edit SideBar

CHAPTER 7 From John Diebold to Eugen Dühring: Rethinking ''The Third Stage of Imperialism''

< CHAPTER 6 The "Many Theories of L. Marcus": From the SWP to the Birth of the "Fifth International" (1959-1966) | SMILING MAN FROM A DEAD PLANET: THE MYSTERY OF LYNDON LAROUCHE | CHAPTER 8 Behind the Vale: The NCLC, The Next Step, and The Real Paper >

Pdf file downloadable here (288 Kb)

In October 1954, LaRouche left Boston to work as an independent management consultant in New York City and in 1955 he became an "efficiency expert"/"systems analyst" for the New York branch of a Chicago-based business-consulting group called the George S. May Company.1 Before he arrived in the Big Apple, "Lynn Marcus" published a long article entitled "Automation" in the spring 1954 issue of the SWP's theoretical journal Fourth International (soon to be renamed International Socialist Review). In the piece – which includes citations both from Norbert Wiener's Cybernetics and Karl Marx's CapitalLaRouche argues that

a new industrial revolution, automation, has entered upon the scene – a consequence, again, of capitalism's lust for relative surplus value. Automation raises the contradictions of capitalist industrialization to a new intensity: technological unemployment beyond yesterday's wildest fears, astronomical quantities of constant capital for each worker directly employed, and a plummeting rate of profit. . . . Automation, a qualitative change in the means of production, hastens the doom of an outdated society. Automation carries with it an intensification of the social and political forces that will drive the working class to take power and reorganize society from top to bottom.

LaRouche then tries to show:

why automation represents the beginning of a new industrial revolution, why it is not merely a continuation of the old industrial revolution. We shall show why capitalism, for the most profound social and economic reasons, cannot complete this revolution. Finally, we shall show how automation relates to the problems of the socialist revolution.

LaRouche claimed that with automation it was technologically feasible "to eliminate most of the labor force in industry today. This is not science-fiction; it is fact, as more and more workers will realize shortly." Because of the enormous initial costs it takes to introduce automation – as well as the need to standardize the technology – only the wealthiest firms will be able to carry it off. Yet with a nationally coordinated "Workers and Farmers Government," the rapid "development of the means of production" would outdate "the capitalist economically and socially" so that "we can dispense with the boss and his equivalents altogether."

Selected passages from Dialectical Economics underscore LaRouche's attempt to relate this new automated world both to his day job in business consulting as well as to a future cybernetic socialist society:

Over a decade ago, while developing systems initially to be applied to "second generation" computer design, the author developed a method of mapping a corporate "total system" in which each new event (or the absence of a predicted probable event) could be directly interpreted (by "chaining") for its contribution to the overall rate of profit in terms of total corporate capital and corporate equity respectively ... By passive simulation, we mean the notion of constructing real-time "total-systems" analyses of an economy, and thus, creating the information on which administrators base their judgment. What we are outlining here is a process of transferring all noncreative (non-cognitive) "decisions," including the actual process of clerical routing, to such computers, totally eliminating the category of clerk from society.2
[H]is (the author's) efforts during the late 1950s and early 1960s to determine the necessary form of computer system capable of simulating the entire operation of a firm – in the course of which, as a by-product, he was able to determine why computer simulation of human intelligence is impossible . . . The efficient determination of socioeconomic policy cannot, therefore, be a group of mathematical geniuses beneficially planning the economy from a vast computer complex.3
What planners in a socialist economy do (is to use) massive computerized administrative procedures of the dynamic type. That is, by interlinking computerized administrative procedures and creating a network organized around a central computer complex, we shall effect a kind of real time simulation of the actual economy. However it will be more than a mere passive simulation. It will be an administrative network which accomplishes much of the necessary paperwork of day-to-day production and distribution control ... To such dynamic computer experiments the planners will supply their own powers of cognition to accomplish what the computer, by its nature, cannot. They will synthesize Gestalts of actual expanded reproduction. These syntheses will be reentered into the computer system to produce dynamic elaborations corresponding to the estimated results of introducing the synthesized policies of development into actual production. A series of printouts, accompanied by a cognitive analysis of the various programs considered, represents the simulation of the planning process of the working class as a whole.4


John T. Diebold (1926 – 2005)

LaRouche's interest in automation again takes us back to his early years in post-World War II Boston, only this time the trail leads not to MIT but to the Harvard Business School and the work of Georges Doriot and John Diebold. In the preface to his famous 1952 book Automation: the Advent of the Automatic Factory, Diebold explains that the book grew out of the Research Group on Automatic Control Mechanisms at Harvard's Business School. This project was managed by a famed Harvard Business School professor named Georges F. Doriot. Born in Paris in 1899, Doriot first began teaching at the business school in 1926. During World War II, he worked for the U.S. Army's Military Research and Development Department rising to the rank of brigadier general. Following the war, Doriot continued to teach at Harvard where he showed a special interest in applying new World War II-generated technologies to modern enterprise. In 1946 Doriot and then-MIT president Karl Compton also founded American Research and Development Corporation, the first venture capital company in history.

In the late 1940s John Diebold came to Harvard's to study under Doriot. After Automation made Diebold famous, he went on to run his own management consulting firm.5 Throughout his life, Diebold remained a critical admirer of Norbert Wiener. Diebold's ideas about automation also were intimately related to Wiener's work on cybernetics as historian Thomas Haigh notes:

Information and the computer were also intimately associated with "cybernetics," a fashionable theory of feedback and automatic control developed by mathematician Norbert Wiener. Cybernetics brought an intellectual veneer to American business's fascination with mechanization, which in the 1950s was generally presented to management as an end in itself. Meanwhile, consultant John Diebold popularized the newly coined term "automation' in his 1952 book of the same name, invoking the idea of fully automated factories giving rise to a new social order.6

In Automation, Diebold examines innovations in the machine tool industry, an industry that LaRouche too would highlight in his early economic writings. Diebold also discusses the use of computers in organizing business data as well as the need for new experts who knew about computers:

Much of the data necessary for the effective use of operations research techniques are now available to businesses in the form of cost accounting, sales analysis, market research, and time and motion study figures. High speed, automatic, information-handling equipment makes possible the rapid rise and automatic accumulation, comparison, and mathematical manipulation of this information. . . . One or two good men, backed by the present staffs and an analytical approach, would be sufficient to translate the questions executives would like to ask into terms meaningful to the computer. Capable men will be needed, men trained to both computer and operations research techniques. At present such men are scarce, and they command high salaries, but increasingly numbers of young engineers and mathematicians are realizing the opportunities in the field.7

(Needless to say, LaRouche tried to market himself as one of these "capable men.")

