Economics of fascism
Encyclopedia
The economics of fascism refers to the economic policies implemented by fascist
governments.
Nevertheless, some scholars and analysts argue that there is an identifiable economic system in fascism that is distinct from those advocated by other ideologies, comprising essential characteristics that fascist nations shared. Others argue that while fascist economies share some similarities, there is no distinctive form of fascist economic organization.
, meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state.
Fascism operated from a Social Darwinist
view of human relations. Their aim was to promote superior individuals and weed out the weak. In terms of economic practice, this meant promoting the interests of successful businessmen while destroying trade union
s and other organizations of the working class
. Historian Gaetano Salvemini
argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social
." Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the national interest.
One significant fascist economic belief was that prosperity would naturally follow once the nation has achieved a cultural and spiritual re-awakening. Often, different members of a fascist party would make completely opposite statements about the economic policies they supported. Once in power, fascists usually adopted whatever economic program they believed to be most suitable for their political goals. Long-lasting fascist regimes (such as that of Benito Mussolini
in Italy
) made drastic changes to their economic policy from time to time. Stanley Payne argues that while fascist movements defended the principle of private property, which they held "inherent to the freedom and spontaneity of the individual personality", a common aim of all fascist movements was elimination of the autonomy or, in some cases, the existence of large-scale capitalism
.
The fascists opposed both international socialism
and liberal
capitalism
, arguing that their views represented a third way
. They claimed to provide a realistic economic alternative that was neither laissez-faire
capitalism nor communism
. They favoured corporatism
and class collaboration
, believing that the existence of inequality and separate social class
es was beneficial (contrary to the views of socialists). Fascists argued that the state had a role in mediating relations between these classes (contrary to the views of liberal capitalists).
In most cases, fascists discouraged or banned foreign trade; fascists believed that too much international trade would make the national economy dependent on international capital, and therefore vulnerable to international economic sanctions. Economic self-sufficiency, known as autarky
, was a major goal of most fascist governments.
Fascism was highly militaristic
, and as such, fascists often significantly increased military spending.
of Benito Mussolini
came to power in Italy in 1922, at the end of a period of social unrest. Working class
activism was at a high point, militant trade union
s were organizing increasingly frequent strikes
to demand workers' rights
, and the Italian Socialist Party
was making significant electoral gains. This caused widespread fear among Italian business circles and part of the middle class
, who believed that a communist revolution
was imminent. With the traditional right-wing parties appearing incapable of dealing with the situation, King Victor Emmanuel III turned to the young Fascist movement, which he considered to hold a hardline right-wing orientation by violently suppressing strikes, and appointed Benito Mussolini prime minister. Soon after his rise to power, Mussolini defined his economic stance by saying: "The [Fascist] government will accord full freedom to private enterprise and will abandon all intervention in private economy."
Specifically, during the first four years of the new regime, from 1922 to 1925, the Fascists had a generally laissez-faire
economic policy under the Finance Minister Alberto De Stefani
. Free competition was encouraged. De Stefani initially reduced taxes, regulations and trade restrictions on the whole. De Stefani reduced government expenditure and balanced the budget. Some former government monopolies (such as the telephone system) were privatized
. Some previous legislation introduced by the Socialists, such as the inheritance tax
, was repealed. During this period prosperity increased and by mid-1920s industrial production had passed its wartime peak. However, this was accompanied with inflation. Overall, this was a period when Fascist economic policy mostly followed classical liberal
lines, with the added features of attempting to stimulate domestic production (rather than foreign trade) and balancing the budget. In a speech given in May 1924, Mussolini declared that he supported the right to strike.
However, "once Mussolini acquired a firmer hold of power... laissez-faire was progressively abandoned in favour of government intervention, free trade was replaced by protection[ism] and economic objectives were increasingly couched in exhortations and military terminology." De Stefani was forced to resign in 1925 because his policy of free trade was opposed by many Italian business leaders, who favored protectionism
and subsidies to insulate domestic business from international competition. In 1926, Mussolini gave an impassioned speech demanding monetary policies to halt inflation and stabilize the Italian currency (the lira
). He also took the final step of officially banning any kind of strike action. From 1927 to 1929, under the leadership of the new Finance Minister Alberto Beneduce, the Italian economy experienced a period of deflation, driven by the government's monetary policies.
In 1929, Italy was hit hard by the Great Depression
. The Italian economy, having just emerged from a period of monetary stabilization, was not ready for this shock. Prices fell and production slowed. Unemployment
rose from 300,787 in 1929 to 1,018,953 in 1933. Trying to handle the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities. The government also issued new securities to provide a source of credit for the banks and began enlisting the help of various cartel
s (consorzi) that had been created by Italian business leaders since 1922. The government offered recognition and support to these organizations in exchange for promises that they would manipulate prices in accordance with government priorities.
A number of mixed entities were formed, called instituti or enti nazionali, whose purpose it was to bring together representatives of the government and of the major businesses. These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business. The government considered this arrangement to be a success, and Italian Fascists soon began to pride themselves on this outcome, saying they had survived the Great Depression without infringing on private property. In 1934, the Fascist Minister of Agriculture said: "While nearly everywhere else private property was bearing the major burdens and suffering from the hardest blows of the depression, in Italy, thanks to the actions of this Fascist government, private property not only has been saved, but has also been strengthened."
This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism
. From 1934 onwards, believing that Italy could have avoided the Great Depression if it had not been linked to international markets, Benito Mussolini insisted that autarky
should be one of the primary goals of his government's economic policy. To this end, the Fascists began to impose significant tariffs and other trade barriers. In 1935, Mussolini boasted that three-quarters of Italian businesses relied on the government.
Various banking and industrial companies were financially supported by the state. One of Mussolini's first act was indeed to fund the metallurgical trust Ansaldo
to the height of 400 millions Liras. Following the deflation crisis which started in 1926, banks such as the Banco di Roma, the Banco di Napoli or the Banco di Sicilia were also assisted by the state. In 1933, Mussolini created the Istituto per la Ricostruzione Industriale
(IRI) with the special aim of rescuing floundering companies. By 1939 the IRI controlled 20% of the Italian industry through government-linked companies (GLCs), including 75% of pig iron production
and 90% of the shipbuilding
industry.
Mussolini also adopted a Keynesian policy of government spending on public works to stimulate the economy. Between 1929 and 1934, public works spending tripled to overtake defense spending as the largest item of government expenditure.
In 1935, following the Italian invasion of Ethiopia
, the League of Nations
imposed trade sanctions on Italy. This forced Italy to achieve autarky immediately, and strengthened Mussolini's belief that economic self-sufficiency was vital to national security. The sanctions did not have their intended effects, because the Italian government had already begun restricting trade and preparing for autarky. In particular, Italy imposed a severe ban on most imports, and the government sought to persuade consumers to buy Italian-made products. For instance, it launched the slogan "Preferite il Prodotto Italiano" (Buy Italian). In May 1935, the government compelled individuals and businesses to turn over all foreign issued securities to the Bank of Italy (Banca d'Italia
). On July 15, 1936, the economic sanctions on Italy were lifted, but the Fascists continued to insist on economic isolation.
