Economic Fascism; T. DiLorenzo

The Free World Flirts With Fascism Few Americans are aware of or can recall how so many Americans and Europeans viewed economic fascism as the wave of the future during the 1930s. The American Am bassador to Italy, Richard Washburn Child, was so impressed with "corporatism" that he wrote in the preface to Mussolini' s 1928 autobiography that "it may be shrewdly Dr. DiLorenzo, this month's guest editor, is Professor of Economics at Loyola College, Bal timore, Maryland. forecast that no man will exhibit dimensions of permanent greatness equal to Mussolini. . . . The Duce is now the greatest figure of this sphere and time." 1 Winston Churchill wrote in 1927 that "If I had been an Italian I am sure I would have been entirely with you" and "don the Fascist black shirt.,,2 As late as 1940, Churchill was still describing Mussolini as "a great man." U.S. Congressman Sol Bloom, Chairman of the House Foreign Relations Committee, said in 1926 that Mussolini "will be a great thing not only for Italy but for all of us if he succeeds. It is his inspiration, his determi nation, his constant toil that has literally rejuvenated Italy ... ,,3 One of the most outspoken American fascists was economist Lawrence Dennis.

In his 1936 book, The Coming American Fascism, Dennis declared that defenders of "18th-century Americanism" were sure to become "the laughing stock of their own countrymen" and that the adoption of eco nomic fascism would intensify "national spirit" and put it behind "the enterprises of public welfare and social control." The big stumbling block to the development of eco nomic fascism, Dennis bemoaned, was "lib eral norms of law or constitutional guaran tees of private rights." Certain British intellectuals were perhaps the most smitten of anyone by fascism. George Bernard Shaw announced in 1927 that his fellow "socialists should be de lighted to find at last a socialist [Mussolini] who speaks and thinks as responsible rulers do. ,,4 He helped form the British Union of 288 Fascists whose "Outline of the Corporate State, ' , according to the organization's founder, Sir Oswald Mosley, was "on the Italian Model." While visiting England, the American author Ezra Pound declared that Mussolini was" continuing the task of Tho mas Jefferson. ,,5 Thus, it is important to recognize that, as an economic system, fascism was widely accepted in the 1920s and '30s. The evil deeds of individual fascists were later con demned, but the practice of economic fas cism never was. To this day, the historically uninformed continue to repeat the hoary slogan that, despite all his faults, Mussolini at least "made the trains run on time,"

insinuating that his interventionist industrial policies were a success. The Italian "Corporatist" System So-called "corporatism" as practiced by Mussolini and revered by so many intellec tuals and policy makers had several key elements: The state comes before the individual. Webster's New Collegiate Dictionary de fines fascism as "a political philosophy, movement, or regime that exalts nation and often race above the individual and that stands for a centralized, autocratic govern ment. " This stands in stark contrast to the classical liberal idea that individuals have natural rights that pre-exist government; that government derives its "just powers" only through the consent of the governed; and that the principal function of govern ment is to protect the lives, liberties, and properties of its citizens, not to aggrandize the state. Mussolini viewed these liberal ideas (in the European sense of the word "liberal") as the antithesis of fascism: "The Fascist conception of life," Mussolini wrote, "stresses the importance of the State and accepts the individual only in so far as his interests coincide with the State. It is op posed to classical liberalism [which] denied the State in the name of the individual; Fascism reasserts the rights of the State as 289 expressing the real essence of the individu al. ,,6 Mussolini thought it was unnatural for a government to protect individual rights: "The maxim that society exists only for the wellbeing and freedom of the individuals composing it does not seem to be in con formity with nature's plans."7 "If classical liberalism spells individualism," Mussolini continued, "Fascism spells government."

