Permanent armaments production

Only in 1934-35 can we observe a definite recovery in the world economy after its collapse in 1929. This recovery has, however a peculiar feature unprecedented in the history of capitalism: it is not accompanied by a proportional rise in world trade. Between 1932 and 1936, the index of world economic activity (the USSR included) rose from 69 to 111 (1929 = 100). The index of world exports, by contrast, declined in value from 39 per cent to 37.8 per cent. This recovery is the result of production which is not commercialised: armaments. It resulted from the intensive rearmament of certain powers: Germany, Japan, Russia and, to a certain degree, England. In 1937, the Federation of British Industries declared that the expenditure on armaments gave a boost to economic activity between four to six times greater than that due to placements of British capital abroad [1].In Germany, armaments expenditures reached 90 billion marks between 1933 and 1938. This figure which Hitler disclosed in 1940 was higher than all the estimates which had been made until then. The index of producer goods quadrupled between 1932 and 1934, that of automobile production, thanks to the motorised army, sextupled. The number of unemployed went from 5,331,000 in 1933 to 172,000 in November 1938 [2]. There was an exceptional demand for the raw materials essential to arms production: a country like Sweden, whose iron was fought over by the European powers, saw its profit index go from 28 to 91.4 between 1932 and 1936.This recovery was manifested unequally. In 1937, Europe accounted for 65 per cent of the world's expenditure on arms. Its industrial production index was 11 points higher than its 1929 level. By contrast, in America, where military-oriented production remained feeble, the same index was still lower (by 7 points) than its 1929 level.In 1937-38, when a new crisis menaced the capitalist world, again an upsurge of armaments production in the powers not yet armed 'saved' the system. Production in the United States had fallen 37 per cent below the 1929 level. Other countries where peacetime economies remained predominant, violently experienced the backlash of the American crisis (Canada, Belgium, the Netherlands, Denmark, Bulgaria, Estonia, Finland, Rumania)."Purchases related to armaments", the League of Nations bluntly wrote in a 1938 report, "were speeded up precisely between the middle of 1937 and 1938, that is to say, during a period when the recession in the United States and the demand for goods risked becoming a world-wide depression analogous to the one which had begun in 1929" [3].There can be no possible doubt about the nature of the economic recovery after the crisis of 1929. It was due exclusively to the armaments economy, that is to the production of the means of destruction. This type of production finds an outlet only in war. War is the only way to make profits from military investments. War broke out. It opened up new possibilities for the powers which supplied the means of destruction. Thus Canada realised during the war years a growth of production equal to its total growth of production over the previous twenty-five years [4]; the United States saw its industrial production grow by 50 per cent [5].At the end of the war, despite the greatest destruction in the history of humanity, world production had not diminished. It had risen above its pre-war level, and the United States had attained one of the strongest growth rates in its history. But in order to accomplish that, the United States had to devote to military expenses, no longer a secondary part of its economy, (in 1929, military expenditures did not go above 1 per cent of the GNP), but the essential part of its productive capacities. "(...) the US military sector represented not a relatively small part of the whole economic system, but a very large part, and at its peak it was almost as great as the total production of the United States in the period before the outbreak of the war." [6]But before we see how this new form of 'life' of the system is going to mould the period which followed World War 2, we must first pose the question: why did the armaments economy enable capitalism to resolve, at least momentarily, the contradictions which paralysed it? Is it because it acted as a brake on the tendency for the rate of profit to fall? Because it moderated the tendency of shrinking markets?Without opening up an in depth discussion of the theory of Rosa Luxemburg versus that of Grossman-Mattick regarding the primordial contradictions of the capitalist system, a few remarks can be made based on the events of this period.In general, it is impossible to consider the tendential fall in the rate of profit separately from the tendency of a shrinking market: the threat of the falling rate of profit forces capitalism to develop the means to constantly accumulate capital and thus to acquire new markets. Increasing the volume of production, which is only possible with the acquisition of new markets, constitutes the principal means of counteracting the falling rate of profit. Simultaneously, the constant rise in the technical components of capital (ie its organic composition), is the motor force behind the tendency for the rate of profit to fall. What makes this necessity to raise productivity inescapable is the deadly competition between the different factions of capital for control of the existing markets (the success of one capital over another