Like What, Exactly? (3)
Part Three: Conceived in Nazi Germany, Born in the USA
The search for a solution to the financial crisis
You probably are not aware of this, but in 2008-2009, when the world market faced its darkest hours of the financial crisis, the attention of many mainstream economists, who were desperately looking for a way out of that mess, turned to the halcyon years of the early Nazi regime. Yep, that’s right — economists scrambled to study fucking Nazi economic policies. Most Marxists don’t realize this, but the template for their cherished “social state” was the Nazi policies of the Great Depression.
Really, I am not making this up. Have a look at this quite interesting article from the New York Times in 2009:
“Every so often, history serves up an analogy that’s uncomfortable, a little distracting and yet still very relevant. In the summer of 1933, just as they will do on Thursday, heads of government and their finance ministers met in London to talk about a global economic crisis. They accomplished little and went home to battle the crisis in their own ways. More than any other country, Germany — Nazi Germany — then set out on a serious stimulus program. The government built up the military, expanded the autobahn, put up stadiums for the 1936 Berlin Olympics and built monuments to the Nazi Party across Munich and Berlin.”
Of course, people can’t eat roads, tanks and monuments, so the author of the article, David Leonhardt, pointed out that this Nazi fascist state spending did not “trickle down” to the working class. He writes this off to the lack of working class bargaining rights:
“The economic benefits of this vast works program never flowed to most workers because fascism doesn’t look kindly on collective bargaining”
Although Leonhardt blames the problem on the lack of collective bargaining rights, think about this: if all this social spending was going into production of roads, tanks and monuments, what additional means of consumption resulted from the spending? None. Even if there had been collective bargaining rights, Nazi spending would not have resulted in additional means of consumption, because there would have been no additional means of consumption available over which to bargain.
Now hold that thought — we will return to it later.
How Nazi Germany economic policies jumped the pond
“But Germany did escape the Great Depression faster than other countries. Corporate profits boomed, and unemployment sank …”
The response of the economy to this entirely unproductive fascist state spending was so effective in increasing profits and reducing unemployment that it drew the attention of the acknowledged godfather of American fascist state economic policy, Lord John Maynard Keynes himself. Leonhardt cites Harold James, an economic historian:
“… the young liberal economists studying under John Maynard Keynes in the 1930s began to debate whether Hitler had solved unemployment.”
Note that James does not say Keynes’ came up with an idea on how to end unemployment, Keynes and his team of economists wondered if HITLER had figured it out. And note what Hitler had figured out:
“Corporate profits boomed and unemployment sank” [without] “economic benefits [flowing] to most workers”
In other words, Keynes’ economics team debated whether Hitler had figured out how to increase profits without increasing wages. This is because, despite the common misconception on the Left, the level of capitalist employment depends not on wages, but on profits. The capitalist mode of production is driven by profits, not wages or so-called ‘demand’. If you want to reduce unemployment, you have to figure out how to stimulate profits. Hitler’s economic policy team had figured out how to increase profits and so drive down unemployment. And how did they increase profits? By fascist state spending on roads, tanks and monuments. This spending had the effect of increasing profits without in any fashion adding to the production of wage subsistence goods.
How Hitler’s policies worked, and Keynes’ interest in those policies, is not a secret: IT IS ON THE PAGES OF THE FUCKING NEW YORK TIMES!
Moreover, right now you can go to Marxists.org and see how Keynes described what Hitler’s economic policy team discovered. His essay is called, “The General Theory of Employment, Interest and Money” and is considered the founding document of the Keynesian school. It is necessary to remember that Keynes is only putting into theoretical terms, the already existing actual practice of the fascist state. He is not creating this theory out of his head in some profound insight of pure genius. So why has this fact not been acknowledged by Marxist academics today?
Keynes’ distillation of Nazi economic policies
The heart of this document, which is almost never mentioned by economists (not to mention dumb Marxist academics), is to be found here. Keynes states his argument in a straightforward manner befitting a person who had only contempt for the working class:
“Though the struggle over money-wages between individuals and groups is often believed to determine the general level of real wages, it is, in fact, concerned with a different object. Since there is imperfect mobility of labour, and wages do not tend to an exact equality of net advantage in different occupations, any individual or group of individuals, who consent to a reduction of money-wages relatively to others, will suffer a relative reduction in real wages, which is a sufficient justification for them to resist it. On the other hand it would be impracticable to resist every reduction of real wages, due to a change in the purchasing-power of money which affects all workers alike; and in fact reductions of real wages arising in this way are not, as a rule, resisted unless they proceed to an extreme degree. Moreover, a resistance to reductions in money-wages applying to particular industries does not raise the same insuperable bar to an increase in aggregate employment which would result from a similar resistance to every reduction in real wages.
