Economics of fascism

The economics of fascism refers to the economic policies implemented by fascist governments.

Historians and other scholars disagree on the question of whether a specifically fascist type of economic policy can be said to exist. Baker argues 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. Payne, Paxton, Sternhell, et al. argue that while fascist economies share some similarities, there is no distinctive form of fascist economic organization. Feldman and Mason argue that fascism is distinguished by an absence of coherent economic ideology and an absence of serious economic thinking. They state that the decisions taken by fascist leaders cannot be explained within a logical economic framework.

General characteristics of fascist economies

An inherent aspect of fascist economies was economic dirigisme, meaning an economy where the government exerts strong directive influence over investment while often subsidizing favorable companies, as opposed to having a merely regulatory role. In general, apart from the nationalizations of many industries, fascist economies were based on private individuals being allowed property and private initiative, but these were contingent upon service to the state.

In an effort to bring about a more productive corporate-worker state under revolutionary syndicalist principles of French Marxist Georges Sorel, fascism turned to economic collaboration of the classes, opposing class struggle. This newly revised approach, which was responding to the theoretical crisis of Marxism, sought to create a “productivist” posture where “a proletariat of producers” would be critical to the “conception of revolutionary politics” and social revolution. Since Italy’s economy was generally undeveloped with little industrialization, Fascists and revolutionary syndicalists, such as Angelo Oliviero Olivetti, argued that the Italian working class could not have the requisite numbers or consciousness “to make revolution.” They instead followed Karl Marx's admonition that a nation required “full maturation of capitalism as the precondition for socialist realization.” Under this interpretation, especially as expounded by Sergio Panunzio, a major theoretician of Italian Fascism, “Syndicalists were productivists, rather than distributionists.” Fascist intellectuals were determined to foster economic development in order for a syndicalist economy to “attain its productive maximum” that was identified as crucial to “socialist revolution.” Fascism, which historian Zeev Sternhell referred to as a “revision of Marxism” was a revolutionary movement that included an economic collectivity component in order to “fuse socialism with nationalism.”

Both National Socialist Germany and Fascist Italy enacted massive social welfare and public work programs, running up huge deficits and the national debt, which corresponded to Mussolini’s favorable impression of Keynesian economics as a “useful introduction to fascist economics.” Under Italian Fascism, the scope of spending for social welfare and assistance “compared favorably with the more advanced European nations and in some respect was more progressive.”

Fascism operated from a Social Darwinist view of human relations. The 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 unions and other organizations of the working class. Both the National Socialists of Germany and the Fascists of Italy nationalized all independent trade unions, as had Vladimir Lenin in Soviet Russia, along with banning strikes and lockouts. Under this labor policy, Italy and Germany enacted laws to make union membership compulsory for all workers. Mussolini 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. 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." That economic policy abruptly changed in Italy by 1934 when Mussolini “reiterated that capitalism, as an economic system, was no longer viable.” Falling back to his earlier revolutionary syndicalist roots, Mussolini proclaimed that the economy of Fascist Italy was to be “based not on individual profit but on collective interest.”

Nonetheless, not long after the creation of the Institute of Industrial Reconstruction (IRI) in 1933, Mussolini boasted about his large nationalization of Italy in a 1934 speech to his Chamber of Deputies that “Three-fourths of Italian economy, industrial and agricultural, is in the hands of the state." As Italy continued to nationalization its economy, the IRI “became the owner not only of the three most important Italian banks, which were clearly too big to fail, but also of the lion’s share of the Italian industries.”

During this period, Mussolini identified his economic policies with “state capitalism” and “state socialism,” the same terms Lenin had employed and supported in his 1921 New Economic Policy (NEP). Similar to subsequent components of fascist economics, Lenin described “state capitalism” along with his NEP policies in 1922 as an economic structure that was be anchored to “a free market and capitalism, both subject to state control” where socialized state enterprises were to operate on “a profit basis.” After the almost total economic collapse of the Soviet Union under War Communism, where “factories were at a standstill, mines and collieries were wrecked and flooded”, most national syndicalists in Fascist Italy came to the decision that productivity and not class conflict was a “critical condition for revolutionary struggle.” Mussolini’s policies have also been described as “economic dirigisme,” an economic system where the state has the power to direct economic production and allocation of resources.

By 1939, Fascist Italy attained the highest rate of state–ownership of an economy in the world other than the Soviet Union, where the Italian state “controlled over four-fifths of Italy’s shipping and shipbuilding, three-quarters of its pig iron production and almost half that of steel.”

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 free market 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 did exist, but that society should still be classless. Hitler wrote in Mein Kampf that "The National Socialist State recognizes no ‘classes’. But, under the political aspect, it recognizes only citizens with absolutely equal rights and equal obligations corresponding thereto." Although a Marxist in his early years who eventually returned to his more socialist roots under his Italian Social Republic by 1943, Mussolini appeared less concerned about social class, despite his policy of "Socialization". 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, supporting protectionism; 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. It also engaged in some privatization, but mostly between 1922 to 1925 that represented a coalition government headed by Mussolini.

