And then the roof fell in! The American Slump
The beginning of a recession is like intoxication: the patient gets worse—but he feels better. British and American capitalism has been looking and feeling better for two years, but now the symptoms are beginning to show. Business has been booming, problems of shortages have been overcome, and for the consumer—with the end of the “sellers’” market, inducements to buy in the form of better quality, better service, better packaging or even lower price: all these have made life seem better and easier.
Buy now and pay later
Since the War the credit buying was expanded greatly in this country, but it has never reached United States proportions. The legal restriction on hire purchase trading that we have here (minimum deposits, etc.) does not apply in the U.S., and consequently, as selling became more difficult, “easier and easier” credit terms were offend. Not only is credit buying respectable in America, but almost a national custom. Whatever the income range—from the lowest paid to those executives whose blood pressure would suffer considerably at the thought that they wen “workers’’—all buy houses, cars (a new one every year if possible), refrigerators, holidays, and all the gimmicks of the American Way of Life, on credit.
Then is also a growing inability and reluctance to repair anything. When that brand new car—or fridge— or house—starts giving trouble, well then, just throw it away and buy another one. Last year Time magazine, which usually has on its cover the effigy of a Great Man (or film star), featured “The American Repair Man.” and the article dealing with the cover story showed in amusing detail the situation of the American worker, surrounded by mechanical appliances which would save him a lot of labour if only he could get them to work again.
Throw it away!
But, of course, the advertisers have the answer: buy another one. Buy this year’s model: be in the fashion: your old green refrigerator is out of date—red is the colour this year1
In fact, there is only one thing wrong with buying on credit, and that is that you have to pay for it even if it is later rather than sooner, and this is rapidly being brought home to those millions of Americans who are now unemployed.
Unemployment
The present situation in America is that there are over three million drawing unemployment benefit. The actual number of unemployed exceeds this figure, since the benefit only lasts for a maximum period of 39 weeks and many have been out of work long enough to be now disqualified. This puts them “on relief,” paid for by their city, and they come out of the statistics of “ unemployed.” Arising from this lack of work (and consequently, lack of pay) the furniture and other items bought on credit are being repossessed by the sellers, mortgages are in many cases being held over temporarily and stealing of food from self-service stores has increased noticeably in those towns that have been forcibly hit by unemployment.
The “land of opportunity” is receding for the unemployed worker whose home and way of life is in danger. Suddenly, the insecurity of capitalism is made real.
This problem will be aggravated since we learnt recently that the American car factories are shortly to shut down production of 1958 models for several months to give dealers time to sell 760,000 1958 cars now unsold. The industry always shuts down every year in order to retool for the next year’s cars, but this year the closure has been brought forward many months.
Too Much
Everywhere the terrible cry goes up—surpluses. Too much food, bumper crops; too much oil; too many cars and other goods on the market: too much production of raw materials from South America and Asia, causing world prices of raw materials to drop drastically: too many unemployed, not able on the benefit to buy more of these commodities and seeing those that they have “ bought ” taken back by the finance companies.
Add to this catalogue the statement by Mr. Khrushchev last November: “We declare war on you in the peaceful field of trade.” Thus Russia, a new competitor, enters world capitalism on a large scale as a rival to the older established powers.
Capitalism’s Answer
What is the answer? In May there was a meeting of the National Industrial Conference Board in New York at which economic and business experts gave their remedies. Cut taxes to encourage business they say: but the man on relief does not pay taxes and has not business been “encouraged” too much? Produce better values, they say; but the man on relief (or in danger of it) will be unable to buy anything other than necessities, good or bad value. Bring back the lost art of selling, they say: but again, if you haven’t got the money you can’t buy, no matter how slick the salesman. Introduce high tariffs against foreign imports? but that will only aggravate the bankruptcy of countries like Bolivia, Chile, Indonesia and others, and will have a profound effect on countries like Britain, which depends largely on car exports to the U.S. It has been estimated that a 4 per cent. drop in key prices in undeveloped lands cancels out all the funds supplied by the United States in economic aid. In many cases the drop has already exceeded that amount.
It may seem strange that those who support capitalism most volubly—including those workers now unemployed—are those who understand its workings least. Or perhaps it is not so surprising since if they did understand it, would they still support it? See the great surprise of the American worker who finds it hard to realise that all that bustling prosperity founded upon these great factories—such permanent things—all this should suddenly collapse into what is now politely called a “recession.” A recession, mark you, that shows no signs of getting better yet. The National Industrial Conference Board which met in New York this month (referred to above) received a “report from businessmen pointing to a further decline in spending for plant expansion that will last into 1959.” And recently a top building-industry economist, speaking to the New York Society of Security Analysts said that the recession will last “through I960″
Our Criticism
Socialists are opposed to capitalism and we are opposed because we do understand the basic workings of the system. The broad cycle of slump and boom will continue due to the basis on which production rests. This basis, this “ incentive ” that is thought so admirable by anti-Socialists, is the competitive urge to profit. But this incentive can work both ways—if the production of a commodity does not appear profitable, then it will not normally be produced. On the other hand, distribution has no relation to the needs of people but only to the ability or otherwise to pay the price.
Generally the picture of the world commodity market today—of which America is only a more dramatic example—is of too many goods unsold, in store, production being restricted. And, at the same time, too many people needing those goods and without the money to buy them.
It’s Falling
This is always the picture in capitalism and is only brought out more clearly when, as at the present time, there is a growing world recession. To those who support capitalism, this system of fake individualism, financial enterprise and dog-eat-dog competition, we say. this world as you see it now is the society that you perpetuate.
We say further that this is not necessary. The energy and enterprise that goes into attempts to solve insoluble problems and to stabilise an unstable system, and the techniques of production that produced these vast crisis-making surpluses—all these could be used perfectly well for the benefit of the whole community, in a society where goods were made to satisfy peoples’ needs and not for the profit of the producers.
With Socialism, economic security would be a reality.
As one of the unemployed said, in Bristol, Connecticut, where now nearly one worker in four is unemployed: “ It seemed set to last for ever, and then the roof fell in.”
L. B.