Throughout the 1930s, the Italian economy maintained the corporatist model that had been established during the Great Depression. At the same time, however, Mussolini had growing ambitions of extending Italy's foreign influence through both diplomacy and military intervention. After the invasion of Ethiopia, Italy began supplying both troops and equipment to the Spanish nationalists under General Francisco Franco
, who were fighting in the Spanish Civil War
against a leftist government. These foreign interventions required increased military spending, and the Italian economy became increasingly subordinated to the needs of its armed forces. By 1939, Italy had the highest percentage of state-owned enterprises after the Soviet Union
.
Finally, Italy's involvement in World War II
as a member of the Axis powers
required the establishment of a war economy
. This put severe strain on the corporatist model, since the war quickly started going badly for Italy and it became difficult for the government to persuade business leaders to finance what they saw as a military disaster. The Allied invasion of Italy
in 1943 caused the Italian political structure - and the economy - to rapidly collapse. The Allies, on the one hand, and the Germans on the other, took over the administration of the areas of Italy under their control. By the end of the war, the Italian economy had been all but destroyed; per capita income in 1944 was at its lowest point since the beginning of the 20th century.
regarded economic issues as relatively unimportant. In 1922, Hitler proclaimed that "world history teaches us that no people has become great through its economy but that a people can very well perish thereby", and later concluded that "the economy is something of secondary importance". Hitler and the Nazis held a very strong idealist
conception of history, which held that human events are guided by small numbers of exceptional individuals following a higher ideal. They believed that all economic concerns, being purely material, were unworthy of their consideration. Hitler went as far as to blame all previous German governments since Bismarck
of having "subjugated the nation to materialism" by relying more on peaceful economic development instead of expansion through war.
For these reasons, the Nazis never had a clearly defined economic programme. The original "Twenty-Five Point Programme
" of the party, adopted in 1920, listed several economic demands (including "the abolition of all incomes unearned by work," "the ruthless confiscation of all war profits," "the nationalization of all businesses which have been formed into corporations," "profit-sharing in large enterprises," "extensive development of insurance for old-age," and "land reform suitable to our national requirements"), but the degree to which the Nazis supported this programme in later years has been questioned. Several attempts were made in the 1920s to change some of the program or replace it entirely. For instance, in 1924, Gottfried Feder
proposed a new 39-point program that kept some of the old planks, replaced others and added many completely new ones.
Hitler refused to allow any discussion of the party programme after 1925, ostensibly on the grounds that no discussion was necessary because the programme was "inviolable" and did not need any changes. At the same time, however, Hitler never voiced public support for the programme and many historians argue that he was in fact privately opposed to it. Hitler did not mention any of the planks of the programme in his book, Mein Kampf
, and only talked about it in passing as "the so-called programme of the movement".
Hitler's own views on economics, beyond his belief that the economy was of secondary importance, are a matter of debate. On the one hand, he proclaimed in one of his speeches that "we are socialists, we are enemies of today's capitalistic economic system", but he was clear to point out that his interpretation of socialism "has nothing to do with Marxian Socialism," saying that "Marxism is anti-property; true Socialism is not." At a later time, Hitler said: "Socialism! That is an unfortunate word altogether... What does socialism really mean? If people have something to eat and their pleasures, then they have their socialism."
He was also quoted as saying: "I had only to develop logically what social democracy failed.... National Socialism is what Marxism might have been if it could have broken its absurd ties with a democratic order.... Why need we trouble to socialize banks and factories? We socialize human beings...." In private, Hitler also said that "I absolutely insist on protecting private property... we must encourage private initiative". On yet another occasion he qualified that statement by saying that the government should have the power to regulate the use of private property for the good of the nation. Hitler clearly believed that the lack of a precise economic programme was one of the Nazi Party's strengths, saying: "The basic feature of our economic theory is that we have no theory at all."
Hitler's political beliefs
drew heavily upon Social Darwinism
- the view that natural selection
applies as much to human society as it does to biological organisms. Hitler believed that history was shaped by a violent struggle between nation
s and races, and that a nation needed to be united under a strong, centralized state led by an heroic leader in order to succeed in this struggle and that individuals within a nation battled with each other for survival, and that such ruthless competition was good for the health of the nation, because it promoted "superior individuals" to higher positions in society.
, a former member of the German Democratic Party, as Chairman of the Reichsbank
in 1933, and minister of economics in 1934. At first, Schacht continued the economic policies introduced by the government of Kurt von Schleicher
in 1932 to combat the effects of the Great Depression
. These policies were mostly Keynesian, relying on large public works
programs supported by deficit spending
- such as the construction of the Autobahn - to stimulate the economy and reduce unemployment
(which stood at 30% in early 1933). There was a major reduction in unemployment
over the following years, while price controls prevented the recurrence of inflation
.
The Nazis outlawed trade union
s and banned strikes
. They also directed Schacht to place more emphasis on military production and rearmament. After the Nazi takeover in 1933, Germany slowly began to recover from the Great Depression. Several economists, such as Michal Kalecki
, have seen the German recovery as an example of military Keynesianism
. However, others have noted that the bulk of the German military buildup occurred after 1936 when the economic recovery was well underway.
In June 1933, the Reinhardt Program was introduced. It was an extensive infrastructure development project that combined indirect incentives, such as tax reductions, with direct public investment in waterways, railroads and highways. The Reinhardt Program was followed by other similar initiatives, with the result that, between 1933 and 1936, the German construction industry was greatly expanded. In 1933, only 666,000 Germans worked in construction, and by 1936, the number had increased to 2,000,000. In particular, road construction was expanding at a very rapid pace. This was part of Hitler's war preparations: Germany needed a state-of-the-art highway system in order to be able to move troops and materials quickly. As a side effect, cars and other forms of motorized transport became increasingly attractive to the population. Therefore, the German car industry also experienced a boom in the 1930s.
In 1936, military spending in Germany exceeded 10% of GNP (higher than any other European country at the time). Military investment also exceeded civilian investment from 1936 onwards. Armaments dominated government expenditures on goods and services. That year also represented a turning point for German trade policy. World prices for raw materials (which constituted the bulk of German imports) were on the rise. At the same time, world prices for manufactured goods (Germany's chief exports) were falling. The result was that Germany found it increasingly difficult to maintain a balance of payments. A large trade deficit seemed almost inevitable. But Hitler found this prospect unacceptable. Thus Germany, following Italy's lead, began to move away from partially free trade in the direction of economic self-sufficiency.
Unlike Italy, however, Germany did not strive to achieve full autarky
. Hitler was aware of the fact that Germany lacked reserves of raw materials, and full autarky was therefore impossible. Thus he chose a different approach. The Nazi government tried to limit the number of its trade partners, and, when possible, only trade with countries within the German sphere of influence. A number of bilateral trade agreements were signed between Germany and other European countries (mostly countries located in Southern and South-Eastern Europe) during the 1930s. The German government strongly encouraged trade with these countries but strongly discouraged trade with any others.
