New anthology by Magdoff and Sweezy: The underlying reasons for stock market crash

Scan page 14

Left to right: Harry Magdoff, chairperson Brenda Bishop, and Paul Siegel speaking at a recent New York Socialist Action Forum entitled: "The Stock Market Crash—What it Means for Working people." Over 60 people attended the meeting, which took place at the New School for Social Research.

Stagnation and the Financial Explosion, by Harry Magdoff and Paul M. Sweezy. Monthly Review Press, New York, 1987. 208 pp. $8.

Harry Magdoff and Paul Sweezy are perhaps the two leading Marxist economists in the United States. Their new book is the fourth in a series of essays on the American economy taken from "The Review of the Month" in Monthly Review, the periodical they co-edit. It includes articles written from 1982 to 1986.

The re-publication of these articles without change except for the addition of a few footnotes involves some repetition. Counterbalancing this minor disadvantage is the perception the reader gains of how Marxist analysts were able to give a much clearer understanding of where the economy was going than were establishment commentators.

These commentators sang hosannahs to the length of the boom phase of the current boom-bust cycle, some of them, to be sure, occasionally glancing anxiously at the mounting imbalance in the system.

Magdoff and Sweezy, however, looked beyond the immediate phenomena to the underlying trends. What they had to say illuminates the significance of the recent stock exchange "Black Monday" better than the plethora of discussion in the media since that dramatic event.

The economy today can be compared to a bus skidding violently on a road filled with oil slicks, with the driver (the ruling class) turning the steering wheel frantically from side to side in an effort to straighten out its course. The back-seat advisers, the economic experts, cry out in a confused chorus, "Right! Left! You're over-correcting!"

Magdoff and Sweezy, however, perceive that, even if the driver is able to get out of the skid without crashing (at the price of a severe knocking about of the occupants of the bus—-that is, all of us), there are other skids that lie ahead. What is needed is for the working class to take the driver's seat and to drive the bus onto a new road, the road leading to socialism.

Because Magdoff and Sweezy are not mere economic technicians, they are able to stand outside of the wilderness of data that is available and to see the forest without getting lost among the trees. They are thus able to write lucidly in essays that are bitesize and easy to swallow for an audience that is not made up of economics specialists.

They make use of the charts and statistics that are the tools of their profession not to overwhelm or obfuscate but to enlighten.

The theme that they keep hammering away on, always with new data, is that the property forms in the United States and other advanced capitalist countries hold back the immense amount of production that is possible. Capitalists will not invest in additional capacity when they can already produce more than the market can absorb— that is, at a profit to them. There is thus a very strong tendency to stagnation.

Saved by war economy This tendency was graphically proven during the Depression of the 1930s.

After the partial recovery in 1933 from the Great Depression, there was a totally unprecedented steep decline in 1937-38, rather than the achievement of full recovery, as had happened in previous business cycles.

In the last analysis, what brought the U.S. economy out of this downturn was the flood of war orders from Europe and then the United States itself entering the wat.

After the Second World War, the ten14 SOCIALIST ACTION dency to stagnation was masked for a prolonged period by production to rebuild a war-torn Europe and to meet a pent-up desire for consumer goods in the United States and by the remilitarization program upon which the United States embarked.

However, even during this period, while unemployment was zig-zagging in accordance with the ups and downs of the ACTION business cycle, the overall trend was up.

There were just two deviations from this overall trend-the periods of low unemployment that occurred during the wars in Korea and Vietnam. This is the way in which capitalism solves its problems—at the cost of creating greater problems for later.

By the mid-1970s, the tendency to stagnation became dominant. Officially recognized unemployment, which underestimates the actual rate, has remained within a range of 6 million to 9.3 million.

What has kept the economy propped up is the continued "fix" of an ever greater armaments program, which has become a habit to which capitalism cannot say no, and the development of a government, corporate, and individual debt structure whose like has never been seen.

Expansion of financial sector 'There has accordingly been a monstrous expansion of the financial sector of the economy. Growth in speculation has taken the place of growth in production. As Business Week said in September 1985, "slow growth and today's rampant speculative binge are locked in some kind of symbiotic embrace."

But this speculative binge, the greatest since 1929, has been a stimulus to the economy, not a drag, as has often been alleged, resulting in the construction of new office buildings and the production of computers and other communications equipment.

This is why the government, afraid of setting off a chain reaction of bankruptcies, has made no effort to control it, merely coming to the rescue when banks threaten to fail. But every time it puts out a fire, it only postpones the fire storm which the accumulating debt, a mountain of inflammable material, is building towards.

