by the growth of a relative surplus population and a reserve army of labor always at the ready to be exploited by capitalists. This is the most important dynamic in capitalist accumulation. At the same time, the growth of a reserve army of labor establishes the basis of a coming crisis of the entire system.
CAPITALIST ACCUMULATION AND ITS CONTRADICTIONS IN THE GREAT BOOM
Marx discovered the general law of capitalist accumulation in the actual conditions of modern production in England in the 1860s, then the center of capitalist industry in the world economy. The sudden emergence of the United States as the new industrial leader in the 1920s created conditions and processes that developed on much greater levels and degrees of complexity. But the result was still the same. In a rising sea of plenty, more and more working Americans found themselves unemployed or displaced in ways that consigned them to poverty and pauperism. Meanwhile, the rich got richer until their speculative excesses created the bust.
In 1934, Lewis Corey applied Marx’s law of capitalist accumulation to explain the root causes of the Great Depression. With a thorough analysis of statistical evidence in The Decline of American Capitalism, Corey explained why the unprecedented buildup of the means of production raised the profits for capitalists to new heights but at the expense of workers who were increasingly displaced from production. “Precisely because it is the most highly developed,” Corey wrote, “American industry offers the fullest confirmation of the analysis Karl Marx made of the laws of capitalist production.”33
Corey revealed that the value of constant capital rose more than wages and the output of manufactured goods during the 1920s. Between 1923 and 1929, constant capital in goods had increased by more than four times that of variable capital. Affirming one of Marx’s principal arguments about capitalist accumulation, Corey showed that the average American worker in 1929, the year of the Wall Street crash, was earning about the same in wages as in 1923. But during that same period, workers set in motion nearly one-third more constant capital, one-sixth more materials, and one-fifth more output. As the capitalist mode of production expanded to new heights, profits rose and wages fell. “As wages are the price of labor-power, of the worker’s skill and muscle and nerves,” Corey wrote, “the fall in wages involves displacement of labor and unemployment.”34
Corey also showed that a qualitative advance in the numbers of displaced workers had occurred between 1923 and 1929, the most prosperous years of the Great Boom. Relative displacement—the number of workers set free from the most mechanized areas of production who found work in less-developed industries or in other areas of the economy—had become a trend. In every year of the period, the number of workers in manufactures was lower than it was in 1919. As capital investment rose 19.1 percent, the absolute displacement of a little more than a million workers contributed to the number of about two million unemployed workers annually in that six-year period.
These major developments defined the U.S. economy during the prosperous 1920s. Productivity rose dramatically because of a massive transformation in constant capital resulting from mechanization. Although this presented the potential of plenty for workers—and was trumpeted by capitalist apologists as the key to universal prosperity—it had the opposite effect. As Corey observed, rising constant capital intensity was an “expression of economic progress” that concealed the contradiction of rising displacement and impoverishment for the majority of the U.S. population. As Corey argued, the growth in capitalist production based on greater use of machines, “simultaneously and antagonistically,” had an adverse effect on employment, thus driving down the purchasing power of the workers. As wages fell relative to output, the growing disproportions between wages and profits set “in motion the forces of cyclical crisis and breakdown.”35 As Corey explained:
The decrease of variable capital (wages) in favor of constant capital (equipment and materials) limits the production of surplus value in proportion to the total invested capital; while the increase in the output of goods and the restriction of mass purchasing power and consumption saturate markets and lower prices to unprofitable levels, thereby limiting the realization of surplus value in the form of profits. The mass of profits rises, but the rate of profit on the total invested capital tends to fall.
Thus the higher composition of capital [the growth of constant capital and diminution of its variable counterpart] is the basic objective factor in the contradictions of accumulation and of capitalist production and prosperity.36
This contradiction is crucial to Corey’s argument about the rising displacement of labor during the Great Boom of the 1920s. Corey used statistical evidence from several sources to argue why the Depression emerged in the midst of “flourishing prosperity” between 1923 and 1929. The main reason was due to the “violent expansion” of production based on higher productivity that compelled even higher rates of efficiency. This created a downward push on what was then the level of “normal unemployment,” which he defined as the way “capitalist industry is so organized and managed that there must always be a reserve of unemployed workers, even in the most prosperous times, to provide labor for new enterprises and as a means of forcing down wages.” Given the “greater and more violent expansion” of American capitalism historically and relative to all other countries, unemployment in the United States always exceeded that in other countries. This was clear during the previous boom of 1900–1913 (excluding the Depression years 1907–1909) when unemployment averaged 7.8 percent of available workers, but it was far worse between 1923 and 1929 given the even greater and “unusual prosperity” generated.37
Carefully following Marx, Corey explained how unprecedented capitalist prosperity during those years generated a corresponding higher rate of unemployment than what was normal.
Unemployment is essentially an aspect of the higher productivity of labor under the social relations of capitalist production. Normal unemployment grows when the productivity of labor rises disproportionately to output. Cyclical unemployment prevails in depressions, brought about primarily by forces identified with the higher productivity of labor (which is not matched by higher employment and wages). And the increasingly greater unemployment of capitalist decline is a result of industry having become so highly productive that it is unprofitable to use all its capacity: hence millions of workers are thrown out of work. The increasing efficiency of American industry in 1920–29 considerably raised the total of “normally” unemployed workers. For while the higher productivity of labor may mean higher wages, it always means a displacement of labor because fewer workers are required to produce a larger output. Thus labor is penalized by its own efficiency.38
The basis for the rise in the productivity of labor, in output per worker, was set in motion at the beginning of the decade. Corey uses examples to make his case. Of thirty-five plants surveyed in 1927, output per worker was 75 percent higher than in 1919 and 39 percent higher than in 1924. Labor productivity in automobile production rose 98 percent between 1919 and 1927; it was even higher, 198 percent, for rubber tires. After temporarily shutting down in 1922 to improve machinery, Ford Motor Company resumed production on a new level of productive capacity that reduced the workforce from 57,000 to 40,000. The operation of blast furnaces had become almost completely automated by 1929, raising productivity 135 percent higher than in 1919. Productivity in steel mills and rolling mills rose 43 percent, and there was an increase of 44 percent in petroleum refining. In 1925, something as simple as the adoption of the Owens automatic bottle machine drove man-hour productivity to rise 4,100 times. The invention of the dial telephone displaced more than half the number of operators. Generally, productivity of labor occurred unevenly across U.S. industries, though it rose substantially in all.39
Significantly, rising productivity between 1919 and 1929 caused an absolute, or permanent, displacement of labor for the first time in U.S. history. Large numbers of workers were displaced between 1919 and 1927, in manufactures, where productivity rose 42.5 percent, 40.5 percent in mining, 12.5 percent in railroads, and 29.5 percent in agriculture. By 1929, it had displaced