By the late 1930s, the aims of German trade policy were to use economic and political power to make the countries of Southern Europe and the Balkans dependent on Germany. The German economy would draw its raw materials from that region, and the countries in question would receive German manufactured goods in exchange. Already in 1938, Yugoslavia, Hungary, Romania, Bulgaria and Greece transacted 50% of all their foreign trade with Germany. Throughout the 1930s, German businesses were encouraged to form cartels, monopolies and oligopolies, whose interests were then protected by the state. In his book, Big Business in the Third Reich, Arthur Schweitzer states:
In the same book, Schweitzer details the triangular power structure that existed between the Nazi party, big business and the generals in 1936. Within a few years of Hitler's accession, "middle-class socialism" had been defeated, collective bargaining had been banned and unions had been outlawed. Large companies were favored over small businesses. Shortly after Hitler became chancellor, Germany refused to pay its reparation payments as was mandated in the Versailles Treaty. It also diverted large sums of money to rearmament, which violated that treaty. This had the support of the generals and the business community, since their profits were guaranteed on these orders.
Under Hjalmar Schacht, a policy was introduced whereby certain nations who traded with Germany (such as the United States) had to deal with special banks. Foreign currency was deposited in these institutions and Americans were paid for their goods (especially raw materials) in scrips that could only be redeemed for German goods in kind. Soon these scrips declined in value, as they were not truly fungible. Many were used by travellers to Germany in the mid 1930s. Schacht was able to build up foreign currency reserves for later use.
Big business developed an increasingly close partnership with the Nazi government as it became increasingly organized. Business leaders supported the government's political and military goals, and in exchange, the government pursued economic policies that maximized the profits of its business allies. Nazi Germany transferred public ownership and public services into the private sector, while other Western capitalist countries strove for increased state ownership of industry.
During the war, as Germany acquired new territories (either by direct annexation or by installing puppet governments in defeated countries), these new territories were forced to sell raw materials and agricultural products to German buyers at extremely low prices. Hitler's policy of lebensraum
strongly emphasized the conquest of new lands in the East, and the exploitation of these lands to provide cheap goods to Germany. In practice, however, the intensity of the fighting on the Eastern Front and the Soviet scorched earth
policy meant that the Germans found little they could use. On the other hand, a large quantity of goods flowed into Germany from conquered lands in the West. For example, two-thirds of all French trains in 1941 were used to carry goods to Germany. Norway lost 20% of its national income in 1940 and 40% in 1943.
Even before the war, Nazi Germany maintained a supply of slave labour. This practice started from the early days of labour camps of "undesirables" , such as the homeless, homosexual and criminals as well as political dissident
s, communists
, Jews, and anyone that the regime wanted out of the way. As the war progressed, the use of slave labour experienced massive growth. Prisoners of war
and civilian "undesirables" were brought in from occupied territories. Hundreds of thousands (perhaps millions) of Jews, Slavs
and other conquered peoples were used as slave labourers by German corporations such as Thyssen
, Krupp
, IG Farben
and even Fordwerke - a subsidiary of the Ford Motor Company
. By 1944, slave labour made up one quarter of Germany's entire work force, and the majority of German factories had a contingent of prisoners. The Nazis also had plans for the deportation and enslavement of Britain's adult male population in the event of a successful invasion
.
The proportion of military spending in the German economy began growing rapidly after 1942, as the Nazi government was forced to dedicate more and more of the country's economic resources to fighting a losing war. Civilian factories were converted to military use and placed under military administration. By late 1944, almost the entire German economy was dedicated to military production. At the same time, Allied bombings were destroying German factories and cities at a rapid pace, leading to the final collapse of the German war economy in 1945.
, dictator of Spain from the Spanish Civil War
in the 1930s until his death in 1975, based his economic policies on the theories of national syndicalism
as expounded by the Falange
(Spanish
for "phalanx"), the Spanish Fascist
party founded in 1933 by José Antonio Primo de Rivera
, which was one of Franco's chief supporters during his bid for power.
system based on the Italian model. Economic liberalism was replaced with economic intervention according to the wishes of the corporations, which also set prices and wages. Combined with autarky
, and in the absence of Marshall Plan
aid after the Second World War
, Spain’s post-war economic growth stagnated. The Spanish corporative system was less successful than the Italian experience. At one point, the Spanish farmers' corporation created a massive bread shortage by setting the price too low. As a result, bread production was abandoned in favour of other, more profitable goods. Although the aim of this policy was to make bread accessible to the poorest among the population, the opposite occurred, and a black market emerged.
As in Italy, wages were set by the state in negotiations between officially recognized workers' syndicates and employers' organizations, with the state as mediator. Prior to the Franco regime, workers' groups had aligned with the Communists
, anarchists
or other republican
forces. Franco's regime, however, tended to favour the interests of large businesses, despite its syndicalist rhetoric. In response, workers created illegal syndicates and organized strikes, which usually were repressed brutally by Franco's police state.
The Popular Front
of the Spanish Republic
had begun a land redistribution program, forcing wealthy landowners to sell some of their land to the state, which in turn was given to impoverished tenant farmer
s. After the Spanish Civil War, the original landowners had their land returned. The primary focus of the Falange, however, was on the rebuilding of urban centers, whilst providing only limited support to the countryside.
, a Roman Catholic lay group to which Franco had given powerful positions within the Ministry of Finance and Economics. The reforms of the 1950s were a huge success, and Spain experienced a period of rapid economic growth known as the "Spanish Miracle
", continuing until Franco's death in 1975. During this period, tourism became an important part of the Spanish economy. Although the corporatist organs and rhetoric from the earlier years of the Franco regime were maintained, they now played a secondary role. Spain's economy was further liberalized by the Spanish transition to democracy
following Franco's death.
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
governments.
Nevertheless, some scholars and analysts argue that there is an identifiable economic system in fascism that is distinct from those advocated by other ideologies, comprising essential characteristics that fascist nations shared. Others argue that while fascist economies share some similarities, there is no distinctive form of fascist economic organization.
General characteristics of fascist economies
An inherent aspect of fascist economies was economic dirigismeDirigisme
Dirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
, meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state.
Fascism operated from a Social Darwinist
Social Darwinism
Social Darwinism is a term commonly used for theories of society that emerged in England and the United States in the 1870s, seeking to apply the principles of Darwinian evolution to sociology and politics...
view of human relations. Their aim was to promote superior individuals and weed out the weak. In terms of economic practice, this meant promoting the interests of successful businessmen while destroying trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s and other organizations of the working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
. Historian Gaetano Salvemini
Gaetano Salvemini
Gaetano Salvemini was an Italian anti-fascist politician, historian and writer.- Biography :Salvemini was born in Molfetta, Apulia....
argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social
Privatizing profits and socializing losses
In political discourse, the phrase "privatizing profits and socializing losses" refers to any instance of speculators benefitting from profits, but not taking losses, by pushing the losses onto society at large, particularly via the government....
." Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the national interest.
One significant fascist economic belief was that prosperity would naturally follow once the nation has achieved a cultural and spiritual re-awakening. Often, different members of a fascist party would make completely opposite statements about the economic policies they supported. Once in power, fascists usually adopted whatever economic program they believed to be most suitable for their political goals. Long-lasting fascist regimes (such as that of Benito Mussolini
Benito Mussolini
Benito Amilcare Andrea Mussolini was an Italian politician who led the National Fascist Party and is credited with being one of the key figures in the creation of Fascism....
in Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
) made drastic changes to their economic policy from time to time. Stanley Payne argues that while fascist movements defended the principle of private property, which they held "inherent to the freedom and spontaneity of the individual personality", a common aim of all fascist movements was elimination of the autonomy or, in some cases, the existence of large-scale capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
.
