Germany and the U.S. Empire (Pt. 2)

As the Soviet army swept westward toward Germany in 1945 and the American and British armies advanced eastward into Germany, soldiers in these armies were in for a shock. They would notice a peculiar smell in the air and then would arrive at one of the Nazi death camps.

These soldiers had been subjected to propaganda designed to portray the German enemy in the worst possible terms. Such wartime propaganda often takes more than a few liberties with the truth. In the case of the Soviet soldiers, they had plenty of experience with “the fascists,” as they called them, and their unspeakable crimes against the peoples of the occupied territories in the Soviet Union. These battle-hardened Soviet soldiers would expect the worst from the Germans.

But nothing could prepare them for what they found in the Nazi death camps. I will not attempt to describe it here. Today it is possible to watch videos of World War II Nazi death camps that are stored in digital form on the Internet. I would, however, advise anybody who is curious to watch these videos on an empty stomach.

A common reaction among the U.S. and British soldiers after they observed—and smelled—the horrors of the death camps was to tell the interviewers that now they knew what they were fighting for. The Soviet soldiers already knew what they were fighting for, but even they were shocked.

The reaction of one British soldier in one of the videos I streamed in preparation for this post unwittingly shed light on what had really happened. Interviewed many years after the war, he expressed amazement that the Germans could do this to “fellow Europeans” who simply practiced a “different faith.” A German Nazi would have explained that this was not true. The people murdered in the camps were not, our Nazi would have explained, Europeans at all. Nor were they murdered because they had a different faith. The death camp victims had to be liquidated because they were a different race.

According to the Nazis, the “great race” of white European Nordic Aryans were merely defending themselves against the racial “aggression” of the Jewish people and other “Asiatic” races such as the Roma—the so-called gypsies. In reality, our Nazi, assuming he was well educated in the “racial science” taught in all the educational institutions of the Third Reich, would explain that the Jews were a bastard Asiatic race mixed with “Negroid” elements. (1) They had come to Europe to destroy the Nordic white Aryan race, who were the only creative race in the world and the hope of all humankind. Certainly, the Nazi would explain, a British soldier of “Nordic Germanic Aryan stock” should understand this in light of their own rich struggle against other races throughout its vast empire.

For 12 years, this lesson that the Jews, appearances to the contrary, were not white Europeans, was driven into the head of every German through the educational system from elementary school right through the universities, on the radio, in “educational” newsreels shown in movie theaters, as well through the various branches of Germany’s boy and girl scout movement—the “Hitler Youth.”

Anybody who wanted to challenge the Nazi “racial science” had no access to any media either printed, motion picture or radio. They would have to settle for word of mouth or illegally reproduced pamphlets. And if you were caught, you ran the risk being thrown into a concentration camp yourself or even being legally executed. (2)

But what about before 1933, when Hitler came to power? Between 1918 and 1933, Germany was a (bourgeois) democracy, and before 1914 the existence of a large well-organized workers’ movement made it possible to legally oppose racist and anti-semitic ideas.

However, in the Germany of the Kaiser virtually all bourgeois parties accepted racism and “antisemitism.” Antisemitism was the doctrine that the Jews were a separate non-European race that should leave Europe or at best should be treated as “alien” residents with restricted rights. This was true not only in Germany but throughout Europe and the United States as well. In those years, with a few individual exceptions, it was only Marxists who opposed racism, including antisemitism. Both church—and synagogue for that matter—insisted that Jews were the people of Israel who had 2,000 years before come from the land of Israel-Palestine to live in Europe. (3)

Most of Germany’s Jews were, however, members of the reform movement, which held in all matters of nationality that the German Jews were Germans. The Christian church had claimed for centuries that the reason the Jews were forced to leave their ancient homeland was because they had rejected Jesus Christ, who was God Himself, and then forced the Roman authorities to kill him. The “exile” of the Jews was “proof” of the truth of the Christian religion.

By the early 20th century, the influence of religion in Germany was in sharp decline among educated people and members of the German workers’ movement. Indeed, it was in Germany that modern Bible criticism exposed the Gospel stories, the basis of the claims that the Jews murdered Christ, as myths and not real history.

However, the bourgeois parties needed to maintain middle-class support in their struggle against the workers’ movement. As part of this struggle, they did everything they could to keep “Christian belief” alive—as they still do today. Among more educated people in Germany—as well as other European countries and the United States—the new race-based antisemitism that had grown up since the economic crash of 1873 was gaining ground.

Therefore, unlike much of the German working class trained in the Marxist ideas of the German Social Democratic Party and its associated organizations, the German middle classes were much more receptive to anti-Jewish agitation. The less educated were still under the influence of the Christian legends of the Jews’ murder of Christ, while the more educated members of the middle class were more impressed by the new “scientific racism.”

The “scientific racists,” who claimed to base their ideas on Charles Darwin’s theory of evolution through natural selection, countered Marxist arguments about the class struggle as the driving force of history by claiming that it was the struggle of different “races”—not classes—that drove history. Hitler’s ideas, therefore, were not unusual among the ruling classes and middle classes in Germany, other European countries, and the United States. On the contrary, Hitler’s ideas were the “conventional wisdom.” Hitler and his Nazis differed from the “everyday” racists only on how far they were prepared to take their ideas within Europe itself.

For the sake of argument, let’s assume that the European Jews were a different “race” descended from Middle Eastern people who immigrated to Europe several thousand years ago. And let’s assume that these early Jewish immigrants had some “Negro” blood, which is clearly the case with many of the Arab natives of Palestine—the supposed real homeland of the European Jews, who were forced to take refuge in Europe after Rome’s wars against the Jews of Palestine in the first and second centuries. Would the Nazi horrors perhaps then be at least somewhat justified, which is the unstated assumption of the British soldier’s comments?

Like Germany, British society was thoroughly saturated with racism. This racism, including antisemitism, was expressed across the entire bourgeois political spectrum, including at times by a man we have met often in this blog, John Maynard Keynes. And Britain’s wartime prime minister was the thoroughly racist and antisemitic Winston Churchill.

