When people hear the word u201Cfascismu201D they naturally think of its ugly racism and anti-Semitism as practiced by the totalitarian regimes of Mussolini and Hitler. But there was also an economic policy component of fascism, known in Europe during the 1920s and ’30s as u201Ccorporatism,u201D that was an essential ingredient of economic totalitarianism as practiced by Mussolini and Hitler. So-called corporatism was adopted in Italy and Germany during the 1930s and was held up as a u201Cmodelu201D by quite a few intellectuals and policy makers in the United States and Europe. A version of economic fascism was in fact adopted in the United States in the 1930s and survives to this day. In the United States these policies were not called u201Cfascismu201D but u201Cplanned capitalism.u201D The word fascism may no longer be politically acceptable, but its synonym u201Cindustrial policyu201D is as popular as ever.
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 Ambassador to Italy, Richard Washburn Child, was so impressed with u201Ccorporatismu201D that he wrote in the preface to Mussolini’s 1928 autobiography that u201Cit may be shrewdly 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.u201D Winston Churchill wrote in 1927 that u201CIf I had been an Italian I am sure I would have been entirely with youu201D and u201Cdon the Fascist black shirt.u201D As late as 1940, Churchill was still describing Mussolini as u201Ca great man.u201D
U.S. Congressman Sol Bloom, Chairman of the House Foreign Relations Committee, said in 1926 that Mussolini u201Cwill 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. . .u201D
One of the most outspoken American fascists was economist Lawrence Dennis. In his 1936 book, The Coming American Fascism, Dennis declared that defenders of u201C18th-century Americanismu201D were sure to become u201Cthe laughing stock of their own countrymenu201D and that the adoption of economic fascism would intensify u201Cnational spiritu201D and put it behind u201Cthe enterprises of public welfare and social control.u201D The big stumbling block to the development of economic fascism, Dennis bemoaned, was u201Cliberal norms of law or constitutional guarantees of private rights.u201D
Certain British intellectuals were perhaps the most smitten of anyone by fascism. George Bernard Shaw announced in 1927 that his fellow u201Csocialists should be delighted to find at last a socialist [Mussolini] who speaks and thinks as responsible rulers do.u201D He helped form the British Union of Fascists whose u201COutline of the Corporate State,u201D according to the organization’s founder, Sir Oswald Mosley, was u201Con the Italian Model.u201D While visiting England, the American author Ezra Pound declared that Mussolini was u201Ccontinuing the task of Thomas Jefferson.u201D
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 condemned, but the practice of economic fascism never was. To this day, the historically uninformed continue to repeat the hoary slogan that, despite all his faults, Mussolini at least u201Cmade the trains run on time,u201D insinuating that his interventionist industrial policies were a success.
The Italian u201CCorporatistu201D System
So-called u201Ccorporatismu201D as practiced by Mussolini and revered by so many intellectuals and policy makers had several key elements:
The state comes before the individual. Webster’s New Collegiate Dictionary defines fascism as u201Ca political philosophy, movement, or regime that exalts nation and often race above the individual and that stands for a centralized, autocratic government.u201D This stands in stark contrast to the classical liberal idea that individuals have natural rights that pre-exist government; that government derives its u201Cjust powersu201D only through the consent of the governed; and that the principal function of government 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 u201Cliberalu201D) as the antithesis of fascism: u201CThe Fascist conception of life,u201D Mussolini wrote, u201Cstresses the importance of the State and accepts the individual only in so far as his interests coincide with the State. It is opposed to classical liberalism [which] denied the State in the name of the individual; Fascism reasserts the rights of the State as expressing the real essence of the individual.u201D
Mussolini thought it was unnatural for a government to protect individual rights: u201CThe maxim that society exists only for the well-being and freedom of the individuals composing it does not seem to be in conformity with nature’s plans.u201D u201CIf classical liberalism spells individualism,u201D Mussolini continued, u201CFascism spells government.u201D
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 u201Cservantsu201D? Is compulsory u201Cnational serviceu201D for young people, which now exists in numerous 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 regulation 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 recently declared that heart bypass surgery on a 92-year-old man was u201Ca waste of resources,u201D wasn’t that the epitome of the fascist ideal — that the state, not individuals, should decide whose life is worthwhile, and whose is a u201Cwasteu201D?
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 governmental encroachment. But since the fascist/ collectivist philosophy has been so influential, policy reforms over the past half century have all but abolished many of these rights by simply ignoring many of the provisions in the Constitution that were designed to protect them. As legal scholar Richard Epstein has observed: u201C[T]he eminent 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 payments, progressive taxation.u201D It is important to note that most of these reforms were initially adopted during the ’30s, when the fascist/collectivist philosophy was in its heyday.
