Does Capitalist Production Have a Long Cycle? (pt 4)

The Great Depression of the 20th century

The Great Depression that began in 1929 and lasted until World War II holds a unique place in economic history.

“The Great Depression,” wrote bourgeois economist J. Bradford DeLong, “has central place in 20th century economic history.” He explained: “In its shadow, all other depressions are insignificant. Whether assessed by the relative shortfall of production from trend, by the duration of slack production, or by the product—depth times duration—of these two measures, the Great Depression is an order of magnitude larger than other depressions: it is off the scale. All other depressions and recessions are from an aggregate perspective (although not from the perspective of those left unemployed or bankrupt) little more than ripples on the tide of ongoing economic growth. The Great Depression cast the survival of the economic system, and the political order, into serious doubt.”

The economic crisis of 1929-33 though it was in some ways just another cyclical crisis of overproduction clearly involved other factors that converted a “normal” cyclical economic crisis into something quite different. What was it? In order to distinguish the crisis of 1929-33 from normal capitalist cyclical crises, I will call it the super-crisis.

The Depression was far from the only disaster of the first half of the 20th century. It was preceded by World War I, the bloodiest war in world history up to that time. According to Wikipedia, the total number killed as a result of World War I is estimated at between nine and 16 million. During World War II, the estimates for the total number of dead range, according to Wikipedia, from 50 million at the low end to more than 70 million at the high end, an order of magnitude greater than that of the preceding world war.

The Depression, therefore, only forms the centerpiece of the era that began in August 1914, when the World War I began in Europe with the guns of August, and ended in August 1945 with the dropping of atomic bombs by the United States on the Japanese cities of Hiroshima and Nagasaki. During these 31 years, the the entire capitalist “order” appeared to be hanging by a thread.

Three years after World I broke out, the Russian Revolution occurred, which brought the working class to power in the former Russian Empire. This revolution, the greatest revolution in world history up to the present, was to be the dominating event of the rest of the century.

But the Russian Revolution was not the only important event that occurred between August 1914 and August 1945. The 31 years from August 1914 to August 1945 saw the definite eclipse of the British Empire as the world’s leading power. In its place, there arose a far more powerful world empire centered on a former British colony, the United States.

The replacement of the British Empire and the lesser empires of France, Belgium and Japan by the U.S. empire was no peaceful affair. It took two world wars before American domination was definitely established over the capitalist world. (1) After that, it took the so-called cold war from 1945 to 1989—which became quite hot in Korea and Vietnam, causing millions of additional deaths—before U.S. imperialism was able to wear down the resistance of the Soviet Union and its East European allies.

The U.S. empire is still working on breaking the resistance of China, Vietnam, North Korea, Cuba, the resisting countries of Latin America, Syria and Iran to U.S. domination. The U.S. empire will not be, and by the very nature of the monopoly capitalism it is based on, cannot be, satisfied until every country on earth is stripped of any meaningful independence and reduced to a satellite or neo-colony.

The years between 1914 and 1945 also saw the rise and fall of European fascism. (2) Though it lasted only 12 years, the German fascist dictatorship of Adolf Hitler spread unprecedented destruction across Europe. In the USSR alone, at least 20 million people died. (3)

There was also the decision of the German government to kill every Jew it could get its hands on. It is important to understand that by “Jew” the Nazis did not mean the followers of the Jewish religion but rather the members of the alleged Jewish race. Among the “Jews” exterminated were Christian as well as atheist “Jews.” (4)

The Hitler tyranny proved a godsend for the leaders of American imperialism. (5) This was perhaps the only war in world history where the leaders of one side did not have to monstrously exaggerate the crimes of the other side. If anything, the leaders of the United States and Britain played down the extermination of the European Jews and the other crimes of the Nazis.

Economically, the years between 1914 and 1945 were marked by one economic disaster after another. First, there was the economic disaster on the European continent caused by World War I itself. In Germany, the economic crisis caused by the war and the consequent blockade far exceeded in scope any pre-World War I crisis of overproduction.