The fascists opposed both international socialism
Proletarian internationalism
Proletarian internationalism, sometimes referred to as international socialism, is a Marxist social class concept based on the view that capitalism is now a global system, and therefore the working class must act as a global class if it is to defeat it...
and liberal
Liberalism
Liberalism is the belief in the importance of liberty and equal rights. Liberals espouse a wide array of views depending on their understanding of these principles, but generally, liberals support ideas such as constitutionalism, liberal democracy, free and fair elections, human rights,...
capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
, arguing that their views represented a third way
Third Position
Third Position is a revolutionary nationalist political ideology that emphasizes its opposition to both communism and capitalism. Advocates of Third Position politics typically present themselves as "beyond left and right", instead claiming to syncretize radical ideas from both ends of the...
. They claimed to provide a realistic economic alternative that was neither laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
capitalism nor communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
. They favoured corporatism
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
and class collaboration
Class collaboration
Class collaboration is a principle of social organization based upon the belief that the division of society into a hierarchy of social classes is a positive and essential aspect of civilization.-Class collaboration under capitalism:...
, believing that the existence of inequality and separate social class
Social class
Social classes are economic or cultural arrangements of groups in society. Class is an essential object of analysis for sociologists, political scientists, economists, anthropologists and social historians. In the social sciences, social class is often discussed in terms of 'social stratification'...
es was beneficial (contrary to the views of socialists). Fascists argued that the state had a role in mediating relations between these classes (contrary to the views of liberal capitalists).
In most cases, fascists discouraged or banned foreign trade; fascists believed that too much international trade would make the national economy dependent on international capital, and therefore vulnerable to international economic sanctions. Economic self-sufficiency, known as autarky
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
, was a major goal of most fascist governments.
Fascism was highly militaristic
Militarism
Militarism is defined as: the belief or desire of a government or people that a country should maintain a strong military capability and be prepared to use it aggressively to defend or promote national interests....
, and as such, fascists often significantly increased military spending.
Political economy of Fascist Italy
The National Fascist PartyNational Fascist Party
The National Fascist Party was an Italian political party, created by Benito Mussolini as the political expression of fascism...
of Benito Mussolini
Benito Mussolini
Benito Amilcare Andrea Mussolini was an Italian politician who led the National Fascist Party and is credited with being one of the key figures in the creation of Fascism....
came to power in Italy in 1922, at the end of a period of social unrest. Working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
activism was at a high point, militant trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s were organizing increasingly frequent strikes
Strike action
Strike action, also called labour strike, on strike, greve , or simply strike, is a work stoppage caused by the mass refusal of employees to work. A strike usually takes place in response to employee grievances. Strikes became important during the industrial revolution, when mass labour became...
to demand workers' rights
Labor rights
Labor rights or workers' rights are a group of legal rights and claimed human rights having to do with labor relations between workers and their employers, usually obtained under labor and employment law. In general, these rights' debates have to do with negotiating workers' pay, benefits, and safe...
, and the Italian Socialist Party
Italian Socialist Party
The Italian Socialist Party was a socialist and later social-democratic political party in Italy founded in Genoa in 1892.Once the dominant leftist party in Italy, it was eclipsed in status by the Italian Communist Party following World War II...
was making significant electoral gains. This caused widespread fear among Italian business circles and part of the middle class
Middle class
The middle class is any class of people in the middle of a societal hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class....
, who believed that a communist revolution
Communist revolution
A communist revolution is a proletarian revolution inspired by the ideas of Marxism that aims to replace capitalism with communism, typically with socialism as an intermediate stage...
was imminent. With the traditional right-wing parties appearing incapable of dealing with the situation, King Victor Emmanuel III turned to the young Fascist movement, which he considered to hold a hardline right-wing orientation by violently suppressing strikes, and appointed Benito Mussolini prime minister. Soon after his rise to power, Mussolini defined his economic stance by saying: "The [Fascist] government will accord full freedom to private enterprise and will abandon all intervention in private economy."
Specifically, during the first four years of the new regime, from 1922 to 1925, the Fascists had a generally laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
economic policy under the Finance Minister Alberto De Stefani
Alberto De Stefani
Alberto De Stefani was an Italian politician. Coming from a background in liberalism to Benito Mussolini's fascism, De Stefani was in charge of Italian economics from 1922 to 1925. His time in charge was characterized by laissez-faire ideals....
. Free competition was encouraged. De Stefani initially reduced taxes, regulations and trade restrictions on the whole. De Stefani reduced government expenditure and balanced the budget. Some former government monopolies (such as the telephone system) were privatized
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
. Some previous legislation introduced by the Socialists, such as the inheritance tax
Inheritance tax
An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate of a person who has died...
, was repealed. During this period prosperity increased and by mid-1920s industrial production had passed its wartime peak. However, this was accompanied with inflation. Overall, this was a period when Fascist economic policy mostly followed classical liberal
Classical liberalism
Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....
lines, with the added features of attempting to stimulate domestic production (rather than foreign trade) and balancing the budget. In a speech given in May 1924, Mussolini declared that he supported the right to strike.
However, "once Mussolini acquired a firmer hold of power... laissez-faire was progressively abandoned in favour of government intervention, free trade was replaced by protection[ism] and economic objectives were increasingly couched in exhortations and military terminology." De Stefani was forced to resign in 1925 because his policy of free trade was opposed by many Italian business leaders, who favored protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
and subsidies to insulate domestic business from international competition. In 1926, Mussolini gave an impassioned speech demanding monetary policies to halt inflation and stabilize the Italian currency (the lira
Italian lira
The lira was the currency of Italy between 1861 and 2002. Between 1999 and 2002, the Italian lira was officially a “national subunit” of the euro...
). He also took the final step of officially banning any kind of strike action. From 1927 to 1929, under the leadership of the new Finance Minister Alberto Beneduce, the Italian economy experienced a period of deflation, driven by the government's monetary policies.
In 1929, Italy was hit hard by the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
. The Italian economy, having just emerged from a period of monetary stabilization, was not ready for this shock. Prices fell and production slowed. Unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
rose from 300,787 in 1929 to 1,018,953 in 1933. Trying to handle the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities. The government also issued new securities to provide a source of credit for the banks and began enlisting the help of various cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
s (consorzi) that had been created by Italian business leaders since 1922. The government offered recognition and support to these organizations in exchange for promises that they would manipulate prices in accordance with government priorities.
A number of mixed entities were formed, called instituti or enti nazionali, whose purpose it was to bring together representatives of the government and of the major businesses. These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business. The government considered this arrangement to be a success, and Italian Fascists soon began to pride themselves on this outcome, saying they had survived the Great Depression without infringing on private property. In 1934, the Fascist Minister of Agriculture said: "While nearly everywhere else private property was bearing the major burdens and suffering from the hardest blows of the depression, in Italy, thanks to the actions of this Fascist government, private property not only has been saved, but has also been strengthened."
This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
. From 1934 onwards, believing that Italy could have avoided the Great Depression if it had not been linked to international markets, Benito Mussolini insisted that autarky
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
should be one of the primary goals of his government's economic policy. To this end, the Fascists began to impose significant tariffs and other trade barriers. In 1935, Mussolini boasted that three-quarters of Italian businesses relied on the government.