As I have explained in earlier posts, the holocaust against the Jews and other European peoples carried out by Nazi Germany meant that the horrors the European colonial powers—including Britain, France, Belgium as well as Germany and the United States—perpetrated against their colonial slaves finally came home to Europe itself. Today, the crimes being committed by “the Empire,” which is dominated by the United States but which present-day Germany is a subordinate though important part, is again coming home to Europe, if in a somewhat different form. Since 2001, the United States and its NATO satellites including Germany have invaded and bombed Afghanistan, invaded and destroyed the government of Iraq, bombed Libya in order to destroy its government, and waged a dirty war against Syria in an attempt to destroy its government while ripping the southern part of Sudan away from the rest of that country. And that is only the beginning of the list.

Not surprisingly, these wars waged by the Empire, combined with the “underdevelopment”—what a bloodless expression—that have been imposed on these nations are leading to a flow of people from Southwest Asian and African countries to the most prosperous countries of Europe. Most of the refugees want to settle in Germany because it is the most economically successful country in Europe with a well-developed social welfare system. The great majority of these people are Muslims. Whether the ancestors of European Jews came from the “Middle East” several thousand years ago or not, the current wave of refugees consists of people from Southwest Asia and North Africa, and some of them even have, horror of horrors, “negroid” blood. Many in Germany have welcomed these people, particularly those who have studied and learned from Germany’s own racist colonial and Nazi past. Some have not.

Hitler and the original Nazis did not attack Muslim people. When Hitler came to power in 1933, only about 3,000 Muslims lived in Germany. During World War II, the Hitler government found it convenient to champion the Islamic peoples against the British Empire and the Zionists in Palestine, who even then were waging a war of colonial conquest against the native Palestinian Arabs.

Present-day Germany has a significant Muslim population much larger than the Jewish population was in 1933. Today, the entire German neo-Nazi movement, just like other movements of the far right in the other imperialist countries, are putting Islamophobia at the center of their agitation. The German and other European Islamophobes claim that Muslims are attempting to impose Islam and Sharia law on Europe and the United States. According to the arguments of today’s racists in Europe and North America, Muslims are attempting to convert the “Christian”—the more “moderate” say “Judeo-Christian”—white society of Europe and the United States to a “brown” Islamic one.

And as was the case in Germany before 1933 as regards anti-antisemitism, it isn’t only the neo-Nazis who engage in Islamophobia. If Islamophobia were confined to the ultra-right neo-fascist fringe, it wouldn’t be nearly as dangerous as it is. Politicians much closer to the bourgeois political “center” also play the same game, just like their predecessors of a century ago were doing in regards to antisemitism. Today, Germany’s neo-Nazi far right is actually weaker than is the case with the neo-fascist far right of other European countries, which has been growing in recent years due to the prolonged European depression.

This may reflect the fact that Germany’s greater prosperity leaves less room for far-right extremism at the current time. But it also may reflect the fact that most present-day Germans are genuinely horrified by the behavior of their grandparents and great-grandparents in the days of the Third Reich that left Germany in both physical and moral ruins.

The same thing cannot be said of the other European German state, Austria, where the far-right “Freedom Party” won more than 30 percent of the vote in recent Vienna elections. This party was founded after World War II to provide a political home for “former” Nazis. As in Germany, the Nazi Party proper is illegal in Austria. Not surprisingly, members of the Freedom Party have over the years been anti-semitic. But today, the party emphasizes Islamophobia.

And let’s not forget the United States. The most popular Republican candidate among the Republican electorate Donald Trump is a strongly Islamophobic demagogue and, of course, he is a strong supporter of Israel, though his prime target is Latino immigrants. Many other U.S. politicians play the same game. Mainstream media shows like “Homeland” feature blond heroic CIA agents fighting evil Islamic terrorists who are plotting to destroy American “democracy” and replace it with Sharia Law.

In order to avoid the horrors of the past, perhaps in a slightly different form—with a new holocaust targeting primarily Muslims instead of Jews—we have to learn from the past. The Third Reich arose out of the basic contradictions of capitalism that I have examined throughout this blog and the class struggles between the capitalists and the working class that arise therefrom. The basic contradictions of capitalism, including between capitalism’s ability to produce more commodities than it can sell at profitable prices, led to a military collision of the German and U.S. imperialists twice during the first half of the 20th century.

Economic forces that set the United States and Germany on a collision course

By the turn of the 20th century, it was only a matter of time before the old European international order—the so-called “Concert of Europe,” led by Great Britain—collapsed. During the last third of the 19th century, Africa and Asia had been divided up among a handful of colonial powers such as Britain and France as well as Belgium (which enslaved the Congo) and Holland (which held Indonesia in chains). As the 19th century drew to a close, the newer capitalist countries such as the United States, Germany, and Japan were getting into the colonizing act. Leaving aside the virtually uninhabitable areas of our planet—like Antarctica—the world was now fully divided up between the imperialist states.

But the division of the world did not reflect the rapidly changing economic balance of power among the capitalist countries. The two most dynamic powers, Germany and the United States, had relatively small colonial empires. The “Concert of Europe” reflected the relative economic balance of power in 1815 at the end of the world war that followed the French Revolution. It did not reflect the very different relative economic strengths of capitalist powers in the world of 1900. A new division of the spoils was inevitable. By the turn of the 20th century, the United States and Germany were on a collision course. Out of this collision was to come first the Third Reich and then the U.S. world empire. This is the world we live in today.

The events that were to lead to the great collision between Germany and the United States can be traced back to one winter day in 1848 in the foothills of California’s Sierra Nevada mountain range. (4) In 1848, California was still a colony of the U.S. It had become a U.S. colony as a result of an uprising of white settlers against the Mexican government and by the war waged against Mexico by the pro-slavery U.S. Democratic President James Polk. California was not to become a U.S. state until 1850.