After the war ended, there was the disaster of hyperinflation in Germany and other central and East European countries. And just as the world economy seemed to be returning to normal, there came the super-crisis of 1929-33, followed by years of lingering Depression that lasted down to the beginning of World War II.

The normal process of expanded reproduction suspended

But it is the Depression that will form the central object of my investigation in this group of posts. For 15 years, the normal process of expanded capitalist reproduction in the most powerful capitalist country on earth—the United States—was in effect suspended. First by the super-crisis of 1929-33 and the depression that followed, and then by World War II itself. And interestingly enough, it was this very country that was least affected by the destruction of World War I—and was the only real winner in that war—that was most affected by depression. Why was this?

In its wake, it became almost an article of faith among many, perhaps most, Marxists of the era that normal capitalist expanded reproduction—capitalist economic prosperity—could never again resume. Either there would be the “prosperity” of war economy such as experienced in the United States during World War II, or Depression with a capital “D”—not the depressions of the pre-World War I kind—would reign.

Since World War I had been followed by the Depression, wouldn’t the much “greater” World War II be followed by an even greater Depression? If not right away, then surely after the process of postwar reconstruction had been completed. In the years after World War II, Marxists eagerly looked for signs of a “new 1929.” Every recession, even every sharp sell-off in the stock market, raised a wave of speculation that the Depression was returning.

But despite all these expectations, shared not only by Marxists eager for a socialist revolution—but fearfully by many bourgeois economists as well— capitalist expanded reproduction did resume its normal course shortly after the war. A great new period of capitalist prosperity set in, which in some ways resembled the period that followed the 1848 revolutions that I examined in last week’s post. Many bourgeois ideologues and economists proclaimed that the new era of economic prosperity had finally definitely “refuted” Marx.

Even many Marxists saw the post-World War II economic upswing as bringing Marxism into doubt. “Since 1945 there has been an period of unprecedented prosperity and growth within the capitalist world,” Kenneth J. Tarbuck wrote in the early 1970s, “which would seem to cast doubt on the Marxist theories of development and crisis.” (Introduction to “The Accumulation of Capital—An Anti-critique” by Rosa Luxemburg and “Imperialism and the Accumulation of Capital,” by Nikolai I. Bukharin, Monthly Review Press, 1972)

Tarbuck wasn’t the only Marxist who expressed such thoughts during the “great boom” that followed the 31 years between August 1914 and August 1945. (6)

Did the ‘Long Boom’ refute Marx?

It was Marx who had done what none of the bourgeois economists had been able to do. He actually explained the process of expanded capitalist reproduction. He stressed that the capitalist mode of production could exist only in this form of expanded reproduction. In volume II of “Capital,” Marx developed his famous diagrams of expanded reproduction, which indeed form the basis—if often unacknowledged—of all modern capitalist “growth theories.”

How exactly did the resumption of capitalist expanded reproduction that Marx considered normal and indeed inseparable from capitalism “cast doubt on Marxist theories of development”? (6) Wasn’t capitalism after 1945 behaving just as it was supposed to, according to volume II of “Capital” and indeed Marx’s other mature writings?

What really does cry out for an explanation is the near collapse of capitalist expanded reproduction between 1914 and 1945—especially during its centerpiece, the Great Depression of 1929-1940. This is the real question that in my opinion must be answered.

The industrial cycle

I have already shown that expanded capitalist reproduction cannot proceed smoothly year by year like it does in the volume II diagrams. Instead, inevitably expanded capitalist reproduction is and must be—once capitalism has reached a certain level of development—broken up into a series of industrial cycles. Each industrial cycle is crowned by a crisis of overproduction that momentarily disrupts the process of expanded reproduction. Each crisis marks the end of one industrial cycle and the beginning of the next industrial cycle.