Planned industrial u201Charmony.u201D Another keystone of Italian corporatism was the idea that the government’s interventions in the economy should not be conducted on an ad hoc basis, but should be u201Ccoordinatedu201D by some kind of central planning board. Government intervention in Italy was u201Ctoo diverse, varied, contrasting. There has been disorganic . . . intervention, case by case, as the need arises,u201D Mussolini complained in 1935. Fascism would correct this by directing the economy toward u201Ccertain fixed objectivesu201D and would u201Cintroduce order in the economic field.u201D Corporatist planning, according to Mussolini adviser Fausto Pitigliani, would give government intervention in the Italian economy a certain u201Cunity of aim,u201D as defined by the government planners.
These exact sentiments were expressed by Robert Reich (currently the U.S. Secretary of Labor) and Ira Magaziner (currently the federal government’s health care reform u201CCzaru201D) in their book Minding America’s Business. In order to counteract the u201Cuntidy marketplace,u201D an interventionist industrial policy u201Cmust strive to integrate the full range of targeted government policies — procurement, research and development, trade, antitrust, tax credits, and subsidies — into a coherent strategy . . . .u201D
Current industrial policy interventions, Reich and Magaziner bemoaned, are u201Cthe product of fragmented and uncoordinated decisions made by [many different] executive agencies, the Congress, and independent regulatory agencies . . . . There is no integrated strategy to use these programs to improve the . . . U.S. economy.u201D
In his 1989 book, The Silent War, Magaziner reiterated this theme by advocating coordinating groups like the national Security Council to take a “strategic national industrial view.u201D The White House has in fact established a u201CNational Economic Security Council.u201D Every other advocate of an interventionist u201Cindustrial policyu201D has made a similar u201Cunity of aimu201D 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 business-government u201Cpartnership.u201D As Ayn Rand often noted, however, in such a partnership government is always the senior or dominating u201Cpartner.u201D
In Mussolini’s Italy, businesses were grouped by the government into legally recognized u201Csyndicatesu201D such as the u201CNational Fascist Confederation of Commerce,u201D the u201CNational Fascist Confederation of Credit and Insurance,u201D and so on. All of these u201Cfascist confederationsu201D were u201Ccoordinatedu201D by a network of government planning agencies called u201Ccorporations,u201D one for each industry. One large u201CNational Council of Corporationsu201D served as a national overseer of the individual u201Ccorporationsu201D and had the power to u201Cissue regulations of a compulsory character.u201D
The purpose of this Byzantine regulatory arrangement was so that the government could u201Csecure collaboration . . . between the various categories of producers in each particular trade or branch of productive activity.u201D Government-orchestrated u201Ccollaborationu201D was necessary because u201Cthe principle of private initiativeu201D could only be useful u201Cin the service of the national interestu201D as defined by government bureaucrats.
This idea of government-mandated and -dominated u201Ccollaborationu201D is also at the heart of all interventionist industrial policy schemes. A successful industrial policy, write Reich and Magaziner, would u201Crequire careful coordination between public and private sectors.u201D u201CGovernment and the private sector must work in tandem.u201D u201CEconomic success now depends to a high degree on coordination, collaboration, and careful strategic choice,u201D guided by government.
The AFL-CIO has echoed this theme, advocating a u201Ctripartite National Reindustrialization Board — including representatives of labor, business, and governmentu201D that would supposedly u201Cplanu201D the economy. The Washington, D.C.—based Center for National Policy has also published a report authored by businessmen from Lazard Freres, du Pont, Burroughs, Chrysler, Electronic Data Systems, and other corporations promoting an allegedly u201Cnewu201D policy based on u201Ccooperation of government with business and labor.u201D Another report, by the organization u201CRebuild America,u201D co-authored in 1986 by Robert Reich and economists Robert Solow, Lester Thurow, Laura Tyson, Paul Krugman, Pat Choate, and Lawrence Chimerine urges u201Cmore teamworku201D through u201Cpublic-private partnerships among government, business and academia.u201D This report calls for u201Cnational goals and targetsu201D set by government planners who will devise a u201Ccomprehensive investment strategyu201D that will only permit u201Cproductiveu201D investment, as defined by government, to take place.