The essence of fascism, therefore, is that government should be the master, not the servant, of the people. Think about this. Does anyone in America really believe that this is not what we have now? Are Internal Revenue Service agents really our "ser vants"? Is compulsory "national service" for young people, which now exists in nu merous states and is part of a federally funded program, not a classic example of coercing individuals to serve the state? Isn't the whole idea behind the massive regula tion and regimentation of American industry and society the notion that individuals should be forced to behave in ways defined by a small governmental elite? When the nation's premier health-care reformer re cently declared that heart bypass surgery on a 92-year-old man was' 'a waste of resourc es," wasn't that the epitome of the fascist ideal-that the state, not individuals, should decide whose life is worthwhile, and whose is a "waste"?

The U.S. Constitution was written by individuals who believed in the classical liberal philosophy of individual rights and sought to protect those rights from govern mental encroachment. But since the fascist/ collectivist philosophy has been so influen tial, policy reforms over the past half century have all but abolished many of these rights by simply ignoring many of the pro visions in the Constitution that were de signed to protect them. As legal scholar Richard Epstein has observed: "[T]he em inent domain ... and parallel clauses in the Constitution render ... suspect many of the heralded reforms and institutions of the twentieth century: zoning, rent control, workers' compensation laws, transfer pay ments, progressive taxation."8 It is impor290 THE FREEMAN • JUNE 1994 tant to note that most of these reforms were initially adopted during the '30s,when the fascist/collectivist philosophy was in its heyday.

Planned industrial ((harmony." Another keystone of Italian corporatism was the i,dea that the government's interventions in the economy should not be conducted on an ad hoc basis, but should be "coordinated" by some kind of central planning board. Gov ernment intervention in Italy was "too di verse, varied, contrasting. There has been disorganic ... intervention, case by case, as the need arises," Mussolini complained in 1935.9 Fascism would correct this by directing the economy toward" certain fixed objectives" and would "introduce order in the economic field." 10 Corporatist planning, according to Mussolini adviser Fausto Pit igliani, would give government intervention in the Italian economy a certain "unity of aim," as defined by the government plan.. ners. 11 These exact sentiments were expressed by Robert Reich (currently the U.S. Secre tary of Labor) and Ira Magaziner (currently the federal government's health care reform "Czar' ') in their book Minding America's Business. 12 In order to counteract the "un tidy marketplace," an interventionist indus trial policy "must strive to integrate the full range of targeted government policies procurement, research and development, trade, antitrust, tax credits, and subsidies into a coherent strategy .... "

Current industrial policy interventions, Reich and Magaziner bemoaned, are "the product of fragmented and uncoordinated decisions made by [many different] execu tive agencies, the Congress, and indepen dent regulatory agencies .... There is no integrated strategy to use these programs to improve the ... U.S. economy." 14 In his 1989 book, The Silent War, Maga ziner reiterated this theme by advocating' 'a coordinating group like the national Secu rity Council to take a strategic national industrial view." 15 The White House has in fact established a "National Economic Security Council." Every other advocate of an interventionist "industrial policy" ~as made a similar "unity of aim" argument, as first described by Pitigliani more than half a century ago. Government-business partnerships. A third defining characteristic of economic fascism is that private property and business ownership are permitted, but are in reality controlled by government through a busi ness-government "partnership." As Ayn Rand often noted, however, in such a part nership government is always the senior or dominating "partner."

In Mussolini's Italy, businesses were grouped by the government into legally recognized "syndicates" such as the "Na tional Fascist Confederation of Com merce," the "National Fascist Confedera tion of Credit and Insurance," and so on. All of these' 'fascist confederations" were" co ordinated" by a network of government planning agencies called "corporations," one for each industry. One large "National Council of Corporations" served as a na tional overseer of the individual "corpora tions" and had the power to "issue regula tions of a compulsory character." 16 The purpose of this byzantine regulatory arrangement was so that the government could "secure collaboration . . . between the various categories of producers in each particular trade or branch of productive activity. ,,17 Government-orchestrated" col laboration" was necessary because "the principle of private initiative" could only be useful "in the service of the national interest" as defined by government bureau crats. 18 This idea of government-mandated and -dominated "collaboration" is also at the heart of all interventionist industrial policy schemes. A successful industrial policy, write Reich and Magaziner, would' 'require careful coordination between public and private sectors." 19 "Government and the private sector must work in tandem.' ,20 "Economic success now depends to a high degree on coordination, collaboration, and careful strategic choice," guided by govern ment. 21 The AFL-CIO has ~choed this theme, advocating a "tripartite National Reindustrialization Board-including representa tives of labor, business, and government"

