The Economic Model of the Fascist State

0:00Jeff Tucker told me some time ago they were having a conference on economics of fascism and asked me for a topic that I'd like to talk about. I said, how about the economics of fascism? So I wrote that down. So I got that before it was taken by somebody else. So I thought that I'd keep it simple. And it just so happens I've written a couple of articles on this topic, maybe 12 or 15 years ago. and so they were published in the Freeman, places like that, and I've done a good bit of reading over the years on fascism, economic aspects of fascism, and of course, as people mentioned yesterday, most people hear the word fascism, they think of anti-Semitism, racism, dictatorship, but there always was an economic component to it, and I think it was Friedrich Hayek who once said to the effect that It controls your economic life, it can control your entire life.

1:01And I'm sure he wasn't the first one to say that, but I could probably dig up that Hayek quote if I wanted to. But that's certainly true, so you really can't separate totalitarian control from what we call fascism. If it's in essence, I guess what we're talking about here is allowing private property, But so heavily regimented and controlled by the state that it is forced to serve the state and the owners of the property are forced to serve the state. And a lot of people don't recognize how enthusiastic so many Americans were in the 1920s and 30s about the idea of fascism. They kind of liked this idea. It was universally applauded by the elite opinion makers all over in many parts of the world.

1:51And so I thought I'd give you some examples of this. The American ambassador to Italy, a man named Richard Washburn Child, he wrote the preface to Mussolini's autobiography. Mussolini was a clever thinker. The title of his autobiography was My Autobiography. I guess he didn't have some slick marketing guy at Random House like I do to pick titles. And here's what the American ambassador to Italy wrote about this. He said, It may be shrewdly forecast that no man will exhibit dimensions of permanent greatness equal to Mussolini. The Duce is now the greatest figure in this sphere and time, end quote. And someone mentioned Churchill yesterday, I think it was Ralph.

2:38Winston Churchill wrote in 1927, quote, If I had been an Italian, I am sure I would have been entirely with you and donned the fascist black shirt, end quote. As late as 1940, Churchill was still describing Mussolini as, quote, a great man, 1940. And so the U.S. Congressman Saul Bloom, he was chairman of the House Foreign Relations Committee, said in 1926 that, quote, Mussolini will be a great thing not only for Italy, but for all of us if he succeeds. It is his inspiration, his determination, his constant toil that has literally rejuvenated Italy, end quote. There were economists too. There was an American economist named Lawrence Dennis who wrote a book in 1936 called The Coming American Fascism, which he thought was a good thing. And he said this, defenders of 18th century Americanism, classical liberalism, the John Locke philosophy and so forth, were sure to become the laughing stock of their own countrymen. And the adoption of fascism would intensify a national spirit and put it behind the enterprises of public welfare and social control.

3:55Then he went on to say the big stumbling block to do this though was, liberal norms of law or constitutional guarantees of private rights. So the fascists always understood who the enemy was. The enemy was individual liberty and the belief in individual liberty. There's one thing I respect about these old fascists is that they were upfront and straightforward. They said, we hate individual liberty, classical liberalism, that's the enemy and that's who we intend to destroy in terms of the world of ideas. They didn't fudge it, they didn't pretend to be Jeffersonians, or at least most of them didn't at all. British intellectuals were quite enthusiastic about fascism. George Bernard Shaw said in 1927 that his fellow socialists should be delighted to find at last a socialist, Mussolini, who speaks and thinks as responsible rulers do.

4:53He kind of liked them. Ezra Pound declared Mussolini as continuing the task of Thomas Jefferson. So he was, Ezra, I think he was insane, he literally, Ezra Pounds literally ended up in a crazy house. So what was fascism? What was it? I'll take it from the horse's mouth. I can offer a few more quotes from Mussolini himself, and a few other people yesterday did this. But here's what Mussolini said in his little book on fascism, called Fascism. The fascist conception of life stresses the importance of the state and accepts the individual only insofar as his interests coincide with the state.

5:46It is opposed to classical liberalism, which denied the state the name of the individual. Fascism reasserts the rights of the state as expressing the real essence of the individual. So that really is it. The individual only exists to serve the state. It's his duty to serve the state. He thought it was unnatural, he used the word unnatural, for government to exist to protect individual rights. He said this, the maximum that society exists only for the well-being and freedom of the individuals composing it Composing it does not seem to be in conformity with nature's plans. If classical liberalism spells individualism, fascism spells government. So that's the essence of it. So the essence is government is the master, not the servant of the people.

