The Current Economic Crisis and the Position of Revolutionary Syndicalism (1931)¹

When the first stock market panic broke out in New York on October 29, 1929, like a bolt from the blue, at first all those who were accustomed to observing only the surface of social phenomena refused to believe in the profound seriousness of the catastrophe. And American economists and financiers—generally superficial and self-confident as only Americans can be—gave us their solemn assurance that this was just a normal stock market panic.

For several weeks, the general public was on their side. What! America, the “Republic of Two Oceans,” America, which has a domestic market so vast and self-sufficient that no other country can match it; whose industry is undoubtedly better organized than any other; America, which, behind high tariff walls, can calmly face international competition – America would face an economic crisis so acute, so profound, that even the great crisis of 1907 to 1909 had not been? At first, this seemed impossible to tens of thousands of people.

And yet many others, alerted by deeper economic studies, had claimed months and years before that there was something unhealthy and a bad omen in the rapid, feverish development of American industries, something from which they predicted a sudden, powerful, and also quite “American” catastrophe.

Their prophecy was based, first of all, on the unscrupulous speculation that had developed in North America, which can only be seen as a symptom of an unhealthy organization of the production and distribution system, but which nevertheless has its significance as such.

The American businessman who has a few million dollars at his disposal is not in the habit of investing all his money in a single or two industrial, commercial, or financial enterprises; Instead, he buys five percent of the shares in one company, takes out a mortgage on it, and uses the new money to buy the majority of shares in a second factory, trading company, or bank, on which he likewise takes out a mortgage, in order to use the latter amount to buy a third company, and so on. In this way, a single person or a small group of industrial swindlers “controls”—as the Americans call it—many and even diverse enterprises, all of which are heavily indebted, until the first storm blows the house of cards apart.

There is also the very American process of stockwatering (capital investment), which, just like the above-mentioned “chaining” of industries, had already contributed so much to the inevitable “crash” in 1907. When five, ten, or fifty industrial, commercial, or banking enterprises, each worth an average of three million dollars, form a “trust,” they are valued together not at fifteen, thirty, or one hundred and fifty million dollars, but much higher, at about twenty, fifty, or two hundred million, and according to this new valuation, they are expected to make a profit. As long as the “boom” lasts, this works well; but when the changed economic situation on the world market or even in the country itself no longer allows the industrial impostors to exploit their real or supposed “monopoly” in such a way that the necessary profit can be made, then things change. Many American—as well as many European—trusts and cartels operate with huge executive salaries, bonuses, perks for the presence of members on the board of directors, and other expenditures of money that the trust and cartel leaders pocket personally, without even thinking about a profit for the shareholders.

On the stock market, however, all that glitters seems to be gold, and so, for example, before the “crash” in New York, the average price of shares in thirty of the main industrial companies in the United States had risen from 100 (in 1923) to 381. The panic knocked it down to 272 in just a few days (the figures are taken from the London Times).

The increasingly sophisticated technical organization of most American and many European large companies also has its drawbacks. The United States is the country where industries are “rationalized” more ruthlessly than anywhere else, and it was from America that the various rationalization systems (Fordism, Taylorism, etc.) spread throughout the capitalist world. These systems relate not only to the improvement of machinery, the arrangement of the various production, handling, and transport processes, and the technical management of the plants, but also—and above all—to costly human labor. The consequence of all this, however, has been that unemployment in many older industrial countries, which was already so difficult to combat in the postwar period, has grown like an avalanche. At the time of this report's publication, there are well over twenty million people in the capitalist world who are capable of working but are condemned to inactivity against their will, and of this number, at least five to six million are in the United States of America.

For revolutionary syndicalists, this is a warning against welcoming “rationalization” with open arms when it only refers to improvements in machinery and materials, as well as technical management, without at the same time demanding a reduction in working hours or an increase in wages. Where modern rationalization extends to the organization of human labor, revolutionary workers should fight it outright wherever it worsens the exploitation of the workforce or stifles the human spirit to the point of dullness. In any case, however, a reduction in working hours must outweigh the intensification of work.

If, on the one hand, production is being vigorously intensified everywhere and, on the other hand, this intensification is throwing hundreds of thousands and hundreds of thousands of workers onto the streets, sometimes terribly reducing the purchasing power of the working masses, then ultimately a catastrophe, an industrial, commercial, and financial global crash, is inevitable.