However, since the overall process across the industrial cycles is one of expanded reproduction, each successive industrial cycle reaches a higher point than its predecessor before it too ends in a crisis.

I constructed an “ideal economic cycle” to show how the contradictions of capitalism in the course of the industrial cycle make inevitable a crisis that temporarily disrupts the process of expanded reproduction. However, it is precisely the crisis that makes possible a new cycle of expanded capitalist reproduction that reaches a higher level than its predecessor before it too ends in a crisis.

Would it be possible to modify our “ideal industrial cycle” and show why the particular industrial cycle of 1920-1929 did not end in a normal crisis, but rather what I call the super-crisis of 1929-33, which pretty much sank capitalist expanded reproduction altogether for the next 15 years? (7)

Let’s review some of the theories of the causes of the Great Depression that I have already touched on.

Perhaps the most superficial is Milton Friedman and Anna J. Schwartz’s claim that the Depression was caused by the incredibly bad monetary policy of the U.S. Federal Reserve System that allowed—or in some versions even caused—the U.S. “money supply” to contract by one-third between 1928 and 1933. The mistakes of the U.S. Federal Reserve System then supposedly sank the otherwise “very healthy and stable U.S. economy” of the late 1920s. Superficial though this theory is, it has dominated university economic departments for a generation.

Another theory of the Depression was proposed by the bourgeois economist Joseph Schumpeter. He explained the Depression as at least in part, due to a mutually reinforcing downturn in the three economic cycles that according to Schumpeter characterize capitalist production. According to this theory, these economic cycles are the industrial cycle, called by Schumpeter the Juglar cycle; the three-year inventory or “Kitchen cycle”; and the alleged 50- to 60-year long cycle, called by Schumpeter and some other economists the Kondratiev cycle.

A variation of this theory would be to explain the super-crisis in terms of Ernest Mandel’s theory of semi-cycles, which I examined several weeks ago. Perhaps the boom of the 1920s preceding the outbreak of the crisis of 1929 had led to such a growth in the organic composition of capital, and consequently so lowered the rate of profit, that capitalist investment collapsed like it had never done before. If this theory is correct, the result of this investment collapse was what we now call the Depression.

I agree that capitalist history, at least since the middle of of the 19th century, has seen successive periods of faster and slower capitalist expanded reproduction. For example, capitalist expanded reproduction sputtered quite badly during the 1830s and 1840s, the formative years of Marx and Engels, making it appear that the whole process was grinding to a halt.

It then suddenly accelerated during the 1850s sinking the hopes of Marx and Engels for a socialist revolution within their lifetimes. Perhaps it began to lose some its momentum during the 1860s and slowed much more after the crash of 1873. It picked up again around 1896, gaining astounding momentum around the turn of the 20th century.

It perhaps began to slow a bit after the brief but violent crisis of 1907. Then came, World War I with its nine to 16 million dead, the postwar economic chaos accompanied by revolutions—including the revolution of October 1917 in Russia—and counterrevolutions.

And just as the process of expanded capitalist reproduction seemed to resume its normal course, it collapsed into the super-crisis of 1929-33. The super-crisis and its aftermath, which we now call the Depression, in turn led straight to World War II.

Since 1945, we can also trace several long-term fluctuations in the pace of capitalist economic growth. Capitalist expanded reproduction proceeded lustily from the late 1940s until about 1967-68. It then went through a period of extreme instability and crisis until around the end of 1982. Between 1983 and 2007, it entered a new period of relative stabilization, though it did not regain its pre-1968 momentum. Then came the crash of 2007-09. What will follow this crash is, of course, as yet unknown.

But so far the Depression remains unique. Is a similar collapse lurking in the future, perhaps the very near future? This question was raised by the panic of last autumn and winter and resulting sharp depression in world industrial production and world trade. There is a general feeling that this is no normal “post-World War II” recession and certainly no run-of-the-mill stock market sell off. Could we possibly be approaching an era like that between August 1914 and August 1945, where the whole process of expanded capitalist reproduction will be disrupted for decades?

