Marx and the Perpetual War Economy

By Eric S.

“Were the Soviet Union to sink tomorrow under the waters of the ocean, the American military-industrial establishment would have to go on, substantially unchanged, until some other adversary could be invented. Anything else would be an unacceptable shock to the American economy.”
― George F. Kennan

Over the past few years, Class Unity’s political education reading groups have focused on developing an understanding of global capitalism as the prime mover of contemporary history. To that end, we have sought a clearer conception of the causes of the most violent expressions of industrial capitalism over the past century, such as fascism and imperialism. Our purpose is to untie these loaded terms from the moral invective with which they are typically weighted down in contemporary cultural politics. Rather, we believe that the best way to understand modern history is through the critique of political economy, as only the materialist conception of history as framed by Marx is adequate to explain the causal mechanisms animating the tumult of recent times.

Reason in history

Marxism is a theory of history. Specifically, it is the theory of the development of the productive forces of industrial capitalism and the resulting class struggle between capitalists and workers. As such, Marx regards most everything in history prior to the early 1800s as ‘primitive.’ Following the French Revolution of 1789, the bourgeoisie, the class who own the means of production under capitalism, wrested political sovereignty from the decaying class of the feudal nobility, and consolidated its rule on the exploitation of wage labor by the new profit driven global economy. While common sense is deeply skeptical towards the attribution of cause and effect to history—the dubious ‘Reason’ that ‘governs the world’, according to Hegel—Marxism defines modern material and cultural progress in strictly economic terms, and argues that the many other social revolutions of the last 200 years all have economic development as their necessary cause, from the guillotine to social media. The driving force of the history of capitalism is the necessity that capital must accumulate. In other words, profits must be able to grow continuously, and for profits to grow continuously, production must increase in scale both industrially and geographically. As a result, the rest of society is perpetually transformed alongside the profit-driven delirium of industrial expansion. To say that history is conditioned by underlying economic forces is not to deny human agency in the face of economic circumstances, but rather to describe the necessity of the material conditions without which political action has no stakes. In order to change the world, one must first understand one’s place in it.

Hegel’s Philosophy of History tells us that history is rational when looked at with an eye towards rationality. While undoubtedly this sounds hopelessly naïve to many after the World Wars, even such unprecedented acts of human carnage become rational when looked at with an eye towards the internal necessities of industrial production for profit. The violence of the World Wars is one of the major historical fixations of the modern age, but its underlying causes are often left ill-defined. The First World War is typically described as the tragic result of the Byzantine web of secret alliances and diplomatic cabals entangling the governments of Europe prior to 1914, pulling each nation one after the other into open conflict following the assassination of the Arch Duke Ferdinand. The Second World War is popularly understood as following from the wrong people attaining political power—the fascists, war and genocide being the clear result of fascist politics. If only greater transparency and cooler heads had prevailed in 1914, and stronger democratic institutions in 1933, then these catastrophes could have been avoided entirely. Simply put, to insist on a purely political explanation for the wars is to mistake the effect for the cause. WWI was in fact the result of the economic conflict between British and German industrial capital for control of the global economy (America’s role was primarily as creditor to Europe); likewise, the fascists came to power because German industry needed the policy of rearmament and eventual war in order to save itself from the Great Depression. In both cases, it was in the economic interests of the ruling class to pursue war. The Nazis did not succeed by virtue of pure force of evil will—the interpretation favored by Hitler, Goebbels, and Riefenstahl as well as later liberal historians—they were rather the useful idiots of industry, the guardians of the sacred demand for profits über alles.

War is a feature of industrialized global capitalism. Why is this? The productive capacities of modern life are vastly more efficient and abundant than any that have ever been dreamt of previously in human history. However, a market economy can only accommodate so much of the industrial product. Because industry must be able to find a buyer for its merchandise in order to realize profits, then there must exist sufficient effective demand for products in order to sustain profitability, and if no such demand exists, then it must be artificially supported—for example, through government subsidies or monopoly protections via the state. As Marx describes it, the drive of industrial capital to accumulate comes with its own peculiar internal limitations, which require novel solutions pushing capitalist production beyond those limits. The major problem for capital arises from the need of each individual capitalist to continuously grow their surplus. In order for capitalists to profit, they must be able to profitably reinvest their surplus from one production cycle to the next; but for profits to continue to grow year after year, then the scale of production must expand accordingly. Unless industrial capitalism can expand beyond its own home market, it will result in crises of over-production and under-consumption, with an unsaleable surplus and bankrupt producers. In Marx’s terms, the forces of production (industrial capacity) contradict the relations of production (market exchange). Paradoxically, under the conditions of industrial capitalism, it is the very excess of available goods that leads to crisis, and not scarcity and lack of resources. 