that would supposedly "plan" the econo my.22 The Washington, D.C.-based Center for National Policy has also published a report authored by businessmen from Laz ard Freres, du Pont, Burroughs, Chrysler, Electronic Data Systems, and other corpo rations promoting an allegedly "new" pol icy based on "cooperation of government with business and labor. ,,23 Another report, by the organization "Rebuild America," co-authored in 1986 by Robert Reich and economists Robert Solow, Lester Thurow, Laura Tyson, Paul Krugman, Pat Choate, and Lawrence Chimerine urges "more teamwork" through "public-private part nerships among government, business and academia. ,,24 This report calls for "national goals and targets" set by government plan ners who will devise a "comprehensive investment strategy" that will only permit "productive" investment, as defined by government, to take place. Mercantilism and protectionism. When ever politicians start talking about "collab oration" with business, it is time to hold on to your wallet. Despite the fascist rhetoric about' 'national collaboration" and working for the national, rather than private, inter ests, the truth is that mercantilist and Pro tectionist practices riddled the system. Ital ian social critic Gaetano Salvemini wrote in 1936 that under corporatism, "it is the state, i.e., the taxpayer, who has become respon sible to private enterprise. In Fascist Italy the state pays for the blunders of private enterprise. ,,25 As long as business was good, Salvemini wrote, "profit remained to private initiative.' ,26 But when the depres sion came, "the government added the loss to the taxpayer's burden. Profit is private and individual. Loss is public and social. ,,27 The Italian corporative state, The Econ omist editorialized on July 27, 1935, "only amounts to the establishment of a new and costly bureaucracy from which those indus trialists who can spend the necessary amount, can obtain almost anything they want, and put into practice the worst kind of monopolistic practices at the expense ECONOMIC FASCISM 291 of the little fellow who is squeezed out in the process." Corporatism, in other words, was a massive system of corporate welfare.

"Three-quarters of the Italian economic system," Mussolini boasted in 1934, "had been subsidized by government.' ,28 If this sounds familiar, it is because it is exactly the result of agricultural subsidies, the Export-Import bank, guaranteed loans to "preferred" business borrowers, protec tionism, the Chrysler bailout, monopoly franchising, and myriad other forms of cor porate welfare paid for directly or indirectly by the American taxpayer. Another result of the close "collabora tion" between business and government in Italy was "a continual interchange of per sonnel between the . . . civil service and private business.' ,29 Because of this "re volving door" between business and gov ernment, Mussolini had "created a state within the state to serve private interests which are not always in harmony with the general interests of the nation.' ,30 Mussolini's "revolving door" swung far and wide: Signor Caiano, one of Mussolini's most trusted advisers, was an officer in the Royal Navy before and during the war; when the war was over, he joined the Orlando Shipbuilding Company; in Octo ber 1922, he entered Mussolini's cabinet, and the subsidies for naval construction and the merchant marine came under the control of his department. General Cav allero, at the close of the war, left the army and entered the Pirelli Rubber Com pany . . . ; in 1925 he became under secretary at the Ministry of War; in 1930 he left the Ministry of War, and entered the service of the Ansaldo armament firm.

