What The Hell America!

Edward Sard was born in 1913 in Brooklyn as Edward Solomon, the son of Charles Solomon and Augustina Hess Solomon, two college graduates who worked at high schools in New York City. Tina Solomon was a suffragette who cofounded a sorority during her student years at Barnard College. It was chiefly through her influence that Edward and his younger brother Eugene (born in 1923 and named after Eugene Debs) received a left-wing education.

Edward was an excellent pupil and also played chess at the highest level. In 1929, he won a scholarship and became a student of economics, first at Cornell and then at Columbia. After the onset of the Great Depression, Solomon became attracted to revolutionary socialism. In 1934, he joined a tiny Trotskyist group led by the former Wall Street analyst Max Gould (alias B. J. Field), whom Leon Trotsky characterized as “a bourgeois radical who has acquired the economic views of Marxism.”

Solomon became very active. In January 1935, he began to publish substantial articles in the group’s magazine Labor Front, as well as giving talks on subjects like the Paris Commune and the rise of fascism. For the first time, he used his pseudonym Frank L. Demby.

In 1936, following Trotsky’s advice, the Workers Party, the largest Trotskyist organization in the United States, decided to enter the Socialist Party of America (SP). They formed a faction around the newspaper Socialist Appeal and were strongly supported by many members of the Young People’s Socialist League (YPSL), the SP’s youth affiliate. However, Field did not want to follow the Workers Party’s example.

His decision caused internal strife. Solomon and Stanley Plastrik led the opposition and were, amid growing tensions, physically assaulted by Field and his associates. After their expulsion, they immediately joined the Socialist Appeal group of James P. Cannon and Max Shachtman, where they were welcomed with open arms.

The “entryism” in the Socialist Party did not last long. In 1937, the Trotskyists and their supporters were expelled, and at the turn of the year they formed a new organization, the Socialist Workers Party. During these vicissitudes, Solomon’s star rose. The Philadelphia YPSL convention in September 1937 elected him as the national officer responsible for education.

Earlier, in 1936, Solomon had graduated at Columbia University with an erudite MA thesis on A History of the Labor Theory of Value. In this work, he described the Soviet Union as “still a workers’ state” and highlighted the danger of fascism:

It is commonly thought that fascism is resorted to by the capitalist class solely because there is a threat of a proletarian revolution. The experience in Austria proves conclusively the contrary. The economic necessity for fascism is based on the falling average rate of profits to such a low point that it is necessary to drive the price of labor-power (wages) down below its value. In order to do this, all those organizations which help to sustain wage levels (trade unions, cooperatives, political parties) must be crushed. This is the first act of every fascist government and shows that, while the threat of proletarian revolution may be a secondary factor, capitalism will not resort to fascism unless economically it has to in order to preserve profits, without which capitalism ceases to exist.

From 1937, Solomon supported himself as a teacher at the Abraham Lincoln High School in Brooklyn. Simultaneously, he tried to work on a doctoral thesis, but his many political activities made it impossible to realize this plan.

During the summer months, Solomon regularly travelled to Europe. In 1936, he met Trotsky in Norway, and he continued corresponding with “the Old Man” thereafter. On his trips, he visited Trotskyist sister organizations. In 1937, he went to Switzerland and also helped coordinate the production of the English-language edition of the International Bulletin in Paris.

The following year, Solomon went to Europe again. Together with his contemporary Nathan Gould, he assisted SWP leader James P. Cannon, who at Trotsky’s urging attempted the unification of several British Trotskyist groups involving figures such as C. L. R. James and Harry Wicks. After that, Cannon and Gould travelled to Paris for the founding of the Fourth International in September.

Solomon stayed in Europe as well but apparently did not participate in the Parisian event. He visited Trotskyist comrades in France, Czechoslovakia, Belgium, and the Netherlands and drew up a report. In the Socialist Workers Party, he held several important positions. But Shachtman’s supporters left the SWP by 1940 and founded a new Workers Party. They no longer considered the USSR to be a degenerated workers’ state, as Trotsky himself did, but rather saw it as a form of bureaucratic collectivism. Solomon followed Shachtman and became head of the new organization’s finance department.

