Letter on Imperialist War and Capitalist Economic Cycles

[This is a letter I wrote in 1979 to Bob Avakian, Chairman of the Revolutionary Communist Party. As usual when communicating with the RCP, I received no reply.]

To Bob Avakian,
Chairman of the Central Committee of the RCP

Dear Bob,

In the recent Central Committee report published in the October/November issue of Revolution[1] you raise some important questions concerning the relation of imperialist war to economic crises. As you say in the report these are questions which need to be seriously taken up. Though I am certainly no expert on the subject I would like to submit a few thoughts for your consideration.

1.  Does imperialist war "exercise the 'purgative function' that economic crisis does under pre-monopoly capitalism?" It seems to me that the formulation here raises some problems, but that the answer is basically "yes" for two reasons: First, war is an excellent means of destroying capital; and second, imperialist war leads to the redivision of the world among the imperialist powers. Of these two factors the first is now by far the most important though this has not been completely true in the past. In fact it seems to me that serious questions can be raised about whether World War I served much of a purgative function at all. (There is no question that World War II did, however.)

2.  It should be noted first of all that there are real limitations on the "purgative" function of redistributing the world among the imperialist powers. Of course the imperialists who expand their empire will benefit, but just as surely those whose empire contracts will suffer. Therefore if redistribution has a "purgative" value for the victors it must have an aggravating effect on the economic problems of the losers. Is it possible that such a redivision will have a net overall beneficial or purgative effect for world imperialism as a whole? Maybe, but I don't see how.

3.  Therefore speaking in an overall sense it seems to me that the primary purgative function of inter-imperialist war lies in the material destruction of capital in the form of factories, machinery, etc. Lenin says in Imperialism, the Highest Stage of Capitalism that imperialism does not resolve the contradictions which exist under pre-monopoly capitalism but on the contrary these contradictions are greatly intensified. In particular, the contradictions which give rise to economic crises are greatly intensified, as are the resulting crises themselves. Marx of course called these economic catastrophes "crises of overproduction" and explained them not as absolute overproduction as compared with what the people need to have produced, but as relative overproduction as compared with what can produced and sold for a profit. Marx emphasized that the resolution of such a crisis lies in the destruction not only of "excess" consumer commodities but of part of the means of production themselves. And indeed in every significant recession or depression there is an enormous amount of capital which must simply be written off, whole factories closed down and dismantled, etc. Imperialism intensifies every aspect of such a crisis including the necessity for wholesale destruction of capital as a means of fundamentally resolving the crisis. (Though of course this only lays the basis for a new cycle leading to a new crisis.)

Since the fundamental problem in any crisis is the relative surplus of capital (which results in the collapse of profits, etc.), the only fundamental means of resolving the crisis is the destruction of that surplus capital, together with some of the "non-surplus" capital. Other measures, such as the furious expansion of credit and even the opening up of new parts of the world for investment, marketing, etc., are only means of postponing the day of reckoning. (Here again is a reason why the redistribution of the world can only be a partial and temporary resolution of a crisis.)

In short, imperialist war plays a purgative function in the overall imperialist world crisis to the extent, and only to the extent, that it physically destroys the means of production.

4.  In the past, imperialist wars have not necessarily destroyed the means of production. Although there was much property destruction in World War I, for example, my impression is that the factories and machines were not greatly affected in any country. (This is an important question of historical research.) Certainly except for a few sensational acts of sabotage there was no physical destruction of capital in the U.S. or Britain. Most of the war was fought in relatively restricted areas of France, Poland, Russia, etc. Even Germany probably was close to unscathed as far as physical capital goes.

In World War II the U.S. was the only imperialist power to escape severe damage to the means of production. Everywhere else there was tremendous destruction of physical capital.

In future imperialist world wars it seems almost certain that the means of production will suffer unprecedented extremes of destruction in every imperialist country (as well as large areas of the rest of the world). To be sure, it is possible that by means of nerve gas, neutron bombs, etc., the physical destruction (though not the human destruction) could be minimized but it does not seem very likely that these kinds of weapons will be the dominant factor in the next world war at least. On the other hand the next world war may well lead to victorious world revolution and the final destruction of the world imperialist system. In that case it will also be untrue, in a sense, that the war served a purgative function for capitalist economic recovery. (Something that kills the patient is not usually considered a purgative.) It may therefore turn out that only one world war, World War II, served a purgative function on the world imperialist economy.

But nevertheless the purgative potential of world war is an important point in the comprehension of the workings of the world imperialist system which unfortunately still exists today. It seems correct to say that, with the exceptions of the first and last world wars (for different reasons), inter-imperialist world war can and does serve a purgative function with respect to imperialist economic crises.

5.  After World War I the world imperialist economic recovery was fragile and short-lived, at least compared to the aftermath of World War II. Why? In my opinion it is because there was a lot more destruction of physical capital in World War II.

