ISR Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

International Socialist Review, January-February 1970


Dick Roberts

Nixon’s Recession and Monopoly Rule


From International Socialist Review, Vol.31 No.1, January-February 1970, pp-22-36.
Transcribed & Marked up by Einde O’Callaghan for ETOL.


(This is an edited text of a speech delivered at the Young Socialist Alliance “Conference on Revolutionary Politics,” Cambridge, Mass., November 1, 1969.)

In a radio address to the American people October 18 and a letter to 2,200 businessmen and trade-union bureaucrats the following day, President Nixon outlined the administration’s policies for “combatting inflation” in the coming period. The radio address was billed as a program to hold back the rising cost of living that has eaten at real wages and living standards in this country since the escalation of the Vietnam war in 1965. It turned out to be an exercise in demagogy. The essential message was a threat directed at American workers. About the only true thing Nixon said was, “We’ve asked the American people to take some bitter medicine.”

In this talk I would like to review the policies Nixon outlined in his radio address and then examine in greater detail the conjuncture of the American and world capitalist economies that have necessitated Nixon’s “medicine.”

Nixon opened by stating what is certainly true:

“All across this land, working men and women look at paychecks that say they’ve had a raise, but they wonder why those bigger checks don’t buy any more than their lower paychecks bought four years ago. All across this land, men and women in their retirement, who depend on insurance and on Social Security and on their life savings look at their monthly checks and wonder why they just can’t seem to make ends meet any more.”

Nixon could have amplified these remarks. War-primed inflation has caused the real wages of American workers, that is, the purchasing power of their wages after you take into consideration higher prices and higher taxes, to fall since the beginning of the escalated attack on Vietnam four years ago. Along with other taxes, Social Security taxes have also risen. But Social Security compensation has not risen, so that Social Security taxes themselves have been used to pay for the war. And at the same time the government has mercilessly slashed medical and other relief programs for the aged and indigent.

Federally-financed housing, one of the most highly touted projects of recent administrations, is in a shambles. “Government-owned housing for the poor across the country has begun a spiral of deterioration that some officials believe may end in catastrophe,” a recent survey of the New York Times concluded.

Yet Nixon, in his radio message, called upon Congress to hold down Federal spending. This means cutting even further into the budgets for health, education and welfare, slashing federal construction and putting construction workers out of jobs.

The President asked the people to “urge state and local governments to cooperate in postponing spending that can be appropriately delayed,” in other words, to support state and city cuts in education, welfare, medical and other budgets which are already being slashed in city after city.

Nixon then called upon “labor’s leadership” – that familiar accolade of the capitalist ruling class for its lieutenants in the trade-union bureaucracies – to “base their wage demands on the new prospect of a return toward price stability,” that is, to hold down on wage demands, when they have already fallen behind the spiraling cost of living.

The mechanism of recession ...

These policies, increase of taxes, reduction of federal spending and restraint of the money supply, if followed long enough, can have only one result: a slowdown of industrial production and an increase of unemployment. This is already beginning to take place.

By curtailing production and consequently throwing workers out of their jobs, the capitalists hope to drive down wages even though they have already fallen behind the rising cost of living. In a capitalist economy, when there is full or even near-to-full employment, as has existed in this country since the escalation of the war, workers are in a position to fight for and get higher wages, and they have done that, even though not fast enough to keep abreast of rising prices. The threat of firing does not hold much water when the supply of unemployed labor is small and the capitalists cannot easily replace those workers who have jobs.

But when many workers are out of work, those who have jobs are more reluctant to press for higher pay since they might be fired.

Others who are out of work are willing to take jobs at lower wages than they would get in periods of high employment. This age-old mechanism of the capitalist system, which Marx called “increasing the reserve army of the unemployed,” functions to hold down wages when there is “too much employment.”