As Marx predicted in the 1860s, the competition between industrialists through the mid-19th century lead to the formation of industrial cartels and trusts, as the larger an enterprise becomes, the more resistant it is to the shocks of the open free market, as the larger firms are able to under-sell their smaller competitors. Thus, the development of industry results in its monopolistic concentration, what Marx calls the ‘organic composition of capital.’ With monopoly capitalism comes the idea of ‘scientific management,’ whereby factories are engineered towards maximizing efficiency through the planned organization of heavy industry. In order for industrial equipment to function optimally, its use must not fall below a certain threshold; for example, turning off a steel works is not like turning off a light when you leave a room, as components of a steel works actually break when not in use. The rhythms of the functioning steel foundry must be kept in sync with the other sectors of the economy supporting it, from producers of coal and oil to wheat and cotton. Most importantly, a steel works is a major financial investment involving numerous creditors, and if plant capacity goes unutilized beneath a certain threshold, then the foundry becomes a financial liability once its owners can no longer pay their debts, and investors must cut their losses. These imperatives all stand in opposition during times of crisis to the lack of a market for the industrial surplus product, as without a possible buyer, the surplus rots in warehouses, and bankruptcies follow. As we can see from these conditions, industrial capitalism itself requires a high degree of economic planning—again, as Marx predicted—as without the careful coordination of industry, the accumulation of surplus capacity would lead to an overproduction crisis whereby there is no market for the abundance of goods suddenly available to consumers. These are the high costs of the anarchy of production! As new technology proliferates, the coordinated global dance of industrial capitalism becomes too important to be left to hazard on the free market, and corporations, cartels, and trusts come into being in order for the increasingly complex nature of social production to work to a common schedule—that of the commodity cycle. The emergence of economic planning becomes the truth of the growth of industrial capitalism, contrary to what later free-market ideologues would have us believe.

The growth of empire 

Monopoly capital has demonstrated two primary methods for dealing with the vicious problem of profitably reinvesting its surplus: imperialism and armament production. Because the industrial surplus exceeds market demand, the capitalist great powers must export onto the global market not only their surplus product, but their surplus capacity. Under imperialist policies such as were pursued by the British throughout the 19th century, and by Germany and the United States by the early 20th, the industrialized nations competed for the ability to export their surplus capital around the world. Thus, contracts were drawn between the developing client states of Western empire and major European and American firms for the rights to supply the non-capitalist world with industrial infrastructure—railroads, electricity, telephones. Without control of global markets, industrialized nations risked stagnation and bankruptcy. As Rudolf Hilferding and Rosa Luxemburg predicted before the First World War, the competition for economic control over a finite globe would soon turn to armed conflict. Economic and military power are universally coordinated in human history, and the modern bourgeois state functions, politically and militarily, in the interests of its native capitalists, supported in their diversified interests abroad by the new forms of industrialized military technology; hence, the ‘military industrial complex’ is the well-managed foundation of deep state power in the industrial age. When a rising power threatens the reigning superpower for economic dominance, war becomes inevitable. Thus, the dominant British Empire came to blows with the rising German Reich. Historians refer to such a deadlock as a ‘Thucydides trap,’ as the same material dynamic lead to the Peloponnesian War fought between Athens and Sparta for regional dominance in ancient Greece. But for industrial capitalism, the investment in armaments is a welcome means of profitably absorbing surplus capacity. And so production for profit becomes hamstrung by its own surfeit, and must go to war to balance its accounts. The means of production are transformed into means of destruction, clearing the slate for later investments in the rubble of Europe.