Mercantilism and protectionism. Whenever politicians start talking about u201Ccollaborationu201D with business, it is time to hold on to your wallet. Despite the fascist rhetoric about u201Cnational collaborationu201D and working for the national, rather than private, interests, the truth is that mercantilist and Protectionist practices riddled the system. Italian social critic Gaetano Salvemini wrote in 1936 that under corporatism, u201Cit is the state, i.e., the taxpayer, who has become responsible to private enterprise. In Fascist Italy the state pays for the blunders of private enterprise.u201D As long as business was good, Salvemini wrote, u201Cprofit remained to private initiative.u201D But when the depression came, u201Cthe government added the loss to the taxpayer’s burden. Profit is private and individual. Loss is public and social.u201D
The Italian corporative state, The Economist editorialized on July 27, 1935, u201Conly amounts to the establishment of a new and costly bureaucracy from which those industrialists 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 of the little fellow who is squeezed out in the process.u201D Corporatism, in other words, was a massive system of corporate welfare. u201CThree-quarters of the Italian economic system,u201D Mussolini boasted in 1934, u201Chad been subsidized by government.u201D
If this sounds familiar, it is because it is exactly the result of agricultural subsidies, the Export- Import bank, guaranteed loans to u201Cpreferredu201D business borrowers, protectionism, the Chrysler bailout, monopoly franchising, and myriad other forms of corporate welfare paid for directly or indirectly by the American taxpayer.
Another result of the close u201Ccollaborationu201D between business and government in Italy was u201Ca continual interchange of personnel between the . . . civil service and private business.u201D Because of this u201Crevolving dooru201D between business and government, Mussolini had u201Ccreated a state within the state to serve private interests which are not always in harmony with the general interests of the nation.u201D
Mussolini’s u201Crevolving dooru201D 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 October 1922, he entered Mussolini’s cabinet, and the subsidies for naval construction and the merchant marine came under the control of his department. General Cavallero, 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; in 1930 he left the Ministry of War, and entered the service of the Ansaldo armament firm. Among the directors of the big . . . companies in Italy, retired generals and generals on active service became very numerous after the advent of Fascism.
Such practices are now so common in the United States — especially in the defense industries — that it hardly needs further comment.
From an economic perspective, fascism meant (and means) an interventionist industrial policy, mercantilism, protectionism, and an ideology that makes the individual subservient to the state. u201CAsk not what the State can do for you, but what you can do for the Stateu201D 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 Dennis, fascism u201Cdoes not accept the liberal dogmas as to the sovereignty of the consumer or trader in the free market . . . . Least of all does it consider that market freedom, and the opportunity to make competitive profits, are rights of the individual.u201D Such decisions should be made by a u201Cdominant classu201D he labeled u201Cthe elite.u201D
German Economic Fascism
Economic fascism in Germany followed a virtually identical path. One of the intellectual fathers of German fascism was Paul Lensch, who declared in his book Three Years of World Revolution that u201CSocialism must present a conscious and determined opposition to individualism.u201D The philosophy of German fascism was expressed in the slogan, Gemeinnutz geht vor Eigennutz, which means u201Cthe common good comes before the private good.u201D u201CThe Aryan is not greatest in his mental qualities,u201D Hitler stated in Mein Kampf, but in his noblest form he u201Cwillingly subordinates his own ego to the community and, if the hour demands, even sacrifices it.u201D The individual has u201Cnot rights but only duties.u201D
Armed with this philosophy, Germany’s National Socialists pursued economic policies very similar to Italy’s: government-mandated u201Cpartnershipsu201D between business, government, and unions organized by a system of regional u201Ceconomic chambers,u201D all overseen by a Federal Ministry of Economics.
A 25-point u201CProgramme of the Partyu201D was adopted in 1925 with a number of economic policy u201Cdemands,u201D all prefaced by the general statement that u201Cthe activities of the individual must not clash with the interests of the whole . . . but must be for the general good.u201D This philosophy fueled a regulatory assault on the private sector. u201CWe demand ruthless war upon all those whose activities are injurious to the common interest,u201D the Nazis warned. And who are these on whom u201Cwaru201D is to be waged? u201CCommon criminals,u201D such as u201Cusurers,u201D i.e., bankers, and other u201Cprofiteers,u201D i.e., ordinary businessmen in general. Among the other policies the Nazis demanded were abolition of interest; a government-operated social security system; the ability of government to confiscate land without compensation (wetlands regulation?); a government monopoly in education; and a general assault on private-sector entrepreneurship which was denounced as the u201CJewish materialist spirit.u201D Once this u201Cspiritu201D is eradicated, u201CThe Party . . . is convinced that our nation can achieve permanent health from within only on the principle: the common interest before self-interest.u201D
Virtually all of the specific economic policies 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 interventionist policies in Italy and Germany did so because they wanted to destroy economic liberty, free enterprise, and individualism. Only if these institutions were abolished could they hope to achieve the kind of totalitarian state they had in mind.