The long period of high employment in this country, the inflationary boom of the sixties, was sustained by the war in Vietnam. A recession would have taken place as long ago as 1965 without that war. What Nixon is doing now, then, is not at all new, regardless of the graduate degrees of his economic advisers: The administration is adopting policies to increase the pool of unemployed labor in order to drive down wages.

The following example shows how completely conscious this policy is. In its October 18 issue, Business Week commented on the then-impending nationwide strike against General Electric:

”The union alliance [between the United Electrical workers, International Union of Electrical workers and 11 other unions] is still untested, and 1969 could be its last chance for many years. Rising unemployment figures could dim members’ militancy by the time the next contract reopening rolls around.”

That is why General Electric is all of a sudden willing to grant a one-year wage reopening contract. By the following year GE believes that workers will be in a more difficult position to bargain for a wage increase.

... Coupled with inflation

But it does not at all follow that a slowdown in production and an increase in unemployment will roll back prices in the near future. Monopoly pricing policies have long vitiated the classical competitive pattern. The fact of the matter is that in the four preceding postwar, recessions of the US economy (1948-49, 1953-54, 1957-58, 1960-61), prices continued to rise during the recessions. The last time that a substantial price drop in an economic downturn occurred in this country was during the great depression of the early thirties.

For reasons that I will explain later, the “captains” of American industry really want to stem the rapid rate of price increases. But they do not know when that will happen or how deeply they will have to cut into employment in order to stem the inflation. When Nixon soft soaps the American people and says he is trying to help us if we are patient, he is aware that prices will continue to rise long after total employment declines.

Furthermore, Nixon is laying the groundwork for blaming price rises on “inflationary” wage settlements. He has no assurance that workers will cooperate with his demagogic appeal for cutting back on their wage demands. Nor should they cooperate for the simple reason that they are still trying to catch up with the pay that the inflation has taken out of their pockets.

Nixon’s economic policies could bring on the first major recession since the beginning of the radicalization of the sixties, the upsurge of the black power struggle and the development of a massive antiwar movement. Since the youth will be the first to lose their jobs and black youth before white, it is evident that such a recession also contains an enormously explosive political potential. One can understand that there is a certain amount of trepidation in ruling-class circles about the consequences of the policies they are undertaking. They hope that they can undercut wages and retard the inflationary tide without a big recession.

The gross deception is that the Nixon economic policies are being undertaken in order to benefit the masses of American people. His administration is not concerned about the cost of living or about the aged or the poor. It is preoccupied with an entirely different question, the question of international monopoly competition, the fight of the US imperialist monopolies for domination of world markets. The inflation, caused by the war which they intend to continue, is undermining the competitive position of US monopolies in world trade. This concern of the ruling class and its government is why they are willing to risk a recession.

Profits and wage labor

In order to understand why international competition is the main driving force behind the Nixon administration’s recessionary plans, it is helpful to recapitulate certain fundamental tenets of Marx’s analysis of the capitalist economic system:

This is a very schematic outline of the laws that Marx uncovered. Let me be more concrete about each of these points.

If capital is not associated with living labor, if, for example, a corporation is idled by a strike, it doesn’t yield any profits to its owners. This is why the strike is the most effective weapon workers can use against their capitalist employers and against the capitalist ruling class as a whole.

On the surface it appears that the reason why the corporation can’t make profits during a strike is because workers aren’t running the machinery – and this is true. But this superficial judgment may lead to the false conclusion that not only workers, but the machines they use, the plants they work in, the raw materials they work on, are also the sources of profit – and that is not true.

Ford Motors, for example, might purchase its steel from United States Steel, its electric lightbulbs from GE, its plants from various contractors, its advertising from BBD&O, and so forth. But economists recognized even before Marx that the mere purchase and resale of a commodity cannot produce profits for all the capitalists involved in the process. Ford cannot buy an electric lightbulb from GE for a nicket and resell it in the finished Mustang for a dime. In that case, Ford would actually be gypping GE, it would be paying a nickel for a product actually worth a dime. The capitalist system cannot be explained by such a process of mutual gypping.