Various banking and industrial companies were financially supported by the state. One of Mussolini's first act was indeed to fund the metallurgical trust Ansaldo
Gio. Ansaldo & C.
Ansaldo was one of Italy's oldest and most important engineering companies, existing for 140 years from 1853 to 1993.-From foundation to World War I:...
to the height of 400 millions Liras. Following the deflation crisis which started in 1926, banks such as the Banco di Roma, the Banco di Napoli or the Banco di Sicilia were also assisted by the state. In 1933, Mussolini created the Istituto per la Ricostruzione Industriale
Istituto per la Ricostruzione Industriale
The Istituto per la Ricostruzione Industriale was an Italian public company set up by the fascist government in 1933 to combat the effects of the global depression on the Italian economy...
(IRI) with the special aim of rescuing floundering companies. By 1939 the IRI controlled 20% of the Italian industry through government-linked companies (GLCs), including 75% of pig iron production
Pig iron
Pig iron is the intermediate product of smelting iron ore with a high-carbon fuel such as coke, usually with limestone as a flux. Charcoal and anthracite have also been used as fuel...
and 90% of the shipbuilding
Shipbuilding
Shipbuilding is the construction of ships and floating vessels. It normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation that traces its roots to before recorded history.Shipbuilding and ship repairs, both...
industry.
Mussolini also adopted a Keynesian policy of government spending on public works to stimulate the economy. Between 1929 and 1934, public works spending tripled to overtake defense spending as the largest item of government expenditure.
In 1935, following the Italian invasion of Ethiopia
Ethiopia
Ethiopia , officially known as the Federal Democratic Republic of Ethiopia, is a country located in the Horn of Africa. It is the second-most populous nation in Africa, with over 82 million inhabitants, and the tenth-largest by area, occupying 1,100,000 km2...
, the League of Nations
League of Nations
The League of Nations was an intergovernmental organization founded as a result of the Paris Peace Conference that ended the First World War. It was the first permanent international organization whose principal mission was to maintain world peace...
imposed trade sanctions on Italy. This forced Italy to achieve autarky immediately, and strengthened Mussolini's belief that economic self-sufficiency was vital to national security. The sanctions did not have their intended effects, because the Italian government had already begun restricting trade and preparing for autarky. In particular, Italy imposed a severe ban on most imports, and the government sought to persuade consumers to buy Italian-made products. For instance, it launched the slogan "Preferite il Prodotto Italiano" (Buy Italian). In May 1935, the government compelled individuals and businesses to turn over all foreign issued securities to the Bank of Italy (Banca d'Italia
Banca d'Italia
Banca d'Italia is the central bank of Italy and part of the European System of Central Banks. It is located in Palazzo Koch, Roma, via Nazionale...
). On July 15, 1936, the economic sanctions on Italy were lifted, but the Fascists continued to insist on economic isolation.
Throughout the 1930s, the Italian economy maintained the corporatist model that had been established during the Great Depression. At the same time, however, Mussolini had growing ambitions of extending Italy's foreign influence through both diplomacy and military intervention. After the invasion of Ethiopia, Italy began supplying both troops and equipment to the Spanish nationalists under General Francisco Franco
Francisco Franco
Francisco Franco y Bahamonde was a Spanish general, dictator and head of state of Spain from October 1936 , and de facto regent of the nominally restored Kingdom of Spain from 1947 until his death in November, 1975...
, who were fighting in the Spanish Civil War
Spanish Civil War
The Spanish Civil WarAlso known as The Crusade among Nationalists, the Fourth Carlist War among Carlists, and The Rebellion or Uprising among Republicans. was a major conflict fought in Spain from 17 July 1936 to 1 April 1939...
against a leftist government. These foreign interventions required increased military spending, and the Italian economy became increasingly subordinated to the needs of its armed forces. By 1939, Italy had the highest percentage of state-owned enterprises after the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
.
Finally, Italy's involvement in World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
as a member of the Axis powers
Axis Powers
The Axis powers , also known as the Axis alliance, Axis nations, Axis countries, or just the Axis, was an alignment of great powers during the mid-20th century that fought World War II against the Allies. It began in 1936 with treaties of friendship between Germany and Italy and between Germany and...
required the establishment of a war economy
War economy
War economy is the term used to describe the contingencies undertaken by the modern state to mobilise its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilising and allocating resources to sustain the violence".Many states increase the degree of...
. This put severe strain on the corporatist model, since the war quickly started going badly for Italy and it became difficult for the government to persuade business leaders to finance what they saw as a military disaster. The Allied invasion of Italy
Allied invasion of Italy
The Allied invasion of Italy was the Allied landing on mainland Italy on September 3, 1943, by General Harold Alexander's 15th Army Group during the Second World War. The operation followed the successful invasion of Sicily during the Italian Campaign...
in 1943 caused the Italian political structure - and the economy - to rapidly collapse. The Allies, on the one hand, and the Germans on the other, took over the administration of the areas of Italy under their control. By the end of the war, the Italian economy had been all but destroyed; per capita income in 1944 was at its lowest point since the beginning of the 20th century.
Political economy of Nazi Germany
Adolf HitlerAdolf Hitler
Adolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...
regarded economic issues as relatively unimportant. In 1922, Hitler proclaimed that "world history teaches us that no people has become great through its economy but that a people can very well perish thereby", and later concluded that "the economy is something of secondary importance". Hitler and the Nazis held a very strong idealist
Idealism
In philosophy, idealism is the family of views which assert that reality, or reality as we can know it, is fundamentally mental, mentally constructed, or otherwise immaterial. Epistemologically, idealism manifests as a skepticism about the possibility of knowing any mind-independent thing...
conception of history, which held that human events are guided by small numbers of exceptional individuals following a higher ideal. They believed that all economic concerns, being purely material, were unworthy of their consideration. Hitler went as far as to blame all previous German governments since Bismarck
Otto von Bismarck
Otto Eduard Leopold, Prince of Bismarck, Duke of Lauenburg , simply known as Otto von Bismarck, was a Prussian-German statesman whose actions unified Germany, made it a major player in world affairs, and created a balance of power that kept Europe at peace after 1871.As Minister President of...
of having "subjugated the nation to materialism" by relying more on peaceful economic development instead of expansion through war.
For these reasons, the Nazis never had a clearly defined economic programme. The original "Twenty-Five Point Programme
National Socialist Program
The National Socialist Programme , was first, the political program of the German National Socialist Party in 1918, and later, in the 1920s, of the National Socialist German Workers' Party headed by Adolf...
" of the party, adopted in 1920, listed several economic demands (including "the abolition of all incomes unearned by work," "the ruthless confiscation of all war profits," "the nationalization of all businesses which have been formed into corporations," "profit-sharing in large enterprises," "extensive development of insurance for old-age," and "land reform suitable to our national requirements"), but the degree to which the Nazis supported this programme in later years has been questioned. Several attempts were made in the 1920s to change some of the program or replace it entirely. For instance, in 1924, Gottfried Feder
Gottfried Feder
Gottfried Feder was an economist and one of the early key members of the Nazi party. He was their economic theoretician. Initially, it was his lecture in 1919 that drew Hitler into the party.- Biography :...
proposed a new 39-point program that kept some of the old planks, replaced others and added many completely new ones.
