The Economic Nature of Fascism

The Gods of Fascism: Benito Mussolini and Adolf Hitler
Photo Credits: Left: Wikimedia Commons/time.com Right: Wikimedia Commons/German Federal Archives

Whenever fascism is discussed, more often than not the characteristic emphasized is its politically tyrannical aspect. However, regarding fascism’s economic characteristics can also be rewarding, as such an examination illuminates how the political tyranny can arise and be reinforced. We in the United States can find both a lesson and a warning from the history of fascist Europe,

The modern definition of fascism begins with Benito Mussolini’s Fascists and Adolf Hitler’s Nazis during the 1930s. In fact, Mussolini, who seems to have been the more intellectual of the two and a socialist, gave his socialist beliefs to the Italian Fascist Party, and Hitler appears to have absorbed his socialism from Mussolini.

Economic Characteristics of Fascism

The socialism of the Fascists was somewhat different from that of the communist Bolsheviks, but their similarities were far more important than the distinctions. As Hitler himself said about his affinity with the Bolsheviks,

There is more that binds us to Bolshevism than separates us from it. There is, above all, revolutionary feeling . . . I have always made allowance for this circumstance, and given orders that former Communists are to be admitted to the Party at once. The petit bourgeois Social Democrat and the trade-union boss will never be a National Socialist, but the Communist always will.

Former communists who joined the Nazi party were almost a third of the Sturmabteilung (SA), also known as the Brownshirts. The SA in turn originated the Shutzstaffel (SS), which became one of the largest, most powerful groups in Nazi Germany. The SA and the Nazi Secret State Police, the Geheime Staatspolizei or Gestapo, had so many former communists they were often called the “Beefsteak Nazis” because their uniforms were brown on the outside, but they were Red on the inside.

The main distinction between the fascists and the communists was the formal ownership of capital property, the means for producing wealth. In the fascist states this ownership remained formally in private, non-state hands, but this was a distinction largely without a difference. Since the fascists in both Italy and Germany maintained total, absolute control of the companies that produced wealth, the company officers became simple adjuncts of the state. It is because the fascist governments possessed this absolute control that fascism must be considered merely a variant of socialism.

The Road to Serfdom

A first-hand witness to the development of fascism was the Austrian economist and political philosopher Friedrich A. Hayek, who recorded his observations in the classic book The Road to Serfdom [E2]. The book’s title was inspired by Alexis de Tocqueville’s writings on the “road to servitude”. In chapter I of Section 4 of

de Tocqueville’s work Democracy in America, de Tocqueville writes,

Of all the political effects produced by the equality of conditions, this love of independence is the first to strike the observing and to alarm the timid; nor can it be said that their alarm is wholly misplaced, for anarchy has a more formidable aspect in democratic countries than elsewhere. As the citizens have no direct influence on each other, as soon as the supreme power of the nation fails, which kept them all in their several stations, it would seem that disorder must instantly reach its utmost pitch and that, every man drawing aside in a different direction, the fabric of society must at once crumble away. I am convinced, however, that anarchy is not the principal evil that democratic ages have to fear, but the least. For the principle of equality begets two tendencies: the one leads men straight to independence and may suddenly drive them into anarchy; the other conducts them by a longer, more secret, but more certain road to servitude. Nations readily discern the former tendency and are prepared to resist it; they are led away by the latter, without perceiving its drift; hence it is peculiarly important to point it out. [P3, p. 486]

The emphasis in the quotation is mine. Hayek was impressed with de Tocqueville’s description of the danger of the “longer, more secret, but more certain road to servitude” since he watched Germany and Austria walk that path under his direct observation. He became even more impressed when he believed he was seeing many of the Western democracies, including the United States, beginning to trod that highway themselves.

According to Hayek the beginning of the road to serfdom is found when economic distress causes people to demand the government do something, anything to relieve the distress. In more recent decades, belief in the efficacy of government actions on the economy has greatly waned under the assault of such men as Milton Friedman, Robert Lucas, Jr., Finn E. Kydland, Edward C. Prescott, and many others in various neoclassical economic movements. However, as the economist and economic historian Mark Skousen tells us,

But it wasn’t always that way. In fact, during most of the twentieth century, heavy-handed central planning was considered more efficient and more productive than laissez-faire capitalism. [E1, Chapter 16]

In Hayek’s view centralized economic planning by the government is intrinsically undemocratic, as both elected and unelected government appointees begin to work their will and impose it upon the people. Slowly, little by little, increasing amounts of economic power are centralized in the state. In chapter 7 of The Road to Serfdom, Hayek immediately reminds us with a quote from Hilare Belloc that, “The control of the production of wealth is the control of human life itself.” Then he declares

Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another. But if we face a monopolist we are at his mercy. And an authority directing the whole economic system would be the most powerful monopolist conceivable.

