International Communist Party English language press

State Interventionism in Defense of Big Capital

(from Prometeo, issues 3 and 4 of 1952)

An analysis of the economic policy of Roosevelt’s New Deal is of particular interest today because it makes it possible to reaffirm, on the basis of extremely clear data, two criteria of interpretation of social facts repeatedly reaffirmed by Marxist criticism in the face of the converging assault of revisionism and official democratic ideologies, and therefore to see clearly also in the developments that that policy has had in this post-war period, both on the economic level and in the political superstructure.

The first is that, in spite of the differences in political form, the capitalist regime reacts to its own internal crises in a unified way, with methods of economic policy that bring democracy and fascism together. Interventionism, dirigisme, state management – these are on the other hand the classic recipes of reformist “economic and social recovery” – are common aspects of every bourgeois political regime in the phase of maximum exasperation of its internal contradictions, convergent expressions on the international level of the policy of capitalist conservation.

The second is that State intervention in the economy, far from signifying a subjection of Capital to the rule of a supposed collective entity, representing the “general interests” of that other abstract collective entity which is “the people”, constitutes the most acute and ruthless form of the maneuvers of the “public powers” in defense of Capital, and therefore of its domination by an ever more restricted circle of private interests. In a subordinate line, the New Deal is the open demonstration of the inconsistency of the thesis according to which “state capitalism” would translate on the economic and political level the historical advent of a third class, that of “technicians” or “directors” (managers) or “bureaucrats”.

The result is that the attribution of the label “progressive” to the Roosevelt New Deal as to any form of dirigisme or state management of the economy – a label that we cannot see why democratic ideology does not extend to fascism, which is historically the progenitor not of interventionism coeval with the capitalist regime, but of its organized planning and consolidation – can have only one meaning for Marxist criticism: the recognition that those forms mark a step forward in the ruthless class domination of the bourgeoisie, an exaltation of the exploitation of labor-power by Capital. If there is progress, O theorists of gradualism, it is only in the weapons of defense of capitalism, in the theory and practice of counterrevolution.

As for the differences in political superstructure, which give a semblance of justification to the antithesis democracy-fascism with all its consequences on the political and military terrain, they are rooted solely in different relations of force between classes. Fascism was born, in Italy as in Germany, as a response to a direct revolutionary threat of the proletariat: its extrinsication was therefore essentially political and resulted in the peaceful abandonment of democratic forms and the violent and open exercise of class dictatorship, which, starting from the primary objective of liquidating by force the class organizations of the proletariat, had to conclude by logical consequence – for the need to oppose to the unitary threat of the proletariat an equally compact front – in the suppression of the bourgeois multi-party system and parliamentarism.

Rooseveltism was born as a response not to a direct revolutionary pressure of the proletariat, but to the immediate cataclysm of an unprecedented economic crisis: for the purposes of the resolution of this crisis, while the economic therapy will take place on the classic binary of fascist interventionism, the maintenance of democratic political forms and the preservation of workers’ trade union bodies not only did not constitute a hindrance, but allowed for more elastic and ramified maneuvers of preservation, which foiled the possible social and political repercussions of the crisis with methods, instead of coercion, of corruption, the classic democratic corruption. It is not surprising, therefore, that Fascism found its “economic way” only at the end of a long experience of political domination, as consequent and unhesitating this as uncertain and contradictory that one (the first Mussolinian Fascism is even orthodox in the economic field, and with liberalist movements), while the New Deal is suddenly presented as an instrument of economic defense and, in a certain sense, serves as a worldwide paradigm for the new experiences of state interventionism in the economy, typical of the totalitarian regimes of the 30s and 40s, as well as the more consummate techniques of exploitation of democratic political forms for the purposes of social defense typical of today’s democracies.

