Source Ken Hanly
Date 03/06/07/22:04

Jacques R. Pauwels (march 2003)

Jacques R. Pauwels (Belgian) is doctor in history and political science in
Toronto, author of The Myth of the Good War: America in the Second World War
(James Lorimer, Toronto, 2002). His book is published in different
languages: in English, Dutch, German, Spanish, Italian and French. Together
with personalities like Ramsey Clark, Michael Parenti, William Blum, Robert
Weil, Michel Collon, Peter Franssen and many others... he signed "The
International Peace Appeal against the US-War"

Wars are a terrible waste of lives and resources, and for that reason most
people are in principle opposed to wars. The American President, on the
other hand, seems to love war. Why? Many commentators have sought the answer
in psychological factors. Some opined that George W. Bush considered it his
duty to finish the job started, but for some obscure reason not completed,
by his father at the time of the Gulf War; others believe that Bush Junior
expected a short and triumphant war which would guarantee him a second term
in the White House.

I believe that we must look elsewhere for an explanation for the attitude of
the American President. The fact that Bush is keen on war has little or
nothing to do with his psyche, but a great deal with the American economic
system. This system -- America's brand of capitalism -- functions first and
foremost to make extremely rich Americans like the Bush "money dynasty"[1]
even richer. Without warm or cold wars, however, this system can no longer
produce the expected result in the form of the ever-higher profits the
moneyed and powerful of America consider as their birthright

The great strength of American capitalism is also its great weakness,
namely, its extremely high productivity. In the historical development of
the international economic system that we call capitalism, a number of
factors have produced enormous increases in productivity, for example, the
mechanization of the production process that got under way in England as
early as the 18th century. In the early 20th century, then, American
industrialists made a crucial contribution in the form of the automatization
of work by means of new techniques such as the assembly line. The latter was

an innovation introduced by Henry Ford, and those techniques have therefore
become collectively known as "Fordism." The productivity of the great
American enterprises rose spectacularly; for example, already in the
twenties countless vehicles rolled off the assembly lines of the automobile
factories of Michigan every single day. But who was supposed to buy all
those cars? Most Americans at the time did not have sufficiently robust
pocket books for such a purchase. Other industrial products similarly
flooded the market, and the result was the emergence of a chronic disharmony
between the ever-increasing economic supply and the lagging demand. Thus
arose the economic crisis generally known as the Great Depression. It was
essentially a crisis of overproduction. Warehouses were bursting with unsold
commodities, factories laid off workers, unemployment exploded, and so the
purchasing power of the American people shrunk even more, making the crisis
even worse.

It cannot be denied that in America the Great Depression only ended during,
and because of, the Second World War. (Even the greatest admirers of
President Roosevelt admit that his much-publicized New Deal policies brought
little or no relief.) Economic demand rose spectacularly when the war which
had started in Europe, and in which the USA itself was not an active
participant before 1942, allowed American industry to produce unlimited
amounts of war equipment. Between 1940 and 1945, the American state would
spend no less than 185 billion dollar on such equipment, and the military
expenditures' share of the GNP thus rose between 1939 and 1945 from an
insignificant 1,5 per cent to approximately 40 per cent. In addition,
American industry also supplied gargantuan amounts of equipment to the
British and even the Soviets via Lend-Lease. (In Germany, meanwhile, the
subsidiaries of American corporations such as Ford, GM, and ITT produced all
sorts of planes and tanks and other martial toys for the Nazi's, also after
Pearl Harbor, but that is a different story.) The key problem of the Great
Depression -- the disequilibrium between supply and demand -- was thus
resolved because the state "primed the pump" of economic demand by means of
huge orders of a military nature