in capturing a market is measured by its capacity to sell more cheaply, that is, to produce with a higher level of technology).The armaments economy acts simultaneously on these two levels of contradiction within capitalism. It acts on the contraction of markets by furnishing a new, even though temporary, outlet for production. This outlet is all the more important in that (in contrast to markets provided by public works programmes such as Hitlerian motorways, or city improvements carried out under the 'New Deal'), it involves a much larger sector of the economy since military needs concern almost all domains of production. Also, the necessity for increasingly powerful and sophisticated armaments especially stimulates the more advanced industries where the concentration of capital is the highest [7]. Finally, military production has the immense advantage of not encumbering markets for which 'civilian' production is destined.Armaments production also acts directly on the tendential fall in the rate of profit in three ways. Firstly, outlets are expanded. Secondly, the rate of exploitation is increased [8] since real wages are reduced by inflation (or in wartime by rationing and inflation [9] and labour time is prolonged. During wars, overtime becomes obligatory and even work camps are instituted under the call for 'civilian duty'. All of these measures took place in the United States after 1933, as well as in Austria, Poland, Australia, Canada, Denmark, Finland, Switzerland, Czechoslovakia, and especially the USSR and Germany [10]. And thirdly, armaments production imparts a strong acceleration to the process of concentration, and therefore of the profitability of capital. [11]However, the history of this period shows that the most concentrated capital in the world, with the lowest paid workers, cannot in any way develop its production if it cannot find an outlet for the sale of its goods. During the great depression of 1929-34, wages fell to extraordinarily low levels and the concentration of capital (by the movement of selection which crises impose) received a big boost. Nevertheless, production and the rates of profit continued to stagnate or to fall.It is therefore because of its function as a 'new' outlet that armaments production has unburdened the capitalist economy. That is to say, that the inherent contradictions of capitalism are centred and manifested at the level of the market (ie, the realisation of surplus value). Thus in 1914, the rapid reduction of the possibilities of imperialist expansion dealt capitalism a mortal wound at its very heart, the market (the necessity to sell).The heads of state who had to deal with this depression were not mistaken about its origin when they declared, as did Roosevelt shortly before the United States entered the war: "We are not consuming all the food we can produce. We are not utilising all the oil we can extract; we are not using all the commodities we can manufacture". [12] It was clear to the most important leader of the capitalist world that the problem appeared not at the point of production (the creation of surplus value): "we can produce,...we can extract,...we can manufacture..."; but at the level of the market: "We are not consuming,...we are not utilising,...we are not using..."Hitler was no less lucid when he proclaimed in February 1939, in what was to become his famous war cry, "Germany must export or perish!"We have seen how the growth of capitalism after World War 2 was really a continuation of the decline which preceded it from the fact that this growth was based on reconstruction. A second important manifestation of this continuing decline is capitalism's maintenance of armaments production large enough to effectively act as a stimulus to growth.In effect, the capitalist powers did not proceed with complete disarmament after World War 2. The constant exacerbation of inter-imperialist antagonisms no longer permitted them to do so. Through localised conflicts, in which the populations of under-developed countries served as cannon fodder, by exploiting any national liberation movement whatever, the great powers continued to tear the planet to pieces in order to divide and redivide it among themselves. The world, so to speak, has never known a period of total peace since Hiroshima. And war, even localised war, consumes an ever growing mass of arms.World War 2 also brought about the reintegration of the 9 million unemployed Americans of 1939 into capitalist exploitation. The end of hostilities caused in less than three years the reappearance of 3 million unemployed in the United States. [13] But the uninterrupted growth of military needs after the war allowed capitalism to reabsorb potentially growing unemployment.During the fiscal year of 1965, nearly 6 million people were employed in one way or another in defence and during the fiscal year of 1968 this figure was nearly 8 million. [14] The magnitude of this gigantic production of armaments can be illustrated by the fact that "the world has spent more on armaments over the last ten years than during the entire first half of the century, the two World Wars included." [15]

If we remember that the percentage of the American national revenue destined for military purposes was less than 1 per cent in 1929 and that before 1913 the 4 per cent reached by Germany on the eve of the war represented an unprecedented maximum, we will understand the significance of the per centages maintained after 1945.

