T THE height of what is probably the greatest ‘boom’

that the United States has ever experienced, the fear
of an approaching new economic crisis is rapidly grow-
ing in the capitalist world. This fear is well grounded.

The _ history of capitalism
shows that every boom ends in
a crisis, and that such crises
have in the past regularly re-
curred every seven to ten years.
In conditions of the recent gen-
eral crisis of the capitalist sys-
tem, however, the course of the
cyclio process of capitalist pro-
duction has been altered, in the
sense that (a) the phases of
crisis and depression have be-
come more prelonged, and (b)
while the depression is followed
by a revival, it is by no means
followed by a phase of general
prosperity.

The present cycle, under the
influence of the world war, is
not a normal one. In the USS. it
has led to a boom. But, in the
majority of other countries, pro-
duction still lags considerably
behind pre-war years and is on
a low, crisis level. The abnorm-
ality of the postwar cycle es-
sentially consists in the follow-
ing: Q

The preceding cycle was _ in-
terrupted by the world war. War
interrupts the normal cyclic
movement of production by cre-
ating a demand for goods that
considerably surpasses the vol-
ume of production. In wartime
it is not the capitalist who seeks
a buyer, but on the contrary,
the buyers compete with each
other for the insufficient quan-
tities of goods available.

Another feature of war econ-
omy is the special character of
the use of materials required
* for the conduct of war. All
commodities may be divided in-
to two basic categories; means
of production, which serve the

further manufacture of com-
modities; and means of con-
sumption, which, apart from

luxury goods for the rich, serve
the reproduction of the labor

by

EUGENE
VARGA

noted
Soviet
economist

.

power of the workers. In normal
times, when both means of pro-
duction and means of consump-
tion have been fully used up,
they are returned into the pro-
cess of circulation of social
capital, the means of produc-
tion as constant capital (build-
ings, equipment, and so on), and
the means of consumption as
variable capital (capital used
for payment of wages).

In war production this is not
so. War materials are com-
pletely consumed by war; they
are not returned into the gen-
eral circulation of social capi-
tal either as constant or as
variable capital. This means

PACIFIC TRIBUNE — PAGE 10

that the modern economy of
capitalist countries tends toward
the absolute impoverishment of
the country. And this , tendency
is further strengthened by the

‘destruction wrought by enemy

action.

Indeed, all capitalist countries.
which fought in the war, with
the exception of the U.S. and
Canada, emerged from the war
greatly impoverished. But in
contrast to the European coun-

tries, the U.S. emerged even
richer than before. Her indus-
trial production for 1946 is 50

percent higher than 1938—on a
boom level.

e
EFORE the war the U.S., the
richest capitalist country,

could utilize only part of her
available productive forces, since
there was no market for a
larger volume of commodities.
Only the world war, with its un-
limited demand for commodi-
ties, made possible the utiliza-
tion of these productive forces
which never found a use in
peace-time. During the war

yr

American production more than
doubled, and as a result Amer-
ica could cover the _ require-
ments not only of the armed
forces but also of the civilian

population, with the exception
of houses, automobiles. and,
temporarily, certain not vitally

essential provisions.

anni
a The U.S. succeeded also in ac-

cumulating considerable wealth
in the form of newly constructed
factories and ships.

Of great importance, too, in
this connection, is the fact ‘that
the U.S. entered the war late,
and that American territory did
not suffer at all from military
operations. :

These differences in the effects
of the war on the U.S., and
likewise Canada, on the one
hand, and on the capitalist coun-

tries of Europe and the Far
East on the other hand, mean
that today, just as after the
First World War, capitalism is

not experiencing a uniform eco-_

nomic cycle. In the U.S. there
is a boom, while elsewhere
there is a gradual deterioration
to a low, crisis level. ;

But the American boom is
not normal, either. To a con-
siderable measure it is a spe-
cial product of the preceding

-period of war economy. Despite

the doubling of industrial pro-
duction, the population of the
U.S. could not. completely spend
their money: incomes on com-
modities, since a considerable
part of the production went for
war materials. AS a_ result,
enormous sums have accumu-
lated in the hands of the popu-
lation in the form of banknotes,
savings accounts and bank de-
posits.

The present boom is, then,
something abnormal, a sudden
release of sums of money that
has no precedent in its scale.

@

ND _ yet, despite the boom,

there are 2,500,000 unemploy-
ed in the U.S. There are 1,500,-
000 demobilized servicemen still
living on their. gratuities. The
volume of industrial production
in 1946 has shrunk by more than
one-third in
that of 1943. Real wages are
falling as a result of the rapid

'

SServes . of

comparison with ©

|

rise of prices (between July and
September the cost-of-living in-
dex jumped by 10 percent.) and
also as a result of the abolition
of overtime and Sunday work.
4 —Commodity reserves have be-
“gun to increase. According
to data of the department of
commerce, the commodity re-
factories and of
gross and retail trade rose in
August by one milliard dollars:
their total value is now 31 mil-
liards. (A milliard is one thous-
and million.) The department
states that this represents a
definite danger for further eco-
nomic development.
2 Stock exchange prices for
raw materials subject to
delivery declined considerably in
October.
3 Since May 1946 there has
been a sharp fall in the
prices of industrial shares. In
the period from the middle of

' May to the middle of September,

the total value of shares regis-
tered at the New York stock
exchange fell from 84 to 65 mil-
liard dollars. Experience shows
that such a fall in stock ex-
change prices takes place about
a year and a half before the
outbreak of a crisis. ;

All this shows that in the
near future—probably not later
than 1948, but possibly earlier— —
the beginning of the new eco-
nomic crisis in the United
States may be expected,

FRIDAY, JANUARY 10, 1947

*