The economics of fascism

The economics of fascism

An uncredited article on the economics of fascism from the April 1937 issue of The One Big Union Monthly.

I.

In the days before fascism was heard of, the question whether socialism was inevitable was sometimes approached from this viewpoint: May not the contradictions of capitalism which make its indefinite continuation impossible, be dissolved by the more complete organization of the employing class, or even by the trend toward the concentration of wealth into the hands of some oligarchy small enough to apply an intelligent paternalism to modern productive forces?

The contradictions were there and were real enough. The swing of the business cycle regularly proclaimed that the growing order and planning inside the factory was not balanced by any such planning in the economy as a whole, and thus the best regulated of plants must periodically close its gates for the lack of market. The market was not there because the growing productivity of labor, which had increased several thousand per cent in the great advance of mechanization since the end of the 18th century, was not balanced by any such increase in the capacity of the proletarized mass of the population to get ad use this wealth, for their living standard at the best times reflected only about twice the purchasing power they had before the industrial revolution.

This disparity was kept within workable limits only by the increasing internal wastefulness of capitalists economy, which often enough spends more to market a product than it does to make it, and by the re-investment of the surplus in new industries at home, or imperialistically, abroad. But every rational growth in capitalism, its trusts and cartels, lessened this easing wastefulness, and the accumulation of capital either enhanced the productivity of labor at home or exploited cheaper labor at the far ends of the earth. The one substantial release on this growing and unused productivity was the military aspect of imperialism which often spent more to gain some object by war that [sic] it would have cost to buy it outright.

The function of industry was social, doing in a large collective way what previously had been done in a small way in men’s homes, but there was little or no social control. Mild-mannered professors were fully aware of this, and likewise aware that much more of the unpleasant disturbance of life, all the way from the increasing nervous disorders to crime waves, was the result of the contradiction between the social function of the productive equipment and its private control. They reasoned optimistically that regulation by commission of democrative [sic] governments would be found increasingly necessary, and would step by step establish the needed balance, thus subordinating socially functioning industry to the public interest and re-establishing the supremacy of human intelligence over the Industrial Frankenstein it had created.

To such liberals, the efforts of labor alike in its strikes or in its building of a philosophy of class struggle, were viewed as just so much more unpleasant disturbance—something that eventually would be regulated or ironed out by a commission appointed in the public interest. The efforts of labor to remedy the great disparity between production and earnings was discussed by such professors under the head of “The Labor Problem.” That there were such workers as the I.W.W. deliberately “fanning the flames of discontent and preaching the doctrine of an irreconcilable struggle between capital and labor”, appeared to such thinkers as a most lamentable thing, as an unintelligent disregard for their text books and their liberal teaching to be excused only by comparison with such other monstrous things as the plug-ugly labor policy of U.S. Steel. To them this class struggle appeared only as another factor holding back their utopia of social regulation by commission in the public interest.

Today this dream of the liberals is fulfilled so far as it can be, in fascism. Now that the omelette is cooked, it is not to their taste, and still mild-mannerdly (sic) as befits them, they ask that the eggs be put back in the shell. The public interest that is being served isn’t their public, and their whole scheme of democracy is squashed. The standard of living under fascism goes down instead of up. Its regulated economy instead of furthering world peace as they had thought a regulated and rationalized economy would surely do, promotes world armament on an unprecedented scale. And man’s intelligence, instead of becoming supreme, is almost completely removed as a disturbing factor in fascist society by being outlawed and sent to a concentration camp.