As far as ordinary Americans were concerned, Washington's military spending
orgy brought not only virtually full employment but also much higher wages
than ever before; it was during the Second World War that the widespread
misery associated with the Great Depression came to an end and that a
majority of the American people achieved an unprecedented degree of
prosperity. However, the greatest beneficiaries by far of the wartime
economic boom were the country's businesspeople and corporations, who
realized extraordinary profits. Between 1942 and 1945, writes the historian
Stuart D. Brandes, the net profits of America's 2,000 biggest firms were
more than 40 per cent higher than during the period 1936-1939; such a
"profit boom" was possible, he explains, because the state ordered billions
of dollars of military equipment, failed to institute price controls, and
taxed profits little if at all. This largesse benefited the American
business world in general, but in particular that relatively restricted
elite of big corporations known as "big business" or "corporate America."
During the war, a total of less than 60 firms obtained 75 per cent of all
lucrative military and other state orders. The big corporations -- Ford,
IBM, etc. -- revealed themselves to be the "war hogs," writes Brandes, that
gormandized at the plentiful trough of the state's military expenditures.
IBM, for example, increased its annual sales between 1940 and 1945 from 46
to 140 million dollar thanks to war-related orders, and its profits
skyrocketed accordingly.

America's big corporations exploited their Fordist expertise to the fullest
in order to boost production, but even that was not sufficient to meet the
wartime needs of the American state. Much more equipment was needed, and in
order to produce it, America needed new factories and even more efficient
technology. These new assets were duly stamped out of the ground, and on
account of this the total value of all productive facilities of the nation
increased between 1939 and 1945 from 40 to 66 billion dollar. However, it
was not the private sector that undertook all these new investments; on

account of its disagreeable experiences with overproduction during the
thirties, America's businesspeople found this task too risky. So the state
did the job by investing 17 billion dollar in more than 2,000
defense-related projects. In return for a nominal fee, privately owned
corporations were permitted to rent these brand-new factories in order to
produce...and to make money by selling the output back to the state.
Moreover, when the war was over and Washington decided to divest itself of
these investments, the nation's big corporations purchased them for half,
and in many cases only one third, of the real value.

How did America finance the war, how did Washington pay the lofty bills
presented by GM, ITT, and the other corporate suppliers of war equipment?
The answer is: partly by means of taxation - about 45 per cent --, but much
more through loans - approximately 55 per cent. On account of this, the
public debt increased dramatically, namely, from 3 billion dollar in 1939 to
no less than 45 billion dollar in 1945. In theory, this debt should have
been reduced, or wiped out altogether, by levying taxes on the huge profits
pocketed during the war by America's big corporations, but the reality was
different. As already noted, the American state failed to meaningfully tax
corporate America's windfall profits, allowed the public debt to mushroom,
and paid its bills, and the interest on its loans, with its general
revenues, that is, by means of the income generated by direct and indirect
taxes. Particularly on account of the regressive Revenue Act introduced in
October 1942, these taxes were paid increasingly by workers and other
low-income Americans, rather than by the super-rich and the corporations of
which the latter were the owners, major shareholders, and/or top managers.
"The burden of financing the war," observes the American historian Sean
Dennis Cashman, "[was] sloughed firmly upon the shoulders of the poorer
members of society." However, the American public, preoccupied by the war
and blinded by the bright sun of full employment and high wages, failed to
notice this. Affluent Americans, on the other hand, were keenly aware of the
wonderful way in which the war generated money for themselves and for their
corporations. Incidentally, it was also from themselves - from the
businesspeople, bankers, insurers and other big investors - that Washington
borrowed the money needed to finance the war; corporate America thus also
profited from the war by pocketing the lion's share of the interests
generated by the purchase of the famous war bonds. In theory, at least, the
rich and powerful of America are the great champions of so-called free
enterprise, and they oppose any form of state intervention in the economy;
during the war, however, they never raised any objections to the way in
which the American state managed and financed the economy, because without
this large-scale dirigist violation of the rules of free enterprise, their
collective wealth could never have proliferated as it did during those

During the Second World War, the wealthy owners and top managers of the big
corporations learned a very important lesson: during a war there is money to
be made, lots of money. In other words, the arduous task of maximizing
profits -- the key activity within the capitalist American economy -- can be
absolved much more efficiently through war than through peace; however, the
benevolent cooperation of the state is required. Ever since the Second World
War, the rich and powerful of America have remained keenly conscious of
this. So is their man in the White House today, the scion of a "money
dynasty" who was parachuted into the White House in order to promote the
interests of his wealthy family members, friends, and associates in
corporate America, the interests of money, privilege, and power.