Or, is the whole process of capitalist expanded reproduction finally at the end its road? Perhaps this time—if not right away, considering the current state of the world’s workers’ movement—the crisis of capitalist expanded reproduction will lead to the conquest of political power by the working class in all capitalist countries such as generations of Marxists have dreamed of. Or will capitalist expanded reproduction suddenly surge forward once again leading to yet another era of prolonged capitalist prosperity?

But can we even begin to understand what is happening today if we don’t understand the 31-year period between August 1914 and August 1945, and especially its centerpiece the Depression of 1929-40? Is there any more important question than this in crisis theory? No crisis theory can be considered adequate, in my opinion, if can’t explain the Depression. That is why I am devoting a whole series of posts to examining this one past episode—but no ordinary episode—in economic history.

So can a Kondratiev-like long cycle or a Mandelian semi-cycle explain the Depression? The problem is that the Depression was of such a magnitude, greater than any other depression, that it is hard to see how a long cycle or semi-cycle alone can explain it. Don’t such theories at most predict a slowdown in growth for several decades and not the wholesale economic collapse that we saw between 1929-40? Let’s examine some other proposals that have been made.

I have already examined the theory of the Depression advanced by John Maynard Keynes. According to his theory, capitalism on the eve of the Depression had reached such a high level of development that scarcity itself—the very basis of economic value according to the marginalists—was beginning to disappear. This led to a collapse in the rate of profit, which caused investment to collapse leading to the Depression.

I examined Keynes’s theory in some detail in my section of posts dealing with his ideas, so I will not deal with it any further here.

There is indeed another theory that has been put forward, the “stagnation theory” of the Monthly Review school, which is associated with the work of the American Marxist economist Paul Sweezy.

Paul Sweezy’s theory of stagnation

Paul Sweezy came to the conclusion through many years of research and study that while economic growth—expanded capitalist reproduction—was the natural state of pre-monopoly competitive industrial capitalism—monopoly capitalism, in contrast, is characterized by a normal condition of economic stagnation.

The question then becomes not what caused the Depression—Depression is actually the normal condition of monopoly capitalism—but why economic growth has generally continued—outside of the Depression—under monopoly capitalism at all?

Sweezy, who was an economics major at Harvard during the early 1930s—while the super-crisis was raging—received a thoroughgoing training in so-called neo-classical marginalist economics. (8) Disgusted by the gap between the economic theory he was learning and what was happening in the real world beyond Harvard Yard, he was then greatly influenced by John Maynard Keynes.

But unlike most young U.S. economists of the time, he didn’t confine himself to Keynes. Radicalized by the Depression, he also became a student of Marx and came to consider himself a Marxist. Therefore, Sweezy was influenced by three quite different schools of thought: traditional marginalism, Keynes’s modified marginalism, and Marxism. In addition, he was influenced to a certain extent by his friend at Harvard Joseph Schumpeter, though Sweezy and Schumpeter were at the opposite ends of the political spectrum.

The real question in my mind is whether these quite different schools of economic thought can be integrated, or whether they are—especially the Marxist relative to both traditional marginalism and Keynes’s modified marginalism—mutually exclusive. In my opinion, the latter is largely the case. Therefore, Sweezy’s Monthly Review school—despite some valuable insights—is inevitably riven by contradictions reflecting its very mixed parentage.

During the 1930s, Sweezy like the left Keynesians, devoted much of his attention to the growing tendency toward the centralization of capital and the growth of monopoly. Sweezy noted that the question of monopoly was virtually ignored by Keynes himself.

The left Keynesian economics of the 1930s modified traditional marginalist theory, which supposedly described the operation of a capitalist economy under conditions of “perfect competition,” to take account of a capitalist economy with a “considerable degree of monopoly.” (9)

In his book “Monopoly Capital,” which Sweezy co-authored with his co-thinker Paul Baran, Sweezy developed his theory of monopoly capitalist stagnation. Baran and Sweezy held that the laws of motion of capital analyzed by Marx in “Capital” apply to an economy based on free competition. They held that quite different laws of motion apply once free competition gives way to the growing power of monopoly.