In 1940 or 1941, Edward and Eugene Solomon both changed their last name to Sard. Eugene wanted to study at the Massachusetts Institute of Technology, although its antisemitic administration had sought to limit the number of Jewish students. In order to pass the selection procedure, he had to adopt a non-Jewish family name. His brother stood by him, and they decided to call themselves Sard, following other family members who had already made this change.

After the United States joined the war against Japan and Germany, Sard took up a position in the federal administration and moved with his wife and their first child, born in 1941, to Washington. From December 1942 to August 1943, he belonged to the Office of Price Administration. He next worked for the War Production Board, serving from August 1943 until October 1944 as editor of the Statistics of War Production — a position that, as he later recalled, gave him access to “confidential data relating to all phases of the war production program for use by 300 top governmental policy makers.”

Thereafter he was promoted to chief of the Office of Component Reports, which made him responsible for the “development of supply requirements estimates for critical components for use by [the] Requirements Committee and policy making levels of WPB [War Production Board] and OWMR [Other War Material Requirements].” He performed this role from November 1944 until September 1945. Through these activities, Sard gained a thorough understanding of the US war economy.

During his “Demby period,” Solomon/Sard frequently wrote for Shachtman’s Workers Party weekly Labor Action. His short articles were based on a solid knowledge of the facts and did not shrink from statistical analyses. In 1940, he argued that “the US, following the example of Europe, has entered upon an armaments economy,” and that “Wall Street is well aware of the fact that the ‘prosperity’ in this country is based on the war and the continuation of the war.”

For Sard, aircraft production was fast becoming the “key industry of the war”; its expansion was “absolutely phenomenal, more so than any other industry in the history of American capitalism.” He pointed out that corporate profits were rising, yet the purchasing power of the population had decreased as real wages were cut through inflation. The war economy went together with a rising profit rate and rate of surplus value.

All of this in Sard’s opinion changed the appearance of US capitalism:

Almost 70 percent of the 1942 fiscal budget will go for war preparations. . . . The United States has truly entered upon a long period of war economy. Representatives of the government and the boss press have been thundering at us for the past several months what this will mean to the working population of the country — gasless Sundays, reduction in the use of electricity for the home, no more aluminum pots and pans, etc. But it will mean much more than a few inconveniences in our normal habits of consumption. The burden of the war economy will be thrown onto the backs of those who toil and sweat for a living — that is the real meaning of this war budget.

Increasingly, the large corporations raised additional capital through their own accumulated reserves of surplus capital and undivided profits. Frequently, a large share of profits was not paid to the stockholders but rather put aside so the management and the board of directors could do with it what they wanted.

This altered the structure of the capitalist class. Self-financing meant “the further concentration of control of huge enterprises in fewer and fewer hands” and a growing economic conservatism of the management: “The era of free, competitive capitalism is over. It is not merely dying. It is dead. It cannot be resurrected, no matter how many pious declarations Messrs. Roosevelt and Churchill issue.” The war economy’s profitability made it clear to Sard that the preservation of profits does not necessarily have to result in fascism, as he had once held in his MA thesis.

To my knowledge, the concept of the Permanent War Economy appeared for the first time in a resolution adopted by the Political Committee of the Workers Party on September 5, 1941 — that is, about three months before the United States officially joined World War II. The resolution paid a lot of attention to economic aspects and partly seems to bear Edward Sard’s stamp. The text pointed out that the United States, without having declared war on Germany, had already become the “arsenal and larder” of Britain and the other Western allies. Following Nazi Germany’s example, US capitalism was compelling people to substitute guns for butter:

The production of consumers’ goods is systematically reduced for the benefit of the production of means of destruction. Even where the war boom has increased the nominal purchasing power of the masses, or sections of them, the government intervenes, as in Germany, to cut down or prohibit the purchase of consumers’ goods (restrictions on installment buying, etc.) and to enforce compulsory “savings,” that is, to reduce effectively the standard of living of the masses by turning over part of their earnings to meet the astronomical war budgets of the government. The frantic attempts by this and other means to prevent inflation may, at most, postpone inflation, but in the end will lead to an inflation of monstrously onerous proportions. If such an inflation is to be prevented at all by the bourgeoisie, it can be done only if a permanent war economy is established or if a Fascist regime in this country imposes its “regulated economy.”

