The Coming of the American Behemoth. Michael Joseph Roberto
down the purchasing power of the workers. As wages fell relative to output, the growing disproportions between wages and profits set “in motion the forces of cyclical crisis and breakdown.”35 As Corey explained:
The decrease of variable capital (wages) in favor of constant capital (equipment and materials) limits the production of surplus value in proportion to the total invested capital; while the increase in the output of goods and the restriction of mass purchasing power and consumption saturate markets and lower prices to unprofitable levels, thereby limiting the realization of surplus value in the form of profits. The mass of profits rises, but the rate of profit on the total invested capital tends to fall.
Thus the higher composition of capital [the growth of constant capital and diminution of its variable counterpart] is the basic objective factor in the contradictions of accumulation and of capitalist production and prosperity.36
This contradiction is crucial to Corey’s argument about the rising displacement of labor during the Great Boom of the 1920s. Corey used statistical evidence from several sources to argue why the Depression emerged in the midst of “flourishing prosperity” between 1923 and 1929. The main reason was due to the “violent expansion” of production based on higher productivity that compelled even higher rates of efficiency. This created a downward push on what was then the level of “normal unemployment,” which he defined as the way “capitalist industry is so organized and managed that there must always be a reserve of unemployed workers, even in the most prosperous times, to provide labor for new enterprises and as a means of forcing down wages.” Given the “greater and more violent expansion” of American capitalism historically and relative to all other countries, unemployment in the United States always exceeded that in other countries. This was clear during the previous boom of 1900–1913 (excluding the Depression years 1907–1909) when unemployment averaged 7.8 percent of available workers, but it was far worse between 1923 and 1929 given the even greater and “unusual prosperity” generated.37
Carefully following Marx, Corey explained how unprecedented capitalist prosperity during those years generated a corresponding higher rate of unemployment than what was normal.
Unemployment is essentially an aspect of the higher productivity of labor under the social relations of capitalist production. Normal unemployment grows when the productivity of labor rises disproportionately to output. Cyclical unemployment prevails in depressions, brought about primarily by forces identified with the higher productivity of labor (which is not matched by higher employment and wages). And the increasingly greater unemployment of capitalist decline is a result of industry having become so highly productive that it is unprofitable to use all its capacity: hence millions of workers are thrown out of work. The increasing efficiency of American industry in 1920–29 considerably raised the total of “normally” unemployed workers. For while the higher productivity of labor may mean higher wages, it always means a displacement of labor because fewer workers are required to produce a larger output. Thus labor is penalized by its own efficiency.38
The basis for the rise in the productivity of labor, in output per worker, was set in motion at the beginning of the decade. Corey uses examples to make his case. Of thirty-five plants surveyed in 1927, output per worker was 75 percent higher than in 1919 and 39 percent higher than in 1924. Labor productivity in automobile production rose 98 percent between 1919 and 1927; it was even higher, 198 percent, for rubber tires. After temporarily shutting down in 1922 to improve machinery, Ford Motor Company resumed production on a new level of productive capacity that reduced the workforce from 57,000 to 40,000. The operation of blast furnaces had become almost completely automated by 1929, raising productivity 135 percent higher than in 1919. Productivity in steel mills and rolling mills rose 43 percent, and there was an increase of 44 percent in petroleum refining. In 1925, something as simple as the adoption of the Owens automatic bottle machine drove man-hour productivity to rise 4,100 times. The invention of the dial telephone displaced more than half the number of operators. Generally, productivity of labor occurred unevenly across U.S. industries, though it rose substantially in all.39
Significantly, rising productivity between 1919 and 1929 caused an absolute, or permanent, displacement of labor for the first time in U.S. history. Large numbers of workers were displaced between 1919 and 1927, in manufactures, where productivity rose 42.5 percent, 40.5 percent in mining, 12.5 percent in railroads, and 29.5 percent in agriculture. By 1929, it had displaced 2,832,000 workers, of whom 2,416,000 found employment elsewhere; thus 416,000 workers were permanently displaced. In both mining and railroads, lower output due to technological innovations increased the rate of displacement to 171,000 and 345,000 workers respectively. The improvements in trucking “competed more effectively” with railroad transport, while “electricity increasingly cut into the demand for coal.” Steam power plants used less coal by turning to more efficient energy sources, such as hydroelectric plants. But nowhere else in the U.S. economy was there greater permanent displacement than in agriculture. It was the first time this had occurred in U.S. history, a historic development given that so much economic growth throughout the nineteenth century was based on the claiming of the frontier, opening new and massive agricultural production. Between 1919 and 1929, farms gave work to 540,000 fewer persons, as the number of farms fell over the same period. But the actual displacement was much greater, since the overall farm population dropped by about a million, of which many had to find employment elsewhere.40
For Corey, the total or “absolute displacement of directly productive workers,” during the greatest period of capitalist prosperity in the contemporary epoch was an indication of something more general about monopoly capitalism. Compared with earlier economic growth and its adverse impact on labor between 1889 and 1919, the level of labor displacement between 1919 and 1929 was even greater, which, for Corey, marked an “unprecedented development, of profound significance.” Considering the increase of 7,180,000 persons to the workforce, plus the 1,155,000 workers who were displaced in manufactures, mining, railroads, and agriculture, Corey reasoned that 8,335,000 workers had to find employment in occupations other than where the displacements had occurred. This would have required these other occupations to be more than three times the size they had been in the earlier twenty-year period. While some ground was gained in distribution services, motor transport, and other areas of trade, absorption in strictly productive enterprises such as construction was limited. As a result, displacement and the absorption rate over the decade of the 1920s revealed that “normal unemployment” increased at least as much as a million, resulting in about 2.5 million unemployed in the year of the crash. As Corey wrote, “This great increase in the reserve army of the unemployed took place in the midst of the most flourishing prosperity.”41
Indeed, the economy did function on this basis, but only for a short time before it became necessary to divert profits from further investment in actual production to non-productive sectors. These investments were essentially speculative. In this Corey saw a fundamental contradiction in U.S. monopoly capitalism that ushered in its decline. Although the economy seemingly performed spectacularly until the 1929 crash, enabling newly elected President Herbert Hoover to declare that American prosperity would continue indefinitely, nothing could be further from the truth. The seeds of the 1929 bust were already evident only a short time after the Great Boom had begun. Though it is generally agreed that the great upswing in the economy had occurred by 1922, the rate of profit in the productive sectors of the economy began to fall two years later and continued to do so until the stock market collapsed five years later. As the rate of profit declined in productive sectors, capitalists diverted their investments to non-productive areas, primarily in finance. Thus profits in the financial sector increased 177 percent between 1923 and 1929. While investments in new facilities and machinery remained constant during that period, new shares and bonds issued for speculative investments tripled.42
But the move toward speculation was itself the product of the higher productivity of labor. Saturated markets for consumer goods meant less investment in capital goods—goods that are produced to make other goods, such as machines used in the production of automobiles—which affected the production of consumer goods and ultimately fueled the displacement of labor. This naturally affected consumption. As American workers who could get credit went into debt, capitalists diverted profits toward more