Financial Measures

It is not important here to examine the causes of the Great Crisis which, from 1929 to 1933, raged in the United States in parallel with the world economic crisis. What is important is to note that this last crisis had all the more catastrophic repercussions in the United States since it had emerged from the First World War as the largest creditor country and since – another aspect of the same evolution – its economic organism had expanded during and after the conflict. The seriousness of this crisis appears, more than in the brutal and sensational figures of the immediate financial collapses and of the productive paralysis, in the extremely slow pace of the American recovery, which will begin later than in any other country, and will therefore reach in all fields the pre-crisis levels later, it will show greater oscillations despite the controls and state interventions, it will be able to say it has been healed only at the outbreak of the European war – with the transformation of the United States into an “arsenal of democracies” – and it will be explained at a dizzying pace by their entry into the war. The index of industrial production (compiled by the League of Nations on the basis of 1929) fell in fact in 1933 to 52.8 (83.5 in England, 53.5 in Germany) with the lowest peak in March of that year (49.6 and, in the production goods industry, 28), slowly rose again to 75.6 in 1935 when in England it was already at 105.7, and in Germany at 94; in 1936, it was still 13 points lower than the 1929 level and only 35 points higher than the 1932 level; it would suffer a new decline in the following year, and begin to rise again in 1939. The unemployed, who in 1929 were 1.8 million, grew in 1933 to 13.2 million and, if the partially unemployed are also included, were still 11.4 million in 1935. Finally, prices in bulk (1929=100) fell in March 1933 to 63.2 and were still at 83.1 in June 1935. Born out of the Great Crisis, the New Deal will have as a result the dizzying economic rise of the United States during the Second World War and their ability to rise without imbalance to their current position of world dominance: further proof of the conservative nature of Rooseveltism.

It is not in the immediate emergency measures taken by the Roosevelt administration – brought to power by a wave of plebiscites in the name of a return through methods of state intervention and dynamism opposed to Hoover’s laissez faire policy, to the pre-crisis “prosperity” – that the typical face of the New Deal is revealed. Those measures are purely classic financial measures. This is not surprising: the immediate and most sensational aspect of the crisis was the collapse of financial institutions, the closure of branches, the dislocation of the credit network which had been both the manifestation and the weapon of the great post-war expansion. But, even then, the aim of the administration was clear: it was a question of liquidating the banking situation inherited from the crisis of 1929, rebuilding the commercial and investment credit system, helping institutions and economic groups directly affected by the crisis, and “restoring” the public debt. This program included the measures of March 1933, in the most critical phase of the American economy: suspension of bank payments, purchase by the State of the preferred shares in the portfolios of banking institutions, reopening of the banks on the basis of their solidity. Clearly, these measures will not save either small savers or small banks; they will save large credit institutions and facilitate the concentration of the banking and credit system. At the same time, a series of measures instituted a direct control by the State on the investments of federal banks and on operations with foreign banks, while the Reconstruction Finance Corporation, already created by Hoover during the previous year, would orient its policy in the sense of “socializing the losses” of the entire economic complex to guarantee the salvation of the large industrial companies. In short, state intervention was immediately translated into the rescue, with “public” powers and money, of financial and industrial organizations in crisis.

But the New Deal would soon have to reveal even more clearly its face as a direct instrument of the great capitalist industry. The Roosevelt administration is the “brain trust” of the preservation of the interests of the ruling class: its ideology is similar to that of the fascist “Labour Charter” of 1927: collaboration between capital and labor under the aegis of the state for the general purposes of the nation, stimulation of the economic mechanism through a general mobilization of “collective” resources: even before its famous domestic regulatory laws, it will set the international example of abandoning the “gold standard” and by torpedoing the World Economic Conference convened by Hoover, it will accelerate the international tendency to close in monetary and customs barriers national economies. Its enemy is declining prices – those famous declining prices that classical bourgeois economics presented as one of the virtues of free competition and, in general, of capitalist production. The devaluation of the dollar, the suspension of trade treaties, the raising of tariffs, are the first measures in favor of the rise of domestic prices the policy of intervention in the industrial and agricultural sectors will be inspired by the same principle: after having paid for the rehabilitation of financial and industrial institutions in crisis, the “nation”, “the people” will pay with higher prices and with the forced distribution of agricultural products – with a policy of “scarcity in consumer goods” – the policy of generosity and breadth of the State (down with Hoover’s “thrift”! ) towards the great “Corporations”.