Many American politicians who have advocated more or less total government control over economic activity have been more devious in their approach. They have advocated and adopted many of the same policies, but they have always recognized that direct attacks on private property, free enterprise, self-government, and individual freedom are not politically palatable to the majority of the American electorate. Thus, they have enacted a great many tax, regulatory, and income-transfer policies that achieve the ends of economic fascism, but which are sugar-coated with deceptive rhetoric about their alleged desire only to u201Csaveu201D 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 u201Cgovernment restrictions henceforth must be accepted not to hamper individualism but to protect it.u201D In a classic example of Orwellian doublespeak, Roosevelt thus argued that individualism must be destroyed in order to protect it.
Now that socialism has collapsed and survives nowhere but in Cuba, China, Vietnam, and on American university campuses, the biggest threat to economic liberty and individual freedom lies in the new economic fascism. While the former Communist countries are trying to privatize as many industries as possible as fast as they can, they are still plagued by governmental controls, 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 u201Cpartnershipsu201D in the automobile, airlines, and communications industries, 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 serfdom is littered with road signs pointing toward u201Cthe information superhighway,u201D u201Chealth security,u201D u201Cnational service,u201D u201Cmanaged trade,u201D and u201Cindustrial policy.u201D
- Benito Mussolini, My Autobiography (New York: Charles Scribner’s Sons, 1928).
- Cited in John T. Flynn, As We Go Marching (New York: Doubleday, 1944), p. 70.
- Cited in Richard Griffiths, Fellow Travellers of the Right: British Enthusiasts for Nazi Germany, 1933-39 (London: Trinity Press, 1980), p. 259.
- Alastair Hamilton, The Appeal of Fascism: A Study of Intellectuals and Fascism, 1919-1945 (New York: Macmillan, 1971), p. 288.
- Benito Mussolini, Fascism: Doctrine and Institutions (Rome: Adrita Press, 1935), p. 10.
- Richard Epstein, Takings (Cambridge, Mass.: Harvard University Press, 1985), p. x.
- Mussolini, Fascism, p. 68.
- Ibid., p. 122.
- Ira C. Magaziner and Robert B. Reich, Minding America’s Business (New York: Vintage Books, 1982).
- Ibid., p. 343.
- Ibid., p. 370.
- Ira C. Magaziner, Silent War (New York: Random House, 1989), p. 306.
- Fausto Pitigliani, The Italian Corporative State (New York: Macmillan, 1934), p. 98.
- Ibid., p. 93.
- Ibid., p. 95.
- Magaziner and Reich, Minding America’s Business, p. 379.
- Ibid., p. 378.
- Lane Kirkland, u201CAn Alternative to Reaganomics,u201D USA Today, May 1987, p. 20.
- Center for National Policy, Restoring American Competitiveness (Washington, D.C.: Center for National Policy, 1984), p. 7.
- Rebuild America, An Investment Economics for the Year 2000 (Washington, D.C.: Rebuild America, 1986), p. 31.
- Pitigliani, The Italian Corporative State, p. 93.
- Gaetano Salvemini, Under the Axe of Fascism (New York: Viking Press, 1936), p. 380.
- S. Belluzzo, Liberta, September 21, 1933, cited in Salvemini, Under the Axe of Fascism, p. 385.
- Salvemini, Under the Axe of Fascism, p. 380.
- lbid., p. 385.
- Lawrence Dennis, The Coming American Fascism (New York: Harper, 1936), p. 180.
- Adolph Hitler, Mein Kampf (Boston: Houghton Mifflin, 1943), p. 297.
- Ibid., p. 126.
- Norman H. Baynes, The Speeches of Adolph Hitler (New York: Howard Fertig, 1969), p. 104.
- Ibid., p. 105.
- Ibid., p. 104.
- Cited in Samuel Rosenman, ed., The Public Papers and Addresses of Franklin D. Roosevelt (New York: Random House, 1938—50), p. 750.
Thomas J. DiLorenzo [send him mail] is the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is How Capitalism Saved America: The Untold Story of Our Country’s History, from the Pilgrims to the Present (Crown Forum/Random House, August 2004). This article is reprinted with permission from the June 1994 issue of The Freeman.