Essential features of the economies of the fascist states

The concept of "state monopoly capitalism" (MMC) describes approximately the same phenomenon as the "dirigisme"—a policy of active intervention in the management of the economy of the state. Iván T. Berend, the author of "An Economic History of Twentieth-Century Europe" (Cambridge, 2006), said the economy of Nazi Germany possessed just these features: the government has a strong control action, effectively controlling the production and distribution of resources. On the whole, except in a few cases, nationalization of the economy of the fascist states developed on the basis of private property and of private initiative, but it was subordinated to the tasks of the state.

German nationalization did not shift into high gear until Hitler’s “Four Year Plan” was adopted in 1936, which provided for the rearmament of Germany that resulted in a war economy. By the early 1940s, over 500 companies in key German industries had been nationalized, mostly accomplished through the creation of the Reichswerke Hermann Göring in 1937. Multi-national industries in occupied territory were particularly targeted for state ownership, where the Reichswerke absorbed between approximately “50 – 60 per cent” of heavy industry in Czech and slightly less in Austria. Göring industrial empire was a major attempt towards “restricting private industrial capitalism and substituting a ‘völkisch’, state-run industrial economy.”

There was an effort by the National Socialists to impose the concept of Gleichschaltung upon Germany, which is defined as the totalitarian control and socioeconomic coordination over almost all aspects of society, where small business “had to be bullied” while “big business was bribed.” This völkisch movement of community control was expressed by a Nazi official in 1933, who proclaimed in Völkischer Beobachter: “The economy is a partial expression of the Volksgemeinschaft subordinate to the function of the state.”

As part of the relations between workers and employers, fascism was guided by the principles of social Darwinism: the strongest prosper, while the weaker are rooted out. In economic practice this meant on the one hand, protecting the interests of successful businessmen, and on the other the destruction of trade unions and other organizations of the working class and "the use of extreme violence to suppress the working class and all working people." As Gaetano Salvemini wrote in 1936, of the responsibility of taxpayers to private capitalist enterprises, the state thus covering failures of the capitalists' profits in private and public work. The fascist government approved pursuit of private profit and gave significant concessions, favoritism and subsidies to large corporations, requiring instead that all of their economic activities must serve the public interest or be confiscated.

An essential element of the economic doctrines of the Nazi party was the belief that the economic suffering of the exploited classes will fade into the past as soon as the nation completes its cultural and spiritual revival. The official anthem of the NSDAP, "Horst Wessel", promised that "the slavery would only last a little more" (German: Die Knechtschaft dauert nur mehr kurze Zeit). However, since the destruction of the issues of exploitation has long been staged in Germany, in particular, and German Social Democrats, on the level of ordinary members of the NSDAP there was not unanimity on this issue and often their views on economic policy were diametrically opposed. Upon their rise to power, the Nazis adapted this economic doctrine to political expediency. Fascist regimes that have lasted a long time (such as Italy under Mussolini) observed regular, sometimes substantial revisions of economic policy. In 1919, at a rally on the square in Milan Sepolkro San, Benito Mussolini said:

"We want to be aristocrats and democrats, conservatives and liberals, reactionaries and revolutionaries, legalists and antilegalists—depending on the circumstances of the time, place and situation."

Subsequently, the ideologues of fascism railed against the proletarian internationalism, and against the liberal capitalism, arguing that their views represent a third way (Italian terza via), a real alternative to both capitalism and free competition (laissez-faire), and the planned socialist economy (in their terminology—communism). The Nazis favored corporatism and class collaboration for assuming—as opposed to the Socialists—that the existence of inequality and the division of society into classes are a good thing. "Enciclopedia Italiana" in 1932, wrote in an article entitled "The Doctrine of Fascism": "Fascism is a necessary fixes, productive and beneficial inequality of men." In contrast, proponents of liberalism, the Nazis welcomed the participation of the government in resolving the interclass protovorechy.

Foreign economic policy of the fascist states was based on the need to achieve independence from foreign markets and foreign capital. By maintaining strict control over imports and the movement of funds between the country and abroad, the state resorted, in some cases, to a direct prohibition of certain foreign operations. However, the term "economic autarky" does not apply, as this term implies a complete closure of reproduction processes, eliminating not only imports but also exports; exports to Italy, for example, as a source of foreign currency were not refused. One of the most essential characteristics of the economy of fascist states was extremely high degree of militarization, with a large share of military items in the budget and the total product going to the military.

Political economy of Fascist Italy

Main article: Economy of Italy under fascism

The National Fascist Party 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 unions 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 cartels (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.

Political economy of Nazi Germany

Main article: Economy of Nazi Germany

Adolf Hitler 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 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." Nonetheless, the term that Hitler later wished he had used for his political party name was “social revolutionary,”which implied a more revolutionary socialist approach to bringing about socioeconomic change.

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 nations 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: 1933–39

Before World War II, the Nazis placed non-Nazi Party professionals in charge of economic policy. Hitler appointed Hjalmar Schacht, 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.