By relying increasingly on the crutch provided by armaments production and finding in the military outlet a stimulus for its growth, capitalism continues to survive. Thus throughout the period of reconstruction, we find the capitalists using the same medicine as that which has maintained the system since 1914. The state's skill in utilising these remedies has evolved; armaments production has permitted the state to intervene in the economy with greater intensity and effectiveness. But the content of these ‘remedies' remains the same, because the nature of the disease has not changed either: the irreversible shrinking of the system's field of expansion; the permanent threat of the falling rate of profit; the heightened competition among the different factions of world capital; the inexorable exacerbation of class antagonisms; the incomplete utilisation of capital; and the instability of the means of exchange.All these economic symptoms which emerged with World War I and developed during the crisis of 1929-38 remained and were constantly aggravated in subsequent periods. The period of post-World War 2 capitalism is only a moment in the unfolding of a cycle which has characterised the general life of the system since 1914, namely: crisis-war-reconstruction.Reconstruction is that least catastrophic moment of the cycle in which capital can best hide its senility. The second period of reconstruction following World War 2 was longer, more spectacular and came after a wave of destruction that was more intense than World War I. Capitalism developed a more refined means of survival. The prosperity of this period was sufficient, at least in the developed countries, to make one momentarily forget what had happened to capitalism since the first war. But as soon as this relative prosperity was threatened, the old wounds of decadence resurfaced more gaping than ever.The period of reconstruction following World War 2 is the logical continuation of the decline which preceded it. It is far from a revival of the ascendant phase of capitalism. The principal economic manifestation of this period naturally appears at the level of the development of the productive forces.

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[1]Henri Claude, De La Crise Economique A La Guerre Mondiale, Editions Sociales, 1947, p.65

[2] Claude, p.70

[3] League of Nations, ‘Apercu General Du Commerce Mondial' 1938, cited by Henri Claude, p.30

[4] Claude, p.24

[5]  Sternberg, p.488

[6] Sternberg, p.494

[7] For example, in 1962 American military expenditure in planes, missiles, electronic and telecommunications equipment accounted for 75 per cent of the total military expenses of the country. Ships, artillery, vehicles and related equipment which were once the mainstay of the armed forces, made up the remaining 25 per cent.

[8] The full importance of this factor can be seen if we express the general rate of profit in the following form: sv       =       sv¼v*c+v            1+ c¼v

*sv¼v is the definition of the rate of exploitation (or the rate of surplus value).

[9] The fact that real wages rose in the United States during World War 2 (probably because American territory was not directly involved in the war) seems incontestable. But the American government nonetheless didn't miss the opportunity of offering workers Goering's famous "alternative", resolved of course in advance: "Either guns or butter". During the war, production of ‘durable' consumer goods was prohibited.

[10] Claude, p.61

[11] In 1945, there was so much progress in capital concentration in the United States that it has been estimated  (Fritz Sternberg) that the 250 largest enterprises produced the equivalent of what some 75,000 industries produced before the conflict.

[12] Speech of May 28, 1941

[13] 9,480,000 unemployed in 1939, 670,000 in 1944, 3,395,000 in 1949 (President's Economic Report, 1950)

[14] United Nations, 26th Session of the General Assembly, United States response to the UN questionnaire on ‘The Economic and Social Consequences of the Arms Race...' 1972, p.48

[15] Perroux, La Guerre ou Partage du Pain, V. 3, p.495