“The Marxist analysis,” Baran and Sweezy wrote, “still rests in the final analysis on an assumption of a competitive capitalist economy.” They went on to observe: “[N]either Lenin nor any of his followers attempted to explore the consequences of the predominance of monopoly for the working principles and ‘laws of motion’ of the underlying capitalist economy. There Marx’s Capital continued to reign supreme.” (10)

Under free competition, the natural state of the capitalist economy is growth and full employment. (11) In contrast, monopoly capitalism is characterized by a natural state of the economy in stagnation. The greater the degree of monopoly, according to Baran and Sweezy, the stronger will be the tendency towards stagnation.

As the centralization of capital proceeds, more and more branches of industry become dominated by a few gigantic corporations. Price competition dies out as the corporations find it in their interests to divide up the market rather than compete with one another by cutting prices, like was the case under free competition. Monopoly prices swell the mass of profit appropriated by these monopoly corporations.

But this creates another problem. What do the monopoly corporations do with this swollen mass of profit? (12)

Under free competition, the surplus value is consumed—or “absorbed,” using the terminology of Baran, Sweezy and the Monthly Review school—in general through either unproductive capitalist consumption or productive capitalist consumption—the process described by Marx in volume II of “Capital.” By the productive consumption of surplus value, Marx meant the transformation of surplus value into new capital.

But under monopoly capitalism, according to the Monthly Review school, this process is blocked in two ways. First, the swollen mass of monopoly profits is so great that the capitalists can consume only a small part of it in personal consumption no matter how extravagant their standard of living is. Second, the monopoly profits cannot be reinvested, because this would cause the collapse of the monopoly profits, in effect killing the monopolistic goose that lays the golden eggs. (13)

In effect, the monopolistic corporations become gigantic sinks of purchasing power leading to, unless some outside force intervenes, economic stagnation.

Baran and Sweezy claimed that Marx’s famous tendency of the rate of profit to fall is no longer valid under monopoly capitalism. Instead, they saw a tendency for what they called “the surplus” to rise. However, whether or not “the surplus” actually leads to a higher actual rate and mass of profit depends on the extent to which “the surplus” is “absorbed.” If “the surplus” is not absorbed, the rate and mass of profit will collapse as the economy descends into stagnation.

While Ernest Mandel saw—in my opinion correctly—only the redistribution of surplus value in favor of the branches of capitalist industry dominated by monopoly at the expense of other branches where “free competition” still reigned, Baran and Sweezy apparently saw an actual increase in the mass of surplus value, or as they preferred to call it, “the surplus” arising from the monopoly pricing power of the corporations.

Perhaps Baran and Sweezy imagined that the capitalists sold consumer goods to the workers at monopoly prices, thereby increasing the rate of surplus value through the process of circulation.

Let’s assume the monopolies are so powerful that they can raise prices as a whole above the value of commodities. Would this be sustainable in the long run? First, if the prices of wage goods rose above their values—or more strictly their prices of production—wouldn’t this sooner or later be reflected in higher money wages? If this happened, there would be no actual increase in the mass of surplus value at all.

In addition, if prices in general rise above the values of commodities, which is apparently what Baran and Sweezy imagined, wouldn’t this tend to reduce gold production, leading to crises that would in the end lower prices back to their values once again? Such a process would indeed bring about a tendency for crises to worsen under monopoly capitalism.

Was this factor at work in the years leading up to the Great Depression? Since neither Sweezy nor any other member of the Monthly Review school to my knowledge has ever developed his line of reasoning, I cannot examine this here, though perhaps we should keep it mind in the unfolding course of our investigation.