Among the directors of the big ... com panies in Italy, retired generals and gen erals on active service became very nu merous after the advent of Fascism. 31 Such practices are now so common in the United States-especially in the defense industries-that it hardly needs further com ment. From an economic perspective, fascism 292 THE FREEMAN • JUNE 1994 meant (and means) an interventionist indus trial policy, mercantilism, protectionism, and an ideology that makes the individual subservient to the state. "Ask not what the State can do for you, but what you can do for the State" is an apt description of the economic philosophy of fascism. The whole idea behind collectivism in general and fascism in particular is to make citizens subservient to the state and to place power over resource allocation in the hands of a small elite. As stated eloquently by the American fascist economist Lawrence Den nis, fascism "does not accept the liberal dogmas as to the sovereignty of the con sumer or trader in the free market. . . .

Least of all does it consider that market freedom, and the opportunity to make com petitive profits, are rights of the individual." Such decisions should be made by a "dom inant class" he labeled "the elite. ,,32 German Economic Fascism Economic fascism in Germany followed a virtually identical path. One of the intellec tual fathers of German fascism was Paul Lensch, who declared in his book Three Years of World Revolution that" Socialism must present a conscious and determined opposition to individualism.' ,33 The philos ophy of German fascism was expressed in the slogan, Gemeinnutz geht vor Eigennutz, which means "the common good comes before the private good." "The Aryan is not greatest in his mental qualities," Hitler stated in Mein Kampf, but in his noblest form he "willingly subordinates his own ego to the community and, if the hour demands, even sacrifices it.' ,34 The individual has "not rights but only duties. "35 Armed with this philosophy, Germany's National Socialists pursued economic poli cies very similar to Italy's: government mandated "partnerships" between busi ness, government, and unions organized by a system of regional "economic chambers,"

all overseen by a Federal Ministry of Eco nomics. A 25-point "Programme of the Party" was adopted in 1925 with a number of economic policy "demands," all prefaced by the general statement that' 'the activities of the individual must not clash with the interests of the whole . . . but must be for the general good. ,,36 This philosophy fueled a regulatory assault on the private sector. "We demand ruthless war upon all those whose activities are injurious to the com mon interest," the Nazis warned. 37 And who are these on whom "war" is to be waged? "Common criminals," such as "usurers," i.e., bankers, and other "profi teers," i. e., ordinary businessmen in gen eral. Among the other policies the Nazis demanded were abolition of interest; a gov ernment-operated social security system; the ability of government to confiscate land without compensation (wetlands regula tion?); a government monopoly in educa tion; and a general assault on privatesector entrepreneurship which was denounced as the" Jewish materialist spirit.' '38 Once this "spirit" is eradicated, "The Party ... is convinced that our nation can achieve per manent health from within only on the principle: the common interest before self interest. ' ,39 Conclusions Virtually all of the specific economic pol icies advocated by the Italian and German fascists of the 1930s have also been adopted in the United States in some form, and continue to be adopted to this day. Sixty years ago, those who adopted these inter ventionist policies in Italy and Germany did so because they wanted to destroy eco nomic liberty, free enterprise, and individ ualism. Only if these institutions were abol ished could they hope to achieve the kind of totalitarian state they had in mind.

Many American politicians who have ad vocated more or less total government con trol over economic activity have been more devious in their approach. They have advo cated and adopted many of the same poli cies, but they have always recognized that direct attacks on private property, free en terprise, self-government, and individual freedom are not politically palatable to the majority of the American electorate. Thus, they have enacted a great many tax, regu latory, and income-transfer policies that achieve the ends of economic fascism, but which are sugar-coated with deceptive rhet oric about their alleged desire only to "save" capitalism. American politicians have long taken their cue in this regard from Franklin D. Roosevelt, who sold his National Recovery Administration (which was eventually ruled unconstitutional) on the grounds that "gov ernment restrictions henceforth must be accepted not to hamper individualism but to protect it.' ,40 In a classic example of Orwellian doublespeak, Roosevelt thus ar gued that individualism must be destroyed in order to protect it.