For capitalism, the Permanent War Economy had become an alternative to fascism. In both cases, the masses would suffer from a violent reduction of living standards.

During the war years, Sard elaborated upon this analysis. He did so in relative isolation, as he became somewhat estranged from the Workers Party. Three elements probably played a role. The Workers Party was nonexistent in Washington. The large majority of its members lived in the New York area, and Sard and his wife were politically almost on their own.

Secondly, as a civil servant, Sard had to abstain from political activism. Finally, Sard’s analysis of capitalist development did not accord with the Workers Party’s view; his hypothesis that capitalism could temporarily revive through a war economy seemed to contradict the proposition of Vladimir Lenin, Leon Trotsky, and others that capitalism had been in its death throes since World War I.

In this context, Sard’s famous article “Toward a Permanent War Economy?” appeared in the first issue of Politics (February 1944), published by Dwight and Nancy Macdonald. Dwight Macdonald had left the Workers Party in 1941, and Sard’s choice of an ex-Trotskyist’s journal seems to underline his political distance from the group at the time. The fact that he used a new pen name in Politics (Walter J. Oakes) perhaps offers support for this claim.

In his article, Sard assumed that immediately after the end of World War II, the preparations would begin for World War III. “World War III is not only a distinct possibility, it is inevitable as long as the world’s social structure remains one of capitalist imperialism.” Senate Bill 1582 of December 1943 showed that the ruling circles of the United States were anticipating a new “total war of three years’ duration, or of any equivalent emergency.” The stated purpose of the bill was to “assure an adequate supply of strategic and critical minerals for a future emergency by holding intact in the post-war period all stockpiles surviving the present war owned by Government agencies and by necessary augmentation thereof primarily from domestic sources.”

The outcome would be a Permanent War Economy, which Sard defined in the following terms:

A war economy exists whenever the government’s expenditures for war (or “national defense”) become a legitimate and significant end-purpose of economic activity. The degree of war expenditures required before such activities become significant obviously varies with the size and composition of the national income and the stock of accumulated capital. Nevertheless, the problem is capable of theoretical analysis and statistical measurement.

According to Sard, the Permanent War Economy represented a new stage of capitalist development. Previously, economic peacetime activities had focused primarily on the production of consumer goods and of capital goods that could be used to produce consumer goods. Henceforth, extensive peacetime expenditures for war would be normal.

Sard estimated that the United States would achieve a Permanent War Economy through annual war expenditures of between $10 and 20 billion. This would profoundly change the inner functioning of US capitalism:

[War] expenditures accomplish the same purpose as public works, but in a manner that is decidedly more effective and more acceptable (from the capitalist point of view). . . . War outlays, in fact, have become the modern substitute for pyramids. They do not compete with private industry and they easily permit the employment of all those whom it is considered necessary to employ. True, this type of consumption (waste) of surplus labor brings with it a series of difficult political and economic problems. These, however, appear to be solvable; in any case, they can be postponed. The deluge may come but the next generation, not the present one, will have to face it.

The up and down of business cycles would be eliminated. Due to growing state intervention, capital accumulation would no longer be accompanied by an increasing industrial reserve army, as Karl Marx had thought:

If the Permanent War Economy succeeds in stabilizing the economy at a high level, unemployment will be eliminated, but only through employment in lines that are economically unproductive. Thus capitalist accumulation, instead of bringing about an increase in unemployment, will have as its major consequence a decline in the standard of living.

The decline in the average standard of living of the workers would in the first instance be relative, but it would soon become absolute, “particularly on a world scale as all nations adapt their internal economies to conform with the requirements of the new order based on an international Permanent War Economy.”