Taking each manufactured product apart, piece by piece, ultimately forces one to the logical conclusion that there is only one constituent in it that could be the source of its new higher value, and that is the human work done on it. In the case of the purchase and resale of human labor power, there really is a kind of gypping, called exploitation: The capitalist employer pays a price for the workers’ labor power and resells at a price higher than the sum of that price of labor power and the price of the materials in the finished product. But this price difference cannot be explained in terms of adding a “margin” to the price of materials; it can only be explained as the difference between what the capitalist pays the workers and the value the workers add to the materials by working on them.

The whole legal system of capitalism, its legislative system, its police and its armies have the function of keeping this kind of gypping – the exploitation of wage labor – going. Try as he will, the worker can never go to the job market and sell his labor power at a price equivalent to the value he adds to the materials by working; in that case he wouldn’t be engaged for long.

Marxists do not argue as is believed by many people that this exploitation of wage labor and appropriation of the surplus value it creates, ends up by pauperizing workers continuously. Under the conditions of imperialism, it is true, two-thirds of the capitalist world’s population is subjected to permanent impoverishment, whatever the temporary fluctuations of this or that underdeveloped economy. Further, as is precisely the case in America today, workers even in the advanced capitalist nations are repeatedly subjected to attacks on their real wages and they must continually fight to defend these wages.

Nevertheless, as Marx wrote in Wage Labor and Capital, “The faster capital ... increases, the more industry prospers, the more the bourgeoisie enriches itself and the better business is, the more workers the capitalist needs, the more dearly does the worker sell himself.” Marx was pointing out, and this was in 1847, 122 years ago, that in a boom more workers are hired and they can therefore get higher wages. I have already indicated that this has been the case in America during the latter half of the sixties and it is creating problems for US business.

Marx’s basic thesis is that the expansion of capital proletarianizes an increasing number of individuals. In the same pamphlet just quoted, Marx wrote: “If capital grows, the mass of wage labor grows, the number of wage-workers grows; in a word, the domination of capital extends over a greater number of individuals.”

In the great American “boom” of the 1960s, over 15 million Americans grew up to join the ranks of the labor force. This was incomparably more than joined the ranks of the capitalist ruling class – particularly its upper echelon.

According to an article in Fortune magazine of May 1968, 33 Americans actually did become “centimillionaires” in this period, individuals “worth” over $150 million each. Every ten years Fortune compiles figures on the wealthiest Americans, and 33 of them were on the 1968 list who were not on the 1958 list. Both Fortune magazine and grade-school teachers make much of such facts to prove the social mobility of American society. But what does it prove when 15 million Americans join the ranks of the proletariat and 33 enter the ranks of the big bourgeoisie?

The accumulation of capital

My second point was that the capital accumulated from the surplus value produced by workers must expand. It is often argued that capitalists could agree to enter into some scheme to limit their profits and produce each year only so much as is needed and divide the profits equitably between themselves. But why should Henry Ford agree to limit his share of the market to 20 per cent if he can carve out 25 per cent? Why should he allow American Motors to get 5 per cent of the market if he can squeeze it down to 2 or 1 per cent, or even drive that competitor out of business altogether? And if he is not allowed to invest his profits to expand his control of the market, what is he supposed to do with the surplus capital?

In the real world of capitalist competition the scheme of “equitable” profits is Utopian. The top capitalists who rule nations reap monopoly superprofits. This can be easily demonstrated historically by the example of the automobile industry.

