A. Leontyev, Corresponding Member, Academy of Sciences of the U.S.S.R.

Developing Lenin’s thesis concerning the decay of capitalism, Comrade Stalin showed how, in the epoch of the general crisis of capitalism, the bourgeois order has become a monstrous barrier to the development of human society. The bourgeois system’s inability to utilise the productive forces of society and imperialism’s inherent tendency to retard the development of the productive forces have become particularly evident.

This tendency takes different forms. To begin with, there is a general slowing down in the rate of economic development in the bourgeois countries, as can be seen from the following comparison: in the 23 years preceding World War One (1890- 1913) world production showed an average yearly increase of 5.8 per cent, whereas, for the same period following World War One (1914-1937) industrial production in the capitalist world increased by a total of 35 per cent, in other words by an average yearly figure of only 1.5 per cent.

In his report to the Eighteenth Congress of the Communist Party of the Soviet Union (Bolsheviks). Stalin noted that over a period of 25 years (1913-1938) industry in the main capitalist countries had marked time round about the pre-war level, exceeding the latter by only 20-30 per cent. When it is borne in mind that the population of the capitalist world increased by approximately 15 per cent during those 25 years, and that an ever greater share of production was allocated for war purposes, it becomes clear that, far from increasing, industrial output per head of the population actually declined.

The inability of present-day capitalism to make full use of the productive forces is manifested in the chronic below- capacity operation of industry and also in the permanent mass unemployment. This is borne out by Comrade Stalin’s characterisation of the general crisis of capitalism “… when capitalism no longer has, nor can have, either in the major countries or in the colonial and dependent countries, the strength and stability it had before the war and before the October Revolution; when industry in the capitalist countries is confronted with the heritage it received from the imperialist war in the shape of chronic under-capacity operation of industry, and of an army of millions of unemployed of which it is no longer able to rid itself”.

World War Two temporarily absorbed millions of hands in the army and in war production. Specific war orders extended the market. But this was of a purely temporary nature, for the deep roots of such phenomena of the general crisis of capitalism as the chronic under-capacity operation of industry, permanent unemployment for millions, the deformation of the industrial cycle, and the protracted agrarian crisis remained in force. Here, too, the following factors must be taken into account.

First, the destruction of material values and human losses caused by World War Two were much greater than in World War One. According to data at hand, World War Two cost about a thousand billion dollars, whereas World War One cost approximately two hundred billion dollars. The number of killed, including civilian population, was nearly 50 billion as against 10 million in World War One.

Second; the fascist recipe of “aggravating the situation” by an armaments race and uncontrolled inflation has been widely used in a number of bourgeois countries after World War Two, especially in the United States and Britain. In view of the inter-dependence of various industries, the armaments programme is giving rise to a war-inflation in the economy of the country.

Such features are characteristic of the post-war policy pursued by the United States and Britain. Today the U.S. armed forces are ten times more numerous than on the eve of the last war. Despite the economic and financial difficulties of the country, the British Labour Government has, on its own admission, more than a million men under arms. Considerable labour power and material means are needed to supply such mass armies with the arms, equipment, transport and provisions essential for modern military technique. The diversion of these commodities from the national economy reduces still more the already low standard of living of the working people.

With the help of their obedient salesmen at the helm of State, the American monopolies are engaged in a feverish armaments race, especially for atomic weapons and aviation. Military allocations are being increased from year to year. For instance, appropriations for “defence needs” in 1947-1948 (the fiscal year in the U.S., starts on July 1) totalled about 10,648 million dollars. In 1948-1949 military expenditure, together with allocations for carrying out the Administration’s aggressive foreign policy which aims at U.S. world domination, reached approximately 28 billion dollars—more than 70 per cent of the State budget.

Third, as distinct from World War One, in World War Two the U.S. productive capacity was extended chiefly at the expense of the State. During World War One four-fifths of industrial construction was financed by private capital and one-fifth by the Treasury. During World War Two, the proportion was the reverse: the Treasury accounted for two-thirds of capital investments and private capital for only one-third. Thus, the monopolists saw to it that the State not only shouldered the burden of capital investments but also ran the risk of the peace-time depreciation of these investments. And, sure enough, after the war, industrial enterprises built at State expense were either closed down or handed over to the monopolists for next to nothing. In this way productive capacity was destroyed on a hitherto unprecedented scale. Although the statistic for industrial operations do not in the least reflect this monstrous fact, it is, nevertheless, a striking indication of the parasitism and decay of present-day capitalism, of its inability to make use of the productive forces and its unrestrained tendency to destroy them.

In the light of these facts the chronic unemployment in the U.S. since the war, unemployment running into millions, acquires particular significance. In 1946-47 there were at least 7-7½ million unemployed, including part-time workers.

Unemployment grew rapidly in 1948 and especially during the current year. There are more than 6 million unemployed and 12 million part-time workers, according to trade union statistics. In the manufacturing industry alone, 1,700,000 lost their job between September 1948 and June 1949.