Industrial and Agrarian Policy

While the system of subsidies to unsafe industries – dear to all experiences of state capitalism, and well known to fascist and post-fascist Italy – provided for the rescue of the largest (and therefore most vulnerable to crisis) industrial complexes and favored their concentration, the Industrial Reconstruction Act, and the organization created by it, the N.I.R.A., put in the hands of industry another defensive weapon: the elaboration of the famous industrial “codes”. Officially, these aimed at eliminating unfair competition and at introducing collective labor contracts with wages and working hours established by the authorities. In reality, the fundamental objective was to limit competition through the classic methods of industrial cartels: the setting of minimum prices (higher than those at the beginning of the market) and the restriction of production, both through the planned allocation of “quotas” of production to member industries, and through the limitation of new plants and new production equipment. The “industrial codes” of the progressive Roosevelt also eliminated that semblance of protection against the excessive power of the industrial magnates set up by antitrust legislation: cartelisation was promoted by governmental encouragement, and the public administration did not even need to resort to needless armed intimidation of the fascist corporations and of the supreme authority of the State, but invited the same industrial representatives to “self-regulate”, providing for its part to sanction the agreements concluded and to legalize, with the N.I.R.A. trademark to the products of the cartelized companies, the boycott of the recalcitrant ones. Both the authorities from which the codes emanated and those in charge of controlling their application were of strict industrial origin, and it is needless to say that, in the relative committees, the decisive weight was assured to the great economic powers. The Roosevelt government, professing to be the guardian of the average American against the excessive power of “big business”, thus proved to be the docile instrument of capitalist concentration.

It is true that, in the meantime, the codes contemplated the stipulation of collective agreements for the reduction of working hours and the introduction of minimum wages; but these measures, which are found in different phases of corporatist legislation, had a clear task of class preservation: the State wrested from the workers’ unions, just in those years recovered from the long crisis of the 20s, the weapon of wage deamnds, allowed with the absorption of masses of unemployed (in fact, with the generalization of the figure of the partially unemployed) to ward off the threat of a permanent army of jobless and, stimulating with minimum wages productivity, allowed the industrialists to achieve a reduction in costs in a regime of stabilized prices and indeed tendentially increasing. On the other hand, the immediate impact on the standard of living of the working class was minimal: the reabsorption of unemployment was very modest, even taking into account the workers partially reabsorbed through the mechanism of reduced working hours (which were very often not respected); in 1935, the average contractual wage was higher than in 1929, but very few workers worked full-time and the unemployment rate had increased enormously (a source as unsuspected as the Brookings Institute’s study, The Recovery Problem in the United States, 1936, calculated that, if distributed evenly over the same mass of workers, the 1935 wage would have been only 67% of the 1929 level); there were also strong wage differentials between male and female workers and between white and black workers. Finally, the recognition of trade unions and the establishment of joint consultation bodies (such as the National Board, in which the two representatives of employers and employees were joined by a presidential representative.... Impartial of the government) made it possible to bind the workers’ organizations to the federal administration, which would in fact function, in all presidential elections, as Roosevelt’s greatest pawn of support.

The N.I.R.A. measures, such as those we will discuss shortly in the agricultural field, would be declared unconstitutional by the Supreme Court in 1936. The immediate effect for the ruling class was achieved, the large industrial unions felt consolidated enough to resume their march without “self-control”; but it is characteristic that it will be the industrialists themselves who will urge, with the beginning of the war economy in 1939, the controls and interventions that three years earlier, through the Supreme Court, they had dismantled. The net result of this period of moderate state intervention was, however, very clear: an intensive development of industrial and financial concentration, an insurance at public expense of high prices, a stabilization of social conflicts.

In one of the periods of electoral decline, Roosevelt was to mount a demagogic campaign against big business and the launching of an “Investigation of Concentration of Economic Power” in 1938, and he himself was to announce publicly: “a concentration of private power unprecedented in history is taking place...0.1% of all corporations publishing a balance sheet..... own 52% of the total assets of these corporations. Less than 5% own 87% of these assets. The 0,1%...take in 50% of the total net profit: less than 4% collect 84% of the total profits...47% of all American households and citizens living alone have...incomes of less than $1,000; at the other end of the scale, a little less than 1.5% of American households enjoy an income that sums to the overall income of 47% of the aforementioned households.” And, further on, he observed that, out of a number of shareholders of large anonymous companies of 8-9 million, 80% collected only 10% of the dividends and owned no more than 10% of the shares, while half of the total of these were in the hands of 1% of the shareholders. Concentration was particularly developed in certain branches: one company had a de facto monopoly of the production of raw aluminum; three trusts produced 61% of American steel; three companies 86% of all automobiles produced in the United States, and so on. Of course, Roosevelt (like Truman) then posed as the defender of the average American citizen, or rather of the worker, against the bullying of the “barons”: in reality, he had made their bed with his entire economic policy and, at most, claimed from the State, because of its capacity for an integral vision of the problems and interests of the class, the power to protect the stability of the system better than the categories, closed within their narrow, immediate and short-sighted horizons. The policy of the N.I.R.A. will find in this respect its most brilliant development during the Second World War, not only in the perfect collaboration between industrialists and the government, but also in the exquisitely progressive practice whereby the executive power, not content with passing fabulous war orders to private industry and entrusting it with lucrative “scientific” research, it would take charge of building new factories at its own expense, which it would resell at a favorable price after the conflict to large trusts, or it would use “its” money to renew the equipment of private companies which, either for short-sightedness or for lack of capital, could not have done so on their own.