Not so long ago in the United States there were 57 car corporations. Today there are only four. Three of them rank as the first, third and fifth largest manufacturing corporations in the United States; the first, third and sixth largest manufacturing corporations in the world. General Motors, Ford and Chrysler have subsidiaries all over the face of the capitalist world and sell cars in over one hundred nations. These are not small accumulations of capital! GM, Ford and Chrysler employ 2,650,000 workers on a world scale; they account for 7 per cent of the total sales of US manufacturing industries; they account for 8 per cent of the total profits. [1]

These three multinational trusts are owned by a handful of American families. The duPonts, Charles Mott, the Mellons, Ford – these are the well-known names on Fortune’s list – and each holds millions and even billions of dollars worth of stock in the automobile trusts.

The Ford family owns 10 per cent of the outstanding stock of Ford Motors. Ferdinand Lundberg, in The Rich and the Super-Rich published last year, calculates the value of this stock at $2 billion. It is hard to grasp these high figures. One billion happens to be a little bit higher than the total number of minutes that have elapsed in history since the year 1 A.D.

Henry Ford II was the subject of an article in the New York Times Magazine, October 19, which can serve to give a more concrete idea of capital accumulation in one of its ramifications – its social ramification. Ford, according to this article, has been married since 1965,

“when he married luscious, leather-brown Cristina ... a kind of late-blooming fellow traveler of the jet set, visiting Acapulco, the Bahamas, the Riviera, hobnobbing with Italians and Greeks, with counts, industrialists and handsome women ... Once on Long Island, Ford, fully clothed, led a Dixieland band, its members also clothed, into a swimming pool ... At a White House dinner dance during the Johnson administration, Cristina wore a white strapless sheath cut so low that Henry himself is said to have complained about the exposure.”

According to the New York Times, the weddings of Ford’s two daughters cost $250,000 each. If you were able to work for forty years at a salary of $6,000, you would not see that much money in your working life. Moreover, the vast majority of Americans do not even make $6,000 a year. The average per capita income is well below $5,000.

But the extravagance of the ruling classes is not the fundamental evil of the capitalist system. It is the fact that in order to guarantee its privilege of extravagance, the capitalist class maintains its private ownership of the means of production.

Technological advance and overproduction

Marx, who lived over a century ago, is accused of being relevant only to a period before the dawn of modern technological civilization. Despite this allegation, the reader of Capital will discover that the essential features of capitalism Marx describes are valid for our own day. Technological advance does not play a secondary role in Marx’s analysis; the machine is central to his theory. It was in the machine that Marx and Engels discovered a fundamental contradiction of the capitalist system.

The machine is absolutely necessary for the expansion of capital, it is the main vehicle of capitalist competition, and those capitalists who can afford the most modern and most expensive machinery can produce goods most cheaply and ultimately capture the market. However, the machine is not a source of values; only human labor power produces value.

In order to make up for this loss of labor power at his command, the capitalist who has purchased the more expensive, more automated machinery, must in the long run produce more and more products and he must more and more control the markets in which they are sold. The monopolist can make up for the costs of his machinery and the decline of the labor force under his control by increasing the volume of goods produced. Goods come to saturate the markets, not because of bad calculations by this or that market analyst, but because the competition between expanding blocs of capital expresses itself on the market as competition between masses of cheapened products.

At the same time the machine spurs further accumulation and leads to monopoly. Marx wrote in Capital:

“The development of capitalist production makes it constantly necessary to keep increasing the amount of capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist as external coercive laws. It compels him to keep constantly extending his capital in order to preserve it, but extend it he cannot except by means of progressive accumulation.”

”Accumulate! Accumulate!” Marx wrote in this famous chapter, “That is Moses and the prophets!”

The machine, taken side by side with the growth of the labor force that I have already spoken of, now impresses upon capitalist production the necessity of cycles. The greater the concentration of capital in machinery, necessitated by competition itself, the greater the necessity of producing more goods to pay for machinery. Investment in machinery consequently impels production towards overproduction. And at the same time, the boom produced by building the machines, the hiring of more and more workers, if not in this sector, then in the next, ultimately leads to full or near-full employment. This comes about just when the market is saturated with overproduced goods.