So there must have been an error somewhere in the reasoning. Were the stresses and strains, the impacts ad blows, the ups and downs of unregulated capitalism due merely to the contradiction between the social function of the productive equipment and its private control? Or did they result fro a quite separate contradiction between productivity and earning? Could the social regulation of the business cycle, even with the most complete restrictions on boom speculation and the best planned postponement of public works to slack times, and the most complete of codes to restrict the insane modern editions of competition, erase the fact that labor does not own what it produces, and that a surplus is produced regardless of whether it be produced evenly or unevenly? And didn’t this contradiction between expanding production and limited earnings only express some still more basic contradiction—that those whose tremendous productive power could undertake the most gigantic tasks of linking oceans, or digging tunnels, or girdling the globe with copper cables, were still powerless to say whether their children should eat or not? Was the labor movements with its persistent demand for “more and more and more” and its philosophy of class struggle, just another unpleasant disturbance of capitalism, a problem to be solved by some commission, or was this labor movement, considered as an element in the historic process, by its continuous struggle for power over production, power over the means of life, the one agent that could dissolve the contradictions of capitalism?

That the answer is yes, is confirmed by an examination of the question: Why doesn’t fascism work?

II.

An examination of the economy of fascism should disclose many things. One very useful bit of information it should yield is what and where this fascism is that we are fighting.

First it should be understood that fascism is not just political dictatorship, not just militant reaction, not just the abridgement of civil liberties, not just the old brought and ready way of trampling on labor, and not just a process of Jew-baiting either. We have had all these things with us before. None of them needed the corporative state; none of them tried to take the whole life in town and regulate it to a plan; none of them sought to invent a new type of society. Neither should fascism be understood as the social realization of a philosophy. Back in 1921 Mussolini said: “During the two months which remain before us, I should like to see us create the philosophy of Italian Fascism.” It was created voluminously within those two months as trimmings for a far more substantial reality.

Fascism is this militant reaction detested by liberals set to the task of realizing the liberal’s regulation of economy in a public interest—the public in fascism as in any other phase of capitalism, being those who pay the regulators.

An examination of who pays to keep fascism going and to get it started will readily disclose that it is not a phenomena confined within the boundaries of Italy, German, or any other nation. Back in 1934 in the “Fortune” article that led to so many disclosures of the internationalism of the armament makers, Adolf Hitler was disclosed as a champion promoted of arms sales on behalf of all the armament makers. Fritz Thyssen, “King of the Ruhr” provided a large part of the fund to get him started. The directors of the large Skoda works controlled by Schneider of France, but in which Vickers-Armstrong of England is also interested, also contributed. And in 1933 before his coup, Adolf paid a most peculiar fine for contempt of court: he had brought suit against a German journalist for stating that he had been financed directly by Schneider-Creusot, French armament makers; in court he was asked the question direct; he refused to answer, and paid 1000 marks fine for contempt of court rather than answer. The French press, controlled by the armament makers, welcomed Hitler with a shriek for further defense, and the investment in Hitler paid well, as France became the leader among nations of the world both for armament and for the export of arms.

Hitler is not only an excellent arms salesman, but quite willing to reciprocate in mustering up adequate means for other nations to participate properly in our mutual extermination. As Wilson Woodside observes in the February Harpers alongside of idle textile mills, margarine factories and packing plants, idle for the lack of a market, the metal industries of Germany are working overtime, and are far behind in deliveries. They are not only arming Germany, but busy making equipment for England as well; and of 668,000 tons of construction underway in German shipyards, 104,00 tons are for Britain. This fascism is an international undertaking and not confined to the internationalism of the armament makers. Fascist economy, for various reasons to be explained later, runs on a deficit; it is not up to non-fascist capitalism in efficiency; it is kept going by the support of world capitalism. There have been direct loans, unpaid. In 1927 Mussolini was saved from a crisis by a $100,000,000 loan floated in the United States. Last year he had Italian interests sell their control of Mosul Oil Fields Ltd., to the British Iraq Petroleum Co. Last September he floated another $236,000,000 loan purchasable only in foreign currency, not officially floated here because under the recent Johnson Act those governments defaulting on war debts cannot borrow here. Such deals, and the complaisant way in which the government of the “democratic nations” have financed exports to Germany and Italy, and the credits directly extended by such exporters, should all set at rest any notion that non-fascist capitalism desires to check the advance of fascism, and may ally itself with labor in order to do so.