The fact that this first occurred in America is no more surprising than the fact that the financial crisis preceded the deeper disturbances in the economic equilibrium. After all, the stock market is a kind of barometer of the deeper commercial, agricultural, and industrial conditions. The fact that it is currently impossible to limit any acute financial crisis to the stock market alone is evident from the fact that in today's production period there is hardly a single large enterprise in industry, trade, and transport that does not have to rely on a bank and is dependent on banks.

Let us now take a look at how things stood in the fall of 1929 in American—and also in many European—industrial, commercial, agricultural, and transport enterprises under the various conditions mentioned above: speculation, rationalization and intensification of production processes, unemployment, etc.

Extreme rationalization and mass production of a wide variety of goods “in series” had pushed the supply of products far beyond demand in many industries. America was proud that there was one car for every eight people in the country, and Mr. Ford² felt compelled to advertise the principle that a true American family must own two cars. This looked good on paper, but in reality, despite huge exports abroad, the situation of the automobile industry in America – and, of course, soon also in European countries due to the downturn – was desperate. In the film industry and various other industries producing consumer goods, overproduction in the months before the crash was just as critical. But the production of semi-finished products and raw materials was also overloaded. When one reads how, before the panic, the giant American Standard Oil Company, in order to compete with the European Royal Dutch, distributed tens of thousands of petroleum lamps free of charge to the population in various Asian countries, solely to create new markets for itself, one realizes that here too, consumption lagged behind production.

The catastrophe broke out, of course, primarily in the finished goods industries, especially luxury goods, and soon spread from America to the main industrial countries of Europe – Germany, England, Belgium, etc. France was spared for longer, and even now the disease is much less pronounced there than in its industrial neighbors.

It is obvious that when a financial crisis breaks out, which soon reveals itself to be based on deeper economic causes, the masses who are affected first begin to economize on goods whose use is not immediately necessary: cars and bicycles, musical instruments, gold and silverware and jewelry, but then also hats and shoes, men's and women's clothing, etc.

By the spring of 1930, however, the semi-finished goods and textile industries were already affected everywhere, until finally—as in every deep economic crisis—the industries producing basic materials and raw materials: iron, steel, rubber, stone, coal, etc., followed suit.

In the summer of 1930, the Berlin-based "Institute for Economic Research" classified the countries experiencing an economic downturn as follows:

1. Incipient decline: Countries showing only isolated signs of decline as a result of the easing of excesses from a previous economic boom.
2. Progressive decline: General declines with a negative trend.
3. Ending decline: Slowed decline or already stagnation at the level reached.

At that time, the only European countries in the beginning stage of decline were the Netherlands, Switzerland, and Sweden, and the only overseas countries were Chile and New Zealand.

In addition to France, Denmark, Ireland, and Norway were also hardly affected by the depressive trend of the unfavorable economic situation.

However, the majority of countries in the world were already in the stage of progressive decline, among them above all the European industrialized countries: Great Britain, Belgium, Italy, Austria, and Czechoslovakia.

The Berlin Institute considered Germany and the United States to be in the final stages of decline, along with the European countries of Poland, Romania, Portugal, and Finland, as well as the South American countries of Brazil, Colombia, Venezuela, and Ecuador.

Of course, such a report on the international economic situation is based on a great deal of detail. Hardly any two industries in the same country are in exactly the same situation, and even now many of the main industries in all capitalist countries are still experiencing a more or less severe economic downturn.

It is likely that the construction industry will once again be the first to emerge from the general depression, as has generally been the case in previous crises that have been studied in detail since the beginning of the 19th century. In any case, however, it must be expected that even in those industries that are already recovering, wherever the low point of the economic downturn has apparently been reached, a kind of convalescence process will follow for several years, a milder depression during which industries will crawl along and rise only slowly until a new period of upswing gradually sets in.

*

Before we can correctly assess the position and duties of the revolutionary trade union movement in the face of economic crises, it is absolutely necessary to answer the question of whether such recurring crises can be prevented in the capitalist economic order. My answer, based on many years of study, is an unqualified no.

I will briefly outline some of the reasons that I have developed in detail in my Théorie du Capital et du Profit, Paris 1926, (Part II, Chapters XXXII, V and VI):

The deeper causes of modern economic crises and the explanation for their periodicity must be sought in the combined fluctuations of demand and supply of goods and in the successive states of overproduction or underproduction.

Social capital, through its tendency to accumulate, creates a constant need to expand production.