Gold discovered

On January 24, 1848, in Coloma, California, in the eastern foothills of the Sierra Nevada mountain range, one James W. Marshall noticed a yellowish substance in river sludge dug up by a water mill on the property of his boss—a certain John Sutter. Could the yellowish substance be gold? Since the first English white settlers had arrived in what was to become the United States at the beginning of the 17th century, U.S. settlers had dreamed of discovering gold—money material—as they pressed ever westward from the East Coast toward the West Coast. But so far they had been largely disappointed. North America was extremely rich in agricultural lands and had many minerals, but it seemed that unlike parts of South America it was not particularly rich in gold.

But that was about to change. Yes, the yellowish substance in the river sludge was gold! Unlike other commodities, it didn’t have to find a buyer and be exchanged for money. It was already money and could be sent to a U.S. government mint for coining into official U.S. currency. Or it could be used directly as money in the form of bullion or bags of gold dust, which for a while circulated as currency in California. Not only what was soon to be the “golden state” but the entire world was set on a new course.

Over the next quarter century, both the United States and Germany were to be thoroughly transformed into powerful industrial countries. In 1848, the United States was still an agricultural country with a weak central government headquartered in Washington, D.C. The U.S. was dominated by white settlers of European origin who were driving westward in search of agricultural and mineral-bearings lands.

There were four modes of production on the North American continent at that time. One was the primary communist mode of production of the Native Nations whose ancestors had lived in North America since before the end of the last ice age more than 10,000 years ago. The Native nations were being ruthlessly driven into reservations or killed outright in the Native American genocide by successive waves of European white settlers.

The second mode of production was the young capitalist economy dominated by wage labor taking shape along the East Coast and most developed in the New England states of the northeastern United States. The third mode of production, dominating the southern U.S., was modern commodity slavery. Unlike ancient slavery, which was multi-racial, “modern slavery” was based on the enslavement of people of African descent. If a slave escaped, his or her black skin would give the escaped slave away. Because of this, modern slavery and racism were inseparable.

Most white Americans were engaged in agricultural production increasingly for the world market. They owned their own land—stolen from the Native nations—and other means of production and at most hired wage labor only occasionally. Most of the labor on their farms was performed by themselves and members of their families. Both these working farmers and the southern slave owners were eager to expand their respective modes of production westward from the Atlantic coast in the East toward the Pacific coast in the West.

The southern slave owners wanted to expand southwestward toward Latin America because these regions possessed the subtropical and tropical climates that were necessary for their mode of production, centered on raising cotton. Cotton required a longer growing season than was available in the northern United States.

The slave owners’ mode of production was extremely expansionary in the geographical sense because being based on slave labor it wore out not only the bodies of the enslaved Africans but the fertility of the land. In addition, the slaveholders needed more slave states to balance the rising number of seats held by the growing number of non-slave states in the U.S. Congress and in the electoral college that chooses the U.S. president.

In foreign policy, the slave owners’ drive south and southwest led to war with Mexico. During the 1850s, the pro-slavery Democratic administrations of Franklin Pierce and James Buchanan plotted to annex the island of Cuba and bring it into the union as a slave state. In economic policy, the slave owners favored low tariffs because they had little interest in building up a domestic U.S. manufacturing industry. They were more than happy to exchange cotton, tobacco, sugar and other semi-tropical agricultural commodities produced by slave labor for necessary and luxury manufactured goods produced in Britain by wage labor.

As a result of the slave owners’ political power in 1848, the U.S. had no central banking system—the attempt to create one represented by the First and Second Banks of the United States—had been defeated by the southern slaveholders and political representatives like Andrew Jackson. The slave owners feared the centralizing effect that a banknote currency system with a single bank of issue would represent. Instead, the individual commercial banks issued their own banknotes whose value was often dubious. The banknotes issued by the different commercial banks had rates of exchange with one another depending on the perceived strength of the issuing banks and the distance from the banks that issued them.

Germany in 1848

If the U.S. had a weak and ineffectual central government thanks to the influence of the slave-owning class, Germany had no central government at all. As a result of the world war that followed the French Revolution, the feudal “Holy Roman Empire of the German People”—often described as neither holy, Roman nor an empire—was replaced by the German Confederation. Two main German states emerged, Prussia and Austria.

A month after Marshall had noticed that yellowish substance in the river gravel that might be and was gold, a revolution broke out in France. It established what was to be the short-lived Second French Republic.

The revolutions of 1848 were triggered by high unemployment that resulted from a global economic crisis that had hit the London money market in October 1847 and soon spread to France and other continental European countries. The revolution that had begun in France soon spread to Germany. Among the participants in the German revolution were two young friends, Karl Marx and Frederick Engels. The immediate aim of the radical left wing of the German revolutionaries was to create a unified, centralized German democratic republic. Such a centralized bourgeois democratic republic would provide the best possible conditions for the German working class to conduct the struggle for socialism through what Marx called “the revolution in permanence.”

If this aim had been achieved, Germany would have had a political system far in advance of the one that existed in the United States, both as regards the degree of political centralization and in terms of democracy. Germany, unlike the United States, had a class of feudal landowners but no slave owners. A successful democratic revolution in Germany in 1848 would have ended the political domination of the semi-feudal property owners. A (bourgeois) democratic Germany would have been in sharp contrast to the slavery-ridden U.S. “democracy.”

But the hopes for a democratic Germany were frustrated when the emerging German capitalist class frightened by the revolutionary spirit of Germany’s young working class took refuge in the arms of the traditional ruling feudal landowning class. Though the democratic revolution of 1848 was defeated in German lands—and in other European countries—an economic revolution was about to occur that was to change Germany forever. That was the economic revolution set off by finding gold in a California river bed a few weeks before the revolution of 1848 broke out in France.