Diebold also singled out the Marshall Plan and the development of postwar European industry for the automation revolution:

Since 1945 the United States, under the Marshall Plan, has engaged the largest exportation of natural wealth to aid other people in the history of the world. This program has served a very important purpose. But the majority of this aid was used to rebuild Western Europe. . . . What is needed is a means of very materially increasing the productivity of the peoples of these countries, as well as furthering the mechanization of European industry. Automation offers just such a possibility.8

The development of new production was vital to the Cold War struggle: "It is only by increasing output per man-hour worked that we will be able to build effective defenses against the aggressive powers of communism." By so doing, the U.S. would now be able "to enlist the effective support of the peoples of the free world in this cause." In contrast, LaRouche claimed that automation only would hasten the coming working class revolution.


In 1965 during the time LaRouche was working with Tim Wohlforth's American Committee for the Fourth International (ACFI), LaRouche and Tim Wohlforth met to discuss politics. Wohlforth later recalled that LaRouche told him that he:

believed that there was a network of foundations and agents of the more moderate, internationalist, Eastern capitalists who sought to avoid unrest at home through reform projects and revolution abroad through development programs like the Alliance for Progress. Even as a radical, LaRouche believed liberals were the main enemy.9

LaRouche's engagement with John Diebold's work as well as his critique of the "liberal" Eastern Establishment financial elite proved critical to LaRouche's pamphlet The Third Stage of Imperialism, first published in the spring of 1967 under the auspices of the West Village Committee for Independent Political Action (CIPA).10 In February of that same year, Ramparts also published its expose of "liberal CIA" control over the National Student Association.

As for the intellectual origins of Third Stage, it seems to have had many roots. It is worth keeping in mind that LaRouche was both the son and the grandson of professional business and technology consultant to the New England shoe industry. Both the shoe and textile industry were virtually eliminated as major employers in New England precisely because capital began developing factories in cheaper areas of the United States such as the American South. By the 1960s, these same industries were beginning to migrate into the developing world. In short, LaRouche had some tangible experience of the "deindustrialization" of New England in the wake of "globalization." At the same time, LaRouche had been convinced since the mid-1950s that the world capitalist economy was headed towards another Great Depression unless it developed new foreign markets to exploit.

Third Stage argued that the Western capitalist world had not entered into an era of uninhibited growth but rather into a pre-depression cycle as the increasing rise of "cancerous" speculative capital suppressed the future growth of real industrial productivity. The looming world capitalist meltdown was rooted in an "underconsumption" crisis triggered by the refusal of capitalists to continually develop new technologies for fear that they would make the "paper value" of their old holdings obsolete. What growth that did occur was largely in unproductive sectors of the economy. In Third Stage, LaRouche advanced the idea that the most sophisticated strategy for capitalist survival tended to "be comprehended only by a narrow layer of financiers whose everyday life compels them to take a world view on all important questions of their self-interest." LaRouche claimed that leading New York-based financial circles centered in organizations like the Committee on Foreign Relations (CFR) and Committee on Economic Development (CED) fully recognized the danger to the entire economic system. To avoid a crisis, they knew that they needed not just to develop new factories in the developing sector but new markets as well.

Third Stage, then, was in part LaRouche's response to John Diebold, whom LaRouche saw as a leading theorist for the advanced capitalist elite. In fact the proposed scenario of Western capital developing industry in the Third World had appeared a decade and a half earlier in Automation. Because LaRouche and Diebold's views are so intertwined, I shall quote from a section in Automation entitled "Automating in Underdeveloped Areas" at some length:

Through the use of automation in the basic manufacturing industries which are necessarily the first required in most underdeveloped areas, it may be possible to increase the material standard of living in these areas in a very short time. With automatic plants it is not necessary to train large labor forces. This fact is of immense importance. It is an enormous undertaking to train for the tasks of modern industry people who have made their living by agriculture, the tending of livestock, and the most simple crafts. The most prevalent idea about industrialization of underdeveloped areas is that it should be based on industries requiring large work forces. Is this really the most fruitful course?
If it is possible to introduce highly automatic basic manufacturing and processing plants in underdeveloped areas, to man these plants in part with a small nucleus of highly trained foreign technicians, and to supplement this group with a small trained work force from the local population, then thereby turn out a high per-capita rate of goods, might not this be preferable to a long-term large-work-force industrial development plan requiring substantial changes in the pattern of life?
Automatic plants provide high industrial output without the need to alter the village and town structure of rural society, whereas the large-work-force industries necessitate changing this structure. The latter industries led to concentration of population, requiring capital investment in housing, not to mention its questionable social desirability. The housing investment drains off much of the industrial investment that could be used instead to obtain industrial output.
It is not at all that certain underdeveloped areas must undergo as long a process of industrialization as we have undergone and which most colonial development experts feel is necessary. Professor Wassily Leontief of Harvard has suggested the possibility that entire stages of skilled-labor development might be skipped by the introduction of automatic plants into underdeveloped areas, in the way the American chemical industry virtually skipped the generation of highly trained chemical technicians who participated in the development of the German chemical industry.

Although LaRouche never referred to Diebold by name, he labeled this strategy "trying to parachute a factory into a jungle."

As for Third Stage, its argument that the real reason the U.S. was bogged down in Indochina was because Wall Street needed to secure the Mekong River delta as a rice belt to support the industrialization of India seemed more than a little far-fetched. Yet if I am correct what LaRouche's critics did not know is that Third Stage was in some ways more the result of LaRouche's intellectual engagement with John Diebold's world as well as the world of V.I. Lenin.


Third Stage posited a split between the different strata of the capitalist ruling class. As such, it is a precursor of sorts to former SDS President Carl Oglesby's attempt to prove that there was a bitter split in the American ruling class between "Yankees and Cowboy" sectors of capital, a thesis he later made famous in his 1976 book The Yankee and Cowboy War.11 Oglesby argued that the rise of the Nixon Administration and the marginalization of the old liberal "Rockefeller Republican" establishment meant that political power was now shifting from the East to the South and Southwest.