The internationalism of fascism has shown itself in many ways apart from these financial transactions. Class conscious capitalists (and despite their professional patriotism they are all by the nature of their investments good internationalists) saw that their press from 1922 on welcomed Mussolini; and the feature writers who howled over the Bolshevik atrocities presented Benito as a rather jovial administrator of castor oil. The international solidarity of capitalist nations and their labor politicians in aiding France in the fascist invasion of Spain, should puzzle only those who forget that in 1934 it was Italian aid in arms and money that upset the liberal government in Austria and drove Vienna’s socialism underground. Hitler states quite openly his willingness to perform a like service for international investors in Czechoslovakia. That this can be done agreeably to all capitalist concerned, is shown by the fascist seizure of the Rio Tinto copper mines in Spain, with the result that shipments previously delivered to Britain are now delivered to Germany; yet there has been no complain lodged by the British owners. Fascism enters the world at a time when capitalism is well developed as a world economy, years after a world war in which allied soldiers were killed with equipment obligingly furnished by their own nations, and long after the typical business unit had become the corporation selling its stocks and bonds and debentures on all the exchange of the world to any buyer who wished to buy. It is most decidedly an international venture, maintained by international support rendered alike morally, politically, and financially.

Why does international capital support these ventures in “deficit economies?” The answer is largely why capital supports government in the first place. To the investor in stock in the proper German enterprises, fascism is not a deficit economy at all. Since 1929 the profits of German employers have raised six-fold, from 500,000,000 to 3,000,000,000 marks. This has come from a cut in wages by over one half. The employers did not get the full advantage of this extra exploitation of labor; a very substantial part of it as of everything has gone to the official racketeers; but even so a six-fold increase in profits is tempting. Wages are down to an average of 25 marks (about $10) per week; but to pay for this service of smashing up unions, stopping all strikes, and restricting civil liberties as must be done to achieve such wage levels, the taxes run to 9,000,000,000 marks or three times the profits. Even this pays only one half the current budget … And beside the taxes there is a tremendous amount of outright graft and forced donations to the Nazis. Incidentally the resources for future exploitation are being ruined. The shortsightedness of Fascist planning is shown by the depletion of the forests that since they days of Bismarck have been nursed with the utmost of care. Says Herr Goering: “The [sic] say I am using up too much of Germany’s forests…but if I have struck too deep into them so far, I shall strike two or three times as deep, for I had better destroy the forests than the nation.” The physique of the working class deteriorates in a manner that will undermine eventually their productivity and their military usefulness. In relation to world economy, a most necessary element for successful exploitation is the inventiveness to keep technique on a competitive par with the rest of the world; the deterioration of German science and learning in general undermines this perhaps most important resource of all; the inventions made in concentration camps do not usually come under the head of the productive arts. But fascism by its very nature does not look far to the future.

Why is fascism economically a failure? Why can’t the complete regulation of capitalist enterprise result in a more efficient use of resources and equipment than the unplanned an chaotic capitalism of the rest of the world? The answer to this question also answers another: Why, if fascism is international endowed, is it so intensely nationalistic?