Effects of a rapid expansion of the supply of money material

In order to analyze the effects of an unusually rapid increase in the quantity of money material, we have to distinguish between two cases: (1) the effects of a large expansion of the quantity of money material with the value unchanged, and (2) a large expansion of the quantity of money material with a fall in the value of money material both absolutely and relative to most other commodities. The latter was the case in 1848 and 1851 with the gold discoveries. For reasons of simplification, I will assume that market prices were equal to the prices of production at the time of the gold discoveries.

Remember, gold itself has neither a market price nor a production price, since prices of all types are defined in terms of the use value of money material measured in terms of its appropriate unit of measure. In the case of gold and other precious metals, that is some unit of weight. Price of a non-monetary commodity is, therefore, a given quantity of the use value of the money commodity defined in terms appropriate to the use value of that commodity—for example, so many ounces of gold.

Gold—or whatever commodity serves as the money commodity—therefore cannot have a price, since a given quantity of gold cannot be measured in terms of itself. If new gold fields are found without a change in the value of gold or commodities, the prices of production of commodities remain unchanged. True, the increase in the quantity of gold will increase bank reserves as the gold is coined and deposited in the banks, and the consequent expansion of gold will lower interest rates.

This will tend to set off a boom and raise market prices. However, as soon as market prices rise above the prices of production, the production of gold will decline as the rate of profit in gold mining will decline below the average rate of profit. Capital will then begin to flow out of gold production into other branches of production. The next crisis will once again lower market prices back to and actually below the prices of production, which under our assumptions remain unchanged. Any “boom” caused by the gold discoveries in this case will therefore be short-lived.

However, the discovery of gold in California in 1848—and in practice all major new geographical discoveries of gold—not only increases the quantity of known gold bearing lands but also lowers the value of gold relative to other commodities. The result will be a rise in the prices of production expressed in devalued gold. Remember, the market prices of commodities will equal the price of production if all capitals of equal sizes—including capital invested in the sector of production that produces money material—yield equal profits in equal periods of time. Assuming that market prices equal prices of production at the time of the gold discovery, as soon as the “cheap gold” is discovered market prices will now be below the new higher prices of production as expressed in devalued gold.

However, the rise of market prices to new higher prices of production does not occur instantaneously. It can only occur through a struggle among commodity owners on the market. Through a series of extra-powerful booms, during which the demand for commodities is greater than supply at existing market prices, market prices are pushed upward to equalize supply and demand. As long as market prices remain below the prices of production, the rate of profit in the gold bullion-producing industry will remain above the average rate and the quantity of gold measured in terms of weight will grow rapidly. As a result, the market will expand faster than it normally does and prices in terms of gold will continue to rise.

Strong gold production causes bank reserves to grow rapidly. Rising bank reserves means lowers interest rates, which in turn increases the profit of enterprise. A portion of the money capitalists are encouraged to convert themselves into industrial capitalists, and the “spirit of enterprise” flourishes. The result is a rapid rise of commodity money circulation. The market enters into an expansion greater than the normal expansion that occurs during the rising phase of the industrial cycle.

During this period of an unusually rapid expansion of the market, crises will be quickly overcome, and there will be no prolonged periods of depression/stagnation. The classical example of this is the crisis of 1857, which was carefully studied by Marx and Engels in hopes that it would trigger a new European revolution (like the crisis of 1847 did), which the two friends hoped would renew the revolutionary wave of 1848, this time in a socialist form.

However, the hopes of Marx and Engels were to be frustrated. Within only a few months of the crisis hitting the English money market in the final quarter of 1857, business was already picking up. By 1859, Britain and other capitalist countries were once again experiencing “great prosperity.” This can be contrasted with the most recent crisis that erupted with full force in 2008. Seven years after the panic reached its height, the world economy remains in a sorry state.

How gold recovers its value after a major geographical discovery

The gold discovered by Marshall in the Californian riverbed in 1848 is known as placer gold—gold that changes places. Gold is an element whose chemical characteristics like all elements is determined by the number of protons in its nucleus. Since the gold nucleus with its 79 protons has a higher mass than most naturally occurring elements, it sinks into the core of planets like Earth. Convective forces within Earth over geological time spans gradually bring gold up into the Earth’s crust. But over historical periods, gold is a non-renewable resource. The uplift of mountain ranges such as California’s Sierra Nevada range also brings up gold from Earth’s interior. The weathering of the mountains releases gold from below the surface that is then carried by mountain streams into the foothills, some in the form of large nuggets.

The individual value of gold nuggets found in foothill streams can be extremely low if the miner is lucky and the labor expended minimal. Mining for placer gold can be also done with artisan methods as illustrated by the famous pans with holes drilled at the bottom that filter out particles of gold. But the quantity of such cheap gold is limited and soon exhausted. You can still pan for gold in the western Sierra Nevada foothills. Tourists who visit the California gold country sometimes do so even today. But the chances of finding a significant quantity of gold by such methods is negligible. However, during a brief period—the first five years between Marshall’s discovery in 1848 and the exhaustion of easily panned gold—huge numbers of people came hoping to get rich quick by finding gold in the California streams.

After all the easily panned gold was exhausted, significant quantities of gold had to be extracted by methods that were open only to industrial capitalists employing wage labor. Mining companies organized on a capitalist basis moved in and found considerably more gold whose value was still relatively cheap compared to the value of gold at the beginning of 1848 but far higher in value than the individual nuggets found by lucky “49ers.”

But again, this gold too was increasingly exhausted. Gold gradually recovered its value relative to other commodities. In this way, the stimulatory effect of gold discoveries on capitalist reproduction progressively exhausts itself. The crash of 1873, which hit both the U.S. and Germany much harder than it hit Britain—which narrowly avoided a full-scale panic on the London money market—announced the end of the period of rising market prices and accelerated capitalist development.

A long period of falling prices set in that was to last until 1896. This period of secular falling prices and long-drawn-out depression became known as the “Great Depression” before that term came to be applied to the events of the 1930s. But by the time the crash of 1873 had occurred, both the U.S. and Germany had been transformed into major industrial powers.

