In 1933, along with Sidney Hook, Burnham helped to organize the American Workers Party led by the Dutch-born pacifist minister A.J. Muste. Burnham supported the 1934 merger with the Communist League of America which formed the U.S. Workers Party. In 1935 he allied with the Trotskyist wing of that party and favored fusion with the Socialist Party of America. During this period, he became a friend to Leon Trotsky. Writing for The Partisan Review, Burnham was also an important influence on writers such as Dwight MacDonald and Philip Rahv. However, Burnham's engagement with Trotskyism was short-lived: from 1937 a number of disagreements came to the fore.
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"Workers of the world, unite!"
In 1937 the Trotskyists were expelled from the Socialist Party, an action which led to the formation of the Socialist Workers Party (SWP) at the end of the year. Inside the SWP, Burnham allied with Max Shachtman in a faction fight over the position of the SWP's majority faction, led by James P. Cannon and backed by Leon Trotsky, defending the Soviet Union as a degenerated workers state against the incursions of imperialism. Shachtman and Burnham, especially after witnessing the Nazi-Soviet pact of 1939 and the invasions of Poland, Latvia, Lithuania, and Estonia by Joseph Stalin's regime, as well as the Soviet invasion of Finland in November 1939, came to contend that the USSR was a new form of imperialistic class society and was thus not worthy of even critical support from the socialist movement.
After a protracted discussion inside the SWP, in which the factions argued their case in a series of heated internal discussion bulletins, the special 3rd National Convention of the organization in early April 1940 decided the question in favor of the Cannon majority by a vote of 55–31. Even though the majority sought to avoid a split by offering to continue the debate and to allow proportional representation of the minority on the party's governing National Committee, Shachtman, Burnham, and their supporters resigned from the SWP to launch their own organization, again called the Workers Party.
This break also marked the end of Burnham's participation in the radical movement, however. On May 21, 1940, he addressed a letter to the National Committee of the Workers Party resigning from the organization. In it he made it clear the distance he had moved away from Marxism:
I reject, as you know, the "philosophy of Marxism," dialectical materialism....
The general Marxian theory of "universal history," to the extent that it has any empirical content, seems to me disproved by modern historical and anthropological investigation.
Marxian economics seems to me for the most part either false or obsolete or meaningless in application to contemporary economic phenomena. Those aspects of Marxian economics which retain validity do not seem to me to justify the theoretical structure of the economics.
Not only do I believe it meaningless to say that "socialism is inevitable" and false that socialism is "the only alternative to capitalism"; I consider that on the basis of the evidence now available to us a new form of exploitive society (which I call "managerial society") is not only possible but is a more probable outcome of the present than socialism....
On no ideological, theoretic or political ground, then, can I recognize, or do I feel, any bond or allegiance to the Workers Party (or to any other Marxist party). That is simply the case, and I can no longer pretend about it, either to myself or to others.
In 1941, Burnham wrote a book analyzing the development of economics and society as he saw it, called The Managerial Revolution: What is Happening in the World.
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