Oglesby first developed his idea of intra-ruling class conflict in a series of articles first published in the New York Guardian in April 1968.12 In Third Stage, LaRouche stressed that the major financial center remained in New York and that the leading "military-industrial complex" and high-tech businesses developed in the Southwest remained interlinked with major New York financial institutions. Yet like Oglesby, LaRouche tried to make distinctions between different "strata" inside the ruling class.

LaRouche stated that the ruling New York-based financial elite advocated programs like Kennedy's Alliance for Progress because they operated from a more globalist perspective. They faced resistance, however, from more "backward" layers reflected in organizations such as the National Association of Manufacturers (NAM). This sector of the capitalist class enjoyed close ties to the anti-Communist national security and state bureaucracy and was perfectly happy to keep Latin America, Africa, and Asia as cheap raw materials suppliers. Hence they also had no qualms about propping up the most backward dictators on the planet from Nicaragua to Zaire.

LaRouche believed that this split inside the ruling class first began to manifest itself after the 1957 major recession in America. While the more sophisticated "Third Stage"-oriented faction took a benign view of Castro's Cuba, Nasser's Egypt, newly independent Algeria and other potential modernizing governments around the world, they faced fierce resistance from the more reactionary wing of capital. In a 1965 essay entitled "The Fragmentation of World Trotskyism" that appeared in the SWP's Discussion Bulletin and is a precursor to Third Stage, LaRouche writes:

The conjunctural conditions of the semi-colonial world presented U.S. imperialism with this grave contradiction. Faced with the impending end to the basis for post-war imperialist expansion, U.S. finance capital desperately required an alternative to the impending contradiction of Western European expansion. That basis could only exist in the "South." The U.S. financiers required a bourgeois-democratic revolution in Latin America, etc., for the purpose of opening up the internal markets of the semi-colonial and colonial countries for imperialist intervention. This meant settling the land question, creating the material basis in the form of a productive peasantry for primitive capitalist accumulation.
For this reason, the U.S. financiers supported revolutions against the old juntist-latifundist gangs, including the Cuban Revolution! The Cuban Revolution was not something that could be engineered; it could only come into existence on the basis of appropriate material, conjunctural conditions. The U.S. imperialists could only hope to control the leaderships of such a revolution to confine these revolutions to bourgeois-democratic limits. If they could be successful in this policy, imperialism had a real basis for escaping the impending general crisis.
However, the experience of the Cuban Revolution quickly provoked a fundamental change in U.S. foreign policy. It would never again ignore the laws of permanent revolution as it had in Cuba in 1959! That decision was made by the beginning of 1960, a fact of which we have a subsequent bloody demonstration in the assassination of Lumumba.13

The New York-based banking elite, however, still wanted to see "Alliance for Progress" controlled modernization directed from above to create new and cheaper places for factory production. But in order to develop new factories, one also needed new electrical grids, roads, a far more educated workforce and the like.

To implement this controlled modernization strategy –- sometimes associated with W.W. Rostow's famous 1961 book The Stages of Economic Growth: A Non-Communist Manifesto -- meant a split inside the capitalist class as a whole. The more "advanced" layers around the "Rockefeller Republicans" and liberal/Social Democratic networks inside the Democratic Party opposed the "Philistine" factions in both parties. In a 23 September 1965 discussion during unification discussions between Tim Wohlforth's ACFI and the Spartacist group headed by James Robertson, LaRouche elaborated on his views. From the minutes of the meeting:

L: [LaRouche] — Their solution (i.e., the capitalists) is to attempt to establish a viable and productive peasantry in the backward countries and lay the basis for primitive accumulation to create an internal marker and lay the basis for capitalist expansion. Since 1959, the U.S. has followed a policy of managed social revolutions, a general policy of imperialism to support nationalist colonial revolution as long as they remain within the control of imperialism.

LaRouche's "since 1959" comment referred to previous U.S. tacit support for Castro in his attempt to overthrow the Batista regime, although LaRouche believed that after 1959 Castro had escaped dependence on American capital thanks to his alliance with the USSR.

LaRouche continues:

The SWP et al. failed to see this and merely sees the U.S. and its allies as conducing a struggle against the colonial revolution . . . this is not the case. They are instead trying to circumvent the Permanent Revolution by sucking the working class and peasantry of these countries into the train of Ben Bella, Nasser, etc. and to use these regimes to lay the basis for the reorganization for healthy internal agricultural development, and, in turn, the imperialist exploitation of these countries. Pabloites see this as progressive. If colonial revolution follows the Cuban-Ben Bella model, the ultimate end is the victory of imperialism.

At a later point in the discussion, LaRouche further elaborated his argument:

How does capitalism progress – by expanding production. But this has come to a halt in the advanced countries, and they expand instead in Latin America, in Africa, in India. We saw this in 1957 in Cuba, how consciously the bourgeoisie supported the Castro revolution. The only solution is to create a prosperous and productive peasantry and create an internal market for capitalist accumulation; otherwise they will have to confront class struggle in their own country, the last resort.14

But who were the agents of this new "Third Stage" but the bankers, CIA liberals and other members of the ruling class. In order for them to succeed in their mission, they had to topple the more backward elements in developing nations. In Third Stage, LaRouche describes this process:

Before stable industrialization can take place, this latifundist system must be largely destroyed. . . The imperialists' difficulty in Latin America at this point is that plantation interests there are not an isolated group within the capitalist system .... To institutionalize land reform, to force latifundists to mechanize, etc. is to wipe out a source of profits of the imperialist home countries.
Furthermore, the comprador class in these countries, rooted in the latifundist families and system, form the "loyal" native governing class, the officer cadres of the police and armies servile to imperialist interests. To overturn the present latifundist interests in these countries is to attack major imperialist profits and investments in that sector and also to alienate and impoverish that caste of dons and colonels on which Coca-Colaization is presently based.

For just that reason: "The polarization of the capitalists and their bureaucracy into a "liberal" and right faction can be the basis for violent cleavages in the imperialists' ranks." In this ongoing struggle between the "liberal" capitalist financiers and the more "backward" sectors of the bureaucracy, LaRouche saw advantage of the Left: "it is almost a law that every such general economic crisis creates at some point an interval of discontinuity in capitalist hegemony at which an effective socialist leadership and movement can intervene successfully to change the course of history. This is the imperialists' greatest hazard."