Then at the end of the 19th century, the process was repeated. New cheaper gold fields were discovered in South Africa and then in the Yukon and Klondike. These discoveries combined with the cyanide process of extracting more gold from poor ores caused prices to rise sharply. Once again the prices of production of commodities rose far above the prevailing market prices of commodities. Beginning in 1896, an era of rapid price increases—in terms of gold—and with it a period of accelerated economic growth set in. In already fast-growing Germany and the United States, industrial production again leaped ahead with renewed vigor. The great economic problem of that time was not unemployment—the demand for labor power was rising rapidly—but the high cost of living and soaring agriculture prices.

But by the end of 1913, the combination of much higher prices and the depletion of the new gold fields meant that the stimulatory effect of the increased production associated with the gold discoveries and the widespread adoption of the cyanide process was exhausted. This was shown by the progressive decline in the annual rate of increase of gold production that was noted by Karl Kautsky, considered the leading authority on Marxism in the German Social Democratic Party and Second International, in his article entitled “The High Cost of Living.” If the “Great War” had not intervened, a period analogous to the period after 1873 with falling prices, lower long-term growth, higher unemployment and accelerated centralization of capital would have set in.

Instead, increasing economic competition between the great powers was quickly transformed into increasing military competition in the form of the Great War. This reflected the fact that the development of the productive forces had reached such heights in Germany and even more so in the United States that the old “Concert of Europe” led by Britain that had avoided a world war for the last 99 years was finished. The two most dynamic capitalist powers were about to collide, not only in the markets of the world but on the battlefields of the Great War.

The rise of a centralized nation state is often necessary to achieve an acceleration of capitalist development. First, a strong centralized government committed to accelerated capitalist development walls off a geographical area that corresponds to a nation through protective tariffs and other controls on trade. This enables the capitalists of that nation state to win mastery over the home market with the direct assistance of the state power.

Controls that discourage the taking of money out of the country—capital controls—also have the effect of expanding the size of the home market of a particular capitalist nation state at the expense of the markets of other countries. The capitalist government often can take additional measures such as subsidizing canals and railroads—called internal improvements in the 19th-century U.S. Or like, Japan did in the late 19th century, they can even use state-owned enterprises to launch industries that appeared to private capitalists too risky to invest in.

The effect is to immediately accelerate the whole process of expanded capitalist reproduction within a given capitalist nation state. However, such measures contain the seeds of war because the state, after all, is an organization based on violence.

However, the gold discovery in California, reinforced by the discovery of gold in Australia in 1851, created an exceptionally rapid expansion of the world market that in both the United States and Germany reversed the order of this process. Instead of the rise of a strong centralized capitalist state leading to rapid capitalist development, rapid capitalist development led to the rise of centralized capitalist states where they had previously been absent.

Under the exceptional conditions created by the gold discoveries, capitalist industry could for a time leap ahead in the United States and Germany even in the absence of a strong centralized modern capitalist government. The most important of these conditions besides the exceptionally rapid expansion of the market was a growing proletariat “free” of both serfdom and slavery on one side and ownership of the means of production on the other. Both conditions were developing in Germany and also in the United States outside of the slave-owning south.

However, in neither Germany nor the United States did it prove possible to create modern capitalist governments and banknote currency systems by peaceful means. Instead, to use the expression of the German leader Otto Von Bismarck, the problems posed by the rapid development of capitalism during the 1850s and 1860s could in both countries only be solved through “blood and iron.” This was truer in the case of the United States—especially as regards the blood part—than it was in Germany. Recent studies have raised the estimated number of deaths in the U.S. Civil War to 750,000.

In Germany under Bismark’s leadership, the Kaiserreich was created. The Kaiserreich brought a federal government to most of Germany—excluding Austria. Since this government did not arise out of a massive democratic revolution from below, it retained many archaic features and was far from the centralized German democratic republic that the revolutionaries of 1848 had hoped to create.

Prussian Chancellor Otto Von Bismarck, united Germany’s first chancellor, was a member of the Prussian landowning caste of semi-feudal landowners called Junkers. Under Bismarck’s leadership, Germany was unified around the ruling Prussian House of Hohenzollern. The Kaiser—German for “Caesar”—was no figurehead but had real power. It was the Kaiser and not parliament who appointed the chancellor. This was shown in 1890 when the new Kaiser, Wilhelm II, dismissed Bismarck from office. The German state of Bavaria even kept its own monarchy and armed forces, though in practice these were subordinate to the House of Hohenzollern headquartered in Berlin.

In the U.S., the exceptionally bloody Civil War was fought. When it was over, the domination of the southern-based slave owning class was ended once and for all. State power—the command of the armed forces—was centralized in Washington, D.C. Chattel slavery was formally abolished. The most radical democratic forces in the United States hoped to see not only the legal end of slavery—which was achieved—but full democracy for the former slaves and a radical land reform that would give the former slaves “forty acres and a mule”—which was not achieved. Unfortunately, “Radical Reconstruction” was defeated and the democratic rights that had been won by the former slaves were rolled back and forms of semi-slavery reestablished that were intermediate between free wage labor and slavery.

If the former African slaves were cheated out of many of the fruits of the overthrow of the slaveholders, in which the slaves themselves played an important part, the same could not be said of the gains won by the industrial capitalists and bankers as a result of the North’s victory in the Civil War. They got the lion’s share of what they needed in the form of the National Banking System with a unified banknote currency backed by the credit of the central government, protective tariffs and “internal improvements,” all designed to accelerate capitalist development while creating a layer of billionaires and millionaires. About the only thing that the ruling capitalist class did not achieve, due to a strong populist opposition, was the creation of a central bank system. This had to wait until the establishment of the Federal Reserve System in 1914.