Hitler refused to allow any discussion of the party programme after 1925, ostensibly on the grounds that no discussion was necessary because the programme was "inviolable" and did not need any changes. At the same time, however, Hitler never voiced public support for the programme and many historians argue that he was in fact privately opposed to it. Hitler did not mention any of the planks of the programme in his book, Mein Kampf
Mein Kampf
Mein Kampf is a book written by Nazi leader Adolf Hitler. It combines elements of autobiography with an exposition of Hitler's political ideology. Volume 1 of Mein Kampf was published in 1925 and Volume 2 in 1926...
, and only talked about it in passing as "the so-called programme of the movement".
Hitler's own views on economics, beyond his belief that the economy was of secondary importance, are a matter of debate. On the one hand, he proclaimed in one of his speeches that "we are socialists, we are enemies of today's capitalistic economic system", but he was clear to point out that his interpretation of socialism "has nothing to do with Marxian Socialism," saying that "Marxism is anti-property; true Socialism is not." At a later time, Hitler said: "Socialism! That is an unfortunate word altogether... What does socialism really mean? If people have something to eat and their pleasures, then they have their socialism."
He was also quoted as saying: "I had only to develop logically what social democracy failed.... National Socialism is what Marxism might have been if it could have broken its absurd ties with a democratic order.... Why need we trouble to socialize banks and factories? We socialize human beings...." In private, Hitler also said that "I absolutely insist on protecting private property... we must encourage private initiative". On yet another occasion he qualified that statement by saying that the government should have the power to regulate the use of private property for the good of the nation. Hitler clearly believed that the lack of a precise economic programme was one of the Nazi Party's strengths, saying: "The basic feature of our economic theory is that we have no theory at all."
Hitler's political beliefs
Hitler's political beliefs
Historians and biographers note some difficulty in identifying Adolf Hitler's political views. His writings and methods were often adapted to need and circumstance although anti-Semitism, anti-capitalism, anti-communism, anti-parliamentarianism, German expansionism, belief in the superiority of an...
drew heavily upon Social Darwinism
Social Darwinism
Social Darwinism is a term commonly used for theories of society that emerged in England and the United States in the 1870s, seeking to apply the principles of Darwinian evolution to sociology and politics...
- the view that natural selection
Natural selection
Natural selection is the nonrandom process by which biologic traits become either more or less common in a population as a function of differential reproduction of their bearers. It is a key mechanism of evolution....
applies as much to human society as it does to biological organisms. Hitler believed that history was shaped by a violent struggle between nation
Nation
A nation may refer to a community of people who share a common language, culture, ethnicity, descent, and/or history. In this definition, a nation has no physical borders. However, it can also refer to people who share a common territory and government irrespective of their ethnic make-up...
s and races, and that a nation needed to be united under a strong, centralized state led by an heroic leader in order to succeed in this struggle and that individuals within a nation battled with each other for survival, and that such ruthless competition was good for the health of the nation, because it promoted "superior individuals" to higher positions in society.
Pre-war economy: 1933-1939
Before World War II, the Nazis placed non-Nazi Party professionals in charge of economic policy. Hitler appointed Hjalmar SchachtHjalmar Schacht
Dr. Hjalmar Horace Greeley Schacht was a German economist, banker, liberal politician, and co-founder of the German Democratic Party. He served as the Currency Commissioner and President of the Reichsbank under the Weimar Republic...
, a former member of the German Democratic Party, as Chairman of the Reichsbank
Reichsbank
The Reichsbank was the central bank of Germany from 1876 until 1945. It was founded on 1 January 1876 . The Reichsbank was a privately owned central bank of Prussia, under close control by the Reich government. Its first president was Hermann von Dechend...
in 1933, and minister of economics in 1934. At first, Schacht continued the economic policies introduced by the government of Kurt von Schleicher
Kurt von Schleicher
Kurt von Schleicher was a German general and the last Chancellor of Germany during the era of the Weimar Republic. Seventeen months after his resignation, he was assassinated by order of his successor, Adolf Hitler, in the Night of the Long Knives....
in 1932 to combat the effects of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
. These policies were mostly Keynesian, relying on large public works
Public works
Public works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...
programs supported by deficit spending
Deficit spending
Deficit spending is the amount by which a government, private company, or individual's spending exceeds income over a particular period of time, also called simply "deficit," or "budget deficit," the opposite of budget surplus....
- such as the construction of the Autobahn - to stimulate the economy and reduce unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
(which stood at 30% in early 1933). There was a major reduction in unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
over the following years, while price controls prevented the recurrence of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
.
The Nazis outlawed trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s and banned strikes
Strike action
Strike action, also called labour strike, on strike, greve , or simply strike, is a work stoppage caused by the mass refusal of employees to work. A strike usually takes place in response to employee grievances. Strikes became important during the industrial revolution, when mass labour became...
. They also directed Schacht to place more emphasis on military production and rearmament. After the Nazi takeover in 1933, Germany slowly began to recover from the Great Depression. Several economists, such as Michal Kalecki
Michal Kalecki
Michał Kalecki was a Polish economist who specialized in macroeconomics of a broadly-defined Keynesian sort...
, have seen the German recovery as an example of military Keynesianism
Military Keynesianism
Military Keynesianism is the accusation that John Maynard Keynes advocated government economic policy in which the government devotes large amounts of spending to the military in an effort to increase economic growth. In fact, the English economist John Maynard Keynes advocated that government...
. However, others have noted that the bulk of the German military buildup occurred after 1936 when the economic recovery was well underway.
In June 1933, the Reinhardt Program was introduced. It was an extensive infrastructure development project that combined indirect incentives, such as tax reductions, with direct public investment in waterways, railroads and highways. The Reinhardt Program was followed by other similar initiatives, with the result that, between 1933 and 1936, the German construction industry was greatly expanded. In 1933, only 666,000 Germans worked in construction, and by 1936, the number had increased to 2,000,000. In particular, road construction was expanding at a very rapid pace. This was part of Hitler's war preparations: Germany needed a state-of-the-art highway system in order to be able to move troops and materials quickly. As a side effect, cars and other forms of motorized transport became increasingly attractive to the population. Therefore, the German car industry also experienced a boom in the 1930s.
In 1936, military spending in Germany exceeded 10% of GNP (higher than any other European country at the time). Military investment also exceeded civilian investment from 1936 onwards. Armaments dominated government expenditures on goods and services. That year also represented a turning point for German trade policy. World prices for raw materials (which constituted the bulk of German imports) were on the rise. At the same time, world prices for manufactured goods (Germany's chief exports) were falling. The result was that Germany found it increasingly difficult to maintain a balance of payments. A large trade deficit seemed almost inevitable. But Hitler found this prospect unacceptable. Thus Germany, following Italy's lead, began to move away from partially free trade in the direction of economic self-sufficiency.
Unlike Italy, however, Germany did not strive to achieve full autarky
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
. Hitler was aware of the fact that Germany lacked reserves of raw materials, and full autarky was therefore impossible. Thus he chose a different approach. The Nazi government tried to limit the number of its trade partners, and, when possible, only trade with countries within the German sphere of influence. A number of bilateral trade agreements were signed between Germany and other European countries (mostly countries located in Southern and South-Eastern Europe) during the 1930s. The German government strongly encouraged trade with these countries but strongly discouraged trade with any others.