Moreover, the same agrarian policy of the New Deal, in many ways similar to the fascist one, responded to the conservation interests of industrial capitalism and of the large landowners. The famous A.A.A. (Agricultural Adjustment Act) inaugurated a policy aimed at favoring the reduction of cultivated areas in order to stem the fall in the prices of some basic commodities (wheat, cotton, tobacco, etc...) and possibly increase them. The theory of this policy of scarcity, at a time when people were starving, was: “to restore the prices of the fundamental products of farms to a level that would restore their purchasing power to a level equal to the purchasing power of agricultural products in the 1909-14 base period”. The methods were basically as follows: restriction of the production of certain agricultural commodities by means of subsidies to farmers; destruction of unsold products; purchase by the State of the surplus of these products burdening the market and compressing prices; agreements between producers’ cooperatives and distributors to maintain and increase prices; all combined with export loans and import duties.

It is obvious that such a policy tended to maintain a market for industrial products at the expense of both the consumer and the taxpayer; but its social effects in the agricultural field were even more radical.

First of all, it is well known – and official American writers are among the first to recognize this – that the entire system of distributing subsidies to farmers to reduce certain productions was centralized in the hands of the large farmers who were able to supplement the net advantage of a stabilization and often an increase in their prices with the additional advantage of the capture of the largest share of government subsidies (Myrdal, in his famous and orthodox survey of black people in America notes that, according to a partial study of 246 Southern plantations, the average liquid income of planters per plantation was in 1937 $3590, of which $883 came from A.A.A.; the average liquid income of tenants on the same plantations, on the other hand, was $300, of which $27 came from A.A.A.; and a few large owners got up to $10,000 in subsidies). In addition, by reducing the acreage of the large extensive crops (cotton, wheat, tobacco), favoring the mechanization of agriculture and, later, the passage to more specialized crops, the agrarian policy of the New Deal precipitated ever greater masses of tenants into simple labor and total unemployment, a process also favored by the provisions according to which the subsidies would have to be partly ceded by the owner to the tenant, and which therefore favored the denunciation of leases. In reality, the contradictory nature of this agrarian policy, which on the one hand demanded a reduction in cultivated land and on the other favored the spread of agricultural machinery, had as a consequence that production did not decrease except to an insignificant extent: after the declaration of unconstitutionality of the A.A.A. in 1936, the Roosevelt administration decided to reduce the amount of land under cultivation. in 1936, the Roosevelt administration passed to the application of new norms, one of which involved subsidies to direct farmers who agreed to replace old crops with more specialized and profitable ones and to introduce practices of "soil conservation", and the other provided for the purchase of surplus wheat and cotton as insurance against years of crisis, thus guaranteeing to farmers a constant income and a possibility of development of production and export in the years of fat profits, those of the war.

From Indirect to Direct Intervention

Up to this point, more or less up to 1936, the New Deal is presented as a system of elastic disciplinary intervention of the economy in favor of the general interests of preservation of the capitalist class and therefore, in practice, of the large and increasingly concentrated economic oligarchies. The financing systems of this gigantic disciplinary apparatus are still “classical”: the principle of the “balanced budget” remains, of financial expenses with corresponding revenues. But the last phase of the New Deal, after the decrees of “unconstitutionality”, presents a new face: the classical economists dip into Keynesianism. The problem of balancing the budget vanishes: there will be no more limits to the increase of public debt. The State, on the other hand, no longer limited itself to defending and encouraging the autonomous initiative of the industrial, financial and agricultural categories (we note, en passant, how the Rooseveltian era also marked the period of maximum capitalist penetration in the South, both with the establishment of industries favored by the State, and with the taking possession of land by northern financial institutions, and with the enormous network of mortgage credit and the management of the various forms of subsidy): the State intervenes to create new industries and to promote public works; the State invests to the extent that the private individual is unable to do so, or does not have the equipment to succeed. It is the period in which, out of tender pity for the slums of the large industrial cities and the small agricultural communities, the State provides for the building of houses, reviving the hardest hit of the economic branches – construction – and opening up, with the regime of contracts and concessions, the phase of the orgies of “capitalists without capital”: It is also the period in which the State, which for the first time in the democratic and progressive America had begun a work of economic assistance to the unemployed with direct subsidies, convinces itself that it “pays” more indirect assistance, that which consists in “creating jobs”.