Perhaps because of his heavy exposure to bourgeois economics in both traditional marginalist and Keynesian forms during his formative period, Sweezy often seemed to have forgotten that surplus value does not arise in circulation—as Keynes held—but must be produced in the sphere of production. Paul Mattick, at the other extreme, completely overlooked the problem of realizing surplus value, while Sweezy as a rule neglected the problems of actually producing of surplus value.

If the Baran-Sweezy theory of monopoly capitalist stagnation is correct, this raises another question. Why didn’t the Depression occur much earlier than it did? Monopolies were already a very powerful force by the turn of of 20th century, but the Depression didn’t occur for another generation. Here we see Schumpeter’s influence. According to Sweezy, stagnation was staved off by technological innovations that opened up huge fields for absorbing “the surplus.”

Like Schumpeter, Sweezy saw great technological innovations as periodically leading to periods of capitalist growth and prosperity. Unlike Schumpeter, however, he didn’t see anything cyclical about these periodic waves of innovation-driven investment. He saw them as accidental incursions on the operation of the monopoly capitalist economy from the sphere of science and technology.

At the beginning of the monopoly capitalist era, the railroad industry was able to absorb “the surplus” that was being generated by the rising power of the monopolies. After the crisis of 1907, this process of “railroadization,” as Sweezy called it, began to slow down. Indeed, though the 1907 crisis was not followed by a prolonged depression, the rate of economic growth in the U.S. economy at any rate, never returned to the level that prevailed before that crisis. (14) A definite tendency toward a higher level unemployment appeared that continued until the “war prosperity” of World War I.

Sweezy explained the slowing down of growth and the resulting rise in unemployment by a dramatic decline in railroad construction. Railroads were no longer fully “absorbing the surplus” and symptoms of stagnation began to appear in the form of lower economic growth and higher unemployment.

How do we know that the slowdown in railroad construction didn’t simply reflect the general decline in economic growth that may of have been caused by other factors?

According to Sweezy, after World War I a new technology took the place of the railroad—the automobile. What Sweezy described as the first wave of automobilization occurred. Not only did the rapidly developing automobile industry provide a huge field for investment, the automobile led to a rise of a whole range of secondary industries.

For example, auto parts, tires, rubber, gasoline stations, and the building of a system of roads and highways. Eventually, “automobilizaton” made the whole phenomena of “suburbanization” possible. According to Baran and Sweezy, huge amounts of “surplus” were absorbed by this process during the 1920s staving off stagnation.

However, by the end of the 1920s “the surplus” generated by the ever-more-powerful monopolies had become so huge that not even the automobilization process—which had far from run its course, as was proven after World War II—could “absorb” it. The capitalist economy abruptly collapsed into its natural state of stagnation—the Depression. Only the World War II war economy, which was able to fully “absorb the surplus” finally ended the Depression.

Two schools of Marxist thought on the Depression’s orgins

Among Marxists, we generally see two schools of thought on the Depression’s origins. One school implies that there wasn’t enough surplus value produced to maintain the level of investment necessary to avoid the Depression. If the capitalists had been more successful in driving up the rate of surplus value, the Depression would have been avoided. Paul Mattick and the Ernest Mandel of “Long Waves” are examples of this viewpoint.

Secondly, we have the view of Baran and Sweezy, who claimed that it was precisely the huge mass of surplus value—or “surplus”—that doomed the U.S. economy to collapse at the end of the 1920s. If the trade unions—which were very weak in the U.S. during the 1920—had won higher wages and thus reduced “the surplus,” the Depression would have been avoided.

It is hard to reconcile these two views, but James Devine has tried. He has argued that if “too much” surplus value is produced, realization problems will cause stagnation—as the Monthly Review school holds—and if not enough surplus value is produced, stagnation will result because of a low rate of profit—as the Ernest Mandel of “Long Waves” argued.