Germany never did recover after World War I (at least until the Nazi war economy was put in place), and the usual explanation for this--the burden of reparations to other imperialists--is only a very partial and secondary explanation. The loss of most of its economic empire was far more important than the reparations problem, I suspect, but in any case the fundamental point is that there was no mass destruction of physical capital which could constitute the cleared ground necessary for renewed high-gear economic expansion. Even in the victorious imperialist countries the recovery was not all that impressive in historical retrospective. There was a severe, though short, downturn in 1920-21, followed by 8 or 9 boom years, and then the Great Depression. Those 8 or 9 boom years among the winners can be explained by a combination of factors: first, and probably most important, the new turf available for exploitation stolen from the Germans (not just its former colonies but less competition in the advanced countries on the part of the weakened German imperialists); second, the development of whole new industries (automobiles, especially, but also radio, etc.); third, credit expansion; fourth, with respect to France and Britain, the reparations loot taken directly from Germany; etc. The basic "problem" with World War I (with respect to its purgative ability) was that it was not destructive enough.

World War II on the other hand was quite destructive of physical capital and this is the primary reason why there was a quarter century post-war boom in the capitalist world. The secondary reason is the pre-war "voluntary" destruction of capital during the Great Depression. It's true that there were also other factors such as new industries to be built up (electronics, computers, nuclear, aerospace, etc.); credit expansion far greater than anything before in history; etc. And in the case of the U.S. especially there was the greatly expanded imperialist economic penetration of the world, and not only the former European colonies which were once off limits to other imperialists, but even more important, penetration of the European capitalist countries themselves.

It is usually recognized that, whatever the case may have been with Germany, Japan, etc., the U.S. economic boom after World War II was due to the great expansion of the U.S. economic empire around the world. But there is a crucial point here which often goes unrecognized: much of the U.S. imperialist expansion around the world--and most certainly within Europe--was possible only because of the tremendous destruction of physical capital in these countries during World War II. In other words, even though the home plant of the U.S. imperialists was not damaged in the war, they were able to benefit from the destruction of the capital of the other imperialist and capitalist countries. New markets opened up for them around the world, and more importantly, new possibilities for the expansion of U.S. capital in the countries damaged in the war. I don't want to unduly simplify matters here. There are a lot of special factors in the U.S. imperialist success after World War II including the new international financial system which in effect allowed the U.S. imperialists to print up I.O.U.'s in almost unlimited quantities in order to buy up companies and resources around the world. But I think that when it gets down to the fundamental cause of the U.S. imperialist post-war economic success, it is really no different from that of the other imperialist "success stories"--it depended upon the prior destruction of a large part of the means of production in the capitalist world by the war, and to a lesser extent, by the Great Depression.

6.  Thus in part I am disagreeing with your comment that a new world war "would not at all constitute or signal some resolution of the crisis for the imperialists, in and of itself--for that, they would have to win the war, redivide the world favorably and at the same time prevent or significantly limit revolution leading to socialism in various parts of the world." [p. 9] Your point about their necessity to prevent or limit revolution is certainly correct, but not, I think, your point about their necessity of winning the war and favorably redividing the world in order to resolve the economic crisis. If we look at World War II, for example, both Germany and Japan lost the war and had the world unfavorably redivided from their point of view. And yet, because of the physical destruction of their own productive plant, and that of many other countries, they were able to begin a long and relatively rapid economic expansion which is only now drawing to a final close. I don't see any obvious reason why a more or less similar scenario could not be repeated after the next world war (again, excepting the possibility of revolution).

You say that "War in itself is not the end of crisis (or a particular spiral), but on the contrary represents the extreme concentration of the contradiction of the imperialist system and the crisis that preceded and led up to the war." World war is certainly the extreme concentration of the contradiction of the imperialist system and the crisis, but I don't see why this precludes it from being at the same time the means by which the economic crisis is in fact resolved through the destruction of physical capital. It seems to me that you yourself are saying that war can resolve such an economic crisis in your next paragraph where you talk about the "purgative function" of war. The point you raise on page 15 about viewing "major spirals under imperialism as being basically defined from inter-imperialist war to inter-imperialist war" also suggests--correctly it seems to me--that inter-imperialist war does constitute the end of one cycle, its resolution, and the beginning of the next.

7.  Is it really true that the basic socio-economic cycle under imperialism is from world war to world war? Yes, I think it is. Actually the fundamental economic cycle still takes the same form as it did under pre-monopoly capitalism with the massive destruction of capital marking the end of one cycle and the beginning of the next. But historical experience so far seems to show that under imperialism only inter-imperialist world war is sufficiently destructive of capital to act as an effective purgative. Anything, from voluntary dismantling of factories to widespread natural disasters, which actually results in sufficiently massive destruction of capital could theoretically bring one cycle to a close and mark the beginning of the next cycle. But today it seems that only world war is capable of destruction on that massive scale.