In Germany, Prussian Chancellor Otto Von Bismarck fought a series of wars with Austria and France that resulted in Austria’s expulsion from the German Federation and a German federal government in Berlin that reunified the German states—minus Austria—into the Kaiserreich, which was to last until 1918. Berlin was both the capital of Prussia, Germany’s most powerful state, and the new German federation.
Germany’s new political system represented a series of compromises between the old largely feudal German Confederation and the need for a modern centralized capitalist state. In most respects, the German state that emerged from the wars of the 1860s and 1870s was therefore quite archaic compared to the state that emerged from the U.S. Civil War in the 1860s.

In the sense of creating a modern currency and banking system, however, the German federal state under Bismarck was more modern than what existed in the United States. Under the national banking system, a uniform bank notes currency system after 1879 was created in the U.S. where banknotes were fully backed by the credit of the federal government. Compared to the chaos of the “free banking system” that had existed in the pre-Civil War era where banknotes were backed only by the credit of individual commercial banks that issued them, this was a big step forward.

But as previously mentioned, the national banking system had no central bank. When a crisis broke out, the extra demand for additional dollar banknotes as a means of payment could not be met until gold arrived from abroad. And since it was physical gold—not electronic entries—that was involved, this sometimes took weeks during which the lack of ready cash would paralyze business sending unemployment soaring.

The result was that the cyclical economic crises in the United States were much more intense than they were in countries that had central banking systems. The United States was notorious for its weak decentralized banking system—called the worst banking system in the world—and the consequent extreme violence of its industrial cycles. However, the extra violence of the U.S. industrial cycle did not prevent the U.S. from maintaining an extremely rapid rate of economic growth across its industrial cycles.

Germany was far ahead of the United States in its development of a modern banking system headed by a central bank. In January 1876, the Reichsbank was founded. Theoretically, the Reichsbank was the central bank of the state of Prussia. Like the Bank of England until 1846 and the U.S. Federal Reserve System today, the Reichsbank was privately owned. But as was the case with the Bank of England—and is the case with the U.S. Federal Reserve Banks today—its desire to earn a profit was subordinated to the need to provide a stable and reliable currency system.

The Reichsbank’s notes were convertible into gold coin until the outbreak of the Great War. Unlike the case in the U.S., the Reichsbank could always increase the quantity of notes to meet an extra demand for means of payment in a crisis. As a result, though Germany experienced booms and recessions they were not nearly as violent as those in the United States under the National Banking System. Indeed, Germany had no full-scale “panics” between the panic of 1873 that occurred before the Reichsbank was founded and the outbreak of the Great War. In contrast, the U.S. experienced two major “panics,” in 1893 and 1907, and many lesser ones. The panic of 1907 finally led to the creation of the U.S. Federal Reserve System, which began operation in 1914.

Democracy in Germany and the United States

In most respects, the German government was far less democratic than the government of the United States. However, this has to be qualified, since Germany had no caste of former slaves deprived of democratic rights like was the case in the U.S., nor was any part of the German population subject to anything like the Jim Crow laws. And in one important respect, democracy in Germany was far ahead of the United States. Germany was the first country to develop a mass, well-organized workers’ political party based on Marxist principles. It was called the Social Democratic Party of Germany. Bismarck attempted to ban the party through the “Anti-Socialist Laws,” but these laws could not halt the growth of the SPD.

After Wilhelm II inherited the throne, he dismissed Bismarck, and the Anti-Socialist Laws were repealed making the SPD a legal party.

The SPD was the greatest lasting organizational conquest of the workers’ movement before the Russian Revolution of October 1917 gave birth to the Soviet state. The German Social Democratic Party still exists today as one of Germany’s two major parties, the other being the right-wing reactionary bourgeois Christian Democratic Party of German Chancellor Angela Merkel. Though the SPD has long since repudiated Marxism, it still draws its main strength from Germany’s trade union movement. Germany’s vastly superior social insurance, lower prison population, and level of police violence owes a lot to the struggles of the Social Democratic Party, especially in the years before 1914 when it was a Marxist Party. (5)

Germany’s unification under Bismarck was incomplete because it didn’t include German areas of Austria, and this was to create trouble later on. U.S. historians, not uncolored by U.S. hostility to a major capitalist rival that it fought two shooting wars with, always like to translate the German term “Kaiserreich,” which in German means “Caeser’s realm,” as the “German Empire.” (6) This is actually misleading. If an empire is defined as the rule of one nation over other nations, Germany was an empire to a much more limited extent than were most of the other European countries. The word “reich,” or “realm,” is actually a rather archaic word for “state power.” A state power may—or may not—be an empire. If the state power rules only one nation—the case in an ideal nation state—it is not an empire but simply a tool one class uses to rule over one or more other classes though the classes of both ruling and oppressed belong to the same nation.

Germany was an empire in the sense that it acquired and cruelly ruled a small empire in Africa, including the Shark Island death camp in Namibia, which was the forerunner of Auschwitz-Birkenau, Treblinka, Chelmno, Belzec, and Sobibor, which were located in Europe and were in the business of killing white Europeans using industrial methods on a mass scale.

Within Europe, Bismarck’s Germany did rule over a small area of Poland, the rest of Poland being ruled by Austria and above all Russia. Overall, Germany was far more nationally homogeneous (in the sense that it mostly consisted of people of the German nationality) than was Austria, whose name in German, strangely enough never translated correctly in English, is “Österreich”—German for “eastern realm.”

Until the revolution of 1918, this other “reich”—as it was and still is called—was very much an empire. The German minority ruled over many nations and nationalities, with the Germans being a ruling oppressing minority nationality. As a result, racism—directed against other white Europeans, which included but was not confined to anti-semitism—was far more rampant in the “Österreich” than it was in the “Kaiserreich.” It was in Austria where many of the worst Nazis were to be born, including Adolf Hitler.