In the spring of 1945 it was obvious that the war, fountainhead of fabulous
profits, would soon be over. What would happen then? Among the economists,
many Cassandras conjured up scenarios that loomed extremely unpleasant for
America's political and industrial leaders. During the war, Washington's
purchases of military equipment, and nothing else, had restored the economic
demand and thus made possible not only full employment but also
unprecedented profits. With the return of peace, the ghost of disharmony
between supply and demand threatened to return to haunt America again, and
the resulting crisis might well be even more acute than the Great Depression
of the "dirty thirties," because during the war years the productive
capacity of the nation had increased considerably, as we have seen. Workers
would have to be laid off precisely at the moment when millions of war
veterans would come home looking for a civilian job, and the resulting
unemployment and decline in purchasing power would aggravate the demand
deficit. Seen from the perspective of America's rich and powerful, the
coming unemployment was not a problem; what did matter was that the golden
age of gargantuan profits would come to an end. Such a catastrophe had to be
prevented, but how?

Military state expenditures were the source of high profits. In order to
keep the profits gushing forth generously, new enemies and new war threats
were urgently needed now that Germany and Japan were defeated. How fortunate
that the Soviet Union existed, a country which during the war had been a
particularly useful partner who had pulled the chestnuts out of the fire for
the Allies in Stalingrad and elsewhere, but also a partner whose communist
ideas and practices allowed it to be easily transformed into the new
bogeyman of the United States. Most American historians now admit that in
1945 the Soviet Union, a country that had suffered enormously during the
war, did not constitute a threat at all to the economically and militarily
far superior USA, and that Washington itself did not perceive the Soviets as
a threat; these historians also acknowledge that Moscow was very keen to
work closely together with Washington in the postwar era. Indeed, Moscow had
nothing to gain, and everything to lose, from a conflict with superpower
America, which was brimming with confidence thanks to its monopoly of the
atom bomb. However, America -- corporate America, the America of the
super-rich -- urgently needed a new enemy in order to justify the titanic
expenditures for "defense" which were needed to keep the wheels of the
nation's economy spinning at full speed also after the end of the war, thus
keeping profit margins at the required -- or rather, desired -- high levels,
or even to increase them. It is for this reason that the Cold War was
unleashed in 1945, not by the Soviets but by the American
"military-industrial" complex, as President Eisenhower would call that elite
of wealthy individuals and corporations that knew how to profit from the
"warfare economy."

In this respect, the Cold War exceeded their fondest expectations. More and
more martial equipment had to be cranked out, because the allies within the
so-called "free world", which actually included plenty of nasty
dictatorships, had to be armed to the teeth with US equipment. In addition,
America's own armed forces never ceased demanding bigger, better, and more
sophisticated tanks, planes, rockets, and, yes, chemical and bacteriological
weapons and other martial tools of mass destruction. For these goods, the
Pentagon was always ready to pay huge sums without asking difficult
questions. As had been the case during the Second World War, it were again
primarily the large corporations who were allowed to fill the orders. The
Cold War generated unprecedented profits, and they flowed into the coffers
of those extremely wealthy individuals who happened to be the owners, top
managers, and/or major shareholders of these corporations. (Does it come as
a surprise that in the United States newly retired Pentagon generals are
routinely offered jobs as consultants by large corporations involved in
military production, and that businessmen linked with those corporations are
regularly appointed as high-ranking officials of the Department of Defense,
as advisors of the President, etc.?)

During the Cold War too, the American state financed its skyrocketing
military expenditures by means of loans, and this caused the public debt to
rise to dizzying heights. In 1945 the public debt stood at "only" 258
billion dollar, but in 1990 -- when the Cold War ground to an end -- it
amounted to no less than 3.2 trillion dollar! This was a stupendous
increase, also when one takes the inflation rate into account, and it caused
the American state to become the world's greatest debtor. (Incidentally, in
July 2002 the American public debt had reached 6.1 trillion dollar.)
Washington could and should have covered the cost of the Cold War by taxing
the huge profits achieved by the corporations involved in the armament orgy,
but there was never any question of such a thing. In 1945, when the Second
World War come to an end and the Cold War picked up the slack, corporations
still paid 50 per cent of all taxes, but during the course of the Cold War
this share shrunk consistently, and today it only amounts to approximately 1
per cent. This was possible because the nation's big corporations largely
determine what the government in Washington may or may not do, also in the
field of fiscal policy. In addition, lowering the tax burden of corporations
was made easier because after the Second World War these corporations
transformed themselves into multinationals, "at home everywhere and
nowhere," as an American author has written in connection with ITT, and
therefore find it easy to avoid paying meaningful taxes anywhere. Stateside,
where they pocket the biggest profits, 37 per cent of all American
multinationals -- and more than 70 per cent of all foreign multinationals --
paid not a single dollar of taxes in 1991, while the remaining
multinationals remitted less than 1 per cent of their profits in taxes.