By the late 1930s, the aims of German trade policy were to use economic and political power to make the countries of Southern Europe and the Balkans dependent on Germany. The German economy would draw its raw materials from that region, and the countries in question would receive German manufactured goods in exchange. Already in 1938, Yugoslavia, Hungary, Romania, Bulgaria and Greece transacted 50% of all their foreign trade with Germany. Throughout the 1930s, German businesses were encouraged to form cartels, monopolies and oligopolies, whose interests were then protected by the state. In his book, Big Business in the Third Reich, Arthur Schweitzer states:
In the same book, Schweitzer details the triangular power structure that existed between the Nazi party, big business and the generals in 1936. Within a few years of Hitler's accession, "middle-class socialism" had been defeated, collective bargaining had been banned and unions had been outlawed. Large companies were favored over small businesses. Shortly after Hitler became chancellor, Germany refused to pay its reparation payments as was mandated in the Versailles Treaty. It also diverted large sums of money to rearmament, which violated that treaty. This had the support of the generals and the business community, since their profits were guaranteed on these orders.
Under Hjalmar Schacht, a policy was introduced whereby certain nations who traded with Germany (such as the United States) had to deal with special banks. Foreign currency was deposited in these institutions and Americans were paid for their goods (especially raw materials) in scrips that could only be redeemed for German goods in kind. Soon these scrips declined in value, as they were not truly fungible. Many were used by travellers to Germany in the mid 1930s. Schacht was able to build up foreign currency reserves for later use.
Big business developed an increasingly close partnership with the Nazi government as it became increasingly organized. Business leaders supported the government's political and military goals, and in exchange, the government pursued economic policies that maximized the profits of its business allies. Nazi Germany transferred public ownership and public services into the private sector, while other Western capitalist countries strove for increased state ownership of industry.
Wartime policies: 1939-1945
Initially, the outbreak of World War II did not bring about any large changes in the German economy. Germany had spent six years preparing for war, and a large portion of the economy was already devoted to military production. Unlike most other governments, the Nazis did not increase direct taxes by any significant amount in order to fund the war. The top income tax rate in 1941 was 13.7% in Germany as opposed to 23.7% in Great Britain.During the war, as Germany acquired new territories (either by direct annexation or by installing puppet governments in defeated countries), these new territories were forced to sell raw materials and agricultural products to German buyers at extremely low prices. Hitler's policy of lebensraum
Lebensraum
was one of the major political ideas of Adolf Hitler, and an important component of Nazi ideology. It served as the motivation for the expansionist policies of Nazi Germany, aiming to provide extra space for the growth of the German population, for a Greater Germany...
strongly emphasized the conquest of new lands in the East, and the exploitation of these lands to provide cheap goods to Germany. In practice, however, the intensity of the fighting on the Eastern Front and the Soviet scorched earth
Scorched earth
A scorched earth policy is a military strategy or operational method which involves destroying anything that might be useful to the enemy while advancing through or withdrawing from an area...
policy meant that the Germans found little they could use. On the other hand, a large quantity of goods flowed into Germany from conquered lands in the West. For example, two-thirds of all French trains in 1941 were used to carry goods to Germany. Norway lost 20% of its national income in 1940 and 40% in 1943.
Even before the war, Nazi Germany maintained a supply of slave labour. This practice started from the early days of labour camps of "undesirables" , such as the homeless, homosexual and criminals as well as political dissident
Dissident
A dissident, broadly defined, is a person who actively challenges an established doctrine, policy, or institution. When dissidents unite for a common cause they often effect a dissident movement....
s, communists
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
, Jews, and anyone that the regime wanted out of the way. As the war progressed, the use of slave labour experienced massive growth. Prisoners of war
Prisoner of war
A prisoner of war or enemy prisoner of war is a person, whether civilian or combatant, who is held in custody by an enemy power during or immediately after an armed conflict...
and civilian "undesirables" were brought in from occupied territories. Hundreds of thousands (perhaps millions) of Jews, Slavs
Slavic peoples
The Slavic people are an Indo-European panethnicity living in Eastern Europe, Southeast Europe, North Asia and Central Asia. The term Slavic represents a broad ethno-linguistic group of people, who speak languages belonging to the Slavic language family and share, to varying degrees, certain...
and other conquered peoples were used as slave labourers by German corporations such as Thyssen
Fritz Thyssen
Friedrich "Fritz" Thyssen was a German businessman born into one of Germany's leading industrial families.-Youth:Thyssen was born in Mülheim in the Ruhr area...
, Krupp
Krupp
The Krupp family , a prominent 400-year-old German dynasty from Essen, have become famous for their steel production and for their manufacture of ammunition and armaments. The family business, known as Friedrich Krupp AG Hoesch-Krupp, was the largest company in Europe at the beginning of the 20th...
, IG Farben
IG Farben
I.G. Farbenindustrie AG was a German chemical industry conglomerate. Its name is taken from Interessen-Gemeinschaft Farbenindustrie AG . The company was formed in 1925 from a number of major companies that had been working together closely since World War I...
and even Fordwerke - a subsidiary of the Ford Motor Company
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
. By 1944, slave labour made up one quarter of Germany's entire work force, and the majority of German factories had a contingent of prisoners. The Nazis also had plans for the deportation and enslavement of Britain's adult male population in the event of a successful invasion
Operation Sealion
Operation Sea Lion was Germany's plan to invade the United Kingdom during the Second World War, beginning in 1940. To have had any chance of success, however, the operation would have required air and naval supremacy over the English Channel...
.
The proportion of military spending in the German economy began growing rapidly after 1942, as the Nazi government was forced to dedicate more and more of the country's economic resources to fighting a losing war. Civilian factories were converted to military use and placed under military administration. By late 1944, almost the entire German economy was dedicated to military production. At the same time, Allied bombings were destroying German factories and cities at a rapid pace, leading to the final collapse of the German war economy in 1945.
Political economy of Franco's Spain
Francisco FrancoFrancisco Franco
Francisco Franco y Bahamonde was a Spanish general, dictator and head of state of Spain from October 1936 , and de facto regent of the nominally restored Kingdom of Spain from 1947 until his death in November, 1975...
, dictator of Spain from the Spanish Civil War
Spanish Civil War
The Spanish Civil WarAlso known as The Crusade among Nationalists, the Fourth Carlist War among Carlists, and The Rebellion or Uprising among Republicans. was a major conflict fought in Spain from 17 July 1936 to 1 April 1939...
in the 1930s until his death in 1975, based his economic policies on the theories of national syndicalism
National syndicalism
National syndicalism is a nationalist variant of syndicalism.- Founding of national syndicalism in France :National syndicalism was founded in France by the fusion of Maurrassian integral nationalism with Sorelian syndicalism. Interest in Sorelian thought arose in the French political right,...
as expounded by the Falange
Falange
The Spanish Phalanx of the Assemblies of the National Syndicalist Offensive , known simply as the Falange, is the name assigned to several political movements and parties dating from the 1930s, most particularly the original fascist movement in Spain. The word means phalanx formation in Spanish....
