necessary impulse for the decline of old race arrangements. World War II, in particular, initiated dramatic changes on the domestic front. The need for soldiers and workers, and for positive international relations with Latin America, meant that the counterproductive and embarrassing customs of Jim Crow had to be shelved, at least for the duration of the emergency.
Montejano goes on to confirm what Kervick noted above, that the “solidarity continued into the postwar decades”:
In more lasting terms, the war created a generation of Mexican American veterans prepared to press for their rights and privileges. The cracks in the segregated order proved to be irreparable.
The PBS documentary A Class Apart tells the same story but in a much more moving and poignant way:
But it wasn’t just the working-class and the cultural minorities who contributed mightily to the WWII war effort. Under the guiding hand of FDR and John Maynard Keynes, the rich pitched in too, paying higher taxes and having their profits limited by price restrictions. This is the flip side of Keynesianism which was bowdlerized from history books beginning in 1970, thus allowing Richard Nixon to proclaim “we’re all Keynesians now” and to usher in an era of supply-side tax-cut theology and monetarist faith in currency expansion and shrinkage. Back to WWII economic planning, as John Kenneth Galbraith explains in Money: Whence It Came, Where It Went, it
reflected strongly the new Keynesian fiscal design. What was urged as the policy against peacetime unemployment would work against wartime inflation; instead of public expenditure to increase employment there would now be higher taxes to restrict civilian demand and consumption….
[A]ggregate demand or purchasing power would be kept in rough equilibrium with the supply of goods available for purchase at current prices. This would be accomplished partly by taxation, partly by a Keynesian novelty, which was compulsory saving. A levy would be made against all wages, salaries and other incomes, which would be returnable, with interest, after the war….
The curtailment or removal of purchasing power was the basic reliance. Keynes said, “. . . the only way to escape from this [inflation] is to withdraw from the market, either by taxation or by deferment, an adequate proportion of consumers’ purchasing power, so there is no longer an irresistible force impelling prices upward.” Only a subordinate role was assigned to direct control of prices or to rationing — “. . . some measure of rationing and price control should play a part in our general scheme and might be a valuable adjunct to our main proposal.”
By any earlier standard, taxes were increased astringently in World War II; by 1944, the revenues of the Federal government were six times the 1939 level, an impressive expansion.
A myth to the contrary, assiduously cultivated by devout friends of the market, these controls were highly effective. From 1942 through 1945, the wholesale prices of industrial commodities were virtually stable — the overall increase from 50.7 to 53.00 (1967 =100) compares with an increase of from 135.3 to 166.1 in the single year of 1974…. Given the scale of the military effort and the associated budget deficit, it is beyond doubt that, in the absence of controls, there would have been large, accelerating and, ultimately, vertical increases in prices. By the end of the war prices and wages would almost certainly have been doubling, perhaps trebling each year, maybe more.
But over the past 45 years, as Kervick laments, the ethos of solidarity, national purpose and teamwork has slowly been replaced by the dogma of Market Fundamentalism.
Is it possible to get the mojo back, that sense of solidarity, national purpose and teamwork? In an attempt to do so, various presidents have invoked Vietnam (Eisenhower, Kennedy, Johnson, Nixon ), drugs (Nixon ) the “Evil Empire” (Reagan ), the “Axis of Evil” (Bush II ) and terror (Bush II and Obama) as existential threats to the life of the nation. But the sense of national purpose remains elusive.
It appears the US’s permanent war economy is in crisis. If so, and if the affliction is terminal, is it possible for the US to switch to some other type of economy?
But the sense of national purpose remains elusive. Glenn Stehle
How about justice? 100 years of a government-backed counterfeiting cartel, the banking system, have created a lot of injustice:
1) Large corporations are narrowly owned or at least narrowly controlled. Let’s redistribute their common stock equally to all US citizens especially since very many jobs have been automated away with the stolen purchasing power of the workers replaced.
2) Many families have lost their family farms to the banks and so-called creditworthy corporations. Let’s have land reform ala Leviticus 25.
3) Almost the entire population has been driven into debt with their own stolen purchasing power or cheated of honest interest rates on their savings. A universal bailout with new fiat is thus called for – at least until all deposits are 100% covered by reserves. This will require at least a temporary ban on new credit creation or the goal of 100% reserves will recede like a mirage as the banks leverage the new reserves.