Chronic unemployment is the scourge of the workers in a number of European countries, particularly in Italy and the Western zones of Germany. The number of unemployed in Italy actually reaches 3 million, in Western Germany the figure is 1½ million. Even the official Information Agency in Rome admits that chronic unemployment “has become an organic feature of Italy’s economic life”.

The parasitism and decay of the present-day bourgeois order are most glaringly reflected in the rapacious treatment of society’s main productive force—human labour power. This plunder takes the form of unrestrained exploitation of the proletariat, the terrible impoverishment of the working masses.

Together with intensified exploitation of the working people, present-day parasitic capitalism is steadily cutting- down the actual number of people engaged in productive labour. As is known, advertising, trade, domestic service and the production of luxuries for the parasitic exploiting class have been developed at the expense of a relative, and at times, absolute curtailment of people engaged in important spheres of production. This tendency is characteristic for all capitalist countries.

World War Two reduced the standard of living in the capitalist world on a scale hitherto unparalleled. The policy pursued by the ruling classes who are transferring the brunt of war costs and post-war burdens onto the shoulders of the working people is adding to the impoverishment of the masses. But monopoly profits are fantastically increasing, breaking all records. In 1948, U.S. company profits, after taxes had been paid, reached the colossal sum of 20.8 billion dollars (as against 17 billion in 1947), that is, double the maximum figure reached during the war (10.8 billion dollars in 1944).

The exorbitant toll exacted by the monopolists is worsening the living conditions of the people. In his message to the special session of Congress on July 27, 1948, President Truman was compelled to admit that the cost of living in the U.S. was higher than ever before in the history of the country.

Such is the picture presented by the impoverishment of the masses and the enrichment of capitalist circles in the U.S. The impoverishment of the working people in all capitalist countries has reached an unprecedented scale.

Productive capacity in the U.S. is far in excess of the home market which is restricted by the capitalist laws of distribution, thus dooming the bulk of the working people to a life of misery. The inflated productive capacity of the U.S. taken together with the severely ravaged capitalist countries of Europe and a considerable part of Asia, make inevitable the outbreak of acute conflicts, intensified struggle for markets, new and deeper economic crises and upheavals.

At present the struggle for markets is developing in conditions of the general crisis of capitalism. This crisis was further aggravated by World War Two in the course of which capitalism, having already lost one sixth of the earth’s surface as a result of the Great October Socialist Revolution in the U.S.S.R., suffered fresh losses when first the People’s Democracies and then China dropped out of its system as objects of exploitation—as markets, sources of raw materials, and spheres of capital investment.

Naturally, the American people and their democratic organisations cannot help but notice the growing economic difficulties. At its Plenum on April 23-24, 1949, the National Committee of the Communist Party of the United States noted that the American people are faced with an economic crisis which has been developing in the country since the end of last year.

This is borne out by data for the end of 1948 and the first half of 1949. For instance the index of industrial production in the United States in October was 199 (100 in 1935-1939): in November it was 195, December 190, January (1949) 187, February 185, March 181, April 179, May 174, June 169 and July 162. Industrial production in July 1949 was 17 per cent below the level of November 1948 and hit the lowest figure since May 1946. Crisis symptoms are increasingly obvious in commodity circulation, credit and foreign trade. This includes such facts as the accumulation of goods and he decline in trade, the sharp curtailments in railway freightage, stock exchange crashes decline in shares to the tune of billions: the growing number of bankruptcies and a sharp decrease in American exports.

Even during the war, U.S. monopoly circles and their economists admitted, with laudable frankness, that the main problem of American export was the “export of unemployment”. It was obvious from the reports published that if U.S. capitalist industry were to use the available labour power, it would be necessary to export goods to the value of 25 billion dollars annually.

Just what this figure means can be gathered from the following: the 1937 volume of world exports totalled 15.3 billion dollars. Before the war the United States accounted for 13.1 per cent of world exports, Britain for 11.9 per cent and Germany for 9.4 per cent. In the period between the two wars (1921 to 1939), U.S. exports averaged 3.6 billion dollars annually; in other words, they constituted 4.3 per cent of the country’s entire production. In the two post-war years of 1946 and 1947, America exported goods to the sum of 25.1 billion dollars, or 5.8 per cent of its gross output.

Thus, U.S. exports only reached half the figure envisaged by American economists during the war. But even this volume of American exports sharply aggravated the contradictions in the world capitalist market. These contradictions are all the sharper since the American monopolists, concerned with maintaining their fantastic super-profits, are restricting the import of foreign goods.

According to data published in July 1949 in the United Nations report on the world economic situation, exports of the West European countries to the United States are far below imports from the United States. In 1948, U.S. exports to Western Europe exceeded imports from these countries by 246 per cent, a fact which resulted in an extremely unfavourable balance for the countries of Eastern Europe in their trade with the United States. In 1948 the exports of the West European countries did not even come up to the 1938 level, the lowest pre-war figure, and reached only 66 per cent of the 1947 figure. Their foreign trade deficit with the U.S. in 1948 totalled 3,247 million dollars.