But what would happen if these same liberal capitalists failed in their mission to find new zones of exploitation? Since these same financier and banking interests had to maintain the value of the speculative paper economy at all costs, they would be forced to reduce the living standards of the American working class through harsh austerity measures and increasing state regulation of the economy. In Third Stage, however, LaRouche still thought that there would be no serious resistance to planned modernization from anti-Wall Street elements in the broader U.S. business community: "Even in those few instances where corporations seem financially independent of Wall Street – and that is only an appearance – they are subject to the rule of finance." Thus during his early left days, LaRouche really did seem to believe that only some form of socialist revolution could ward off a major capitalist crisis should the capitalists fail in their attempt to generate new and more modern spheres of exploitation in the developing world.


The notion that advanced capitalism was doomed to a breakdown crisis lay at the heart of LaRouche's economic theories. Yet as the NCLC began to forge its own peculiar links to the far right, concepts from Third Stage were reinterpreted to justify the new policy. In retrospect, then, one even can see the theoretical foreshadowing of a potential coalition between the NCLC and the radical right at work in The Third Stage of Imperialism even though it would be an intellectual blunder of the post hoc ergo propter hoc variety to read Third Stage as in any way advocating such a policy.

In Third Stage LaRouche is particularly fascinated by the division of different sectors of bourgeois society when faced with an economic crisis. While LaRouche at this stage does not make a radical division between "finance" and "productive" capital, he is concerned with the possibility that attempts by the more advanced banking interests to create vast new markets in the Third World would necessarily lead to protests by right-wing and "latifundist" "dinosaurs" in both the advanced and developing nations. Should these more "advanced elements" represented by the internationalist-oriented bankers and financiers succeed, however, the threat of imminent capitalist depression in the advanced sector could be postponed. If not, the strong possibility of a new 1930s-like economic depression now loomed on the immediate historical agenda.

There is no hint that a leftist organization should (or even could) ally with the international bankers -- much less the right-wing dinosaurs –- in Third Stage. Yet in 1973 the NCLC extended "critical support" to the Nixon Administration, which the NCLC claimed was being "watergated" by big capital acting through the CIA. The "real enemy" now became the liberal banking elite which was supposedly furious at the philistine Nixon for not imposing austerity policies fast enough. NCLC "critical support" for Nixon would also provide an initial ideological rationale for the Labor Committee's pivot to the "populist" radical right.

Although a full discussion of this question can be found in How It All Began, the debate over whether or not the NCLC should orient towards what might be broadly described as a liberal "anti-Nixon" "Pop Front agenda" occurred in 1970-71. The so-called "Bavarian" tendency around Steve Fraser promoted a policy of active orientation towards the trade union and peace movements and argued that the period of capitalist expansion into new markets was still ongoing.

Against Fraser, LaRouche claimed that the window for bourgeois expansion into new markets that he had hypothesized in Third Stage was over. The monetary pressures on the capitalist sector meant that capitalists had to push for a new series of wage and price controls on the working class. To participate in any Pop Front formation, even "critically," would encourage the working class to lose its ability to independently resist the coming "liberal" assault on living standards.15 This idea of incipient fascism and emerging political crisis – which the Fraser tendency dubbed "Pantherism" – was supposedly confirmed on 15 August 1971 when the Bretton Woods gold standard exchange system officially ended. The abolition of the Bretton Woods agreement was interpreted by LaRouche as an acknowledgment that his "economic collapse" perspective now was proven fact.

In 1971-72, the NCLC first launched a concerted attack on the "Popular Front" with special emphasis on the CPUSA, which it saw as the central "left" component of any new Popular Front formation. While Carl Oglesby with his "Yankee/Cowboy War" argument advocated some kind of SDS rapprochement with the Eastern Establishment, LaRouche gradually adopted the exact opposite strategy. Over time, the NCLC tried to form alliances with reactionary elements in both the U.S. and abroad against the "Trilateralist" "globalists."

The idea that finance capital was the root of all evil would soon crystallize into a mad demonization of the Rockefeller financial group. By 1974-75 at the latest, the NCLC also entered into a tactical alliance with some far right forces such as Hitler fan Willis Carto's overtly anti-Semitic Liberty Lobby. The Labor Committee simultaneously courted the most "hard-line" elements in the East Bloc as well and fiercely attacked "Eurocommunism" as a "liberal CIA"-backed plot against the Soviet Union.

The NCLC's political gambit ideologically corresponded to a radical sharpening of the alleged division of good "productive" or "industrial" capital against "parasitic" "finance" capital. By the mid-1970s, "finance capital" was increasingly seen not as the lifeblood of the capitalist credit system but a virus bent on destroying capitalism itself and plunging the world into a feudalistic "New Dark Age." Private investment bankers now became members of a new kind of "caste" formation, the vestigial but deadly relics of a pre-industrial capitalist mercantile society that still parasitically imposed itself on the larger productive "real economy."


During the 1950s and early 1960s, LaRouche developed his own unique economic worldview based on an interpretation of capitalism that emphasized that it remained inherently unstable and had not escaped the threat of economic collapse in spite of various Keynesian-inspired "stabilizers" to the system. As a Marxist, LaRouche viewed capitalism as a transitional system between feudalism and socialism. The productive powers of mankind were advanced by capitalism in a revolutionary manner until the moment came when the "social relations" of production based on private property ownership turned against the "real economy" and everything imploded. By the mid-1970s, however, LaRouche began shifting from a Marxist interpretation of capitalism to what he labeled the "American system of economics" ostensibly based on the writings of Hamilton, Franklin, and the Philadelphia-based Carey family as well as famous German "Zollverein" economist Friedrich List. LaRouche now critiqued Marx for his failure to appreciate both List and Carey as major political economists. A long-time Labor Committee member named Richard Sober (who died of cancer in 1979) did extensive research into List in particular.

Both List and Carey stressed that Adam Smith's laissez faire vision depended on a "rigged" argument. Although Smith called for free trade he did so in the context of a vast British commercial and territorial empire that favored British goods. The British used their financial might to encourage potential economic competitors to remain "raw materials" and agricultural producers whose trade would feed British factories, not challenge them with cheaper goods. British capitalism, in short, actually encouraged "underdevelopment" and not the modernization naively lauded in The Communist Manifesto. Meanwhile, what development that did occur was largely dependent on financing from the London capital markets. With his uncritical embrace of the "Manchester School of Economics" as the only viable template for advanced capitalist development, Marx had fallen for the propagandists of the Manchester School and failed to deal with the real political economy of the 19th century.