The sky-high costs of the Cold War were thus not borne by those who profited
from it and who, incidentally, also continued to pocket the lion's share of
the dividends paid on government bonds, but by the American workers and the
American middle class. These low- and middle-income Americans did not
receive a penny from the profits yielded so profusely by the Cold War, but
they did receive their share of the enormous public debt for which that
conflict was largely responsible. It is they, therefore, who were really
saddled with the costs of the Cold War, and it is they who continue to pay
with their taxes for a disproportionate share of the burden of the public
debt. In other words, while the profits generated by the Cold War were
privatized to the advantage of an extremely wealthy elite, its costs were
ruthlessly socialized to the great detriment of all other Americans. During
the Cold War, the American economy degenerated into a gigantic swindle, into
a perverse redistribution of the nation's wealth to the advantage of the
rich and to the disadvantage not only of the poor and of the working class
but also of the middle class, whose members tend to subscribe to the myth
that the American capitalist system serves their interests. Indeed, while
the wealthy and powerful of America accumulated ever-greater riches, the
prosperity achieved by many other Americans during the Second World War was
gradually eroded, and the general standard of living declined slowly but
steadily. During the Second World War America had witnessed a modest
redistribution of the collective wealth of the nation to the advantage of
the less privileged members of society; during the Cold War, however, the
rich Americans became richer while the non-wealthy -- and certainly not only
the poor -- became poorer. In 1989, the year the Cold War petered out, more
than 13 per cent of all Americans -- approximately 31 million individuals --
were poor according to the official criteria of poverty, which definitely
understate the problem. Conversely, today 1 per cent of all Americans own no
less than 34 per cent of the nation's aggregate wealth. In no major
"Western" country is the wealth distributed more unevenly.

The minuscule percentage of super-rich Americans found this development
extremely satisfactory; they loved the idea of accumulating more and more
wealth, of aggrandizing their already huge assets, at the expense of the
less privileged. They wanted to keep things that way or, if at all possible,
make this sublime scheme even more efficient. However, all good things must
come to an end, and in 1989/90 the bountiful Cold War elapsed. That
presented a serious problem. Ordinary Americans, who knew that they had
borne the costs of this war, expected a "peace dividend;" they thought that
the money the state had spent on military expenditures might now be used to
produce benefits for themselves, for example in the form of a national
health insurance and other social benefits which Americans in contrast to
most Europeans have never enjoyed; in 1992, Bill Clinton would actually win
the presidential election by dangling out the prospect of a national health
plan, which of course never materialized. A "peace dividend", then, was of
no interest whatsoever to the nation's wealthy elite, because the provision
of social services by the state does not yield profits for entrepreneurs and
corporations, and certainly not the lofty kind of profits generated by
military state expenditures. Something had to be done, and had to be done
fast, to prevent the threatening implosion of the state's military spending.
America, or rather, corporate America, was orphaned of its useful Soviet
enemy, and urgently needed to conjure up new enemies and new threats in
order to justify a high level of military spending. It is in this context
that in 1990 Saddam Hussein appeared on the scene like a kind of deus ex
machina. This tin-pot dictator had previously been perceived and treated by
the Americans as a good friend, and he had been armed to the teeth so that
he could wage a nasty war against Iran; it was the USA -- and allies such as
Germany -- who originally supplied him with his infamous weapons of mass
destruction. However, Washington was desperately in need of a new enemy, and
suddenly fingered him as a terribly dangerous "new Hitler," against whom war
needed to be waged urgently, even though it was clear that a negotiated
settlement of the issue of Iraq's occupation of Kuwait was not out of the
question. George Bush Senior was the casting agent who discovered this
useful new nemesis of America, and who unleashed the Gulf War, during which
Baghdad was showered with bombs and Saddam's hapless recruits were
slaughtered in the desert. The road to the Iraqi capital lay wide-open, but
the Marines' triumphant entry into Baghdad was suddenly scrapped. Saddam
Hussein was left in power so that the threat he was supposed to form might
be invoked again in order to justify keeping America in arms. After all, the
sudden collapse of the Soviet Union had shown how inconvenient it can be
when one loses a useful foe.

