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Phasing Out The Dollar

By VVAW

No matter how "perfectly clear" Nixon makes our economic problems, one thing is perfectly clear to the average American: something is drastically wrong with the economy! However perplexing and boring the economy seems to be, it is, nevertheless, becoming impossible to ignore. As food bills, doctor bills and rents skyrocket, and as our schools and cities fall apart, the ability of poor and working people to meet the rising cost of living is actually decreasing. Logically they are having to ask what it all means.

Anyway you look at it, understanding the economy isn't a very easy task. Nixon tries to cloud things even further by having us believe that each new crisis that comes along, Phases I-II-III, the dollar crisis, the crisis of the cities and the crisis of the schools is a 'special case,' totally unrelated to everything else that?s going on. The truth is that our economy is an integral part of the economy of the entire world. What happens in one place will have very definite effects in another. To get a relatively accurate picture of what's going wrong, we must first look at the various parts of economic life in America today and then put them together to view the entire picture.

RELATIVE ECONOMIC POSITION WEAKENED

The first thing we should realize is that the overall position of the U.S. economy, relative to the rest of the world, has dramatically weakened in the last 25 years. The long range effects of running a permanent wartime economy, of pouring billions of dollars down the rat-hole of "defense," sooner or later must take their toll. The results being felt today are overwhelming. In 1950 the U.S. held 42% of the world's entire gold and monetary reserves. In 1971 it held only 8%. From 1950 to 1971, U.S. production of the world?s steel dropped from 47% to only 19%. From its unquestioned lead as an industrial power in 1950 the U.S. economy now ranks a weak 6th place in terms of its overall rate of industrial growth. Certainly some of this change had to do with the economic recovery many nations made after WWII. The point is, however, that the U.S. never fully reverted to a peacetime economy and thus severely limited its potential for sustained economic growth.

THE DOLLAR CRISIS

One way that we can see that America isn't the economic powerhouse it once was is through the 'dollar crisis'. Again we see where a quarter of a century of wasteful military spending has clearly taken its price. By pouring billions into war, less and less was available for funneling back into building the economy. The reckoning came after years of costly war in Indochina had dealt crippling blows to the dollar. Since May 1971, the dollar has been devalued 28% in relation to the Japanese yen, 23% to the German mark, 22% to the Australian dollar, and 19% to the French franc. You can bet that the people and not the American businessman have taken up the slack of the dollar devaluation through higher prices and lower real wages.

THE OLIVE DRAB LEMON

Since military expenditure is the primary factor in this situation, it should be briefly examined. Some 60% of our annual Federal budget goes for "defense." This is opposed to the insignificant 18% of the Federal budget spent on the needs of the American people. Anyway you care to view it, the $80 billion spent on war is wasted money. It certainly doesn't benefit the American people; Vietnam, a strong case in point! If it wasn't out of the scope of this article, we would analyze why the military and business interests rather than the American people run this country. For now, just check out whether or not our "defense" bill was cut after the much heralded 'cease fire' in Vietnam. Not quite! Rather, Nixon is asking for a 4.7 billion dollar increase in it. That is in the same budget that Nixon is trying to axe OEO, Model Cities, Medicare, veterans benefits, urban renewal programs, clean water programs, aid programs for the aged, hospital funding, and vocational rehabilitation programs. Will welfare mothers who are unable to adequately feed their children understand how Nixon can ask for 7.5 billion dollars for 5 new Trident submarines? Not very likely!

TAX THE POOR/BENEFIT THE RICH

Who is paying for all this in the first place? Of the entire Federal budget, 63% is paid for from personal income taxes but only 21% from corporate taxes. During Nixon?s term in office, Federal taxes on wages will increase by 20 billion dollars, while corporations will be given a 25 billion dollar cut. Nixon calls it "tax reform" but if you want to know why real wages have gone down $500 a year since Nixon took office, you have a good idea right here. Check it out people -- one tenth of all Americans earn 29% of all annual income and own 56% of all wealth in this country. Two hundred individuals and 26 corporations control over 50% of the nation?s entire wealth! Contrast that with the poorer one half of the entire U.S. population that earns only 23% of all annual income and owns only 3% of all wealth.

INFLATION AND THE COST OF LIVING

We've briefly show how a permanently large military budget has cause dislocations in the economy that have dramatically weakened the strength of the dollar. Incredible inequities in the distribution of wealth and a very regressive tax system point out who is benefiting from all this in the first place ? and it's not the general public! The last part of the picture is how it affects the general quality of life in America, 1973. As the dollar devalues, it causes a process of inflation where prices must spiral up and up to keep pace with the diminishing value of the dollar. However complicated this inflationary process may seem, there is always one cardinal truth about it that people cannot escape from: as wholesale prices go up, the price increase is always passed on to the public. Even if wages do increase somewhat, they will NEVER keep pace with inflation. Business profits are never cut ? wages always are. Inflation is one bill the public always ends up paying.

While Nixon's 'wage-price' freeze may have sounded reasonable, it was in reality a wage freeze. Even as wages remained static, corporate profits showed an increase during the same period of time. Similarly, the cost of living did not remain the same but increased. This cost of living index basically reflects the inflationary spiral of prices. It is currently rising at about 9.6% per year. Nixon?s ceiling on meat prices may have currently captured the headlines, (they are up 5.4% since this Feb.) but they are only one of many basic items that have suddenly shot up in price. Gas prices are up an average of 11% in most major cities since last year, private and public education is up over 25% in the past four years, lumber prices are way up, building material, rents, bus fares, and now Ma Bell tells us to expect the 20? phone call.

As long as the Congress and the President continue to put the interests of the military industrial complex above the interests of the American people, things aren't going to get any better. Inevitably the public's lot is going to get even harder as the economy continues to falter: the costs of this in terms of the quality of human life are frightening. VVAW has and will continue to fight for a reordering of our national priorities and to see that government is put back where it belongs: in the hands of the people!