thus 416,000 workers were permanently displaced. In both mining and railroads, lower output due to technological innovations increased the rate of displacement to 171,000 and 345,000 workers respectively. The improvements in trucking “competed more effectively” with railroad transport, while “electricity increasingly cut into the demand for coal.” Steam power plants used less coal by turning to more efficient energy sources, such as hydroelectric plants. But nowhere else in the U.S. economy was there greater permanent displacement than in agriculture. It was the first time this had occurred in U.S. history, a historic development given that so much economic growth throughout the nineteenth century was based on the claiming of the frontier, opening new and massive agricultural production. Between 1919 and 1929, farms gave work to 540,000 fewer persons, as the number of farms fell over the same period. But the actual displacement was much greater, since the overall farm population dropped by about a million, of which many had to find employment elsewhere.40
For Corey, the total or “absolute displacement of directly productive workers,” during the greatest period of capitalist prosperity in the contemporary epoch was an indication of something more general about monopoly capitalism. Compared with earlier economic growth and its adverse impact on labor between 1889 and 1919, the level of labor displacement between 1919 and 1929 was even greater, which, for Corey, marked an “unprecedented development, of profound significance.” Considering the increase of 7,180,000 persons to the workforce, plus the 1,155,000 workers who were displaced in manufactures, mining, railroads, and agriculture, Corey reasoned that 8,335,000 workers had to find employment in occupations other than where the displacements had occurred. This would have required these other occupations to be more than three times the size they had been in the earlier twenty-year period. While some ground was gained in distribution services, motor transport, and other areas of trade, absorption in strictly productive enterprises such as construction was limited. As a result, displacement and the absorption rate over the decade of the 1920s revealed that “normal unemployment” increased at least as much as a million, resulting in about 2.5 million unemployed in the year of the crash. As Corey wrote, “This great increase in the reserve army of the unemployed took place in the midst of the most flourishing prosperity.”41
Indeed, the economy did function on this basis, but only for a short time before it became necessary to divert profits from further investment in actual production to non-productive sectors. These investments were essentially speculative. In this Corey saw a fundamental contradiction in U.S. monopoly capitalism that ushered in its decline. Although the economy seemingly performed spectacularly until the 1929 crash, enabling newly elected President Herbert Hoover to declare that American prosperity would continue indefinitely, nothing could be further from the truth. The seeds of the 1929 bust were already evident only a short time after the Great Boom had begun. Though it is generally agreed that the great upswing in the economy had occurred by 1922, the rate of profit in the productive sectors of the economy began to fall two years later and continued to do so until the stock market collapsed five years later. As the rate of profit declined in productive sectors, capitalists diverted their investments to non-productive areas, primarily in finance. Thus profits in the financial sector increased 177 percent between 1923 and 1929. While investments in new facilities and machinery remained constant during that period, new shares and bonds issued for speculative investments tripled.42
But the move toward speculation was itself the product of the higher productivity of labor. Saturated markets for consumer goods meant less investment in capital goods—goods that are produced to make other goods, such as machines used in the production of automobiles—which affected the production of consumer goods and ultimately fueled the displacement of labor. This naturally affected consumption. As American workers who could get credit went into debt, capitalists diverted profits toward more speculative enterprises to make up for the declining rate of profit in productive enterprises. Prosperity became increasingly based on greater speculation until the Great Boom turned into its opposite, the Great Depression. Nevertheless, the underlying cause for this later development inhered in the fundamental divide between capital and labor created by capitalist accumulation. The law that Marx discovered in 1867 to explain how modern industrial growth in England created greater poverty in an ever-rising sea of plenty, was applied by Corey in 1934 to explain how the prosperity of the 1920s caused the greatest economic crisis in contemporary world history.
IN 1938, MAGIL AND STEVENS argued that the germ of American fascism was present in monopoly capitalism in the 1920s when Big Business and the Republican Party created an “entire mechanism of repression” to subject the working and middle classes to its control and domination. For much of the Depression decade that followed, the U.S. ruling class was split on how to end the economic crisis. This was abundantly clear in the battles between Roosevelt and his New Dealers who sought to save capitalism through direct government intervention, and those who remained wedded to the laissez-faire doctrine and ruling-class politics of Roosevelt’s three Republican predecessors. Through it all, however, the power of monopoly-finance capital remained superior despite the labor insurgency of 1934 that required the reformist Roosevelt and his administration to usher in Social Security, the National Labor Relations Board, and other components of what we know as the welfare state.
Nevertheless, the power of capital over American society continued to grow throughout the New Deal as the final phase in the transition to state monopoly capitalism. As the epicenter of the world capitalist system—Pax Americana in the making—the United States was the one advanced capitalist nation that could save its own version of liberal capitalist democracy from collapse. As the world’s banker and leading creditor to other nations, it prevailed through boom and bust, prosperity and depression, while the myriad and pervasive powers of capital became ever more totalizing at home and abroad. From a Marxist standpoint, it was a course irreversibly determined by the imperatives of monopoly and finance capital—the laws of motion governing its movement and social character—to accumulate exponentially in order to sustain profitability at the highest levels throughout the system. Those who profited most by it then forged new policies aimed at enhancing the executive power of government over the legislative branches and the judiciary, all aimed at preventing a revolutionary socialist alternative, real or perceived, to rise up against it. Simply put, capitalist progress meant the increasing subjugation of labor. Here was the root of the violence, deception, and manipulation that Magil and Stevens recognized as “the entire mechanism of repression.” The advance of such power to create and destroy at ever higher levels was a sure indicator of fascism as a result of the decline and decay of American capitalism. The centralization of wealth and power, monopoly, had mandated the increasing antidemocratic politics of the ruling class.
Lewis Corey explained this in 1934 in The Decline of American Capitalism by demonstrating how capitalist accumulation and economic growth exacerbated fundamental and irreconcilable contradictions between capital and labor, now at a much higher stage of capitalist development than those Marx observed in nineteenth-century England. Still, Corey affirmed what Marx had discovered as one of many laws governing the motion of capital. The constant and necessary drive for capitalist accumulation during the booming 1920s had subjected American labor to even greater control by capitalists. Just as the seeds of the bust were evident in the boom, so were fascist processes aimed at the domination of capital over society. In the epicenter of world capitalism, fascism neither required an economic collapse, a strong working-class challenge to capitalist rule, nor the fiery rise of its most immediate antagonist, middle-class reaction.
American fascism came to life in the midst of prosperity as a property of capital, specifically in its constant quest to reproduce itself. This was what Magil and Stevens implied by terming Big Business and Wall Street as the “fountainhead” of American fascism and what they surely meant when they defined it as “the rule by finance capital.” As Corey noted, modern capitalism was in transition from its industrial stage to a higher form, monopoly-finance capital and imperialism, when Marx’s Capital was published in 1867. But nothing in this movement to a higher stage of development had fundamentally altered the general law of capitalist accumulation. Corey ably demonstrated that American capitalists were driven to do what Marx saw in their English predecessors: “To