Germany and the United States compared

Both the United States and Germany arrived too late to build large colonial empires before 1914. Since Germany was unified by Bismarck only in 1871, it was not in a position to compete with Britain and France in the empire-building game in Asia and Africa. The United States was building an empire within North America itself in the course of the 19th century, enslaving Africans and committing genocide against the Native nations. The U.S. seized Cuba, Puerto Rico, and the Philippines from Spain as a result of the 1898 war. It also seized the Hawaiian Islands. Germany acquired colonies in South West Africa, where the Shark Island death camp was located, and in parts of Asia. But these overseas empires in the pre-1914 years were quite modest compared to the rapidly growing industrial power of the two countries.

In the case of the United States, the vast size of the country, which includes some of the richest agricultural land on Earth combined with great mineral wealth plus the “internal Afro-American colony,” compensated for the relative scantiness of the U.S. overseas empire. The African Americans were forced to—and still are—sell their labor power at a considerably cheaper price than the white workers and, therefore, perform on average extra unpaid labor—surplus value—compared to the white workers who belong to the oppressing “Anglo” nationality. This extra surplus value creates a profit above and beyond the average rate of profit that can be partially shared, through various mechanisms I have examined elsewhere in this blog, with a privileged white workers’ aristocracy.

This is the material basis for the widespread racism among white workers that has so weakened the U.S working class and its trade unions overall. The United States also attracted a great number of immigrants from many countries of Europe, Latin America and Asia that could also be super-exploited. The most super-exploited of all were workers from China. The various immigrant communities to varying degrees also served as what amounted to “internal colonies” that produced extra surplus value.

As a result of this “internal colonization,” the heritage of slavery and the genocide of the Native nations, the class struggle was greatly distorted in the United States. Instead of the workers uniting in trade unions and creating a mass workers’ party like the German working class did, there were often struggles between various groups of workers along national lines for jobs. Early on, Irish workers fleeing the potato famine of 1846 were pitted against “free” African American workers. Both the Irish and African American wage workers, accustomed to hard manual labor, were willing to take jobs shunned by the “Anglo” workers.

Later, Chinese workers, who were accustomed to the extremely low standard of living that prevailed for most people in old China, were pitted against all other workers. There was even once a “labor party” in California whose program was to exclude Chinese workers so that white workers could earn higher wages. Large sections of the white working class supported the Democratic Party, which appealed to the racism of the white workers against African American workers, not only in the South but in the North through the urban Democratic Party machines. While the workers of Europe increasingly followed the example of the German workers in creating mass workers’ parties, the vast majority of the U.S. working class continued to vote for the Democratic and Republican Parties and, for awhile in the late 19th century, the farmer-based Populist Party.

Today, this vicious heritage of racism and working-class political fragmentation is reflected in the extreme weakness of the U.S.’s trade union movement, in its violent and racist police forces, its huge prison population, and a very skimpy system of social insurance. It is not merely a matter of geography that the immigrants now fleeing Syria, Libya and other Southwestern Asian and North African countries prefer Germany to the United States.

Bismarck’s Germany faced major barriers to expansion in Europe that did not confront the white settlers in the United States. To its east lay the czar’s empire. Though in decline, it was no easy pushover, as Bismarck well understood.

The Russian nation and ultimately the Polish nation and the many other oppressed nations of the Russian Empire represented a barrier to German expansion in that direction. However, Russia’s brutal oppression of the many other nations and nationalities of the Russian Empire did offer opportunities to Russia’s potential enemies, including the Germans. If Germany were to crush these nations, it would take the most extreme means to do it—or attempt it. In Bismarck’s time, the relationship of forces made this unthinkable. In the 20th century, this was to change.

To be continued


1 It is pretty clear today from both fossil and genetic evidence that all European people are descended mostly from “Negro” Africans who entered Europe about 45,000 years ago. Europeans differ from modern Africans in having more Neanderthal ancestors, whose own ancestors lived in Europe and Southwest Asia for hundreds of thousands of years before the modern “Negroes” arrived. But ultimately, the ancestors of the Neanderthal also came from Africa.

When genetic evidence revealed about five years ago that the Neanderthals and African peoples interbred, most European physical anthropologists with a few exceptions were surprised. They had convinced themselves that the “modern,” or anatomically modern, people as they moved out of Africa into Asia and Europe would surely have completely exterminated a people as different from them as the Neanderthals were. After all, Europeans had always done that whenever they met “natives” in historic times. After 45,000 years, the anthropologists figured that not a gene of the “primitive” native Neanderthals should survive. But in reality, Neanderthal genes do survive in all modern European and Asian peoples. It turned out that it was a gross slander on ancient peoples to assume that they behaved like modern white European colonialists.

As for the modern European Jews, they are identical to all other modern European peoples with perhaps a little bit more Southwest Asian admixture over the last few thousand years than is typical for most other Europeans. In any case, the peoples of Europe, Southwest Asia and North Africa are extremely closely related, having continuously intermixed with each other throughout recorded history. (back)

2 Nazi Germany had a kind of dual criminal justice system. First, there were the ordinary courts and prisons with prosecutors and criminal defense attorneys. With all political opposition and trade unions illegal, the regular criminal justice system was even more stacked against you than is the case even in the U.S. today. But if, against all odds, you prevailed in the courts, the Gestapo could independently of the regular criminal justice system put you into “protective custody” “at your request” in one of the many concentration camps.

This system was first widely used with Communist prisoners shortly after Hitler took over in 1933 and was soon extended to trade union leaders and Social Democrats, then the church-based opposition and indeed any type of political opposition whatsoever. Later the concentration camp system extended to the Jews and other racial “enemies” such as the so-called “gypsies,” except that the “protection” provided included being murdered in gas chambers.

The Nazis didn’t invent concentration camps. That honor goes to Great Britain in its African colonies. Nor were concentration camps confined to Germany and Nazi-occupied Europe. Germany was not the only imperialist country during World War II to run a concentration camp system parallel to the normal criminal justice system. During the war the United States under Democratic President Franklin D. Roosevelt established a concentration camp system for every Japanese man, woman, and child. As was the case with the people who found themselves imprisoned in the German concentration camp system, the imprisoned Japanese Americans weren’t accused, let alone convicted, of a crime. The excuse was that the Japanese Americans could not be relied upon to support the United States government in the war against Japan. The war propaganda made clear that their imprisonment was based on race.

