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Stock Market Slump Reveals
Wall Street’s View of Future

(21 September 1946)

From The Militant, Vol. X No. 38, 21 September 1946, pp. 1 & 7.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

As the Truman administration boasts of record-breaking peace-time production and as dividend payments soar to new highs, the stock market ominously clangs an alarm.

A new feverish wave of selling last week tumbled prices on the Stock Exchange. For the second week in a row that barometer of the capitalist system – the stock market quotations – fell sharply.

The landslide unloading by small investors and speculators climaxed a steady drift downward since the May high point. By last week, more than 19 billion dollars of stock values had been liquidated – $9,300,000,000 in the first days of September.

“Looks Fine”

Administration spokesmen have responded with a cheery note of “optimism.” U.S. Treasury Secretary Snyder on Sept. 11 opined business prospects “look fine.” Civilian Production Administrator Small said, “It’s all a state of mind.”

And RFC Director Allen boomed: “Wonderful! Wonderful! We’re going to have a wave of prosperity like you never saw before. And let me tell you this – we’re never going to have another depression in this country.” (Life magazine, Sept. 9)

But these economic witchdoctors cannot with a mere pass of their hands wave aside the visible symptoms, of malignant disease eating at the vitals of American capitalism.

The Stock Exchange is recording Wall Street’s outlook on America’s future. As Henry Hazlitt, N.Y. Times financial commentator, observed on September 9: “The stock market seldom reflects today’s events; it reflects, instead, today’s judgment, good or bad, on the longterm future.”

“No Confidence”

For the “long-term future” of its own system, Wall Street has cast a vote of “No confidence.” That is the real meaning of the stock market slide.

The stock market’s advance warning of an economic disaster comes when American capitalism stands at the summit of world power. It has crushed the most aggressive of its capitalist rivals abroad. And it boasts of record peace-time economic achievements at home.

On Aug. 30, Civilian Production Administrator Small reported that July production had reached a new all-time peacetime peak, “The stop and go output ... has now been replaced by continuous, high-level production,” he said. “Industry is within sight of full production of finished goods.” Employment has reached the all-time peak of 58,100,000.

Exports Boom

At the same time, U.S. export trade boomed to heights never known before. “Commercial shipments are expected officially to reach $10,000,000,000 this year. That would top the previous peak of $8,228,000,000 reached in 1920,” reports the United States News, Sept. 13.

Why, then, does Wall Street vote thumbs down on its own “long-term future”?

First of all, American Big Business has now placed a minus sign beside its hopes for prosperity based on the world market. American productivity, doubled during the war, has outstripped the capacity of a ruined world to buy its products. Not ten billions in exports – but 30 billions was the hope.

The great markets of Europe and Asia are disrupted. The peoples are burdened by colossal debt. Their economy is hopelessly disorganized. Their production stagnates at levels far below the pre-war years.

Adding It Up

“What it all adds up to,” says the Sept. 5 World Report, Big Business weekly of world affairs, “is that odds are against continuance of the present export boom much beyond two or three years.”

Where is American capitalism to find an outlet for its monumental accumulation of capital? Where can it invest its idle dollars profitably? Searching the whole world horizon, it sees only black clouds.

Here at home, capitalist economists acknowledge that to sustain the economy, the capitalists are required to invest over $20 billion dollars annually in plants and equipment. They are spending only half that. Where is the market for expanded production?

Certainly, not in this country. V-J Day saw a sharp decline in total wages, with the elimination of overtime, mass lay-offs downgrading, shorter hours. No subsequent wage increases have compensated for this slash. Simultaneously, the war-born inflation, the devouring war debt and taxes, eat deep chunks out of mass purchasing power. The workers cannot buy back what they produce – while the monopolists withhold commodities for higher prices.

Glut Begins

And on Aug. 27, the Department of Commerce reported the beginnings of the glut that sootier or later means closed-down factories and’ mass unemployment. Value of manufacturers’ inventories reached an all-time high in July of nearly 18 billion dollars.

The source of Wall Street’s despairing outlook is the possibilities of lowered profits. Next year, the profits tax rebates will end. Carry-back provisions will cease to operate. And, as one financial commentator let slip in the Sept. 5 N.Y. Times: “Prices are too high, real wages in terms of purchasing power are too low ...” The domestic market is shrinking.

“Where the stock market is concerned it’s always tomorrow’s profits that determine today’s prices,” says Business Week, Sept. 14. For tomorrow’s profits, Wall Street wants further inflation of prices and further slashing of wages. But – the mighty American labor movement stands astride its path.

Where to turn? More and more Wall Street beats the drum for a new war adventure. Its promises of peace, plenty and security under capitalism can find only one fulfillment: Atomic annihilation in World War III.

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