The Great Depression, for example, undoubtedly resulted in the liquidation of enormous amounts of capital--but still not enough to effectively purge the system of its crisis. It is a very important question of political-economic theory to be able to say exactly why the Depression--despite its unprecedented severity--was unable alone to restore the imperialist economic system. Of course, if my general line of argument is correct, the reason is that the Depression wasn't sufficiently destructive of capital, but the question is: why wasn't it sufficiently destructive? I don't know that I can give a complete answer to this but some relevant points seem to be:

  1. The excess capital plant built up under imperialism is way beyond anything ever seen before in pre-monopoly capitalism. To use a somewhat arbitrary numerical illustration, whereas under pre-monopoly capitalism it was necessary to destroy perhaps 10 or 20% of outstanding capital to get things going again, under imperialism the destruction needs to be more like 50 or 60%. (The exact percentages can only be determined by extensive and careful historical research.)
  2. Giant monopoly corporations (and their controlling financial institutions in many cases) can in general allow a much larger portion of their productive plant to sit idle, and to sit idle for a much longer time, than can pre-monopoly capitalists, since their assets, resources, lines of credit, etc., are much greater.
  3. Money and credit capital is much more easily destroyed by traditional cyclic processes than is physical capital, but because of the unparalleled growth of all kinds of capital in the imperialist economy it is more than ever necessary to wipe out a larger proportion of physical capital in order to really purge the system.
  4. The state plays a much more central economic role than it did in the days of pre-monopoly capitalism. Of course this has expanded enormously since (and because of) the Great Depression, but even in the first few decades of this century the role of the state (Federal Reserve, etc.) was quite significant. Such intervention helps prevent or at least postpone the outright destruction of capital in a variety of ways: subsidies, government contracts, loans and loan guarantees, etc. And it helps postpone the collapse of credit which, when it comes, requires the writing off of enormous quantities of money capital as well as forces the widespread destruction of physical capital.

There must be other factors too. In any case, it seems to me that eventually all these mitigating factors would fail and the economic boil would burst on its own--except that the imperialists inevitably resort to war long before this. In short, under imperialism the crisis stage of the economic cycle is so severe and so prolonged that the various imperialist national groups are compelled to resort to war and fascism before the economy can complete its purgative collapse.

8.  On page 9 you discuss two spirals or cycles under imperialism: the "major spirals" from one inter-imperialist war to the next, and the shorter term "cyclical developments". You suggest that the major spirals are principal over and condition the cyclical developments. I think your basic conception here is certainly correct: there are two kinds of cycles (I call them both 'cycles' rather than 'spirals', for reasons which I'll try to bring out below) and the longer one (from war to war) is the more principal, more important, and the conditioner of the shorter cycle.

However in saying that the shorter cycle "is not eliminated under imperialism" you seem to imply that it is the continuation of the pre-monopoly capitalist economic cycle while the longer cycle is something totally new. I don't see it quite that way. To me it seems that both present-day economic cycles are the continuation of the pre-monopoly capitalist economic cycle, that "one has split into two", and that if anything the longer cycle is the primary offspring. It is true of course that the period of the short cycle (the time from the beginning of one short cycle to the beginning of the next short cycle) is closer to that of the period of the pre-monopoly cycle, but that is not the essential point. The short cycle is based on the more superficial phenomena (such as variations in credit supply, inventory fluctuation, etc.) which existed also in the pre-monopoly cycle and which triggered the more basic variations (such as the collapse of credit and contraction of capital). These more basic fluctuations now occur in the long cycle because under imperialism the more superficial cyclic variations no longer trigger (in every case) the basic variations. To be less abstract, it seems to me that the basic capitalist economic cycle is the same in the imperialist economy as it was under pre-monopoly capitalism, going from one purgatory anihilation of capital to the next, but that now this takes a considerably longer period to develop. The more superficial economic fluctuations--which still occur and result in the short cycle--usually do not trigger the collapse of the credit bubble, for example, like they used to (the old time "panics"), nor result in the extensive destruction of capital like they used to. (The same sorts of reasons mentioned in section 7 above go part of the way towards explaining why this difference exists.) Eventually, after a number of such short cycles, and as the underlying basic contradictions build, one of these short-cycle downturns will trigger the more disastrous long-cycle collapse (unless world war cuts short this development).

From the point of view of Marxist political economy, from the point of view of the basic socio-economic contradictions at work in modern society, it is the long-term cycle which deserves to be viewed as the continuation of the pre-monopoly economic cycle. Altogether too much attention has been focused on the short-cycles in the recent past, to the exclusion of attention to the basic economic cycle. This is why I for one am very glad to see your discussion of this longer cycle as principal in the C.C. report. It seems to me to be an important step towards reconstituting Marxist political economy on a solid foundation under today's imperialist conditions.

9.  The analysis that I have argued for in this letter, that the destruction of "excess" capital is the essential purgative activity of inter-imperialist war, requires the abandonment of the "capital shortage" theory which has been put forward by the RCP in the past. Since I submitted a paper to the Party leadership on this theory several years ago I will not go into it any further now.

*    *    *

I know there is a lot more to all this than I have gone into here, or indeed than I am capable of exploring at the present time. But I hope I have been of some small help in spurring your own thinking on these questions.

Scott H.
(Dec. 2, 1979)


[1]  Bob Avakian, "The Prospects for Revolution and the Urgent Tasks in the Decade Ahead", Revolution, vol 4, no. 10-11, October/November 1979, pp. 6-19.

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