Or not. I reckon the End is near otherwise and the Lord will certainly not tolerate our existing money system. But repentance is much to be preferred over Judgement since many will not survive the latter except in the form of ashes:
“For behold, the day is coming, burning like a furnace; and all the arrogant and every evildoer will be chaff; and the day that is coming will set them ablaze,” says the Lord of hosts, “so that it will leave them neither root nor branch.” “But for you who fear My name, the sun of righteousness will rise with healing in its wings; and you will go forth and skip about like calves from the stall. You will tread down the wicked, for they will be ashes under the soles of your feet on the day which I am preparing,” says the Lord of hosts. Malachi 4:1-3 New American Standard Bible (NASB)
One goal that did achieve a sense of solidarity, national purpose, and teamwork was the goal of landing a man on the moon by 1969; although it did rely upon the underlying urgency of the Cold War for at least part of its motivation. As I recall, that endeavor did not generate universal enthusiasm in the beginning, but gradually gained momentum as the decade passed and (mostly) successes followed.
Did you see October Sky? Here’s the trailer:
For someone like me who came from the working class and managed to make it into the middle class, it really hit home.
Yes, I have seen the film. Very inspiring.
Thanks – we are indeed in a bad way as a country. But as a life-long admirer and sometime active follower of Karl Marx, I have to tell you that most of his followers were wrong, while Keynes, (and Marx himself), were right. Capitalism can only end after it has been perfected. Attempting to end it prematurely, citing special circumstances that Marx himself would never have conceded, gave us the waking nightmare of Soviet-style Communism. Anyone still ambivalent about that outcome must read or re-read Solzhenitsyn – or the novels of Vasily Grossman. All things pass, and so will Capitalist coercion. But it will only pass away after a wholesome and life-affirming alternative has grown up within it. Either that or through a general breakdown of our science-based civilization, followed by a reversion to a neo-feudal or neo-barbarous conditions of life.
I’m an optimist. I don’t think smart people can be permanently ruled by stupid people. Or that psychologically normal people can be permanently ruled by sick-minded, Ayn-Randian sociopaths. We, here, in this MMT movement, are very lucky. We know what’s fundamentally wrong with Capitalism today and how it can be fixed, at least in the short run. They didn’t know in the 1930s – and had to endure depression, war and a barbarous totalitarianism on account of it. We may yet escape a repeat of such things. It is what we are all working toward.
We know what’s fundamentally wrong with Capitalism today Dale Pierce
ans: Government-backed banks.
and how it can be fixed, Dale Pierce
The elimination of government backing for the banks and restitution for its victims. Otherwise, if you ignore justice, you’ll just fail in a different way from the 1930s. How many more failures can the world endure?
Just a note to build on this line: “Under the guiding hand of FDR and John Maynard Keynes, the rich pitched in too, paying higher taxes and having their profits limited by price restrictions.”
Let’s give a shout-out here to the labor movement as well. The idea for the proposal that ignited the tax-the-rich charge during World War II — FDR’s April 1942 call for a 100 percent tax rate on individual income over $25,000, about $350,000 today — came from the UAW, and the CIO unions kept pressing for this “super tax” for the next two years.
The unions didn’t get their 100 percent top rate. They did get a 94 percent top rate on income over $200,000, and that top rate would hover around 90 percent for the next two decades.
Sun Yatsen got it right – “Reforms are not the answer to tyranny, and tyranny cannot be cured with words”.
Revolution is the only answer – to sweep the house clean and start again. But revolution will only succeed when the concepts can be easily understood by everyone, and that pre-revolutionary mental state becomes a reality.
When the imperious conscientiousness of change begins to solidify, assembling into a mental structure, capable of specific demands, a concrete, practical issue, demanding a positive, inescapable answer, then this crystallisation, this solidification into concepts easily handled by everyone, peasant as well as official, has to precede revolution.
But it is this psychological pre-revolutionary mental state that is a phenomenon least understood of all.
What drove growth? …Plentiful, cheap oil. Those days are gone and no amount of tinkering can return the economy to sustained growth, especially with the contravening force of climate change bearing down.
Actually, it is the money system that drives growth, that REQUIRES growth so that the usury* can be paid. Sadly and unnecessarily, that money system is based on theft of purchasing power from the less or non so-called creditworthy when it could be based on just sharing instead.
*Usury is ANY positive interest rate, not just high ones.