“In other words, the struggle about money-wages primarily affects the distribution of the aggregate real wage between different labour-groups, and not its average amount per unit of employment, which depends, as we shall see, on a different set of forces. The effect of combination on the part of a group of workers is to protect their relative real wage. The general level of real wages depends on the other forces of the economic system.
“Thus it is fortunate that the workers, though unconsciously, are instinctively more reasonable economists than the classical school, inasmuch as they resist reductions of money-wages, which are seldom or never of an all-round character, even though the existing real equivalent of these wages exceeds the marginal disutility of the existing employment; whereas they do not resist reductions of real wages, which are associated with increases in aggregate employment and leave relative money-wages unchanged, unless the reduction proceeds so far as to threaten a reduction of the real wage below the marginal disutility of the existing volume of employment. Every trade union will put up some resistance to a cut in money-wages, however small. But since no trade union would dream of striking on every occasion of a rise in the cost of living, they do not raise the obstacle to any increase in aggregate employment which is attributed to them by the classical school.”
Quite simply Keynes is stating here that inflation — the persistent depreciation in the purchasing power of state issued currency — can produce the same results as Hitler’s monument building. According to Keynes, workers were so dumb they would only look at the nominal wage in their paychecks, but fascist state monetary policy could inflate nominal wages away; the workers would not even notice this depreciation in what their wages can buy — and even if they did they would soon give up and stop resisting it.
Was Keynes right? Well, it is important to realize that since Keynes’ time, even the theoretical clarity among the most advanced sections of the working class has declined to such an extent Bernanke no longer find it necessary to conceal that he is trying to create inflation to depreciate our paychecks. However, the real point of this exercise is not how we have been dumbed down by the fascist state over the years so that we no longer even recognize we are being shit on. The point of this exercise is to demonstrate, in a fashion Marxist academics like those of the underconsumptionist school can’t deny without exposing themselves as fascist sympathizers, that all Keynesian policies are fascist and were fascist from their very inception. The link between Keynesian policies and the policies of Hitler fascism are so well documented, it is no longer a matter of debate — it has now become the starting point of the debate over policies in the present crisis.
See, for instance, How did Nazi fiscal policy work? by Tyler Cowen.
Or this scholarly paper: “Employment, the Keynesian Theory and the Phenomenon of Nazism” by Eleftherios Giatrakis.
Or this one for the NBER: “Did Economics Cause World War II?” by Robert J. Gordon.
And then there is also this one for the NBER: From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons by Keynesians Almunia, Bénétrix, Eichengreen, O’Rourke and Rua.
What are the authors of each of these papers trying to understand? Go back to the earlier discussion of the secret of Hitler’s success in reducing employment according to Leonhardt:
“The economic benefits of this vast works program never flowed to most workers, because fascism doesn’t look kindly on collective bargaining. But Germany did escape the Great Depression faster than other countries. Corporate profits boomed, and unemployment sank …”
Since the fall of unemployment was tied not to the increase in the wages of the workers, but to the rising profits of corporations, this implies the real interest in early fascist policies by the authors of the above papers is how to boost profits — in other words, the problem of the present crisis is the problem of how to increase the mass of profits, a classical problem of Marx’s theory.
The Obama stimulus package and “full employment”
When the Obama administration was confronted by reporters in the early days of the crisis, one of the questions raised was why the administration was so reluctant to reduce hours of labor to address rapidly rising unemployment. The Obama administration was trying to push its huge $800 billion stimulus program through Congress at the time. Although Obama predicted this huge program would hold down unemployment and ultimately bring the economy to “full employment”, it was massive, wasteful and costly. Facing reporters at the time, Obama economic adviser and former Treasury Secretary Larry Summers had this to say:
“I think we got the Recovery Act right. The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”
Reducing hours of work could have been accomplished immediately and would have not cost a single dime of government spending. However (and this is the point) reducing hours of labor would not have added to the profits of corporations, it would have reduced them — the Nazi success lay precisely in reducing unemployment by increasing profits. This is why at the height of the financial crisis economists cracked open their books and began to bone up on the Nazi experience. Since Keynesian policies have only ever been a derivative of Nazi policies, Keynesians were forced to returned to the source, so to speak.
Now, to be honest, I should also explain that Keynesians were so desperate they also cracked open Das Kapital. Brad DeLong, spent a period of time poring over Marx’s 1851 essay, “Reflections on Money”. As he observed, however, Marx’s theory did not support the Keynesian school’s argument and in fact Marx ridiculed policies much like the ones Keynesians proposed:
“The Birmingham men, 122 who want to do away with the inconveniences of money by putting large quantities of money into circulation, or by lowering the standard of money’, are of course fools. Proudhon, Gray and others who want to retain money but in such a way. that it should no longer have the properties of money, are also fools. Since it is tit the money market that the entire crisis erupts and ill the features of bourgeois production recur as symptoms, which, it is true, become incidental causes, nothing is simpler to understand than the fact that it is money that narrow-minded reformers who stick to the bourgeois standpoint want to reform. Because they want to retain value and private exchange, they retain the division between the product and its exchangeability. But they want to modify the token of this division in such a way that it expresses identity.”