By the early 20th century, the competition between the industrial powers for global economic and military dominance was accelerating. Throughout the previous century, England had ruled as both the major imperial superpower as well as the first nation in history to develop industrially. As the major exporter of industrial technology (the ‘workshop of the world’), England favored free trade policies, as they benefited from low tariffs and the access to resources and markets supplied by their vast colonial network. The need to export surplus capacity, and not a lack of available resources, is what the British economist J.A. Hobson in 1902 called the ‘economic taproot of imperialism,’ which supersedes the supposed ‘civilizing duty’ of the advanced nations towards the rest of the world as the real cause of imperialism. Rudolf Hilferding’s Finance Capital, published in 1909, was among the most influential Marxist accounts of monopoly capitalism. Hobson and Hilferding distinguished between two models of the relation of industry to finance and the state under monopoly capitalism: the ‘German model’ integrating the state, industry, and finance into a single centrally-planned conglomerate, in distinction from the ‘free market’ separation of industry and finance favored by the British. The German model makes explicit the identity of state and economic planning, as economic expansion abroad becomes the instrument of state power on the international stage. (Importantly for any historical comparison with the present-day, the German model of monopoly capitalism ceased to exist in the West after 1945.) Once Germany and the United States had developed their own productive capacities enough to rival England, their governments opposed free trade in favor of protectionism, which allowed them to protect their home markets from British control. Thus, the conflict arose between two modes of capitalist expansion over a finite global market—the world simply wasn’t big enough for the both of them. Along these lines, Lenin, greatly influenced by Hobson and Hilferding, described ‘the division of the world among the great powers’ in his Imperialism, the Highest Stage of Capitalism, written in exile during WWI prior to the Russian Revolution. Indeed, by 1914, Marxists no longer needed to predict global conflict driven by the growth of industrial monopolies, as its reality had already come to pass.  

The rise of fascism

Just as the competition for imperial control of global markets is the sufficient cause of the First World War, so the needs of industry following the Great Depression of 1929 caused the Second. The success of Hitlerian politics was totally dependent upon the approval of the masters of German industry. In the wake of the collapse of the global market in 1929, many German steel manufacturers and industrialists were suddenly bankrupt. On the one hand, their heavy financial investment in industrial plant did not allow for them to curtail production without suffering catastrophic losses; on the other hand, there was no international market for the industrial surplus during the Depression. A market therefore had to be created through the policy of rearmament, in violation of the Treaty of Versailles, and which necessitated the political ascendance of belligerent nationalists to control of state. Like the Bonapartist bourgeoisie analyzed by Marx in the 18th Brumaire of Louis Bonaparte, the German capitalist class willingly suffered the loss of political freedom for the protection of profit. In the years before the start of the war, rearmament in fact saved the German economy from the Depression, just as it would for the United States through the 1940s. 

A curious first-hand document exists chronicling the decision-making behind industrial support for fascism. Alfred Sohn-Rethel, a Marxist economist loosely affiliated with the critical theorists of the Frankfurt School, worked during the early 1930s for an organization called the Central European Economic Bureau (Mitteleuropäischer Wirtshaftstag, or MWT), which represented the combined interests of major German industry in close coordination with the German military. In his book The Economy and Class Structure of German Fascism, Sohn-Rethel describes his improbable role as secretary at the MWT (without his employers knowing of his political affiliations) during the crucial years between the market crash and the rise of Hitler in 1933. From conversations with his superiors and colleagues, Sohn-Rethel determined that the impetus for the rise of Nazism was from the agreement among the leaders of the major industrial and agricultural firms across all sectors of the economy, in concert with the high command of the German military, to pursue a policy of rapid military rearmament with the aim of extending Germany’s geographic sphere of influence in central Europe. The Hitlerian fantasy of lebensraum for the Aryan supermen was in fact an ideological mask for the economic need of German capital to exert control over its neighboring region’s natural resources if it was to thrive as an industrial superpower. The Second World War was in every sense the sequel to the First, and both wars come down to German industry’s attempt to wrest control of the global economy from the hands of the dying British Empire. The need of German industry to grow necessitated its taking violent measures to usurp control of the global economy, with war as its sole recourse. According to Sohn-Rethel, the German military industrial complex elected fascism for its own economic needs, and not in pursuit of dubious racial fictions.