And so Mars could remain the patron saint of the American economy or, more
accurately, the godfather of the corporate Mafia that manipulates this
war-driven economy and reaps its huge profits without bearing its costs. The
despised project of a peace dividend could thus be unceremoniously buried,
and military expenditures could remain the dynamo of the economy and the
wellspring of sufficiently high profits. Those expenditures increased
relentlessly during the 1990s. In 1996, for example, they amounted to no
less than 265 billion dollar, but when one adds the unofficial and/or
indirect military expenditures, such as the interests paid on loans used to
finance past wars, the 1996 total came to approximately 494 billion dollar,
amounting to an outlay of 1.3 billion dollar per day! However, with only a
considerably chastened Saddam as bogeyman, Washington found it expedient
also to look elsewhere for new enemies and threats. Somalia temporarily
looked promising, but in due course another "new Hitler" was identified in
the Balkan Peninsula in the person of the Serbian leader, Milosevic. During
much of the nineties, then, conflicts in the former Yugoslavia provided the
required pretexts for military interventions, large-scale bombing
operations, and the purchase of more and newer weapons.

The "warfare economy" could thus continue to run on all cylinders also
after the Gulf War. However, in view of occasional public pressure such as
the demand for a peace dividend, it is not easy to keep this system going.
(The media present no problem, as newspapers, magazines, TV stations, etc.
are either owned by big corporations or rely on them for advertising
revenue.) As mentioned earlier, the state has to cooperate, so in Washington
one needs men and women one can count upon, preferably individuals from the
very own corporate ranks, individuals totally committed to use the
instrument of military expenditures in order to provide the high profits
that are needed to make the very rich of America even richer. In this
respect, Bill Clinton had fallen short of expectations, and corporate
America could never forgive his original sin, namely, that he had managed to
have himself elected by promising the American people a "peace dividend" in
the form of a system of health insurance. On account of this, in 2000 it was
arranged that not the Clinton-clone Al Gore moved into the White House but a
team of militarist hardliners, virtually without exception representatives
of wealthy, corporate America, such as Cheney, Rumsfeld, and Rice, and of
course George W. Bush himself, son of the man who had shown with his Gulf
War how it could be done; the Pentagon, too, was directly represented in the
Bush Cabinet in the person of the allegedly peace-loving Powell, in reality
yet another angel of death. Rambo moved into the White House, and it did not
take long for the results to show.

After Bush Junior had been catapulted into the presidency, it looked for
some time as if he was going to proclaim China as the new nemesis of
America. However, a conflict with that giant loomed somewhat risky;
furthermore, all too many big corporations make good money by trading with
the People's Republic. Another threat, preferably less dangerous and more
credible, was required to keep the military expenditures at a sufficiently
high level. For this purpose, Bush and Rumsfeld and company could have
wished for nothing more convenient than the events of September 11, 2001; it
is extremely likely that they were aware of the preparations for these
monstrous attacks, but that they did nothing to prevent them because they
knew that they would be able to benefit from them. In any event, they did
take full advantage of this opportunity in order to militarize America more
than ever before, to shower bombs on people who had nothing to do with 9/11,
to wage war to their hearts' content, and thus for corporations that do
business with the Pentagon to ring up unprecedented sales. Bush declared war
not on a country but on terrorism, an abstract concept against which one
cannot really wage war and against which a definitive victory can never be
achieved. However, in practice the slogan "war against terrorism" meant
that Washington now reserves the right to wage war worldwide and permanently
against whomever the White House defines as a terrorist.