(Spanish
Spanish language
Spanish , also known as Castilian , is a Romance language in the Ibero-Romance group that evolved from several languages and dialects in central-northern Iberia around the 9th century and gradually spread with the expansion of the Kingdom of Castile into central and southern Iberia during the...
for "phalanx"), the Spanish Fascist
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
party founded in 1933 by José Antonio Primo de Rivera
José Antonio Primo de Rivera
José Antonio Primo de Rivera y Sáenz de Heredia, 1st Duke of Primo de Rivera, 3rd Marquis of Estella , was a Spanish lawyer, nobleman, politician, and founder of the Falange Española...
, which was one of Franco's chief supporters during his bid for power.
Political economy of the United States
Today many similarities are seen in the growth of the United States and the military industrial complex. An expanding military and defense budget support corporate private interests with multi-billion dollar contracts. While politicians preach about capitalism, they prefer to privatize the gains/profits and socialize the loss to its citizen base, the taxpayers. The theory of trickle down economics in the United States, keeps the separation between the strong and the weak by supplying the top individuals with the money supply and leaving the poor with little resources. Government contracts are given to powerful corporations, while the wealth in the country is held by the elite, who control the majority of the economy. They hold control over the banks, the media, the ownership of business, the money supply, and the government. While the U.S calls itself a democracy, it gives little power to the actual population base and is controlled by the top elite. The democratic policies of the U.S. only appear to hold true in small settings, and in more localized demographic areas.Protectionism and syndicalism
During and after the Spanish Civil War, Franco and the Falange created a corporativeCorporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
system based on the Italian model. Economic liberalism was replaced with economic intervention according to the wishes of the corporations, which also set prices and wages. Combined with autarky
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
, and in the absence of Marshall Plan
Marshall Plan
The Marshall Plan was the large-scale American program to aid Europe where the United States gave monetary support to help rebuild European economies after the end of World War II in order to combat the spread of Soviet communism. The plan was in operation for four years beginning in April 1948...
aid after the Second World War
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, Spain’s post-war economic growth stagnated. The Spanish corporative system was less successful than the Italian experience. At one point, the Spanish farmers' corporation created a massive bread shortage by setting the price too low. As a result, bread production was abandoned in favour of other, more profitable goods. Although the aim of this policy was to make bread accessible to the poorest among the population, the opposite occurred, and a black market emerged.
As in Italy, wages were set by the state in negotiations between officially recognized workers' syndicates and employers' organizations, with the state as mediator. Prior to the Franco regime, workers' groups had aligned with the Communists
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
, anarchists
Anarchism
Anarchism is generally defined as the political philosophy which holds the state to be undesirable, unnecessary, and harmful, or alternatively as opposing authority in the conduct of human relations...
or other republican
Second Spanish Republic
The Second Spanish Republic was the government of Spain between April 14 1931, and its destruction by a military rebellion, led by General Francisco Franco....
forces. Franco's regime, however, tended to favour the interests of large businesses, despite its syndicalist rhetoric. In response, workers created illegal syndicates and organized strikes, which usually were repressed brutally by Franco's police state.
The Popular Front
Popular Front (Spain)
The Popular Front in Spain's Second Republic was an electoral coalition and pact signed in January 1936 by various left-wing political organisations, instigated by Manuel Azaña for the purpose of contesting that year's election....
of the Spanish Republic
Second Spanish Republic
The Second Spanish Republic was the government of Spain between April 14 1931, and its destruction by a military rebellion, led by General Francisco Franco....
had begun a land redistribution program, forcing wealthy landowners to sell some of their land to the state, which in turn was given to impoverished tenant farmer
Tenant farmer
A tenant farmer is one who resides on and farms land owned by a landlord. Tenant farming is an agricultural production system in which landowners contribute their land and often a measure of operating capital and management; while tenant farmers contribute their labor along with at times varying...
s. After the Spanish Civil War, the original landowners had their land returned. The primary focus of the Falange, however, was on the rebuilding of urban centers, whilst providing only limited support to the countryside.
Liberalization and Opus Dei
In 1954, Franco abandoned the corporative system in favour of free-market reforms implemented by economic technocrats. Many of these technocrats were members of Opus DeiOpus Dei
Opus Dei, formally known as The Prelature of the Holy Cross and Opus Dei , is an organization of the Catholic Church that teaches that everyone is called to holiness and that ordinary life is a path to sanctity. The majority of its membership are lay people, with secular priests under the...
, a Roman Catholic lay group to which Franco had given powerful positions within the Ministry of Finance and Economics. The reforms of the 1950s were a huge success, and Spain experienced a period of rapid economic growth known as the "Spanish Miracle
Spanish miracle
The Spanish miracle was the name given to a broadly based economic boom in Spain from 1959 to 1974. The international oil and stagflation crises of the 1970s ended the boom.- The pre-boom situation :...
", continuing until Franco's death in 1975. During this period, tourism became an important part of the Spanish economy. Although the corporatist organs and rhetoric from the earlier years of the Franco regime were maintained, they now played a secondary role. Spain's economy was further liberalized by the Spanish transition to democracy
Spanish transition to democracy
The Spanish transition to democracy was the era when Spain moved from the dictatorship of Francisco Franco to a liberal democratic state. The transition is usually said to have begun with Franco’s death on 20 November 1975, while its completion has been variously said to be marked by the Spanish...
following Franco's death.
See also
- DirigismeDirigismeDirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
- Economic nationalismEconomic nationalismEconomic nationalism is a term used to describe policies which emphasize domestic control of the economy, labor and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. It opposes globalization in many cases, or at...
- Fascism and ideologyFascism and ideologyFascism and ideology is the subject of numerous debates. The position of fascism on the political spectrum is a point of contention.-Ideological origins:...
- FascismFascismFascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
- CorporatismCorporatismCorporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
- Hamiltonian economic programHamiltonian economic programThe Hamiltonian economic program was the set of measures that were proposed by American Founding Father and 1st Secretary of the Treasury Alexander Hamilton in three notable reports and implemented by Congress during George Washington's first administration....
- MercantilismMercantilismMercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
- ProtectionismProtectionismProtectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
- StatismStatismStatism is a term usually describing a political philosophy, whether of the right or the left, that emphasises the role of the state in politics or supports the use of the state to achieve economic, military or social goals...
- War Corporatism
- War economyWar economyWar economy is the term used to describe the contingencies undertaken by the modern state to mobilise its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilising and allocating resources to sustain the violence".Many states increase the degree of...
- Military-industrial complexMilitary-industrial complexMilitary–industrial complex , or Military–industrial-congressional complex is a concept commonly used to refer to policy and monetary relationships between legislators, national armed forces, and the industrial sector that supports them...
- DistributismDistributismDistributism is a third-way economic philosophy formulated by such Catholic thinkers as G. K...
External links
- The Role of Private Property in the Nazi Economy: The Case of Industry (pdf) by Christoph Buchheim and Jonas Scherner
- Economic Fascism by Thomas DiLorenzo
- The ‘Political Economy of Fascism’: Myth or Reality: or Myth and Reality? by David Baker [Now offline, but edited and published under this title in New Political Economy, Volume 11, Issue 2 June 2006 , pages 227 – 250.]
- Wiesen, S. Jonathan German Industry and the Third Reich Dimensions: A Journal of Holocaust Studies Vol. 13, No. 2 http://www.adl.org/Braun/dim_13_2_forgetting.asp
- German Economic Policy by Wilhelm Baur. An official Nazi pamphlet