State Action to Absorb Surplus: Imperialism

Download: MOLOCH: Mass-Production Industry as a Statist Construct.

I. The Origins of Sloanist Mass Production

A Fork in the Road
A Wrong Turn
The Role of the State in Tipping the Balance

II. The Institutional Imperatives of Sloanism

Economies of Scale, Economies of Speed, and Push Distribution
Microeconomic Institutional Forms for Providing Stability
Mass Consumption to Absorb Surplus
Political Capitalism
State Action to Absorb Surplus: Imperialism
State Action to Absorb Surplus: Creation of New Industries

III. Conclusion

The roots of the corporate state in the U.S., more than anything else, lie in the crisis of overproduction as perceived by corporate and state elites–especially the traumatic Depression of the 1890s–and the requirement, also as perceived by them, for state intervention to absorb surplus output or otherwise deal with the problems of overproduction, underconsumption, and overaccumulation.

According to William Appleman Williams, “the Crisis of the 1890’s raised in many sections of American society the specter of chaos and revolution.” [122] Economic elites saw it as the result of overproduction and surplus capital, and believed it could be resolved only through access to a “new frontier.” Without state-guaranteed access to foreign markets, output would fall below capacity, unit costs would go up, and unemployment would reach dangerous levels.

Accordingly, the centerpiece of American foreign policy to the present day has been what Williams called “Open Door Imperialism” [123]: securing American access to foreign markets on equal terms to the European colonial powers, and opposing attempts by those powers to divide up or close markets in their spheres of influence.

Open Door Imperialism consisted of using U.S. political power to guarantee access to foreign markets and resources on terms favorable to American corporate interests, without relying on direct political rule. Its central goal was to obtain for U.S. merchandise, in each national market, treatment equal to that afforded any other industrial nation. Most importantly, this entailed active engagement by the U.S. government in breaking down the imperial powers’ existing spheres of economic influence or preference. The result, in most cases, was to treat as hostile to U.S. security interests any large-scale attempt at autarky, or any other policy whose effect was to withdraw major areas of the world from the disposal of the U.S. corporate economy. When the power attempting such policies was an equal, like the British Empire, the U.S. reaction was merely one of measured coolness. When it was perceived as an inferior, like Japan, the U.S. resorted to more forceful measures, as events of the late 1930s indicate. And whatever the degree of equality between advanced nations in their access to Third World markets, it was clear that Third World nations were still to be subordinated to the industrialized West in a collective sense.

In the late 1930s, American leadership fears that Fortress Europe and the Greater East Asian Co-Prosperity sphere would deprive the American corporate economy of vitally needed raw materials, not to mention outlets for its surplus output and capital, led FDR to maneuver the country into another world war. The State Department’s internal studies at the time estimated that the American economy required, at a minimum, the resources and markets of a “Grand Area” consisting of Latin America, East Asia, and the British Empire. Japan, meanwhile, was conquering most of China (home of the original Open Door) and the tin and rubber of Indochina, and threatening to capture the oil of the Dutch East Indies as well. In Europe, the worst case scenario was the fall of Britain, followed by the German capture of some considerable portion of the Royal Navy and subsequently of the Empire. War with the Axis would have followed from these perceived threats as a matter of course, even had FDR not successfully maneuvered Japan into firing the first shot. [124]

World War II, incidentally, also went a long way toward postponing America’s crises of overproduction and overaccumulation for a generation, by blowing up most of the capital in the world outside the United States and creating a permanent war economy to absorb surplus output.

The American policy that emerged from the war was to secure control over the markets and resources of the global “Grand Area” through institutions of global economic governance, as created by the postwar Bretton Woods system, and to make preventing “defection from within” by autarkic powers the centerpiece of national security policy.

The problem of access to foreign markets and resources was central to U.S. postwar planning. Given the structural imperatives of “export dependent monopoly capitalism,” [125] the threat of a postwar depression was very real. The original drive toward foreign expansion at the end of the nineteenth century reflected the fact that industry, with state capitalist encouragement, had expanded far beyond the ability of the domestic market to consume its output. Even before World War II, the state capitalist economy had serious trouble operating at the level of output needed for full utilization of capacity and cost control. Military-industrial policy during the war exacerbated the problem of over-accumulation, greatly increasing the value of plant and equipment at taxpayer expense. The end of the war, if followed by the traditional pattern of demobilization, would have resulted in a drastic reduction in orders to that same overbuilt industry just as over ten million workers were being dumped back into the civilian labor force.

A central facet of postwar economic policy, as reflected in the Bretton Woods agencies, was state intervention to guarantee markets for the full output of U.S. industry and profitable outlets for surplus capital. The World Bank was designed to subsidize the export of capital to the Third World, by financing the infrastructure without which Western-owned production facilities could not be established there. According to Gabriel Kolko’s 1988 estimate, almost two thirds of the World Bank’s loans since its inception had gone to transportation and power infrastructure. [126] A laudatory Treasury Department report referred to such infrastructure projects (comprising some 48% of lending in FY 1980) as “externalities” to business, and spoke glowingly of the benefits of such projects in promoting the expansion of business into large market areas and the consolidation and commercialization of agriculture. [127] The Volta River power project, for example, was built with American loans (at high interest) to provide Kaiser aluminum with electricity at very low rates. [128]


122. William Appleman Williams, The Tragedy of American Diplomacy (New York: Dell Publishing Company, 1959, 1962) 21-2.

123. Williams, The Contours of American History (Cleveland and New York: The World Publishing Company, 1961).

124. Laurence H. Shoup and William Minter, “Shaping a New World Order: The Council on Foreign Relations’ Blueprint for World Hegemony, 1939-1945,” in Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management (Boston: South End Press, 1980), pp. 135-56

125. “Now the price that brings the maximum monopoly profit is generally far above the price that would be fixed by fluctuating competitive costs, and the volume that can be marketed at that maximum price is generally far below the output that would be technically and economically feasible…. [The trust] extricates itself from this dilemma by producing the full output that is economically feasible, thus securing low costs, and offering in the protected domestic market only the quantity corresponding to the monopoly price–insofar as the tariff permits; while the rest is sold, or “dumped,” abroad at a lower price…. “–Joseph Schumpeter, “Imperialism,” in Imperialism, Social Classes: Two Essays by Joseph Schumpeter. Translated by Heinz Norden. Introduction by Hert Hoselitz (New York: Meridian Books, 1955) 79-80.

Joseph Stromberg, by the way, did an excellent job of integrating this thesis, generally identified with the historical revisionism of the New Left, into the theoretical framework of Mises and Rothbard, in “The Role of State Monopoly Capitalism in the American Empire” Journal of Libertarian Studies Volume 15, no. 3 (Summer 2001), pp. 57-93. Available online at <>.

126. Gabriel Kolko, Confronting the Third World: United States Foreign Policy 1945-1980 (New York: Pantheon Books,
1988), p. 120.

127. United States Participation in the Multilateral Development Banks in the 1980s. Department of the Treasury (Washingon, DC: 1982), p. 9.

128. L. S. Stavrianos, Promise of the Coming Dark Age, p. 42.

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