And so the problem of the end of the Cold War was definitively resolved, as
there was henceforth a justification for ever-increasing military
expenditures. The statistics speak for themselves. The 1996 total of 265
billion dollar in military expenditures had already been astronomical, but
thanks to Bush Junior the Pentagon was allowed to spend 350 billion in 2002,
and for 2003 the President has promised approximately 390 billion; however,
it is now virtually certain that the cape of 400 billion dollar will be
rounded this year. (In order to finance this military spending orgy, money
has to be saved elsewhere, for example by cancelling free lunches for poor
children; every little bit helps.) No wonder that George W. struts around
beaming with happiness and pride, for he -- essentially a spoiled rich kid
of very limited talent and intellect -- has surpassed the boldest
expectations not only of his wealthy family and friends but of corporate
America as a whole, to which he owes his job.

9/11 provided Bush with carte blanche to wage war wherever and against
whomever he chose, and as this essay has purported to make clear, it does
not matter all that much who happens to be fingered as enemy du jour. Last
year, Bush showered bombs on Afghanistan, presumably because the leaders of
that country sheltered Bin Laden, but recently the latter went out of
fashion and it was once again Saddam Hussein who allegedly threatened
America. We cannot deal here in detail with the specific reasons why Bush's
America absolutely wanted war with the Iraq of Saddam Hussein and not with
the arguably much more dangerous regime of North Korea. A major reason for
fighting this particular war was that Iraq's large reserves of oil are
lusted after by the US oil trusts with whom the Bushes themselves -- and
Bushites such as Cheney and Rice, after whom an oil tanker happens to be
named -- are so intimately linked. The war in Iraq is also useful as a
lesson to other Third World countries who fail to dance to Washington's
tune, and as an instrument for emasculating domestic opposition and ramming
the extreme right-wing program of an unelected president down the throats of
Americans themselves.

The America of wealth and privilege is hooked on war, without regular and
ever-stronger doses of war it can no longer function properly, that is,
yield the desired profits. Right now, this addiction, this craving is being
satisfied by means of a conflict against Iraq, which also happens to be dear
to the hearts of the oil barons. However, does anybody believe that the
warmongering will stop once Saddam' scalp will join the Taliban turbans in
the trophy display case of George W. Bush? The President has already pointed
his finger at those whose turn will soon come, namely, the "axis of evil"
countries: Iran, Syria, Lybia, Somalia, North Korea, and of course that old
thorn in the side of America, Cuba. Welcome to the 21st century, welcome to
George W. Bush's brave new era of permanent war!

Finally this. Some experts claim that wars are actually bad for the
American economy. This is partly correct, but also partly false. It all
depends about which economy, about whose economy one is talking. For the
economy of average Americans, the war in Iraq is definitely a catastrophe,
because they will pay its huge bills. With their money, but also with their
blood, since it is also the ordinary -- and preferably black and/or
Hispanic -- Americans who supply the cannon fodder and who are exposed to
"friendly fire" and to the carcinogenic depleted uranium and other risks
associated with handling some of the more exotic weapons in the Pentagon's
arsenal, as was already the case during the Gulf War. The sons of the
wealthy and privileged stay safely at home; is this not what young George W.
Bush did at the time of the Vietnam War? For the military-industrial
complex, for the economy of the Bushes, Cheneys, Rices, Rumsfelds, etc., for
the economy of the oil trusts and weapons manufacturers, for the economy of
the wealthy Americans who own the shares of these trusts and corporations,
this war -- like wars in general -- is nothing less than wonderful. Because
they will pocket the profits that wars generate as profusely as the death
and destruction that will befall others. Their economy thrives on war, their
"warfare economy" cannot function without war. This is why Bush must
continue to find new enemies for America, continue to conjure up new
threats, continue to wage war. If peace might ever break out in the world,
it would be nothing less than a catastrophe for the economy of Bush's


[1] George W.'s grandfather Prescott Bush, a New York banker, specialized
during the thirties in business with Nazi Germany, made huge profits in the
process, and used that money to launch his son George, later to become head
of the CIA and, later still, president of the USA, in the oil industry.

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