The disemployment of workers to drive down their wages coincides with the laying off of workers in order to clear the warehouses of too many goods. Large-scale unemployment is forced on the working masses because too many products have been manufactured. As the number of jobless increase, the overproduced goods are used up, wages are pushed down to “tolerable” levels and finally the path is cleared toward new investment and a new production cycle. The advance of technology has not allowed capitalism to escape from the repetition of boom and bust. On the contrary it is exhibited in the consequent permanent job instability for the marginally employed, in the United States specifically, the “last hired and first fired,” the black working class.

Monopoly and imperialism

It is evident that the tendency towards overproduction is inherent in the advance of technology, which is, in turn, a necessary consequence of capitalist competition. At the same time we have seen that competition entails a progressive centralization of capital and the growth of monopoly.

But what about monopoly? When one or a very few huge corporations come to control a given market or industrial sector, they can analyze the market down to the last detail and set their prices and amount of production at a level assuring maximum profits. They can adjust the rate of introduction of new technology in accordance with these profit-maximizing conditions. And they can do all this thanks to their monopoly position, because entry of new capital into “their” sector, which would upset all their “price-quantity” calculations, is so difficult, so costly, as to be impossible within very broad limits.

But the permanent necessity for capital to expand, to find new arenas for the exploitation of labor and sales of its product, assures that no stage of monopoly is stable. Monopoly does not resolve the contradictions inherent in the insatiable appetite of capital; in a certain sense it intensifies them.

In the first place it should be noted that the very existence of strong monopoly positions by no means precludes the entry of new masses of capitals; it only limits them. The existence of a number of enormous accumulations of capital results in the tendency towards the formation of an “average rate of monopoly profit.”

If the profit rate very much exceeds this average rate for a very long time in any sector, capital from outside will flow in and drive prices back to a level commensurate with the average monopoly profit rate. There is no accumulation of capital so big and no condition of entry so formidable that another immense mass of capital will not be ready to break the monopoly if the profits rise far above this average rate of monopoly profits. The decline of prices of color TV sets a few years after they were introduced on the market is a recent case in point.

Nevertheless, within these limits and over long periods of time, monopolies can set prices and adjust output; they do not have to invest unlimited amounts in new technology to maintain their market positions – something any owner of a car is acutely familiar with. But precisely to the extent that they do this, monopolies tend to choke off arenas for productive investment. The contradiction emerges: monopolies give rise to superprofits; but far from providing “super arenas” for productive investment, they tend to limit these arenas. The contradiction which, in the absence of strong monopoly positions, assumed the form of the overproduction of goods, under monopoly conditions assumes the form of overproduction of capital.

Is that really a problem for capitalists? Can there be such a thing as “too much money”? For the individual capitalist or mass of capital the answer is obviously no. But for the system as a whole, the answer is an emphatic yes. For accumulation is “Moses and the prophets”; every mass of capital must either grow or contract; the surplus value that has been appropriated in one cycle of production must be capitalized in the next so that more surplus value can be extracted in the future.

Capital is forced from monopolized sectors into other sectors. It must find new sectors and whole new regions to exploit labor in or it must try to take over existing sectors. Consequently the development of monopoly does not reduce competition and tend to stabilize the system. It intensifies competition, as capitals which have monopolized sectors and regions compete for domination and control of others and for domination and control of each other.

In the case of conglomeration, huge masses of capital that cannot find productive outlets for investment turn toward the stock market in order to extend their control. There is a spectacular leap in the centralization of capital and an intensification of the fight for control of markets. Peaks of conglomeration, although not on the spectacular scale of the merger wave that began in 1967, have occurred twice previously in US history: in 1899 and 1929. Both years culminated long periods of capital expansion that were followed by periods of intense economic instability.

The competition between multinational trusts defines for Marxists the essential character of imperialism.