"One can hardly avoid the conclusion," wrote Magdoff and Sweezy in June 1986, "that the expansionary forces that have been behind the upswing of the last few yearsthose normal to this phase of the cycle, the military buildup, the continuing deficits, and the structural shift from production to finance—are running out of steam and the FEBRUARY 1988 inevitable collapse of the Reaganite illusion is looming more and more ominously on the horizon." That collapse came in October 1987.

Now all the talk is of the dire need to reduce the federal trade and budgetary deficits. But, according to Magdoff and Sweezy, these deficits are only symptoms; it is the stagnation of late capitalism that is Cliff Conner/Socialist Action the disease.

What they wrote in May 1985 is taking place today: "The economy as currently structured is (regarded as) sacrosanct. All blame for present troubles and future dangers is then heaped on the deficits and the federal debt load...And since it is supposedly imperative that the deficit be reduced, the agenda shifts to debate over where and how to cut welfare programs which—so the argument goes—-we can no longer afford."

Problem of budget deficits Although the budgetary deficits have acted as a stimulus to a stagnant economy and are now being used as a justification for FREE MAYEKISO!

An urgent defense campaign is taking shape on behalf of South African labor leader Moses Mayekiso and four other jailed Black trade unionists, whose trial resumes this month.

The defendants are being tried for "high treason and sedition" for their community-organizing efforts in the Black township of Alexandra. The charges focus on activities that include organizing rent and consumer boycotts and encouraging the government security forces to leave the township.

These charges could carry the death penalty.

Mayekiso, the general secretary of the National Union of Metalworkers of South Africa, helped pioneer the democratic, shop-floor-based system of organization prevalent in the country's Black unions. He was also chairman of the grassroots Alexandra Action Committee, which displaced the government-appointed administrators of the township in February 1986.

In the United States, defense activities have been spearheaded by the United Auto Workers union. The drastic cuts in the social wage of the working class, this does not mean that they do not constitute a problem. Capitalism cannot live with the deficits, and it cannot live without them.

The increase in interest payments on the federal debt since Reagan became president is even greater than the cuts in the health, education, and welfare programs. The cost of interest rose from 6.6 percent of all government expenditures in 1975 to 12.4 percent in 1984—at a rate that would bring it to 25 percent in the next five years.

The wealthy bondowners are acquiring greater wealth at the expense of the rest of us. Mass purchasing power is thus cut, reducing the domestic market, and the deficit ceases to be a stimulus to the economy becomes a brake.

What Magdoff and Sweezy advocate is a massive campaign similar to that of World War II. This campaign will produce miracles of production, not for the purpose of destruction but to feed the 20 million people that the Physicians' Task Force on Hunger estimates suffer from hunger each year and to house the millions of homeless and those suffering from inadequate living quarters.

"The more people move away from searching for illusory panaceas and begin to fight for their elementary rights to decent jobs, housing, and medical care, the closer they will come to coping with the real issues," they write.

Political strategy needed

What is required for the carrying on of such a struggle, as Magdoff and Sweezy (economists rather than political leaders) do not say, is a political strategy that will mobilize the masses and in the course of struggle raise their consciousness concerning the need for building a rational social order-that is, a socialist society.

This strategy has been formulated in the Transitional Program for Socialist Revolution, first written in 1938 by Leon Trotsky in the light of the past experience of struggle and subsequently amplified by the Fourth International in the light of continued experience.

The Transitional Program is designed to meet the various turns taken by capitalist crisis. In the event of inflation, it calls for a sliding scale of wages to meet the rising cost of living.

In the event of recession and unemployment, it calls for a sliding scale of hours—shorter hours of work at no loss of pay—and the nationalization under the management of workers' committees of factories that have closed down.

The Transitional Program, however, is not a collection of slogans to be mechanically advanced. It is a guide to action that must be creatively applied. Magdoff's and Sweezy's book shows that is more significant than ever.

UAW has convened a committee of prominent judges and attorneys to monitor the trial. The union has also launched a campaign to send postcards demanding Mayekiso's freedom to the South African ambassador in Washington, D.C.

We urge our readers to order the postcards and brochures describing Mayekiso's case and to distribute them in their unions, workplaces, and schools. Send to the UAW's Governmental and International Affairs Department at 1757 N Street N.W., Washington, D.C. 20036.

Letters of protest can also be sent to the Embassy of South Africa, 3051 Massachusetts Ave. N.W., Washington, D.C. 20008. Mail copies to NUMSA, P.O. Box 9451, Johannesburg 2000, South Africa.

Scan page 15

changes in America's eating habits. The food industry as a whole spends $7 billion a year on advertising. These funds are used primarily to promote snack foods, candy, The impact on the American diet is huge. One-fourth of our total sugar intake derives just from the consumption of sodas. The employment of sweeteners is