In response to the British "free trade" threat, "national economists" like List and Carey developed carefully state-sponsored planned industrialization policies which would at times include using protectionist methods to challenge British industrial and political hegemony.16 In The Liberal Ideal and the Demons of Empire, the historian Bernard Semmel writes of List:

With the United States as his prime example, List described the way in which the superiority, indeed supremacy, of Britain's finance capital had distorted less developed economies and impeded their progress. America's commercial crises were at root the consequence of that nation's adverse balance of trade with Britain, he asserted, a situation that the credit facilities and low rates of discount offered by the Bank of England to facilitate British exports to the United States helped to bring about. Britain, moreover, had invested considerable sums In the construction of canals and railways in the United States and this capital had been made available to Britain by America's unfavorable trade balance. By its discount operations, the Bank of England could at will lower the prices of British products to the disadvantage of American manufactures and increase American consumption of these products, and America would be compelled to cover the purchase of increased imports by the export of stocks and government bonds, which left the American economy even more vulnerable to manipulation to suit British convenience. ... An agricultural nation like the United States which permitted the British a predominant position in the supply of manufactures likewise became a vassal to the British people – "permanently indebted to them," "dependent on their many institutions and drawn into the whirlpool of their agricultural, industrial, and commercial crises."17

List's co-thinker Henry Carey, an Irish-American Whig economist, viewed England's actions not simply from the prism of the American experience but also from British policy towards Ireland. Carey argued that the British had kept Ireland deliberately backward and agrarian in what we would today call a "neo-colonialist" relationship. Carey argued that:

From 1688 onward, the history of Great Britain was one of almost continuous trade wars, but the system that Britain established was at core different from those of earlier trade empires. Previous empires had sought only to regulate the relations of their subordinate states with one another and with foreigners; Britain alone worked also to control the internal structure of its colonial dependencies. . . . More recent British policy compelled other peoples to "continue mere tillers of the earth" and become Britain's "economic dependents." Thus it perpetuated, albeit under the auspices of free trade, the goals of the mercantilist colonial system.18

In the mid-1970s, the NCLC – reflecting in part the broader collapse of American radicalism – began searching for a new strategy for revolution. Abandoning the classic model of worker-based revolution, LaRouche also abandoned Marxism. Instead, the NCLC now tried to identify "anti-Rockefeller" and "anti-finance capitalist" elites in foreign governments. This quest also led the Labor Committee to try to ally with far right "nationalist" groups and governments around the world, a policy theoretically undergirded by LaRouche's twisted version of "the American system of economics."19


The notion that there were good productive capitalists in conflict with "finance capital" has led to some very curious politics. In The Making of an Atlantic Ruing Class, Kees van der Pijl point out that:

Prior to the actual era of Atlantic integration, the international articulation of bourgeois hegemony in the North Atlantic area in the twentieth century developed essentially in terms of two idea-typical frames of reference: the money-capital concept and the productive-capital concept. These two concepts capture the common denominators in the antinomous positions from which capitalists, actively or passively, were engaged in the international circulation of capital; either as agents in the process of circulation itself, or as productive capitalists; either as functionaries of fictitious capital or as managers of real capital. As ideal-types, the money-capital and productive-capital concepts constituted the vantage-points from which historically specific and increasingly synthetic, strategies for adjusting bourgeois rule and international relations to the ongoing process of internationalization were developed.
The money-capital concept underlay the liberal internationalism of the early twentieth century. It rose to prominence with the internationalization of the circuit of money capital, which generalized a rentier ideology among the bourgeoisie, both in Europe and the United States.
The productive-capital concept, on the other hand, provided the frame of reference for ruling-class hegemony when the Atlantic economy subsequently became compartmentalized into spheres-of-influence due to the pressures generated by the introduction of mass production (or large-scale industrial production generally), in a context of acute imperialist rivalry and nationalism.

According to van der Pijl:

In Germany, a critique of the international circuit of money-capital was developed which carried strong connotations of the pre-war capitalist critique of money-capital. The basis for the adoption of this specific strand in the productive-capital ideology was provided by the presence of a relatively large agricultural sector and landed class bloc in Germany. . . . Imperialist rivalry in the twentieth century added new elements to the body of ideas developed by List.
In their diatribes against cosmopolitan liberalism, the most aggressive elements in German imperialism increasingly mobilized traditional prejudice against trade and money-dealing, to which they opposed honest virtues like industriousness and military prowess.
Militarism in a sense reflected the desire to bring German productive capacity into the field directly, as pure power, instead of having it grope its way through the intricate web of international commodity and money circulation, controlled by perfidious British and, as the more heated fantasies had it, by Jewish financiers plotting secretly with Bolshevism. . . . As the historian Werner Sombart put in 1915, the war was nothing less than the "the struggle between the commercial and the heroic world outlook."

In the wake of World War I,

The typical anti-capitalism of German nationalism in this era, subsumed in National Socialist ideology, was expressed forcefully by Ferdinand Fried in his influential book, Das Ende des Kapitalismus(1931).
In Fried's view, the West was dominated by three notorious financial and commercial centers: New York, London, and Paris. Decadent and weakened, this rentier/creditor cartel coldly insisted on debt service, despite the consequences. "It can maintain itself only as long as it keeps the rest of the world chained in a complicated, subtle system, inextricable to the eye, called world economy; in reality, the world by way of this "world economy" is chained to the interest-collecting West."
The indebted part of the world, including the Soviet Union, was in a state of revolt, however, and pushed the creditor states onto the defensive. . .
Lumping the Soviet Union together with capitalist Germany was not a slip of the pen. Soviet socialism was seen as the ultimate consequence of the emancipation of productive capital as a labor process from its capitalist form. Those who favored a development in the same direction in capitalist countries were momentarily willing to play down the political differences.

Van der Pijl concludes his analysis:

As G. Wirsing explained in another well-known tract of the period, Germany and the Soviet Union were both revolting against international capitalism. Moreover, since in his opinion the national-Russian tendency in Moscow already had triumphed over the "red-Comintern" one, the idea of a crusade against the Soviet Union was naive, fostered only by the Vatican and the oil kings. . . . The central element linking all these various propositions was the productive-capital concept, the critique of money capital from the vantage-point of real production.