Capital must bear fruit, and under the current capitalist social order, production ultimately has only one goal: the realization of entrepreneurial profit. Now, if today's society devotes all its energy, and especially all its intelligence, to the technical perfection of the production and distribution of goods, civilization is periodically confronted with the serious question that social consumption is unable to consume the growing stream of goods supplied to it by social production.

Ultimately, the conflict between the progressive growth of production in periods of economic boom and the less pronounced development of actual demand arises from the accumulation of the fixed part of total social capital. As long as this accumulation and the growth of production are not subject to social control, as long as production remains a private hunting ground for profit seekers, production will practically always encounter the resistance of an original power, the resistance of a primal force that is stronger than production itself—namely, the real social needs of humanity, which reject all superfluous goods. Let us take an example of what unbridled capitalist production necessarily leads to: A report recently appeared in the international press: the giant shoe factory Thomas Bat'a in Zlin (Czechoslovakia) had decided to increase its production from 100,000 pairs of shoes per day to 200,000 pairs per day and to increase its workforce to 30,000 people. Bat'a believes he can realize his plan by lowering prices, improving the quality of his products, and increasing wages. In 1930, the prices of certain items were already reduced by almost 40 percent. Of course, Bat'a does not ask whether the implementation of his plan might ruin several thousand or tens of thousands of shoemakers and small shoe factories. Nor does he have to ask, under the capitalist social order, whether the national and international markets for footwear (Bat'a's factory exports a lot) can withstand such an expansion of giant companies. For Bat'a is no child and knows better than anyone that the realization of his plan will force competing shoe factories in other countries to introduce the most necessary technical improvements in their operations as well.

We are familiar with the various palliative measures that are used everywhere to prevent economic crises: the export of surplus goods can certainly relieve the pressure on a national market to some extent, but it also has the effect of generalizing the crisis; local, regional, and national authorities can have certain public works carried out in times of depression; for their part, workers' associations can send their unemployed members to the colonies or—like the English _trade unions_—to the dominions, etc., free of charge.

Ultimately, however, all these measures only serve to shift the economic evil from one country to another or from one period to another, or to bring about a prolonged, general depression instead of a short, sudden crisis. In many cases, such as in the implementation of public works, such measures lead to the execution of unproductive work, i.e., to the waste of human labor.

From all that has been predicted, it is clear that only strict social control of production can help solve the problem discussed here.

Can this help be brought about by the establishment and further development of cartels and trusts in various industries? Here, too, my answer is negative.

It has often been remarked that the periodically recurring crises in the first half of the 19th century were more violent, more panic-stricken, but also shorter: the weaker, unviable capitalist enterprises were then swept away as if by a storm wind; the dead wood fell away, but after the hurricane had subsided, the sun of prosperity soon broke through the clouds again. In recent decades, however, the havoc wreaked by economic crises has been less panic-stricken in nature, but the general decline in business and social ills often lasts for years.

Capitalist associations, cartels, and trusts are largely to blame for this gradual transformation of economic crises. It is well known that modern big capitalists insist that, through their associations, they are able to adapt production in their industry to consumption. They believe that they can moderate prosperity in a period of economic boom, but also alleviate misery in a period of industrial decline, by restricting the supply of their goods and reducing rising prices in the former period, and conversely, by stabilizing production as much as possible in the latter period in order to keep prices high.

To a certain extent, all this is true, and over the course of a century, social production has undoubtedly become more regular. We will say little here about the abuses that have occurred on the part of modern business associations, especially when it came to “keeping up” commodity prices in times of depression. During public inquiries into cartels and trusts, especially in Germany and the United States, there were often dramatic scenes between the organized large companies in the coal and steel industries and the manufacturers in the processing industries, when the latter complained about the “ruinous” prices that were being “extorted” from them by the former.

“When the cook quarrels with the kitchen maid, you hear where the butter stays,” says a Dutch proverb. That is why such investigations are so instructive.

The leaders of cartels and trusts respond to all such complaints and public accusations by saying that they are only possible because their associations are not yet sufficiently widespread and tightly organized. That is why they also prefer the American trust to the German cartel. Their ideal is the creation of giant associations in a “vertical” direction, extending from raw materials to end products intended for immediate consumption. These organizations are to be further linked between the various spheres of production by close connections. A vision of the future that ultimately promises us a productive feudal state in which a few thousand industrial barons, ruled by some two hundred financial kings, would dictate the law to us throughout the world.