A just-right rate of surplus value is therefore necessary to produce capitalist growth and prosperity. If the rate of surplus value is either above or below this level, the economy will suffer stagnation. Devine believes, if I understand him correctly, that the rate of surplus value was too high in the period preceding the Depression to allow the realization of the values of commodities to proceed properly. The workers during the 1920s were simply too exploited to buy back enough of the commodities they were producing to prevent the economic collapse.

This explanation is also popular among many bourgeois liberal pro-New Deal historians of the Depression as well as among trade unionists.

The theory that the Depression was caused by an insufficient rate of surplus value leading to a low rate of profit, which caused investment to collapse, is therefore definitely the odd theory out.

Another possibility

But there is another possibility. I have argued that in order for commodities to realize their value, including the surplus value embodied in them, there must be a sufficient production of money material. The role of gold in the realization of value and surplus value was, as we saw, played down by Mandel—though unlike Paul Mattick, Mandel was aware that the realization of surplus value was a problem—and ignored completely by Baran and Sweezy.

Could the answer to the riddle of the Depression lie in this direction? Fairly accurate figures for world gold production from the mid-19th century onward do exist, so it is possible to explore this line of inquiry empirically and not just theoretically. Were there any unusual movements in gold production around the time of or preceding the Depression, and if so, what would have caused them. I will examine these questions in my next post.


1 Does U.S. domination in the post-1945 world represent a realization of Kautsky’s theory of “super-imperialism” that Lenin criticized? First, Kautsky speculated during the carnage of World War I that the capitalists might agree in the future to peacefully divide up the world. Nothing like that happened. Instead, America imposed its domination through force of arms during the two world wars and lesser conflicts. To this day, the United States keeps large forces in Germany and Japan. During the “cold war,” the excuse was that the United States had to maintain these forces to “protect” these countries from a Soviet attack. But who is the United States protecting these countries from today?

In reality, the American world empire is held together in the final analysis by a combination of force, economic alliances and outright bribes, just like earlier empires were. This combination of carrots and sticks has prevented any serious rebellion against American domination in Japan and Europe—Eastern Europe from 1989—since 1945. When what was left of Yugoslavia in 1990s did resist the imposition of American domination, it was militarily attacked by the United States through the so-called NATO “alliance.” The difference between American domination of Western Europe and Japan and the rest of the world is that in the case of the satellite imperialist powers of Western Europe, Japan, Canada, Australia, and New Zealand, there are more carrots. But the presence of huge military forces and bases in and near these countries means the stick is also available if it should become necessary.

Second, it would be a mistake to assume that American domination and the American empire will necessarily endure as long as capitalism survives. British domination lasted from Britain’s victory over France in 1815 until 1914, a period longer than American domination has lasted so far. But it eventually came to an end. In fact, the very domination of the United States has unleashed forces that have led to the decline of the domestic U.S. economy much like Britain’s domination led to the decline of the British economy. If this continues, it is only a matter of time before American domination over the capitalist world collapses. I will have a lot more to say about this in later posts.

2 Though Franco’s dictatorship in Spain, a product of the fascist era and certified member of the “free world” after World War II, lasted until the Spanish dictator finally died in bed in 1975. The dictatorship in neighboring Portugal, which was another product of the inter-war fascist era, also enjoyed the protection of the American world empire. It lingered on until it was finally overthrown by the Portuguese revolution of 1974. And during the 1960s, a new vicious U.S.-backed military dictatorship was established in Greece, the very “birthplace of democracy.”

3 Twenty million dead was the figure given during the Khrushchev era in the Soviet Union. Under Gorbachev, it was claimed that 27 million people died during the war. It is possible this latter figure is inflated because the Gorbachev regime had a motive to exaggerate a bit in order to justify its policy of unconditional surrender to the demands of American imperialism. The overall picture, however, is not in doubt.

4 This is an important point. Things are no different for Arabs in this regard under Zionist rule in Palestine today. The ancient Jewish kings of Palestine of the Hasomenan dynasty are often criticized by modern liberal bourgeois historians for giving the inhabitants of ancient Palestine the choice of either converting to Judaism or being expelled.