By the mid-1970s, the NCLC pushed an argument highly similar to that of Wirsing. The new "line" – interestingly enough – was largely developed when LaRouche was living in Germany, where he also met with Willis Carto. Although LaRouche presented the "American system" idea as a more sophisticated critique of errors in Marx, he managed to overlook the fact that Engels had written a famous book Herr Eugen Dühring's Revolution in Science, (better known as Anti-Dühring) attacking Dühring, a notorious anti-Semite who happened to be Carey's leading German promoter and author of works such as Carey's Umwalzung der Volkswirtschaftslehre (1865) and Die Verkleinerer Careys(1867). Although it must be stressed that neither Carey nor List were anti-Semites, it is hard to believe that LaRouche somehow didn't know that Carey's leading German advocate just happened to be a dreadful anti-Semite.20

In the mid-1870s, Dühring’s ideas exerted an enormous influence on the Berlin wing of German Social Democracy (SPD). Dühring became so popular that Marx asked Engels to write Herr Eugen Dühring’s Revolution in Science (best known as Anti-Dühring) after Wilhelm Liebknecht warned them repeatedly about Dühring’s growing influence. Dühring was championed by, among others, the young Eduard Bernstein as well as by August Bebel. The SPD was so much in Dühring’s camp that the pro-Dühring faction actually forced Anti-Dühring not to continue to be run in a series in the party paper but in a more obscure SPD theoretical journal.

Dühring was one of Germany’s leading anti-Semites. At first, Bernstein – who knew Dühring personally – thought this was some peculiar quirk and he didn’t take Dühring’s ideas on Jews seriously. Engels joked to Marx that Dühring was incapable of elaborating his views “without dragging in his repugnance to tobacco, cats and Jews.” Yet Dühring went on to write on of the most influential anti-Semitic books in 19th century Germany, his 1881 opus, Die Judenfrage. The book went through numerous editions and helped shape the most extreme wing of German anti-Semitism which is saying a lot.

Die Judenfrage’s claim to historical fame is that in it for the first time ever in print, Dühring hints that the Jews really should be eliminated totally from Germany since measures such as social ostracism or restrictions on marriage and such may not be enough to prevent their corruption of the body politic. In Die Judenfrage and his earlier economic works, Dühring tries to dismiss Marx as yet another Jew influenced by the Jew David Ricardo (“a hero of the stock exchange”) who brings a Jewish view to economics. Thus spake Dühring: “The economizing Jew, no matter whether so-called Socialists or not, value Ricardo in a characteristic way as the greatest national economist whom Adam Smith does not equal.”

Dühring considered himself an expert on the mathematics of infinity and wrote about it and counting numbers and such in such works as Cursus der Philosophie (1875). Dühring’s 1861 doctoral dissertation is also on space, time and math. It is called De Tempore, Spatio, Causalitate atque de Analysis Infinitesimalis Logica. Nietzsche and Dühring even got into a feud about the nature of infinity, infinite regress and counting numbers. (Some of this controversy may provide cultural background for Cantor’s future work on the mathematics of infinity.) For us, however, the question is less lofty. The NCLC developed its “discovery” of Carey and List as somehow being superior to Marx while LaRouche was in Germany. It was also while he was living in Germany that LaRouche held secret discussions with Willis Carto of the Liberty Lobby/Institute for Historical Review even as the Security Staff cultivated the Liberty Lobby connections since at least the fall of 1974. Carto also had strong German connections; like LaRouche his wife is German. There was also a German publishing house which closely worked with Carto as well, the Tūbingen-based Grabert Verlag.

Did LaRouche somehow independently discover Carey and List out of the blue, so to speak, while he also independently embraced anti-Semitism? One has to ask if it is also likely that neither LaRouche nor the Germans had any idea that the leading Carey/List promoter in 19th century Germany happened to be Eugen Dühring? The role Dühring played in popularizing Carey was never mentioned in NCLC publications. But did the “American System” that LaRouche so promoted in the mid-1970s actually speak with a German accent?


A somewhat similar analysis of "finance capital" also can be found in Lenin who – in turn – drew heavily from J.A. Hobson, the author of the famous 1902 book Imperialism. Hobson believed that Victorian England had been manipulated into war with South Africa thanks to the machinations of "a small group of international financiers, chiefly German in origin and Jewish in race."21 They constituted a critical section of the class of "finance capitalists." In Hobson's view,

This class of capitalists was also rooted in a preindustrial mercantilist class long known for its parasitism, particularly in colonial areas. These modern usurers (the rentiers, who in search of a higher return than was possible at home, invested their capital abroad) had revived the exploitative finance capitalism of earlier times. The rentier's return was "tribute" and not properly capitalist profit, but unfortunately Great Britain had become "a nation living upon tribute from abroad," and the classes enjoying this tribute employed, when they could, "the public policy, the public purse, and the public force to extend the field of their private investments, and to safeguard and improve their existing investments." .... The ordinary middle-class investors were merely "the cat's paw of the great financial houses," international bankers like the Rothschilds or J.P. Morgan.22

Bernard Semmel points out that Hobson believed that

These banking houses formed "the central ganglion of international capitalism" and constituted the ultimate authority on issues of war and peace. The tight organization of this financial capitalism was promoted by its control, "so far as Europe is concerned, chiefly by men of a single and peculiar race, who have behind them many centuries of financial experience," placing them "in a unique position to manipulate the policy of nations." It was hardly necessary to be more explicit: Hobson's readers would know he spoke of the Jews. "There is not a war, a revolution, an anarchist assassination, or any other public shock, which is not gainful to these men," Hobson continued, in the manner of Toussenel and Drumont.23

Lenin would take Hobson's analysis of rentier capital and make it a critical argument in Imperialism: Highest Stage of Capitalism. Similar ideas about "parasitic" groups would later be reformulated into the notion of an "outsider" or "comprador class" in modern dependency theory. The historian Hilmar Kaiser points out that in the mid-1960s "dependency theory" arose as a radical critique of more modernization theory. Echoing the ideas of List and Carey with a neo-Marxist twist, dependency theory

provided a negative assessment of the impact of Western penetration into the social and economic structures of the Middle East. Like the modernization approach, dependency theory distinguished between two poles in the world economy: a core area and underdeveloped regions. The core integrated a peripheral area by subordinating it through socioeconomic penetration. Thus, the periphery remained a supplier of raw materials, receiving in exchange the finished product of the core. Controlling trade, the core prevented the development of an industrial base in the periphery.
In the process of subordination, some local elites which dissociated themselves and their interests from the rest of the population were co-opted by the core. This group, known as the "compradors" in dependency terminology, served as local agents of the core's interests. Thus, dependency prevented the development of a self-aware bourgeoisie in the periphery.24