The federal administration ceases to disburse money to the states for direct assistance to the unemployed and, with the Emergency Relief Appropriation Act of 1935, inaugurates a policy of public works for able-bodied workers and of limiting direct subsidies to the disabled, and another unsuspected author, Mitchell, notes that, under this system, the State obtained the double advantage of “paying” (security) wages higher than subsidies, but generally lower than those current in private employment", and built roads, reclaimed land, created power plants and electrical installations, with an intensified exploitation of labor-power to be put on account of charity; it opened “emigrant camps” for peasant families uprooted from the great plantations of the South and transplanted in new areas of tillage, with the advantage that the whole program of “internal migration” cost only 75 dollars per year per family against 350 of direct assistance, and allowed to open to economic activity “virgin” areas and, once tillage was completed, to award them to the vultures of land speculation and to the industrialists of agricultural transformation; with the Farm Security Administration (1937) it provided, more fascist still, to fix to the land the former proletarianized tenants granting loans of “rehabilitation”, destined to the creation of small self-sufficient companies on lands purchased by the State; organizing the Civilian Conservation Corps, it conveyed the displaced youth, without work and potentially rebellious, in “work services” that remind one of Hitler; and finally, with its most gigantic work, the Tennessee Valley Authority, it transformed, by means of gigantic investments, a valley of small farmers and shepherds into the largest reservoir of electric energy in the United States, where power plants, built and owned by the government but managed by capitalists (i.e. sold to private individuals who have no capital of their own and pay interest and depreciation to the State for the use of fixed assets, keeping the product and thus the profit), they produce cheap energy for small farms but, above all, for the large industrial processing industries that have sprung up in the area (among other things, the energy of Tennessee, this “community” that makes our reformers and socializers swoon, later proved to be an essential element in the expansion of the atomic plants of Oak Ridge and the aluminum factories of Alcoa). With its intervention, the State acts, in short, as a stimulator of the entire economic cycle, it “creates employment”, that is, it multiplies the possibilities of extortion of surplus value.

Shall we sum up this rapid synthesis of Rooseveltian measures? The State intervenes for the double purpose of economic stabilization and social stabilization: it provides rescue for industries in danger, for the financing of their expansion, for the maintenance of their prices; to further consolidate this policy of preservation, it forces them to control and discipline themselves; when the therapy has reached its effect, and the large concentrated companies show that they can walk by themselves, the State, not without propagandistically preparing the ground with an... anti-monopolistic campaign, goes further – becomes an entrepreneur and, partially manager, that is, creates industries, inaugurates economic initiatives, arouses new possibilities of work, which, either through the regime of contracts, or through that of selling at a good price, or through the opening of “virgin zones” and “depressed areas”, will return for a round all but complicated in the narrow circle of the “appropriators of the products of human labor” (which, as in the case of T.V.A. or as in the case of nationalized enterprises in all countries and, in general, in all forms of state capitalism, are not necessarily “owners of the instruments of production”); in the agricultural field, it sustains prices and the “purchasing power of the direct cultivator”; in reality, it proletarianizes the middle classes to the advantage of the great bourgeoisie and, by storing surplus agricultural products, it constitutes that gigantic “granary” which will allow America, after stabilizing its prices and keeping those of the world market artificially high, to resell the waste of its overproduction to the wartime allies and to buy with its “generous gifts” the post-war serfs; in the social field, it does not eliminate unemployment but “redistributes” it; it does not increase the average wage per head, but ensures a minimum wage to the reserve of unemployed (or partial workers); it legally recognizes the trade unions in order to bind them to the general policy of the exploiting class.

Who paid for and pays for this multilateral defense organization of the American ruling oligarchy? The whole world has paid and is paying for it; contemporary and venture generations of American taxpayers have paid and will pay for it. The federal public debt, from the financial year 1929-1930 to 1941 – the eve of Pearl Harbor – had risen from $16 billion to $58 billion. The international debt to the United States, who can calculate it? The New Deal, progressive and interventionist, democratic in its political forms as well as fascist in its economic policy, was the necessary premise for the greatest machine of exploitation of the workforce (American and international) that the history of capitalism has ever known: the “non-colonialist” empire of Wall Street.