6:35As far as economics and the economic policy, if you read some of this literature, especially the Italian fascist literature, which I'm going to focus on since Hans is our Hitler expert in the book about the Germans yesterday. There's a lot of talk about planned industrial harmony. And this was just essentially ignoring or being ignorant of the whole idea of the spontaneous order of markets, the Adam Smith's invisible hand, how harmony is created by the pursuit of self-interest in the free market, in a private property economy. This was all ignored and there was this insistence that you need to have some sort of central plan to have harmony, that the market was chaotic.

7:21And as though Adam Smith didn't explain all this, you know, almost 200 years earlier. And so some more quotes by the Duce. Government intervention in Italy was too diverse, varied and contrasting. There has been disorganic intervention, case by case, as a need arises, and Mussolini is complaining. Fascism would correct all this by directing the economy towards certain fixed objectives, and would introduce order in the economic field. So there had to be fixed objectives, fixed by the state or by Mussolini, whoever, and that would introduce order. And there was said to be a need for a unity of aim, a central plan, in other words.

8:10And you see, I dug up some almost identical statements in one of my articles here by some Americans. Robert Reich, the former Labor Secretary, in one of his books he says this, In order to counteract the untidy marketplace, an interventionist industrial policy 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. And it was very Mussolini and I guess that, you know, there's too much ad hoc intervention. And he goes on to say in another publication, he's complaining that interventionism is the product of fragmented and uncoordinated decisions made by many different government agencies.

8:56and it needs to be more unified. And so it's pretty much echoing Mussolini there, Robert Reich. Another element of this was government business partnerships. And I think Bob Hicks mentioned some of the aspects of corporatism yesterday. And whenever I hear this government business partnership, I always, what pops into my head is a line of Ayn Rand's where she pointed out in one of her publications that whenever a business enters into a partnership of Government. Government always ends up being the senior partner. So it's not really a partnership. It's a corrupt bargain at the very least. And this certainly happened in Italy. In Mussolini's Italy, businesses were grouped into syndicates, groups called syndicates, such as the National The National Fascist Confederation of Commerce, the National Fascist Confederation of Credit and Assurance, Steele, and so on.

9:58And then there were government-planned agencies called corporations for each industry that would try to plan everything. And why was this necessary? Again, according to Mussolini, because the principle of private initiative could only be useful in the service of the national interest in this way. So economic nationalism is what we're talking about here as far as economic fascism, and you could just eliminate the word fascism and call it economic nationalism, or national greatness conservatism, that would be an even better phrase to describe what we're talking about here as far as that goes. And I think it was also, Bob Higgs had mentioned the corruption aspect of this, of the revolving Three-quarters of the Italian economic system had been subsidized by the government.

11:00Three-quarters of the Italian economy, according to Mussolini. And basically, they socialized the losses and privatized the profits of these businesses that were sort of in cahoots and supporters of Mussolini and his regime is what they did. And here's one critic of all this. He talked about Mussolini's revolving door. He says this. It's an interesting description of how it works. Signor Ciano, one of Mussolini's most trusted advisors, was an officer in the Royal Navy before and during the war. When the war was over, World War I, he joined the Orlando Shipbuilding Company. Building Company. In October 1922 he entered Mussolini's cabinet and the subsidies for naval construction and the merchant marine came under the control of his department.

11:49General Cavallaro at the close of the war left the army and entered the Pirelli rubber company. In 1925 he became undersecretary at the Ministry of War and then he left the Ministry of War and entered the service of the Ansaldo armament firm. What a surprise, what a shocker. Among the directors of the big companies in Italy, retired generals and generals in active service became very numerous after the advent of fascism. So it was just good old fashioned cronyism and mercantilism really. There was a lot of protectionism too. Protectionism was a big part of the fascist system. System, Economic Autarky was a part of it. And so these are some of the elements of, if you look at this system of economic fascism with watered down central planning, I think of it as economic nationalism in the extreme. And as far as what I'm going to have to say here in my remaining time, is I can't help drawing Abraham Lincoln into all this, as those of you who have read my writings. And I think he really deserves to be drawn into this because the whole