This policy indeed violates our modern democratic principle of freedom of religion. The current Zionist rulers of Palestine, however, defining the categories of “Jew” and “non-Jew” in purely racial terms, simply give the natives of modern Palestine the choice of expulsion. Unlike their ancient ancestors, modern Palestinian Arabs therefore cannot escape their fate by converting to the the “true Jewish religion” any more than Jews in Nazi Germany could escape their fate by converting to the “true Christian” religion. In both cases, it’s not about religion, its about “race,” even if the “races” in both cases have virtually no biological basis.

5 The uniquely vicious nature of the German fascist dictatorship made it possible for the government of Franklin Roosevelt—who was aiming for a universal U.S. world empire—to get world democratic public opinion on the side of American imperialism in the name of fighting German Nazism. This made it possible not only for democrats but also members of the Communist parties, not to mention the Social Democratic parties, to enthusiastically participate in the imperialist war believing that they were fighting to free the world from fascism when in reality they were fighting for and dying for the American empire.

6 These sorts of arguments are heard during every “long wave of capitalist expansion.” Ironically, the post-World War II “long wave of expansion” was coming to an end around the time that Tarbuck wrote these words.

7 During the last five years of this period, expanded reproduction was disrupted by World War II rather than by the Depression. But the second World War within a generation largely grew out of the Depression itself.

8 I say so-called “neo-classical,” because while the marginalist economists claimed to be continuing in the tradition of the classical school of Adam Smith and David Ricardo, their theories were actually the negation of everything that was scientific in classical bourgeois political economy.

9 This is a problem right here. The theory of monopolistic competition is an extension of marginalist theory. In my opinion, in order to analyze monopoly capitalism correctly, you should start with Marx, not the marginalists.

10 This raises an interesting question. If the “laws of motion” of the economy have been changed so much by the growth of monopoly—is it even correct to describe the present-day economy as a capitalist economy?

11 Sweezy seems to have been misled by his marginalist mis-education in this regard. In reality, even the period of freely competitive industrial capitalism was marked by prolonged periods of mass unemployment and excess capacity. For example, there was the terrible depression and mass unemployment that followed the crisis of 1837. Marx makes clear that there wasn’t anything like “full capacity utilization” in his time, and criticized Ricardo for assuming “full capacity utilization” for his time.

12 This is certainly a problem for those corporations that make monopoly profits. For example, the profit-swollen Internet search engine monopoly Google has announced a plan to develop an Internet-oriented new operating system that would challenge Microsoft’s Windows operating system monopoly.

Microsoft, for its part, has announced a new search engine to challenge Google’s monopoly. The Intel microchip monopoly, having all but eliminated competition in its main market, is desperately looking for other markets to invade. If these monopolies simply stick to the markets that they already dominate, they will be obliged to reinvest their profits increasingly at the rate of interest, not the rate of profit. Over time, this leads to a steady reduction in the rate of profit on their total capital. This is why the division of the markets among monopolistic corporations is not stable but at most only a truce between wars.

13 This would not be a problem if the market grew fast enough. The problem is that the market doesn’t, for reasons that I have examined in previous posts. Indeed, if a situation arises in which a few or even one corporation can meet all the demand, capital will inevitably be centralized in one or at most a few corporations pretty quickly. Therefore, aren’t monopolies as much the result of capitalist economic stagnation as they are the cause of it? This a question that I will examine in coming posts.

14 It seems that the boom of 1905-07 that immediately preceded the crisis of 1907 was the greatest boom in U.S. history. According to a table of U.S. unemployment reproduced in “Monopoly Capital,” the U.S. rate of unemployment fell to 0.8 percent, below the 1.2 percent level for 1944, the lowest rate reached during the World War II war economy! The rate of unemployment has not even approached such levels for many decades in the United States. The lowest level for the post-World War II period was 2.5 percent in 1953. For comparison, the official level of unemployment is currently at 9.5 percent.

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