There was never the slightest danger of a Japanese air attack—except for the single Japanese air raid against the U.S. military base at Pearl Harbor located in the U.S. colony of Hawaii—that is, thousands of kilometers west of the U.S. mainland. Still less was there the slightest chance that Japan would invade the U.S. mainland.

The internment in concentration camps of Japanese Americans was accompanied by a racist campaign against the Japanese people in posters, “educational” newsreels, the mass media, and cartoons shown in movie theaters in the guise of children’s entertainment. Some of these racist “educational” materials and cartoons can be watched today on the Internet, and it is interesting to compare them to the propaganda against the Jews in Germany that can also be found on the Internet.

To be fair, unlike the Nazi camps the Japanese American men, women, and children were not worked to death in the U.S. concentration camp system and there were, of course, no gas chambers or crematoriums to spoil the smell of the air around the towns where the concentration camps were located. Concentration camps yes, death camps no. The mass murder of Japanese civilians by the Roosevelt and Truman administrations was to occur in Japan itself. (back)

3 The Zionists claim the ancestors of the European Jews came to Europe as refugees from their historic homeland in Palestine during Rome’s war against the Jews of 66-73 AD and 132-136 AD. If this were true, it would be analogous to what is happening to the people of Syria today as a result of the U.S.-inspired war in their homeland and to the people of modern Palestine who were driven out by the U.S.-sponsored Zionist colonization of Palestine by European Jews in 1948. While it quite possible that a few of the ancestors of today’s European Jews might have been among the refugees of those ancient wars, most of the ancestors of the European Jews were almost certainly already living outside of Palestine by that time—even assuming that the ancestors of today’s European Jews were all Jewish 2,000 years ago, which is certainly not the case. In reality, the European Jews have many Germans, Poles, Russians and people of other European nationalities among their ancestors.

We also know the origins of the so-called Jewish “Diaspora”—the situation where the great majority of the Jewish people live outside of their alleged “homeland” in Palestine—preceded the Jewish wars by many centuries, a fact ignored by pro-Zionist propaganda. People from Palestine, whether Jews or not, have been emigrating from that small Southwest Asian province for economic reasons throughout recorded history. The only time in the long history of Palestine, whether ancient, medieval, or modern, where the bulk of its native population was actually exiled was during the “Nakba” of 1948. The modern colonial-settler state of Israel was established by modern imperialism using Jews displaced from Europe by imperialism itself and then from Islamic countries as a result of the creation of Israel. (back)

4 But wouldn’t dynamic industrial Germany and the United States have come into military conflict anyway even if economic development was slower? Maybe, but it is far from certain. Since the late 19th century, German capitalism has been consistently more dynamic than the capitalism of any other European power. Why has German capitalism been so successful? This success is often attributed, of course, to the sense of discipline of the German people that is so suited to capitalism.

But rather than the sense of discipline of the German people being responsible for the success of German capitalism, perhaps it is the other way around. Maybe the extremely rapid development of capitalism and the very high level it reached in Germany is responsible for the sense of discipline of the German people.

In the late 1840s, capitalism was beginning to develop in the German-speaking lands. But German capitalism was at that time well below the level not only of Great Britain but France. But Germany was not isolated from capitalist Britain and France to the same extent as the eastern European countries that were still very much under the domination of the feudal Russian Empire. Remember, in 1848 legal serfdom still existed in Russia. Germany was sort of half way between feudal Russia and industrial capitalist Britain and France but obviously evolving in the direction of its capitalist western neighbors. German capitalism, however, was held back by the complete absence of a centralized government, a modern uniform currency system, and a common market in the German-speaking lands.

At this critical point in Germany’s evolution, a sudden expansion of the world market occurred as the result of first the Californian and then the Australian gold discoveries. The countries under the thumb of the Russian Empire could not take advantage of the resulting unprecedented opportunity created by the gold discoveries of 1848 and 1851 for rapid capitalist development because they still had serfdom and lacked a sufficient free proletariat.

Once industrialization took off in Germany, the German capitalists were able to use the most modern industrial technology available in the mid-19th century, giving them a real advantage in coming decades over France and increasingly over Britain as well. If the gold discoveries had not occurred when they did, capitalism would still have grown in the German lands, but it is by no means sure that it would have reached the heights both absolutely and relative to other European nations that it did. In any case, explaining the success of German capitalism compared to other European capitalist countries, which is so important for the present situation in Europe, is a very interesting problem for historical materialism. (back)

5 Of course, not everybody in the Social Democratic Party of Germany was a Marxist. The SPD tolerated non-Marxist tendencies such as Edward Bernstein’s “revisionists,” though they were in a minority in the pre-1914 SPD. It wasn’t until the disaster of August 1914, when the SPD faction in the Reichstag voted for war did it became clear even to Lenin that a revolutionary workers’ party cannot tolerate the existence of a pro-imperialist anti-Marxist faction in its ranks if it is to fulfill its historic mission.

In truth, most of the members of a revolutionary workers’ party cannot be expected to master all the details of Marxist theory—most, after all, have to work for a living. Indeed, it is rare even for individual leaders to master all details of Marxist theory, all the more so since Marxism is a living science that cannot simply stop where Marx and Engels left off. At best, the party as a collective whole can strive to fully master the science we call Marxism. The SPD for many years was closer to this ideal than any other early workers’ party was. Without the pioneering work of the SPD, the Russian Social Democracy and the Bolshevik Party that grew out of it and led the first lasting workers’ revolution in history would not have been possible. (back)

6 The word “czar” used for the monarch in Russia and some other eastern European monarchies also means “Caeser” after the Roman family that founded the Roman Empire on the ruins of the ancient Roman Republic. Caesar came to mean “the state power” and is still occasionally used in that way even today. (back)

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