12:57The whole idea of economic nationalism didn't come from Italy and Germany first. It came from America, and it came from Alexander Hamilton before it came from Benito Mussolini. Hamilton, in his report on the manufacturers, was the first American, outspoken American advocate of economic nationalism, whereby the government would take a much more active role in promoting national greatness. They advocated massive government subsidies for road and canal building, for example, at a very early time, protectionist tariffs, central bank, these were all Hamilton's ideas. This was the economic version of economic nationalism that was started at the very beginning of the republic. And, of course, this battle over economic nationalism was fought in the political trenches in America for many decades.

13:49and it was originally the Hamiltonians who were the economic nationalists who didn't believe that the economy would develop sufficiently if left to the devices of the free market. It needed subsidies for roads which in one of the chapters of my Lincoln book I show that that wasn't necessary. There were many thousands of miles of privately financed roads built in the early days of the 19th century in the United States. They thought industries like steel needed to to be protected with tariffs, and of course the steel industry has been protected with tariffs almost from the very beginning in the 19th century, and it's under Hamilton's notion that it was an infant industry, needed to be protected while it was growing up, and of course it apparently still has not grown up because one of the first things Bush did was put 50 percent tariffs on steel in his first administration, the steel hasn't grown and then of course the Central Bank, the Bank of America was Hamilton's baby and the Central Bank was always intended to be used to finance this whole economic nationalism scheme among other things.

14:56Then after that, Henry Clay took up the mantle after Hamilton's death, the Whig Party and Henry Clay took up the mantle of economic nationalism and then Lincoln. Lincoln, after Clay's death, Lincoln was the heir to this whole tradition and we finally succeeded in adopting economic nationalism as an economic policy during the Lincoln administration with the National Currency Act, massive subsidies for the transcontinental railroads, protectionist tariffs that were in the 45 to 50 percent range and stayed there until 1913 when the Income Tax came in. So that was the Republican policy of that time. And since I've written, in the years since my Lincoln book came out, there have been several other books written by various authors who pretty much agree with this. A historian named Holt at the University of Virginia, pretty well-known historian of the Whig Party, he's written a new book that pretty much agrees Michael Lind, What Lincoln Believed

16:28I spent hours and hours just searching through documents and articles and things and I kind of enjoy it. It's sort of like being an investigative reporter and an economist at the same time. And so there are a lot of really obscure academic journal articles that I've dug up that I put into my book. And it would be a real miracle if Michael Lind had dug up these exact same obscure academic articles that he cites but doesn't cite that he got them from my book. So he essentially plagiarizes me, but he comes, so I criticize the Lincoln regime on economic grounds for adopting protectionism, corporate welfare, central banking. But Lin, he's an economic nationalist and he says this was great, it's a great thing that this happened.

17:14So the whole thrust of his book was this was a great thing. He praises all of this as being a good thing. And he calls it Lincoln's Second American Republic, this economic nationalism. And he goes on further to say that some of the ideas behind economic nationalism in the 19th century, long before the fascists came around, came from such people as Frederick List, the German theorist. He wrote a book called The National System of Political Economy in 1841. And Lincoln was a fan of some of the German theorists here, especially the people like List and Lieber. Francis Lieber was one of his advisors. And here's what Michael Lind writes in his book.

18:04He says, Bismarck's Imperial Germany, which followed a policy of economic nationalism, modeled on that of the United States. So he argues that Bismarck's Germany took a look at what happened in the United States with protectionism, massive corporate welfare for railroads and so forth, and central banking, and then adopted that. And he thinks this is a good thing. And he says this, theorists of the German historical school developed a nuanced historical approach to economics to justify all of this as an alternative to the abstract pseudo-scientific from Germany the theory and program of economic nationalism was disseminated to Japan during a visit to Germany in the 1870s Okubo Toshimichi, one of the leaders of the Meiji Restoration became acquainted with the Hamilton Clay List Lincoln tradition. And really, I think it's funny is that these are sort of, you know, this sort of evolved into German and Japanese fascism.