There are those who have been overawed by the impressive postwar power of the US monopolistic trusts: their ability in one part of the capitalist world to control immensely profitable markets, fix prices there, sell billions worth of goods; and their ability in another part of the capitalist world to control governments, suppress colonial revolution, extract superprofits at the expense of the poverty, malnutrition and early death of these two-thirds of the world’s population. The argument is made that so long as the super-exploitation of the Third World can be maintained, the monopolists can “buy off the workers of the advanced capitalist countries.

Impressionism of this kind, which is not new in the history of the radical movement, is to be expected in periods of prolonged capitalist prosperity. One can find more sophisticated critiques of Marxism in the writings of the leading theoreticians of the Second International written around the turn of the century. Eduard Bernstein then argued that the internationalization of the trusts – only beginning at that time – would enable the few great powers to solve the main contradictions produced by monopoly competition and he predicted a gradual and peaceful evolution of capitalism to socialism.

But World War I was to prove that the world division of markets does not resolve the antagonisms inherent in the need for different masses of capital to expand; it exacerbates them to the extreme. Surplus capital has penetrated every inch of the globe, it has choked off all outlets and superprofits are piling up crying out for investment. A crisis shakes the world imperialist system, not because there is potentially too little to go around, not potentially enough to feed everybody, but because the monopolies are glutted and can find no profitable outlets for their billions. Physical destruction of existing values in world war “solves” this problem.

Monopoly control of raw material resources in the under-developed world and of the markets in the advanced capitalist countries cannot be viewed as separable aspects of imperialism. They are complementary necessities of expanding capital.

Clearly the needs of imperialist capital far overreach the ability of national markets to satisfy them. If capital was, in fact, limited to the confines of national boundaries, each economy would be subjected to frenzied oscillation of boom and bust cycles. But the point is that capital long ago flowed over national boundaries into the colonial world, there to exploit labor and to fix its grasp on the sources of raw materials and to seize protected export markets, and into each and every market of the advanced capitalist nations. The internationalization of investment was forced upon capitalism exactly in order to overcome the restriction of national markets, without giving up the political and military prerogative of the national state. Among the consequences of this internationalization was the possibility it offered the monopolies to buffer themselves against the fluctuations of one economy by operating in many economies simultaneously.

The four postwar US recessions have been relatively shallow and short-lived because US imperialism could sell its goods abroad and pour investments into profitable European markets. The big inflationary upswing of the US economy since 1965, on the other hand, has softened the impact of recessions in Italy, France, Germany and Britain.

But this does not free capital in the last analysis from the necessity of exploiting wage labor on an ever increasing scale. The reality is that the instability of the governments and markets of the Third World nations, itself the result of imperialist investment, also serves to greatly limit the amount of capital that can be profitably and safely invested in these plundered nations. And this at one and the same time explains the permanent underdevelopment of these nations and the necessity of capital more and more to throw itself on the markets of the advanced capitalist nations in pursuit of profits.

The great disparity in development, manifested in the economic backwardness of such a vast area of the capitalist world, cannot free expanding capital of its fundamental contradictions. One should not forget that before the first world war and before the second world war, as today, the same peoples were superexploited, the same un-evenness prevailed, and yet this did not save the workers of the advanced nations from the trenches of interimperialist wars, wars that had as one of their central aims precisely the redivision of markets and sources of raw materials in the underdeveloped world. The Vietnam war today is also tearing at every strand of the social fabric of this nation. International monopoly rule does not serve to free the workers in the bastions of monopoly power from the contradictions of world monopoly. It more and more closely binds their fate with that of the oppressed everywhere.

Roots of postwar prosperity

In the light of this discussion we should briefly examine the long period of relative stability and class peace that has prevailed in the advanced capitalist nations since the second world war. The United States decisively won World War II. This enabled it for almost a quarter of a century to open up paths for world trade and investment that had been choked off in the thirties. The needs of US monopoly capital were clearly recognized by the rulers of this country in the period leading up to the war and during it.