Marx did not think very highly of simpletons like these:
“They deal with everything in monosyllables and this constitutes their specific talent. The monetary system and the entire present system are in their opinion as straightforward and as stupid as they themselves are …”
Hilariously enough, after reading Marx’s statement, DeLong, ever the simpleton, wrote:
“Why he is opposed is really not clear to me…”
Carchedi debunks the Keynesian economic argument
As the data from Hitler’s Germany confirms, fascist state economic policies do not work by “expanding demand”, but by expanding profits. This should be clear now with the publication of Guglielmo Carchedi’s essay, “Could Keynes end the slump?” Carchedi’s argument is critical to understand because it debunks the common assumptions regarding how Keynesian fascist policies work. In his essay, Carchedi explains the results of his theoretical and empirical work:
“The thesis that state-induced redistribution and investment policies, possibly through state borrowing, could start a sustained recovery, provided the scale is sufficiently large, is not only theoretically invalid but also empirically unsubstantiated.”
Unfortunately, having shown that Keynesian (fascist state) policies do not work by redistributing income nor by direct state investment, Carchedi left the critical question unanswered:
“How did Nazi-style policies work to reduce unemployment and boost profits?”
It is not enough to explain how Keynesian policies don’t work, Carchedi had a responsibility to explain how they have actually worked for 80 years. Despite this major flaw, however, Carchedi does at least provide us with a clue how Keynesian policies might have worked during this period: the only way the policies could work is if they enabled the fascist state to destroy the excess capital in the economy.
“Then, if either pro-labour or pro-capital anti-crisis policies are impotent against the slump, the crisis must run its course until it itself creates the condition of its own solution. This is the destruction of capital. Only when sufficient (backward) capitals have been destroyed (have gone bankrupt) can the more efficient productive units start producing again on an enlarged scale.”
For some still unexplained reason Carchedi never follows up on this clue as to how fascist state spending might be involved in the actual destruction of capital. But the conceptual problem he appears to have encountered in this regard may be indicated in the very paragraph in which his solution is presented — he seems to think fascist state intervention in the economy is preventing the destruction of capital:
“It follows that, if these policies at best postpone the explosion of the crisis, they also postpone the recovery.”
Carchedi’s argument is that fascist state policies somehow delay the destruction of capital; so it never occurs to him these policies might accelerate this destruction. In truth, fascist economic policies systematized the destruction of capital itself by diverting economic resources into entirely unproductive state consumption like military spending, road construction and so forth as Leonhardt noted. To what productive use were the autobahn, the military, Nazi stadiums and monuments going to be put? And, today, how is it not possible to see that Washington defense spending on a scale equal to the gross spending of all other countries combined is nothing more than the destruction of capital on an unimaginable scale? By itself, the US accounts for 28% percent of a paved roads on the planet — how is this not the destruction of capital?
Carchedi rightly states the recovery of profits requires the destruction of capital, but then he ignores how this destruction is being accomplished. Having proven Keynesian policies don’t work the way Keynesians says it does, he simply leaves it at that, never investigating whether by some off chance it works the way he says it has to work in order to be official policy for 80 years.
Now think about this: if the fascist state unproductively spends $100 and the increase in productivity is 5%, the loss in real output over 10 years is $165; and over 80 years it is $5,414.63. The more capital is destroyed unproductively by the fascist state, the greater the loss of real output over the same period. The higher the increase in productivity, the greater the loss of real output over the same period.
Declining wages and slowing “nominal economic growth”
Thus we get this paper on the negative effects of Nazi spending on the German economy:
“The implementation of the Nazi ideology into agricultural institutions and the suppression of private consumption had a stronger impact on German food production and consumption than has hitherto been thought. We argue that the reforms of agrarian institutions reduced the growth of total factor productivity in German agriculture between 1933 and 1938 considerably. This exacerbated the restrictive effects of prioritizing the armaments industry to the detriment of the consumer goods industry and private consumption. As a consequence of less efficient food production and of consumption constraints, German consumers were forced to a diet and thus to a material standard of life that were much more frugal than national income figures suggest.”
Along the same lines, Tyler Cowen noted:
“McDonough indicates that economic growth in the Nazi 1930s was due primarily to arms spending, or again it was not real economic growth at all. This piece has much useful detail on private German consumption during the era and again the conclusions are pessimistic. Of course employment rose dramatically but it does not seem that real (non-militaristic) consumption and output did very well. There was militaristic make-work, based on transfers from one group to another, but with few accompanying economic benefits.”