Later, he writes

The power conferred by the control of production and prices is almost unlimited. In a competitive society the prices we have to pay for a thing, the rate at which we can get one thing for another, depend on the quantities of other things of which by taking one, we deprive the other members of society. This price is not determined by the conscious will of anybody. And if one way of achieving our ends proves too expensive for us, we are free to try other ways. … In a directed economy, where the authority watches over the ends pursued, it is certain that it would use its powers to assist some ends and to prevent the realization of others. Not our own view, but somebody else’s, of what we ought to like or dislike would determine what we should get. And since the authority would have the power to thwart any efforts to elude its guidance, it would control what we consume almost as effectively as if it directly told us how to spend our income.

The emphasis in the quote is again mine. In chapter 10 entitled Why The Worst get On Top, Hayek begins with the famous remark by Lord Acton that

Power tends to corrupt, and absolute power corrupts absolutely.

The burden of the chapter is to convince us that any concentrations of power, but in particular concentrations of economic power, will attract the attention of unscrupulous, power-hungry people, just like blood in ocean water attracts sharks. These human sharks, elected to office, then endeavor to accumulate even more power, and to redirect attention away from any of their failures to alleged failures of the free-market. I have endeavored to show in many of my posts that the use of government economic power is most often counterproductive, usually making economic conditions worse. However, the picture statist politicians attempt to sell the public is that the economic failures are free-market failures, due to the intrinsic nature of free-markets themselves. For example, since the beginning of the Great Recession, progressives have tried to sell us the explanation that greedy bankers and investors were the primary cause of the 2007-2008 financial crisis. Instead, careful research tells us the proximate cause of the crisis was the government mandating of sub-prime mortgages! As such statist politicians gain growing control of government, increasing economic power is gained little-by-little by the state, until the government ends up as an autocratic, authoritarian state. This was the path Italy and Germany took in the 1920s and 1930s from democratic republics to the evil dictatorships they became. One can argue it is the road followed by initially idealistic Russian revolutionaries in 1917 to the evils of the Soviet Empire that fell apart in 1991.

Is America Becoming Fascist?

I have little doubt the road to serfdom is the highway the United States is traveling today. No one can gainsay the fact American governments at all levels, particularly the federal level, have acquired accumulating amounts of economic power as the American economy becomes progressively less of a free-market economy. Just consider some of the federal captures of economic power over the last few decades.

• The capture of control of the money supply, beginning with Richard Nixon when we went from a gold-standard to a fiat-money system.
• The arrogation of power through Fannie Mae and Freddie Mac, authorized by an amendment of the Community Redevelopment Act of 1977, to mandate a specific fraction of all new mortgages be sub-prime mortgages.
• The micromanagement of the financial sector of the economy with the Dodd-Frank Act.
• The potentially total control of the physical environment by the Environmental Protection Agency.
• A start on the nationalization of health care with the misnamed “Affordable Care Act”.
• The occasional seizure of power to allocate capital by government fiat, as with the American Recovery and Reinvestment Act.

If Friedrich Hayek is right about accumulating economic power in the state generating tyrannical government, we should be very alert for beginning signs of a tyranny. We do not have to look very far to find them among the signs of Democratic Party corruption. Also, I have noted growing authoritarian strains in the Democratic Party in the posts Bernie Sanders and the Road to Serfdom, Do Progressives Want a Police State?,   Is Democracy the Best Government? Is It in Danger?, Progressives’ Basic Assumptions, The Proper Functions of Government, Progressives’ Disrespect for the U.S. Constitution, The Limits to Free Speech, and Democrats Want to Imprison Scientific Skeptics?. All the danger signs that the Democratic Party is becoming more autocratic and wants to centralize in the government both economic power and other controls over people’s behavior are flashing.

Be Afraid. Be Very Afraid.

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