There is an illuminating quotation from Dean Acheson, who is much in vogue because of the recent publication of his memoirs. In November 1944 – and one recalls what the world looked like in November of 1944 – Acheson as Undersecretary of State addressed a Congressional audience as follows:

“We cannot go through another ten years like the ten years at the end of the twenties and the beginning of the thirties without having the most far-reaching consequences on our economic and social systems,” Acheson stated. “We have got to see that what the country produces is used and sold under financial agreements which make its production possible ... Under a different system you could use the entire production of the country in the United States.” However, to introduce such a system, namely, socialism, “would completely change our Constitution, our relation to property, human liberty, our very conception of law. And nobody contemplates that. Therefore you must look to the other markets and those are abroad.” [2]

Expanded world trade, a stable international monetary system, a worldwide network of bases and investments, were the pillars upon which two decades of postwar imperialist prosperity rested. The physical destruction of the industrial plant and equipment of Europe and Japan; a dislocated and disorganized labor force subjected to Communist Party and social democratic misleadership – and consequently a cheap labor force; a flood of US money and guns in the Marshall Plan and NATO; these were the ingredients of big and profitable markets for capital investment. The rebuilding of the European and Japanese economies helped sustain the long boom for a number of years.

It is unquestionable that the postwar US recessions would have been longer and more severe if US capital and goods had not found needed outlets in Europe. The “automobilization” of Europe is the fundamental cause of the “suburbanization” of the United States. Today US foreign investments stand at the colossal figure of $150 billion. US corporations do not export goods from this country so much as they manufacture and sell them abroad. “US foreign investment” is now greater than the Gross National Product of Germany or Britain.

Acheson used the formulation “what this country produces.” But what is this country? Who owns and controls these foreign investments that are so crucial in the world capitalist economy? Esso, Ford and General Motors account for 40 per cent of US direct investment in Germany, Britain and France. In all of Western Europe, 20 US trusts account for two-thirds of US investment. [3] And if the “dollar must be salvaged,” if the “balance of payments must be righted,” if the “balance of trade must be corrected” – one must remember in whose interests these international economic operations are being conducted.

I pass over now from monopoly to the fourth point of my presentation: the irreconcilable contradiction between the unlimited needs of capital to expand and labor power, which is a limited commodity.

There are only so many workers available to capital at any one time, in each state, nation, continent or in the capitalist world as a whole, be they 70,000,000 in the US market, 250,000,000 in the world capitalist market. The insatiable thirst of capital to expand drives it beyond the capacities of national markets and ultimately of the world market.

The long expansion of capital following the second world war has brought about a new redivision of the world markets and a new crisis of world trade and investment that inevitably flows from this conjuncture. There is a sharp intensification of the battle for access to each national market. Europe and Japan in the last five years have been like the United States of the immediate postwar period, hungry for foreign markets, especially for the most lucrative of all world markets, the US market itself.

This gives the present period a different character from the period of prosperity and relative class peace in the advanced capitalist nations that flowed from an unfettered expansion of capital. Capital that has fully absorbed the labor power available and has glutted the world market with goods is like a caged beast. The overwhelming superiority of the US military machine and the formidable advance of world revolution in China and Eastern Europe rule out for the present the murderous “solution” of interimperialist war resorted to in 1914 and 1939 and tend to ally the imperialists against the common threat of world revolution.

But this all the more impels the imperialists to search for weaknesses, real or supposed, in the military defenses of the noncapital-ist world. It partially accounts for the attack on North Vietnam just a decade after the ill-fated attack on North Korea, both with the ultimate prize in mind of opening up the immense Chinese market itself to imperialist goods and capital.

And it all the more presses upon capital the need for “peaceful” outlets. It all the more reinforces the competition for control of markets and the need of capital to drive down wages in order to better its position in this competition. Once again, as in the first world war and its aftermath, and as in the second, the phenomenon of world overproduction, of world capital surpluses, does not find capitalism finally giving to the world working masses a stable share of the produce. On the contrary, capital is redoubling its attack on labor, seeking new means to deprive workers of what they already have.