A planned economy must be relatively self-contained economy. Thus Mussolini’s famous, though unsuccessful, “Battle for Wheat”, his draining of marsh-land, and his latest supreme effort to colonize Italy and Ethiopia alike in the style of the emperors from Constantine on, his adscription of agricultural labor as serfs to the soil. He calls this serfdom “deproletarianization”, but frankly says that Italy must have “genuine peasants attached to the soil, who do not ask the impossible, who know how to content themselves.” It is a form of sharecropping but with payment in kind that takes Italian agriculture back many centuries and results in some 6,000,000 rural workers, according to an official survey made in 1934, living either in caves or hovels, or in houses, as the report put it “almost absolutely uninhabitable.” The same fact is back of Hitler’s battle for “Rohstoffreiheit” —to need no foreign imports of raw materials. You can’t plan capitalism, and keep it a part of a chaotic world capitalism. At the same time to step out of world economy is most uneconomical. With the free interchange of the products of various parts of the earth in an unbridled competition, goods are normally produced where they can be produced cheapest. German pays for “freedom in raw materials” by using ore or 35 per cent iron content which costs four times as much to smelt as Swedish 65 per cent ore—and now she is mining 5 and 7 per cent deposits in the Hartz Mountains! On the first steps along the old “Berlin to Bagdad” route lie bauxite for making aluminum and oil, and these may explain much of the internal politics of this region, as Germany lacks both.
But if the failure of fascist economy is the result of an attempt to replace the use of the world’s resources with the uneconomic spoliation of the fascist nation’s own, then would not fascism succeed should it blossom out, as it threatens to, in a world fascist economy, or even in some region, as these United States, where nature has endowed the land with most of the resources needed? As to the latter, even the United States could not maintain its present population long without imports; there is scarcely any industrial process in which we engage that does not absolutely require some import. But perhaps world fascism is possible. To capitalists it is not a desirable state of affairs; it means that all but a handful of capitalists would be reduced to the universal serfdom; and the regulation of a world would be most costly. Though the bourgeois historians write of the latter days of the Roman empire as a time when the hand of the state was everywhere regulating all things, the modern business man reading such history understands that the hand of the state was everywhere grabbing things too.

World economy could readily enough be coordinated on the basis of a community of interests to effect the highest possible standard of living for all—if run by producers for producers; but to co-ordinate world economy under an iron hell, on the basis of discordant interests, where every petty official of the supreme oligarchy was looking for his graft for doing this dirty work, where everyone was discontent, where the military command was incessantly needed to maintain order and thus made mindful of its own opportunity to become the supreme oligarchy, is to enter a period of even greater chaos and waste than we suffer from now.

Fascism is not a forward looking plan; it is not even to be explained in terms of a far-sighted rationalism on the part of those who support it; it is the blind retreat from the threshold of new order that offers abundance to all, and thus privilege, prestige, and sundry other perverted desiderata of a class society to none. It rallies its support with an irrational appeal, and is not to be fought by any other means than power. The road to fascism is paved with liberal good intentions. Its means of operation is the regulation of the disturbances of capitalism in an alleged public interest. All planned control of economy not vested in labor, and not run by workers for workers, is grist for its mill. Every regulation over workers, whether by union officials or by public bodies on which such union officials sit, is another brick for its world-wide jailhouse. And the materials are being accumulated rapidly the world over.

Against this drift to Mussolini’s serfdom there are tremendous forces that can be rallied—the great dynamic power that has brought the world forward to this alternative of going back to serfdom and family or forward to a greater freedom and plenty. Capital establishes fascism, albeit reluctantly, for the same reason that it establishes and supports any form of government, hollering the while for “more business in government and less government in business. It is done to “police the poor.” It is done on an every increasing and more costly scale because capitalism is ever the breeder of a profounder discontent. Capitalism requires and produces a working class schooled and trained and brought into the contacts requisite for building revolutionary class organization; the most able class that ever his history submitted to exploitation by a class of idlers. It creates abilities that it cannot use; and unused ability is the great disturbing factor that fascism cannot put down.

The contradictions of capitalism—the great basic ones that are involved in the working class struggle for power over the means of life—cannot be ironed out even by an iron heel. They persist as a driving force toward a new society, but as a force that can build this new society only if organized as a class force, on the basis of class struggle, by working vigilantly avoiding every restriction to their own activity, whether from inside their organization or outside it. Therein lies the greater historic role of the I.W.W., more readily visualized today than ever before—by the planned economy of plenty that can be effected by the One Big Union of labor, to complete man’s conquest of nature through the establishment of the supremacy of human intelligence over the Industrial Frankenstein it has created.

Originally appeared in The One Big Union Monthly (April 1937)
Typed up by Erik