We will leave aside the question of whether the masses of the population would tolerate such a medieval existence of slavery or serfdom in the long run. Even if such a system could prevent economic crises, it would still be possible for a revolutionary crusade by consumers against the united production tyrants to engulf them all. The 1918 revolution in Germany swept away 26 dynasties in one fell swoop; internationally, however, we could do much more, economically and politically!

The only question that arises for us here is whether the cartels and trusts, developed to their ultimate abominable consequences, would be able to regulate production in such a way that the successive production cycles of the past—the suspension of business, the beginning of an economic boom, sudden stagnation and business catastrophe, depression, and slow recovery—could be permanently eliminated.

However, this is not the case. Rather, we note that the serious economic crises of the pre-war period, those of 1901 to 1902 and 1907 to 1909, as well as the current crisis, which began in the fall of 1929, prevailed particularly in those countries where — as in the United States and Germany — the most powerful cartels and trusts existed, and that not only did the associated big capitalists prove powerless to stem the tide, but that the development of cartels and trusts actually exacerbated the general malaise.

How can this phenomenon be explained? Let us look at the means available to cartels and trusts to restrict production in times of general business stagnation. Such a restriction is easy to implement on paper, but technically speaking, the expansion or restriction of production depends on the amount of working capital and the speed of its circulation. However, it is often absolutely impossible to withdraw capital once it has been thrown into production, or to slow down the production process, which is constantly accelerating thanks to technology and improved means of transport.

What is the point of constantly improving production if one is ultimately forced to shut down the blast furnaces and leave the modern machines, which are already becoming obsolete under modern competition, unused? Nor should we forget that even the most powerful trusts, such as the United States Steel Corporation or the German-American Electricity Trust, have their independent competitors, their outsiders, who are always ready to continue the work of a trust and steal some of its customers away from its powerful competitor if the trust were to restrict its production too much.

Trusts and cartels are not there to serve social interests and prevent crises, but above all to enable entrepreneurs to make a profit.

And finally: what does it mean to restrict production? It means closing down the less efficient and older factories and scrapping inferior machinery, or even reducing working hours. In any case, however, this increases unemployment or reduces the total wages of the working population. Restricting production therefore always results in a reduction in the purchasing power of the working population, and this at a time when demand has already begun to decline.

The inevitable setback in one industry has an impact on many other industries. If the metal industry starts leaving large projects unfinished and halting the construction of new plants, it is not only metalworkers who suffer, but also workers in the construction industry, brickworks, cement factories, sawmills, etc.

Let us now ask, conversely, what the situation is like in a period of rising production. Let us assume that this period is initiated in particular by a general demand for railway equipment in the new and older countries. Blast furnaces and iron foundries then begin to supply large quantities of material for railway cars and rails, and the construction industry takes care of the construction of tracks and station buildings. But how could the united iron barons and construction entrepreneurs then hinder industrial growth when railway materials and buildings are needed everywhere? It can never happen that social demand manifests itself in leaps and bounds, or that after a boom, demand is temporarily saturated because new facilities require little maintenance work for years?

Internationally, the question is even more complicated: if the associated large entrepreneurs in one country refused to carry out the initially necessary work during a period of economic boom, other entrepreneurs, whether in their own country or abroad, would always be ready to take advantage of the opportunity and try to conquer a new market. From a technical and financial point of view, it must generally be considered absurd if, after many years of stagnation or decline in business, a period of economic boom finally arrives and then production is curtailed, factories are closed, and workers are laid off. Even cartels and trusts cannot do this. In such periods, the motto is often: either deliver the required goods quickly, within a certain time, or lose the opportunity to deliver them altogether.

In order for production and consumption to balance each other out on a regular basis, production must be directly adapted to consumption, and both must be regulated at the same time.

Now the question arises as to whether state capitalism or state socialism, as it is often called, could intervene here to solve the problem. This question has become all the more important since, firstly, more and more industries and businesses in all modern countries are being attracted by the state and, secondly, an international political party – social democracy – is now striving to put this state capitalism into practice in Russia. Social democrats and state communists (Bolsheviks) find much support for this endeavor even in conservative circles, wherever small manufacturers oppressed by capitalist associations call for state aid, or where official economists and magistrates prefer the state monopoly to the monopolies of big capitalists.

But even today's state is powerless to permanently reconcile production and consumption. Compared to private capitalists, it certainly has the advantage of being able to offset losses in one area of production with profits in others. On the other hand, however, it is notoriously a poor economist, and in this respect it lags behind private entrepreneurs.