The Nixon administration’s economic policies are dictated by this new conjuncture of world monopoly competition. The inflation caused by the war has begun a process of undoing the seemingly unchallengeable US monopoly in world trade that existed following World War II. Now, high prices of US products tend to erode their competitive position in foreign markets and to open the US market itself to a flood of foreign products.

The crucial automobile industry is a significant case in point. Over one million foreign cars poured onto the US market in 1968, over one half of these Volkswagens, and the rate for 1969 is even higher. This has terrifically intensified competition in this industry, not only between US and foreign car corporations, but between the US corporations themselves. The target is production of the “compact.” Chrysler’s failure in this field was recorded in the precipitous stock decline of Chrysler shares that led the recent collapse of Wall Street prices. It forced one holder of Chrysler stock, whose name was not revealed, to drop in one sale, 531,000 shares of Chrysler, worth $35 million.

Ford’s Maverick is supposed to be the big gainer, but Ford himself has not been happy about the situation. His firing of the president of Ford Motors in October brought Henry Ford into the news. This followed the report of third-quarter profit declines. Ford recently told two correspondents from the German magazine Der Spiegel,

“Yes, he was trying to reduce the US market of VW and other imports. Yes, we were not on our toes in the past. Yes, the Japanese are more dangerous competitors than the Europeans. Yes, they make him furious.”

Ford added,

“I would have gladly bought Volkswagen in 1948, but unfortunately that did not happen. I talked about it with representatives of the British Military Government in Germany at that time, but they said no.” [4]

The central problem is world overproduction. Italy’s owner of Fiat, Sr. Agnelli, has been complaining about “too many” cars, at the same time Italian workers have erupted in a massive struggle for better jobs, wages, living conditions.

The central purpose of the Nixon administration’s attack on American labor is to drive down the wages of American workers to levels that make US monopolies more competitive in international trade. The auto industry is not exceptional. Foreign steel, textiles, chemicals and even TV sets have steadily eroded the grasp of I’. S. monopolies on the world market.

While Nixon was making the radio address that I spoke of at the outset, the Business Council, representing the major corporations in this country, was meeting with administration spokesmen in Hot Springs, Virginia. From the report in the October 20 Wall Street Journal, it is evident that plainer words were spoken. The headline of that article was, “Recession Risk Needed to Combat Inflation, Administration and Business Leaders Agree.” It contained the following paragraph:

“In private conversations, a sampling of key businessmen almost eagerly received the somber economic prescription. ‘A recession might be just what it takes,’ one said, to shake workers into more diligence about their jobs as well as to moderate wage settlements. Another said, unless the US sharply improves its cost performance, it will face two ‘gruesome alternatives,’ either ‘closing our borders’ to foreign trade or devaluing the dollar, bringing ‘the 1930s all over again.’”

Thus these spokesmen for US monopoly dismiss in a few words a quarter of a century of imperialist economic artifice. To the second speaker, unless US industry can improve its “cost performance,” meaning “drive down wages,” either it will have to dump free trade (i.e., reverse the trend of the Marshall Plan, GATT, the “Kennedy Round,” etc.) or devalue the dollar (give up hopes in salvation through international monetary reform, “paper gold,” etc.). In any case, both assert in their own way what Marxism has emphasized: The sole source of value to accumulating capital is the exploitation of wage labor. Nixon’s economic policies are aimed directly at the wages of American workers. By driving American wages down, Nixon hopes to increase the “room for maneuver” of US monopolies on a world scale.


1. Fortune magazine, June 1969.

2. Quoted by David Horowitz, Empire and Revolution, 1969, p. 233

3. The Economist, December 17, 1966.

4. Atlas, June 1969.

Top of page

ISR Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Last updated on 25 June 2009