These are interesting conclusions, not because it supports my view, but because it supports the view of most of the Left that despite increasing fascist state spending, deficits and GDP, the real wages of workers, and economic performance generally, has been declining for forty years. People wants to ascribe this decline to so-called “neo-liberal” policies in Washington, but evidence from Nazi Germany shows the decline in real wages is a necessary feature of fascist state spending itself.
The nominal growth in Gross Domestic Product is an illusion having nothing whatsoever to do with the real increase in the consumption of society. Spending $4.5 billion on a Nimitz-class aircraft carrier shows up in GDP, but puts no food on the tables of the working class. The labor that goes into the production of the aircraft carrier, however, is a very real expenditure of human brain, muscles and time. The labor is — by definition — unpaid labor and cannot be compensated for since the labor itself produces no real commodity. But the fact that the labor is uncompensated is only the beginning: the expenditure itself reduce the possibility of future output as well, since this labor expenditure cannot reenter the process of capitalist reproduction.
The two arguments presented here, taken together, show that neither the increase in employment or the increase in GDP have anything whatsoever to do with an increase in the material wealth of society. In fact, it is likely the opposite is true: the more employment and GDP increase, the further into poverty and misery the great mass of society descends.
The emergence of the American fascist state
What I have introduced above might only be considered indirect evidence that the fascist state in its entirety must be abolished and with it all existing economic relations bound up with the fascist state. I began with the curious interest of economists in the economic performance of the Nazi regime itself after the outbreak of the financial crisis and traced that interest to Keynes.
I followed this to a collection of scholarly works by economists on this subject and to Carchedi’s recent work showing Keynesian policies don’t work the way they are commonly described.
Finally I showed how, from the data of the Nazi regime itself, that fascist state policies had the same results we have experienced for more than four decades: declining real wages and increasing poverty, side by side with growing debt and government expenditures.
But nowhere in this mass of indirect evidence have I shown that, in fact, the fascist state in Washington is pursuing the exact same policies as the Nazi state in the 1930s.
That DIRECT evidence can be found here. This book is a collection of materials produced by the discussion of the Truman administration in the 1940s following the end of World War II. The collection was pulled into book form with an introduction by Paul Nitze, cold warrior in a succession of administrations. The topic under discussion is National Security Report 68. Wikipedia describes NSC-68 this way:
“National Council Report 68 (NSC-68) was a 58-page top secret policy paper issued by the United States National Security Council on April 14, 1950, during the presidency of Harry S. Truman. It was one of the most significant statements of American policy in the Cold War. NSC-68 largely shaped U.S. foreign policy in the Cold War for the next 20 years, and involved a decision to make Containment against Communist expansion a high priority. The strategy outlined in NSC-68 arguably achieved ultimate victory with the collapse of the Soviet Union and the subsequent emergence of a “new world order” centered on American liberal-capitalist values alone. Truman officially signed NSC-68 on September 30, 1950.”
The date Truman signed the document is especially significant — only a few months earlier conflict began in Korea, initiating six decades of military adventures. The book includes details of plans for the near total militarization of the US industry for the purpose of rapidly expanding the US military — an extremely lucrative development for American capital. Indeed, Nitze and the other authors explained the economic benefits of this buildup:
“With a high level of economic activity, the United States could soon attain a gross national product of $300 billion per year, as was pointed out in the President’s Economic Report. Progress in this direction would permit, and might itself be aided by, a build-up of the economic and military strength of the United States and the free world; furthermore, if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.”
Surprisingly, in the thirty years the report has been available, not a single Marxist scholar has published a study on it or the impact this initiative had on the operation of the capitalist mode of production. Mind you this document has been the core policy of the American fascist state from 1950 until the fall of the Soviet Union. During that time the number one policy goal of Washington economic policy was “full employment”.
By “full employment” Washington meant the maximization of the employment of labor power for purpose of a highly profitable aggressive military expansion. Employment was not a “right” as most Marxists seem to think; it was a requirement imposed on the population by the fascist state. The purpose of this imposition in the US was the same as it was in Nazi Germany: military expansion and corporate profit.
This is why, even in the present crisis, as employment plummeted millions of workers were dumped into the streets in a matter of months, the policy of the Obama administration still stressed: “more work done, more product produced and more people earning more income”.
Marxists academics appear to have no clue about the significance of this document, preferring simply to describe it as a plan for containing the Soviet Union. But there is a problem with that explanation: the Soviet Union has been gone for twenty years. If, as some argue, NSC-68 was just some sort of “emergency measure” dictated by the “Soviet Threat”, why does Washington still continue to insist on “full employment”?