Now that socialism has collapsed and survives nowhere but in Cuba, China, Viet nam, and on American university cam puses, the biggest threat to economic liberty and individual freedom lies in the new eco nomic fascism. While the former Commu nist countries are trying to privatize as many industries as possible as fast as they can, they are still plagued by governmental con trols, leaving them with essentially fascist economies: private property and private enterprise are permitted, but are heavily controlled and regulated by government. As most of the rest of the world struggles to privatize industry and encourage free enterprise, we in the United States are seriously debating whether or not we should adopt 1930s-era economic fascism as the organizational principle of our entire health care system, which comprises 14 percent of GNP. We are also contemplating business government "partnerships" in the automo bile, airlines, and communications indus tries, among others, and are adopting government-managed trade policies, also in the spirit of the European corporatist schemes of the 1930s.

The state and its academic apologists are so skilled at generating propaganda in support of such schemes that Americans are mostly unaware of the dire threat they pose for the future of freedom. The road to ECONOMIC FASCISM 293 serfdom is littered with road signs pointing toward "the information superhighway," "health security," "national service," "managed trade," and "industrial policy." 0 1. Benito Mussolini, My Autobiography (New York: Charles Scribner's Sons, 1928). 2. Cited in John T. Flynn, As We Go Marching (New York: Doubleday, 1944), p. 70. 3. Ibid. 4. Cited in Richard Griffiths, Fellow Travellers of the Right: British Enthusiasts for Nazi Germany, 1933-39 (Lon don: Trinity Press, 1980), p. 259. 5. Alastair Hamilton, The Appeal of Fascism: A Study of Intellectuals and Fascism, 1919-1945 (New York: Macmillan, 1971), p. 288. 6. Benito Mussolini, Fascism: Doctrine and Institutions (Rome: Adrita Press, 1935), p. 10.

7. Ibid. 8. Richard Epstein, Takings (Cambridge, Mass.: Harvard University Press, 1985), p. x. 9. Mussolini, Fascism, p. 68. 10. Ibid. 11. Ibid., p. 122. 12. Ira C. Magaziner and Robert B. Reich, Minding America's Business (New York: Vintage Books, 1982). 13. Ibid., p. 343. 14. Ibid., p. 370. 15. Ira C. Magaziner, Silent War (New York: Random House, 1989), p. 306. 16. Fausto Pitigliani, The Italian Corporative State (New York: Macmillan, 1934), p. 98. 17. Ibid., p. 93. 18. Ibid., p. 95. 19. Magaziner and Reich, Minding America's Business, p.379. 20. Ibid., p. 378. 21. Ibid. 22. Lane Kirkland, "An Alternative to Reaganomics," USA Today, May 1987, p. 20. 23. Center for National Policy, Restoring American Com petitiveness (Washington, D.C.: Center for National Policy, 1984), p. 7. 24. Rebuild America, An Investment Economics for the Year 2000 (Washington, D.C.: Rebuild America, 1986), p. 31.

25. Pitigliani, The Italian Corporative State, p. 93. 26. Ibid. 27. Ibid. 28. Gaetano Salvemini, Under the Axe of Fascism (New York: Viking Press, 1936), p. 380. 29. S. Belluzzo, Liberta, September 21, 1933, cited in Salvemini, Under the Axe of Fascism, p. 385. 30. Salvemini, Under the Axe of Fascism, p. 380. 31. Ibid., p. 385. 32. Lawrence Dennis, The Coming American Fascism (New York: Harper, 1936), p. 180. 33. Adolph Hitler, Mein Kampf(Boston: Houghton Mifflin, 1943), p. 297. 34. Ibid. 35. Ibid., p. 126. 36. Norman H. Baynes, The Speeches of Adolph Hitler (New York: Howard Fertig, 1969), p. 104. 37. Ibid., p. 105. 38. Ibid., p. 104. 39. Ibid. 40. Cited in Samuel Rosenman, ed., The Public Papers and Addresses of Franklin D. Roosevelt (New York: Random House, 1938-50), p. 750.