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New International, August 1949


Jack Brad

Books in Review

Sternberg’s View


From The New International, Vol. XV No. 6, August 1949, pp. 189–190.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Living with Crisis
by Fritz Sternberg
John Day, New York, N.Y.

The value of this book lies in the author’s comprehensive understanding of the world as an interdependent unit in which politics and economics have been welded together. Unfortunately Dr. Sternberg has a tendency to present theses as axioms rather than as analysis bolstered by fact.

Sternberg’s examination of post-war American economy is based largely on official reports, particularly the excellent Presidential economic reports. His study of European problems utilizes much of the data collected for the first time for Marshall Plan operation. Sternberg’s forte is establishment of the correct interrelationships between these no longer separable economic forces. His emphasis on the world context for American economy and the dislocation caused by the shift of overwhelming economic power to the U.S. has not been treated so thoroughly elsewhere.

In an exceptionally felicitous phrase Sternberg describes the present period as a “truce economy” – neither war nor peace. One of the outstanding features of this era is the permanent expansion of the American state into the largest single major force in U.S. capitalism, consuming about one third of the national income. Of the swollen national budget of $42 billions, three-quarters goes for war costs, creating an enormous fixed drain of no productive value. Of this sum $14 billions is allocated to maintaining and expanding the military establishment. For the first time during peace, armament has a great role in American life – at a time when the state has acquired unprecedented powers.

This larger political trend is accompanied by a rapid concentration. Sternberg points to the conclusions of the Federal Trade Commission report on wartime concentration under government aegis as part of the war production program and to the post-war merger movements which have shifted the structure of the economy. Concentration was so accelerated by the war that today 250 largest American corporations have a productive capacity equal to that of all of Western Europe combined. These monstrous monopolies exercise tremendous pressure on foreign policy. The needs of big capital are best satisfied by a foreign policy that is based on strategic considerations rather than direct export of capital. It is interesting that the Republican Party, for example, has been able to form a solid united front with the Democrats on foreign policy.

Unfortunately, Sternberg does not elucidate some of his interesting inferences on the changed character of U.S. imperialism. Three markets gave the U.S. its inflationary boom character: Pent-up demand for consumer goods was made effective by war savings. Exports continued heavy under impetus of lend-lease, UNRRA and Marshall Plan aid. New capital expenditures boosted producer goods manufacture in heavy industry, as obsolete machines and plants were modernized to cut labor costs (this too under government subsidy via tax rebates).

Each of these markets is in decline today.

It is Sternberg’s thesis that the rise of the military sector at a time when these other markets are falling off is of such decisive importance as to take control of the economy. For the national military establishment, to be augmented shortly by Atlantic Pact commitments, creates a new market, one that is profitable, guaranteed and particularly reassuring to heavy industry.

While there is no war party here as yet, it is Sternberg’s contention that an important section of monopolists will find their best and most certain market in military production. Any sharp economic decline could alter the balance of these major industrial sectors toward a vested interest in armaments. From this arises the terrible danger of toboganning into war in order to preserve prosperity. In this manner foreign policy becomes for the first time a decisive factor in U.S. economy. Control of the vastly enhanced power of the state becomes a major objective of all social classes.

Now this central theme of Sternberg’s book gives socialists a major interpretation of current forces and it has considerable validity. However, it is questionable if it occupies the place Sternberg gives to it. The main line of development of a war party in the U.S. depends on larger considerations of inter-imperialist conflict, while the trend described by Sternberg has an abetting character. An examination of the situation in 1939 would elucidate this. Roosevelt seems to have come to the realization that the crisis was not soluble by Keynesian schemes and heavy industry had become deeply involved in war production. But these were forces which accelerated, not created, the basic antagonisms. This is precisely the fallacy of Beard’s theory of Roosevelt as the Macchiavellian schemer. That he was, but he was also the defender of fundamental imperialist interests.

Sternberg’s major thesis is well supported by a number of corollary ideas. For example, he sketches the basic difference between U.S. and European capitalist development. While the latter expanded as the manufacturing hub of a great trading periphery that supplied raw materials and served as a market, the U.S. grew as a continental expansion on the basis of a rich home market.

America has emerged as the greatest world power but it is still not the center of world trade. It buys very little and its exports have never exceeded 10 per cent of production in peacetime. This is why the dollar shortage bedevils the rest of the capitalist world. The behemoth of U.S. industry looms over the world but is itself not involved productively to the same degree as others are dependent upon it. The result is chronic imbalance.

Europe is impaled on a terrible dilemma. It must trade for survival, but its greatest competitor must also be its largest market if the economic wheels are to turn. But the U.S. is no such market. In spite of the free flow of American oratory on the subject, the U.S. is the greatest obstacle to “free trade.”

When he makes his own political proposals Sternberg seems to lose some of his objectivity. He is for a Third Camp, an independent democratic socialist Western Europe, free of both U.S. and Russian imperialism. Some of the best sections of the book deal with the potential of such an entity. Unfortunately, he torpedoes his own program by his insistence on the necessity of the Atlantic Pact to safeguard Europe from Russia while it is developing this Third Camp.

That there is a contradiction between this and his earlier excellent explanation of the dangers inherent in an expanded U.S. military program is ignored. These difficulties are to be overcome by “synchronizing” a domestic New Deal with a “New Deal in our foreign policy.” At this point it becomes difficult to distinguish Sternberg from the plethora of would-be-advisers-to-the-State-Department.

While insisting that “without transformation of Europe’s social structure a Third World War is inevitable,” the place Sternberg gives to the U.S. in Western Europe is equivalent to a veto on such a transformation. In other parts of the book, such as in his excellent chapter on Germany, Sternberg explains the reactionary consequences of U.S. intervention quite adequately.

Living in Crisis is an extremely lively and intelligent commentary on contemporary world politics, while suffering the faults of a too great admiration for the possible achievements of U.S. foreign policy.

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