U.S. trade has acquired a unilateral character. On the one hand the U.S. is out to extend its exports while at the same time preventing a corresponding amount of imports. On the other hand the other capitalist countries, particularly the countries of Western Europe, are compelled to import U.S. goods but are not allowed to export a sufficient amount of goods. Hence the chronic dollar famine in these countries which is one of the reasons for the general dislocation in the present-day economy of capitalists. This two-fold contradiction was in great measure are possible for the “Marshall Plan” which, in its turn, aggravated the conflict.

It is most significant that 1948—first year of the “Marshall Plan”—did not see an increase in American export. On the contrary, compared with 1947, U.S. exports dropped by 18 per cent in value and by 23 per cent in volume.

The economic crisis of over-production, developing against a background of the terrible impoverishment of the masses, is spreading not only in the United States but also in the capitalist countries of Western Europe.

For months past it has become increasingly difficult for West European countries to find markets, with the result that production is being curtailed.

According to the United Nations’ report on the world economic situation, published last July, industrial output in all countries of Western Europe dropped in the first quarter of the year compared with the first quarter of 1948. The first quarter of 1949 was marked by a sharp rise in unemployment in all West European countries: the figures doubled in general, but in some countries to even higher. In France the number of registered unemployed increased by one and a half times in the first three months of 1949, in the American and British zones of Germany the increase was almost twofold, the unemployed figures doubled in Holland, the increase was almost as great in Norway while Switzerland registered a threefold increase in the numbers unemployed. The inter-twining of the West European crisis with that in the United States threatens to aggravate the crisis still further.

In conditions of ever-growing crisis Britain, the leading European capitalist country, is faced with increasing export difficulties—forcing exports is one of the essential point in the Labour Government’s economic programme.

Complying with the orders of the Wall Street monopolies, the British Government devalued the pound. The immediate result was a depreciation in the currency of some two dozen other capitalist countries. The American monopolists now have the possibility of buying cheaply the industry of the West European countries and the sources of raw materials in their colonies. Devaluation means a further disastrous deterioration in the living standard of the working masses. At the same time, the depreciation of sterling is a way of veiling the plunder of a number of colonial countries to whom Britain still owes vast sums dating back to the war. Moreover, devaluation, far from solving the economic difficulties of the capitalist world, will intensify them. Cripps’ promise that devaluation would mitigate Britain’s financial crisis and lessen her dollar deficit is obvious charlatanry designed for the gullible. It is clear that the American monopolists did not dictate the devaluation of the pound for the purpose of promoting British exports at a time when American exports are declining month by month and the struggle for markets is steadily growing sharper. But the calculations of the American monopolists are built on sand: in their race for super-profits they are pursuing a policy which can only result in a further shrinking of markets and, consequently, a further intensification of the economic crisis of over-production in conditions of the unprecedented impoverishment of the masses.

The economic crisis of over-production is caused by the inner laws governing the capitalist system or economy. The cause of the crisis is the main contradiction of capitalism, the contradiction between the social nature of production and the private, capitalist form of appropriation. At the same time, the greedy and short-sighted policy of the monopolies, dictating their will to the bourgeois governments, undoubtedly aggravates the growing crisis in the capitalist countries. The policy of the armaments race could not, and did not save these countries from the blows of the crisis. Once again, the estimation given by Stalin of a similar policy pursued by the aggressive rulers of Germany and Japan on the eve of World War Two has been brilliantly confirmed:

“For what does placing the economy of a country on a war footing mean? It means giving industry a one-sided, war direction; developing to the utmost the production of goods necessary for war and not for consumption by the population; restricting to the utmost the production and, especially, the sale of articles of general consumption—and, consequently, reducing consumption by the population and confronting the country with an economic crisis.”

At the same time, ruling monopoly circles are still further aggravating the ever-growing economic crisis by their aggressive policy toward the Soviet Union and the People’s Democracies, a policy which sabotages all economic relations, a policy which discriminates in trade, and so on. Coupled with the Western Powers’ policy of dismembering Germany, the grabbing policy being pursued by the monopolies is artificially restricting the already shrunken market and thus increasing overproduction and accelerating the growth of unemployment.

Marxism teaches that there is no such thing as permanent crises of over-production. This holds true also today in the epoch of the general crisis of capitalism when the industry of capitalist countries do not exist without going through the usual cycle, although the cycle itself is considerably disturbed compared with the previous epoch. This disturbance in the cycle is more obvious in the post-war period than it was in the period between the two wars. The present crisis of over-production is beginning to grip the capitalist world not after a phase of prosperity but after a short-lived, speculative, post-war “boom”, caused by specific and rapidly changing circumstances. This disturbance vividly demonstrates the general weakening of capitalism’s economic foundations, the instability and internal decay of these foundations.

Workers of all lands, unite!

For a Lasting Peace, For a People’s Democracy!


Organ of the Information Bureau of the Communist and Workers’ Parties

NO. 22 (49), FRIDAY, OCTOBER 14, 1949