Certainly, the gradual democratization of the state could give this body new advantages and increasingly make the general welfare the goal of production and consumption. The general study of the economic situation, which has already begun statistically—in Germany, for example—could also serve to provide better guidance for production. Because of these advantages, state monopolies will undoubtedly continue to have a great future in the course of the 20th century.

Of course, this only applies to certain industries, such as railways, postal services, telegraphy, etc. In general, the revolutionary syndicalist movement opposes state monopolies just as much as private monopolies. Even in industries that are directly dependent on monopolization by the state, we can hope that, after the period of state monopolies, there will come a time of direct organization of labor by special-purpose associations and trade unions and by the public organized in cooperatives.

Under the current economic system, the state, just like private entrepreneurs, must reckon with capitalist competition, including international competition. It must respect the private property of citizens, obtain the necessary funds through loans if necessary, have the work carried out on a wage basis, and tolerate the accumulation of ground rent in the hands of individuals, etc. Even if the state replaces private entrepreneurs in a branch of production, the foundations of the current economic system—private property and the wage system—will remain in place. Under these circumstances, it will never be able to overcome the periodic fluctuations in production and consumption. For the state, too, the direct adjustment of production to consumption remains a pipe dream, and it cannot escape the looming threat of unemployment.

Production and consumption are primal economic forces that are far more deeply rooted in economic life than the state itself.

Today's state cannot free itself from competition for production aimed at entrepreneurial profit, at the risk of not being able to support industries that are not suitable for state exploitation. If, for example, the railways are a state monopoly, the state must supply railway cars, lay new tracks, etc., if railway material is in demand from all sides during an economic boom. But if demand is saturated and an economic downturn occurs, then the state must also restrict production, lay off workers, etc. How would the various political parties criticize state exploitation if the state, neglecting its exploitation duties, were to operate at a loss of ten or twenty percent in a given year?

Finally, the organs through which the state could communicate with the masses of consumers in each branch have not even been created, so that even the most necessary means of learning about general consumption and its probable movement are lacking to the large producer—the state. This is another reason why the state today cannot adapt production to consumption, and so it too is defenseless in the face of the deeper movements of economic life.

The modern state is too superficial an observer; it is too strongly politically structured and not sufficiently economically oriented.

Decades ago, socialist circles were already saying: "The old social order will perish under the sign of unemployment," and the events of recent years have only too clearly demonstrated how close the hour of that demise is.

All of this makes it obvious what stance the revolutionary trade union movement should take toward modern economic crises.

We hardly need to go into the necessity for workers to defend their wages first and foremost in times of economic downturn and crisis. But if one of these modern economic crises is indeed to become the “death crisis” of capitalist rule, it is particularly the task of revolutionary syndicalists to prepare the masses of the working population to take over economic power.

Precisely because social democracy everywhere has lost its way in the swamp of state socialism in recent decades, advocating, like today's feudal lords in industry, trade, and transportation, a social order that is built from the top down, it can only be the task of revolutionary syndicalists and libertarian communists to implement, as far as possible, a social order and a system of production and distribution that is built from the bottom up, thereby countering the strict centralization of business associations and the state with the federative alliances of businesses.

Therefore, the main emphasis of our revolutionary propaganda must be placed on the introduction of factory, workshop, and farmer delegates (councils) of the workers. Even if this propaganda remains mainly theoretical at present, the realization of this workers' representation in capitalist and state-owned enterprises can already be linked to other demands during periods of strikes, so that it gradually becomes the main demand of the working masses.

Even under the current social order, workers can demand the right to inspect the books of the companies where they work, possibly send their representatives to the management and supervisory boards, and participate in the preparation of their company's balance sheet in such a way that no balance sheet may be prepared in the future without the approval of the staff.

It is possible that, under the influence of the gradual democratization of the state mentioned above, state and municipal enterprises and administrative services will here and there take the lead over capitalist enterprises and serve, for example, to show what socialism and communism actually are and what the administration of industry, trade, and transport, as well as public enterprises, looks like when it is run from the bottom up. In any case, syndicalist propaganda must manifest itself in all directions and intervene wherever the realization of our demands is even remotely possible.

There is no need to discuss here the later local, regional, national, and international organization of workers' and civil servants' representatives. This must be developed gradually, in accordance with the most diverse circumstances.

---