Dependency theory translated "an overtly nationalist rhetoric" into a new vocabulary "which exhibited the theoretical influence of Weberian or Marxist class concepts. Dependency theory left enough room to accommodate nationalist notions of social development." Kaiser further shows that various versions of dependency theory were used by anti-Armenian Turkish nationalists on both the left and right as ideological justification for persecuting Armenians in much in the same way that Jews were made scapegoats:

In order to present Armenian economic success as an obstacle to economic development, all authors have had to employ political arguments too. Only by doing so can they overcome the apparent contradiction that a dynamically developing segment of the population should be the cause for a lack of development. To arrive at such a conclusion one has to maintain an implicit ex post facto view of the events at hand. Armenian economic success was not an obstacle to Ottoman economic development but to the nationalist program of economic Turkification. This was the real problem to be overcome. ... In sum, social history has been unable to criticize and revise Turkish nationalist views. On the contrary, it complements and reinforces these views.


Looking back at Third Stage some four decades later, it first must be stated that it is very much a product of its time. LaRouche's take on Diebold's ideas of industrial development and his broader riff on modernization a la the Alliance for Progress are not unique for the period. At the same time, his speculations on the splits inside the capitalist elite are mirrored in other leftist discussions at the time such as Carl Oglesby's exploration of the idea of deepening rifts in the American power elite. Seen from a broader perspective, however, Third Stage can be viewed as part of a transitional period in LaRouche's personal history as well as in the history of the Labor Committee as a whole. From this point of view, Third Stage may stand as a mid-way marker between the worlds of John Diebold and Eugen Dühring.


1 In a brief letter to the editor that appeared in the January 1958 issue of the National Association of Accountants' NAA Bulletin, LaRouche lists himself as "Executive Engineer in Charge of Client Services for the Eastern Division of the May Company." As for the George S. May Company, it had been founded in Chicago in the 1920s as one of the first business consulting firm in the United States. In the early 1950s, the company greatly expanded its operations after it decided to specialize in consulting for medium and small size companies with some 50 to 500 employees.

2 Lyn Marcus, Dialectical Economics: An Introduction to Marxist Political Economy (Lexington, Mass: D.C. Heath, 1975), 442.

3 331-32.

4 227. The vision of a fully automated factory first entered into popular discourse as far back as the November 1946 issue of Fortune magazine when Fortune featured a large color spread on the "Automatic Factory" along with a highly-influential article entitled "Machines without Men." See David Noble, Forces of Production: A Social History of Industrial Automation (New York: Knopf, 1984), 67. On the potential role of computers and automation in socialist state planning, see the appendix "Machines of Communism" in this study.

5 In the 1960s Diebold served as the director of the CIA-supported International Cybernetics Association. On the CIA and the foundation – originally entitled The American Society for Cybernetics – see Flo Conway & Jim Siegelman: Dark Hero of the Information Age: In Search of Norbert Wiener, 329-31.

6 Thomas Haigh, "Inventing Information Systems: The Systems Men and the Computer, 1950-1968," The Business History Review, 75: 1 (Spring 2001), 32.

7 John Diebold, Automation: The Advent of the Automatic Factory (New York: D. Van Nostrand Company, 1952), 124-25.

8 170-71.

9. Tim Wohlforth, In These Times (10/29-11/4 1986).

10 The preface for Third Stage is dated "March 26, 1967." West Village CIPA also took out a small ad in the National Guardian announcing its appearance. Parts of Third Stage would be reprinted in Donald C. Hodges (ed.), Readings in U.S. Imperialism (Boston: Porter Sargent, 1971). Porter Sargent had been LaRouche's friend dating back to the early 1940s. (For more on Third Stage, see How It All Began, chapter one.)

Shortly after Third Stage was published, LaRouche wrote an 11 June 1967 letter to the staff of the National Guardian at 197 East 4th Street. The letter was written at the time of the June 1967 Mideast War and LaRouche seems to have hoped that the National Guardian would publish it. (LaRouche may have thought that if the letter were published, it would serve as an incentive for Guardian readers to buy a copy of The Third Stage of Imperialism.)

LaRouche argues that the Left was hopelessly confused about the real origins of the war with some cheer-leading the Arabs and others the Israelis. In reality, Egypt attacked Israel because it faced "a mountain of debt service." For Nasser to escape economic crisis, he had only two options. The first was to establish a real United Arab Republic so he could get access to oil and in the process drive up oil prices. The second option was to threaten to create such a united Arab state in order to scare the Western imperialists into giving him concessions. Therefore Nasser used a relatively low-grade conflict between Israel and Syria over water rights as a pretext to declare "a phony war" to shake down the West. Israel, however, took advantage of the "phony war" to declare "a real preventive war" against the Arab states.

LaRouche said that for years the Arabs had schemed to squeeze out more oil revenue from the West. Yet every time they tried, imperialism – "via the CIA" and related groups – sets up coups by colonels, sheikhs, and "what have you" to overthrow the threatening regime. In response, leaders like Nasser needed to create "an Arab Holy Alliance" against the CIA. Yet when such things happen, "ideologically charged" issues "often far removed" from real material concerns frequently become involved in the equation. So the issue of Israel more or less functions as a pretext for the Arab states to unite ideologically [although if I am reading LaRouche correctly, the real reason to unite is the extraction of higher oil revenues from the Seven Sisters oil cartel]. Because of Israeli oppression of Arabs both inside Israel and out [the Gaza Strip], an oppression which is worse than the way U.S. blacks are treated in cities in the north of the United States, there is a lot of popular resentment against Israel. Yet the real issue for Nasser isn't the conquest of Israel but rather the need to establish some kind of Arab military confederation to gain access to oil revenue. So Nasser launched his "phony war" and telegraphed his punches and as a result got caught flat-footed in the Israeli blitzkrieg attack.