Sohn-Rethel’s analysis argues that the development of the productive forces of industrial capitalism comes into conflict with the economic demands of the free market. 

‘In the course of its industrial development, the modern production plant has become unable to adapt structurally to movements in the market. The market economy no longer dominates social reproduction. When demand falls and prices fall, it should be possible to restrict production and reduce unit costs. However, if a modern large company restricts the scale of production and operates below capacity, unit costs will go up, because an increasing proportion of cost factors has become inelastic, even apart from the constantly growing general overhead costs. On the contrary, when a given production capacity reaches full or even over-employment, unit costs decrease and competitiveness increases without substantial additional investment, such that profits increase disproportionately and create a boom that is out of proportion with market developments. The overall effect is that the economic autonomy of structures of production has increasingly destroyed the market economy’s capacity to regulate itself. If, however, production is no longer able to obey the demands of the market, then it is necessary to try to subject the market to the demands of production. The times when a large company was closed down because it was bankrupt according to the regulations of the market have long since passed; today market regulations are manipulated instead. There is a great variety of methods for such manipulation, but they all fall more or less under the same generic term: monopoly.’ 

Monopoly capitalism represents the emergence of economic planning within capitalism. According to Marx, as the social nature of the production process increases in complexity, the more it requires the interventions of managers and planners to ensure the efficiency of plant output in keeping with market demand. In other words, the advance of industrial capitalism requires technocratic manipulation merely in order to prevent its own implosion. As Marx describes it in Capital, Volume III, monopoly capitalism is the abolition of the capitalist mode of production within the capitalist mode of production itself, as new social forms of both labor and ownership are required by the ever-greater complexities of industrial production and infrastructure. Monopoly capitalism in fact points beyond itself to the possibility of the social ownership of the means of production, given that economic activity itself becomes socialized on an ever-increasing scale through the course of the development of the productive forces. Rather than corporations being owned and controlled by share-holders, it is now conceivable for them to be owned by the workers themselves—the corporation, the very symbol of capitalist greed, is in fact the social form of worker control of the economy in embryo. 

But so long as production is controlled for the profits of the ruling class, then the surplus of industrial capacity will have to find a market for its products. The only way to keep producing steel for a market in which there is no demand for steel, in a world in which there are diminishing profitable investment opportunities for expanded steel production, is to produce weapons. Weapons have the added advantage of creating more demand (albeit an artificial one) instead of adding to excess capacity or over accumulation, because they are not accumulated at all. They destroy each other and everything else, giving rise to more war and the need for reconstruction. The only way for otherwise bankrupt heavy industrialists to keep the profits on which their economic lives depended was to make bullets—and the only way to keep making them was to keep using them. These were the ‘economic causes of the war,’ to pervert the Keynesian expression. Hence the battle cry of the Second International: Socialism or Barbarism—that is, the choice facing modern humanity is between either the social control of the means of production for use, or their employment for profit resulting in the carnage of world wars and mass death as a release valve for the unmarketable abundance of modern technology.

Pax Americana

The main problem with the investment of industrial capital’s surplus capacity in military hardware is that, in strictly economic terms, it works. While once great German cities like Nuremberg and Dresden were leveled to dust and ash, the American economy boomed in the post-war years, largely thanks to the boost of military production during the course of the war. For aspiring industrial superpowers, armament production is a reliable means of absorbing surplus capacity, but also for ensuring that the nation’s military is well-equipped and capable of enforcing its interests all over the world. For the newly born American empire after 1945, the economic and strategic necessity of military investment facilitated its control of the global economy as this was only dreamt of by the Nazis and their corporate partners. 

In 2023, as America deficit spends to provide foreign aid for wars in Ukraine and Israel, we must bear in mind the real causes necessitating these investments. War is a necessary means of preserving industrial profits. When billions are sent abroad to protect the ‘rules-based order,’ they inevitably flow back into the balance sheets of arms manufacturers—and then into the campaign funds of the politicians who prosecute war. Only socialism defined as the collective ownership of the means of production can remove over-abundance as the root cause of warfare in a profit driven industrial economy.

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