Sard saw the Permanent War Economy as a capitalist alternative to fascism: the ruling class would rather “stave off the advent of fascism as long as possible.” But he believed that it could only be a temporary way out for the bourgeoisie: “It is not my belief that the Permanent War Economy will provide an enduring solution for capitalism. But it can work for the period under consideration.”

Substantial tax increases would become unavoidable, and this would lead to an intensification of “political and class conflict.” In case this would result in explosive situations, the burden of armament could also be shifted onto the working class through deliberate and uncontrolled inflation. That would, however, imply “that the decisive section of the ruling class is determined to establish fascism as soon as possible. I see no evidence, however, to warrant this belief although, of course, there are many similarities between fascism and the Permanent War Economy.”

Sard considered it “more probable that the inflationary sequence is a contender for a prime place on the agenda after World War III than in the Post-World War II period.” Only the labor movement was in his view capable of preventing such a catastrophic outcome. For that, the United States would absolutely need a “labor party, independent of capitalist political machines, and based upon trade unionists.”

With his analysis, Sard not only opposed the Keynesians but also those Marxists who still assumed that the historical alternative was between proletarian revolution or Fascism. Sard’s argument fell on deaf ears with his comrades of the Workers Party, as the Shachtmanites kept on believing in the ongoing decline of US capitalism.

The first five postwar years were a period of insecurity for Sard and his wife Dorothy. The pressures of a new family, with a second child born in 1947, contributed to this. Sard’s employment history was one of ongoing change, with a series of posts following each other in quick succession between 1945 and 1950. In 1951, he finally became director of the National Association of House-to-House Installment Companies, Inc., later renamed National Association of Installment Companies. He held this position until his retirement in 1984.

After an interruption of five years, Sard began to publish again, this time using a third pen name: T. N. Vance. His outlet was again the New International, the journal of the International Socialist League (ISL), which since 1949 had been the successor of the Workers Party. Sard was still a sympathizer, not a member, of this current. By now, the ISL had come to appreciate the idea of a Permanent War Economy, which became an essential part of its program.

In a long series of articles, Sard elaborated his theory. In a first contribution titled “After Korea — What?,” he described the arms race after World War II. Since 1945, two different kinds of imperialism had been facing each other. On the Russian side, there was “Bureaucratic Collectivism,” with nationalized property, slavery, and peonage — essentially an “import” imperialism, “based on the economic necessity of acquiring constantly new sources of labor power; both skilled and slave, and of adding to its stock of producer and consumers goods.”

On the American side, there was an aggressive capitalism, “an ‘export’ imperialism, inexorably driven by the most rapid accumulation of capital in the history of capitalism to export capital in all its forms in ever-increasing quantities.” This antagonism would not immediately lead to World War III, but it was the cause of a world situation that could be characterized as “neither peace nor war.” In the United States, “the phenomenal expansion of the productive forces during World War II” had continued after 1945 — a development that “has not only been contrary to the expectations of the bourgeoisie but also, let us admit, unexpected by most Marxists.”

In a series of six essays, Sard further explored the nature and impact of the Permanent War Economy. He praised and criticized the “contributions” and “mistakes” of his precursor Walter J. Oakes, using phrases such as “we do not entirely share Oakes’ conclusion,” thus further concealing his identity. Sard’s central thesis remained the idea that the capitalist mode of production — “a system that has long outlived its historical usefulness” — could only survive through ever-increasing state intervention.

Basing his work on extensive statistical material, he revealed that not only had direct war outlays become permanently sizeable, but also that indirect war outlays (military aid to other countries, etc.) had grown faster than total output as well. In addition, the influence of the state grew in other domains such as the control of prices, and it effected “the desired balance between the war and civilian sectors of the economy.” At the same time, the ongoing armament made it possible to reduce unemployment to insignificant levels.

However, the Permanent War Economy as a combination of prosperous capital accumulation and (almost) full employment was not without contradictions. First, during this high stage of capitalism, a “new and fundamental law of motion” becomes visible, i.e., a decline of the standard of living.