Now as it so happens, Nasser is one of imperialism's "best successes in this period." Nasser's Egypt is a national revolutionary capitalist comprador regime. Nasser's Egypt, therefore, is a "Bonapartist regime." As such, it is very close to what "Development Decade" imperialists like. [In other words, they can carry out their controlled modernization policies under such a government.] But the 1967 actions by Nasser may have gone "too far" for the imperialists. On the other hand, it is also possible that the Israelis acted independently. Therefore the real question that radical journalists like those in the National Guardian should be trying to answer is to what extent the imperialists sanctioned an Israeli strike because they felt Nasser had gone too far or was it also possible that the Israelis retaliated on their own without being sanctioned by the West. So far then, LaRouche concludes his letter, the answer is "not yet clear."

11 Carl Oglesby, The Yankee and Cowboy War: Conspiracies from Dallas to Watergate (Kansas City: Sheed Andrews and McMeel, 1976).

12 Oglesby's articles were related to a famous incident inside SDS and discussed in New Left Notes at the time. Through the daughter of a wealthy businessman, Oglesby had been introduced to Eldridge Haynes, head of Business International. Haynes and Oglesby began a "dialogue" which led to joint meetings with SDS members the role of SDS which Oglesby describes in great detail in his recent memoir Ravens in the Storm. For more on Oglesby, see the appendix SDS: Three Puzzles at in How It All Began at

13 L. Marcus, "The Fragmentation of World Trotskyism," SWP Internal Bulletin, 25 (14), 37. LaRouche dates his article as written on 9 August 1965.

14. From "Conversations with Wohlforth" (Marxist Bulletin No. 3), publication of the Spartacist League.

15 For a deeper appreciation of the Labor Committee's hostility to Eastern Establishment-style liberalism symbolized by McGeorge Bundy's Ford Foundation and New York mayor John Lindsay, see the discussion of the Labor Committee and the New York teachers' strike in How It All Began at

16 This form of argument has obvious echoes in the debates inside the Soviet Union between the NEP economists linked to Bukharin who wanted to encourage a free market against the Left Opposition "heavy industry" grouping around Trotsky whose policies Stalin eventually adopted in the 1930s.

17 Bernard Simmel, The Liberal Ideal and the Demons of Empire (Baltimore: Johns Hopkins University Press, 1993), 68-69. This is an invaluable book. Equally invaluable is Roman Szporluk, Communism & Nationalism: Karl Marx versus Friedrich List (New York: Oxford University Press, 1988).

18 75.

19 For these ties, see the discussion of the Labor Committee's links with the far right in Argentina in the chapter on LaRouche and Norman A. Bailey posted on LaRouche Planet. Also see Dennis King's website for a discussion of this same issue as well as Dennis King's book Lyndon LaRouche and the New American Fascism. Also see the chapters posted on LaRouche Planet on "Unity Now," Roy Frankhouser, and Mitch WerBell for LaRouche's ties to the domestic American far right.

20 It is even possible that the NCLC "discovery" of Carey came after LaRouche first encountered Dühring although this is obvious speculation. It is equally possible that NCLC research on both Carey and List led back to Dühring. LaRouche's attack on Marx as a Ricardian dupe of sorts can be found in both Carey and Dühring. Dühring also played a significant role in Marx's life as well as we have noted. (At one point Marx was grateful to Dühring because Dühring was one of the very few German academics to review volume one of Capital when it first came out.)

I confess that I write the above with some dread as I do not believe that LaRouche's political evolution depends on his discovering a secret far right book that some anti-LaRouche counter-conspiracy buff might think "explains" everything. My point here is that when the NCLC did begin to examine the concepts associated with "the American system of political economy" the group had clear models in both List and Carey who were not anti-Semites. Yet the NCLC went down an obviously anti-Semitic path and by so doing recreated either by accident or wittingly the same kind of worldview so painfully evident in Dühring. Given that the NCLC always conducted elaborate historical research on hot topics, I find it improbable that someone in either Germany or America didn't realize that Carey's leading German intellectual advocate was Dühring, who – it so happened – for a significant period of time also maintained close ties to the early SPD. Yet in the "goldfish bowl" world of the NCLC, there was never any discussion of the way Dühring incorporated anti-Semitism into his worldview.

Dühring's role and influence in 19th century Germany remains a topic that demands more specialized research than what currently exists, in part, I suspect, because Dühring's ties to the early SPD may be embarrassing for leftist German academics. In Nazi Germany, Alfred Rosenberg drew heavily from Dühring, who lived until 1921 and saw the rise of a Dühring Society. A well-educated anti-Semite named Alexander Jacob wrote a book entitled Eugen Dühring on the Jews. It includes a translation of one of the many editions of Die Judenfrage. We quote from Jacobs' lengthy intro:

Even Hitler does not refer to Dühring in his works and was more familiar (even personally) with Houston Stewart Chamberlain racialism. Alfred Rosenberg, the Nazi ideologue, however wrote a work on the Jewish question very similar to Dühring’s called Die Spur des Juden im Wandel der Zeiten (1920). [Something like "The Trail of the Jews down through the Ages" -- HH] In it, he discusses first the historical circumstances of the Jews from their diaspora after the destruction of Jerusalem to their various interventions in modern European politics. The second section deals with the Jewish mentality as revealed in its religious documents and cultural and economic works. The work ends with a discussion of the Jewish ambition for economic and political mastery of the world and suggests ways of curbing this tendency forthwith in Germany. The points contained in Rosenberg's anti-Jewish program are in many ways similar to the points of the Nurnberg Laws of 1935." (p 40)

And again from Jacob on the close ideological ties between Dühring and Rosenberg:

The steps suggested by Dühring in the first editions of the Judgenfrage may thus serve as the guideline to more reasonable conservative politicians for the task of social reformation. The anti-Semite programmer outlined by the moderate Nazi ideologue Alfred Rosenberg in his Der Spur des Juden im Wandel der Zeiten may also be considered as a clear formulation of the task . . . The only difference between Rosenberg and Dühring here is, of course, that the former still considers Zionism as a solution to the Jewish problem whereas Dühring thought that the creation of an Israeli state would only mean giving another head to the Jewish serpent.' (44-45)

21 Simmel, 111.

22 114.

23 114-15.

24 Hilmar Kaiser, Imperialism, Racism, and Development Theories: The Construction of a Dominant Paradigm on Ottoman Armenians (Ann Arbor, Ml: Gomidas Institute, 1997), 38.

Edit - History - Print - Recent Changes - Search
Page last modified on June 30, 2016, at 09:10 PM