Germany’s National Socialist government spent large amounts of state revenues for a comprehensive social welfare system to combat the ill effects of the Great Depression, where Hitler repeatedly promised throughout his regime the “creation of a socially just state.” In 1933, Hitler ordered the National Socialist People's Welfare (NSV) chairman Erich Hilgenfeldt to “see to the disbanding of all private welfare institutions,” in an effort to socially engineer a classless society by selecting who was to receive social benefits. Under this state-operated welfare structure, Nazis administrators were able to mount an effort into the “cleansing of their cities of ‘asocials.’” Nonetheless, the NSV instituted expansive programs to address the socio-economic inequalities among most German citizens. Joseph Goebbels once remarked about the merits of Hitler’s welfare state in a 1944 editorial “Our Socialism,” where he professed: “We and we alone [the Nazis] have the best social welfare measures. Everything is done for the nation.”

The Nazis outlawed independent trade unions and banned strikes, creating the German Labor Front (DAF), which was one of the largest National Socialists organizations, comprising over 35,000 full-time employees by 1939. 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, although in May of 1933, Hitler’s regime defaulted unilaterally on Germany’s foreign debt along with a decree for sweeping capital controls that made it difficult to engage in foreign trade. 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:

Monopolistic price fixing became the rule in most industries, and cartels were no longer confined to the heavy or large-scale industries. [...] Cartels and quasi-cartels (whether of big business or small) set prices, engaged in limiting production, and agreed to divide markets and classify consumers in order to realize a monopoly profit.

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. Generally, National Socialists and Fascists were hostile to the business community and the profit motive. The Viennese-born economist Peter Drucker explained this hostility in his 1939 book The End of Economic Man, writing that “profits are so completely subordinated in Germany and Italy to requirements of a militarily conceived national interest and of full employment that the maintenance of the profit principle is purely theoretical.” One businessman in 1939 told of his experience in Nazi Germany where the business community “fear National Socialism as much as they did Communism in 1932” and that “these Nazi radicals think of nothing except ‘distributing the wealth.” He complained that when a businessman makes a “sale at a higher price” he could be “denounced as a ‘profiteer’ or ‘saboteur,’ followed by a prison sentence.” Examining the scope of Nazi Germany’s taxation structure, German historian Götz Aly discovered a high tax rate that was both confusing and almost confiscatory, especially during the war years. In 1942, a wine wholesaler and hotel owner in Berlin was levied not 40 percent of his firm’s profit, but its “annual turnover of 5.7 million reichmarks.” Götz Aly maintains that National Socialist administrator’s “aim was clearly to soak the rich and ‘neutralize big spenders,’” since they displayed “hostility towards the wealthy.”

Wartime policies: 1939–45

See also: Hunger Plan and Forced labor in Germany during World War II

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.

Starting with the Molotov-Ribbentrop Pact (Nazi-Soviet Pact) of August 1939, National Socialist Germany and Soviet Russia engaged in military and commercial trade where, by late 1939, “Russian deliveries of raw stuffs, especially grain and oil, to Germany were considerable.” The Soviet Union even agreed to pay freight charges for all such goods carried over the Russian railways. Moreover, Soviet Russia opened up their ports to German ships in the Arctic, Black Sea and the Pacific for imports of badly needed raw materials, due to the British blockade. Along with Nazi-Soviet trade, the Russian government provided refueling and repair facilities to German shipping, including for submarines. In the first year alone, Nazi Germany received “one million tons of cereals, half a million tons of wheat, 900,000 tons of oil, 100,000 tons of cotton, 500,000 tons of phosphates,” and at least one million tons of soybeans.

Desperate for more food and oil from Russia, Hitler ordered that deliveries of German war materials to their Soviet allies “should have priority even over that to the German armed forces”. Some of the Nazi-Soviet trade included machine tools for manufacturing munitions, the cruiser Luetzow, “plans of the Bismarck, heavy naval guns and other gear and some thirty of Germany’s latest warplanes, including the Messerschmitt fighters 109 and 110 and the Ju-88 dive bombers.” In addition, the Soviets received diesel engines, generators, turbines, locomotives, and “samples of German artillery, tanks, explosives, chemical-warfare equipment.”

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" (Template:Lang-de), such as the homeless, homosexual and criminals as well as political dissidents, 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 of Poles, 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.

Political economy of Franco's Spain

Francisco Franco, 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.

Protectionism and syndicalism

During and after the Spanish Civil War, Franco and the Falange created a corporative 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.

Prior to the Franco régime, 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 farmers. 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.

As in Italy, wages were set by the state in negotiations between officially recognized workers' syndicates and employers' organizations, with the state as mediator. During the Spanish Republic, 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.

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 Dei, 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.

See also

• Corporatism
• Dirigisme
• Economic nationalism
• Fascism and ideology
• Fascism
• Hamiltonian economic program
• Mercantilism
• Military-industrial complex
• Protectionism
• Statism
• War Corporatism
• War economy

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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 [4]
• German Economic Policy by Wilhelm Baur. An official Nazi pamphlet