This decline was not to be measured in absolute terms: as Sard observed, there had been an “indisputable and very sizable increase in personal consumption expenditures.” What Sard had in mind was a relative decline of the standard of living compared with the increase in total production. Only for the lowest strata of the working class had living standards declined absolutely: “They still remained worse off than in 1939.”

Second, increasing state intervention caused a significant growth of the state bureaucracy. The size of the federal civilian bureaucracy had tripled from 571,000 in 1939 to an estimated 1,568,000 in 1950, while the military bureaucracy had increased in the same period from 342,000 to an estimated 1,500,000. Armament and bureaucratization implied an increasing consumption of surplus value by the state in the form of increasing taxes. Not only were the working classes burdened in this way but also the bourgeoisie, and public funding was therefore becoming “a major arena of the class struggle.”

Third, the Permanent War Economy yielded a profit bonanza of fantastic proportions. Sard estimated that the rate of surplus value grew from 92 percent in 1939 to 123 percent in 1950, while the average rate of profit for all industry had gone from 25.6 percent in 1939, via 33.4 percent in 1944, to 27.7 percent in 1950.

Fourth, Bonapartist tendencies were developing: “The inter-marriage between the big bourgeoisie and the upper echelons of the military bureaucracy was a basic characteristic of the Permanent War Economy.” In its wake, the power of the police grew, and the state intervened more frequently in strikes and labor disputes:

There is, of course, as yet no bureaucratic-military dictatorship in Washington, although there are possible tendencies in that direction. Nor can the present regime, given the tempo at which world history moves, be classified as temporary.

Fifth, there was a tendency towards military-economic imperialism. The “almost insatiable appetite” of the Permanent War Economy was rapidly exhausting the natural resources (iron ore, petroleum) within the United States and made American imperialism increasingly dependent on raw materials from foreign sources.

Finally, inflation was becoming unceasing and permanent:

The higher the ratio of war outlays to total output, the greater the degree of inflation. There is no method under capitalism whereby the creation of purchasing power through waste (war) production can be so controlled and absorbed that inflation is eliminated.

All in all, the Permanent War Economy had provided capitalism with “a temporary respite, while aggravating every phase of the class struggle.” For Sard, the “historic task of the working class” was “to put an end to the Permanent War Economy without permitting the bourgeoisie and the Stalinists to unleash World War III.”

The article series on The Permanent War Economy was Sard’s magnum opus. In the years thereafter, he continued to publish in the New International until the ISL’s dissolution in 1958. When unemployment in the United States increased in the mid-1950s, he could easily explain this with reference to a temporarily declining ratio of war outlays during those years.

He had more trouble accounting for the improving standard of living. In 1957, Sard admitted that “the average standard of living of the employed working class is higher today than, let us say, it was two, three or four decades ago.” However, he argued that this trend should be seen as a part of “total misery, the casualties of wartime, both in war and peace, and the psychological impact on want satisfactions in a world that lives under the constant threat of total annihilation.” Obviously, this was a weak argument; it exposed a vulnerable side of his theory.

Unfortunately, Sard did not develop his ideas further, though he gave some hints as to how this could perhaps be done. He observed, for example, that capitalism had “visibly, before our very eyes, outgrown its national framework and must burst this integument asunder in one form or another.” Through this statement, he implicitly brought into question the methodological nationalism of his own theory. But that is another subject.

In 1958, Sard withdrew from politics. He remained a close friend of Max Shachtman, with whom he shared an interest in the cultivation of ornamental plants, until the latter passed away in 1972, although they disagreed on Shachtman’s conservative turn from the 1960s. Sard became a prizewinning cultivator of bromelias and, together with his wife, enjoyed trips to Europe and other parts of the world.

Sard’s series of articles of 1951 was published as a book in 1970; his theory was developed further by others and provoked counterarguments. But for the rest of his life, Sard cloaked himself in the political anonymity he cherished throughout his years of political involvement and writing. His theory of the Permanent War Economy, on the other hand, would acquire a lasting significance.