19:20There's this whole combination of ideas. Liszt is saying, isn't it great that we exported these ideas to Japan and Germany? But I'm reading this and saying, well, this is fascism is what it is. It's nothing to brag about. And Lind is such a fascist that, you know, I looked up the Webster's Dictionary of Definition of Fascism. It says it's, quote, a political philosophy, movement or regime that exalts nation and often a race above the individual. And that stands for a centralized autocratic government. In the last two chapters of Lin's book, What Lincoln Believed, he points out that Lincoln was a white supremacist who his whole life had this scheme in his mind that he followed through with during his administration to essentially deport all the black people back to Liberia, Central America, anywhere but America and Lin says in his book that had Lincoln lived his second administration probably would have been very largely devoted toward trying to create an all-white society because Lincoln didn't believe

20:32Democratic Republic could exist as a multiracial republic. And so Lin goes on in the last chapter of his book to praise countries like Australia that had an immigration policy that did not allow blacks to immigrate into Australia. And so he says the whole last chapter is just an ode to the Australians and the Canadians and others in the 19th century, early 20th century, because why? Well, economic nationalism and a racist immigration policy. and he sort of paints this as they had the right idea and so he seems to fit the Webster's Dictionary definition of a fascist to me with this combination of things, of policies and so that's how I'm going to bring Lincoln into all this and that what the Germans and the Japanese and Italians were referring to as economic fascism, I think it has roots, you can make a case that has roots here in America that that has long preceded any ideas that Mussolini or the Japanese fascists or Hitler, people like that, had.

21:35Okay, and of course there's a long, that's not, it didn't end there in the United States. And since no one has quoted John T. Flynn yet, I don't think they have anyway, I will, in how Flynn described the New Deal, the first New Deal, by making an analogy to Mussolini. John T. Flynn said, Mussolini organized each trade or industrial group or professional group into a state-supervised trade association. He called it a cooperative. These cooperatives operated under state supervision and could plan production, quality prices, distribution, labor standards. Roosevelt's National Recovery Act provided that in American industry, each industry should be organized into a federally supervised trade association.

22:25It was not called a cooperative, it was called a code authority, but it was essentially the same thing. This was fascism. So the NRA was very similar to what was going on at the time in Italy. And another example I'd like to bring your attention was a Wall Street Journal article that I wrote on October 26, 1993, quite some time ago, that I'll just pass around here. And it was, I'll just give it to somebody here, maybe you could pass it around the other aisle, just hand it to the gentleman on the end. And this was about, since I had already read all this stuff I've been talking about prior to this, This was in the middle of the Clinton administration plan to nationalize the health care system and you know I was very keenly paying attention to what Clinton was saying about this because like a good slick politician he didn't mention anything about this during the campaign in 1992 and then all of a sudden he gets inaugurated and there's all this talk about health care reform and for weeks and weeks I kept hearing health care reform, health care reform, health care reform but in no specific

23:36And then finally, when he made his first speech outlining just what the reform would be, I'm there in front of the television taking notes, and he outlined that there would be a national health board of seven appointees at the top, and then there would be sort of these regional commissions all around the country that would plan the different aspects of the health care industry, you know, the medical schools would be under the supervision of one or the other. One type of organization, the nursing profession would be under the control of another type. And I'm sitting there saying, where have I heard this before? This organizational chart, and sure enough, it was Mussolini's Italy. So I just, like right then and there, I just whipped up this article in about an hour and sent it to the Wall Street Journal.

24:26And they published it like a day later on there. And the title they gave it was, Clinton Health Plan Salutes Italy's Past. And the way I wrote it was I made all these analogies between the Clinton Plan and Mussolini's but I didn't say that it was Mussolini's until the last two paragraphs. And so I just said it was an Italian plan. So if you read it, it sounds like Italy did it maybe ten years ago and it didn't work too well. But then I reveal in the last couple of paragraphs that this was the 1930s that I was quoting in there. and so Americans have had, I guess you could call Hamilton the founding father of economic fascism in the world and which is why I'm thinking of writing a book called Hamilton's Curse because there's a book called Hamilton's Blessing and the blessing is supposedly public debt is supposedly Hamilton's blessing to America and so this is one reason why my next target might be Hamilton, America's homegrown economic fascist

25:28And maybe I'll quit right about there.