The Pragmatic Economics of Fascism

Economic systems are often the backbone of political ideologies and are never all about money. They shape how power is organised, who wins and who is left out.

Fascism is often thought of as uniquely Mussolini’s creation, but it can be defined as any

ultranationalist authoritarian system that rejects individual rights in favour of a “national

identity”, where the economy is controlled not by abolishing private property, but by

surrendering it to the regime’s will. As such, this term can not only be applied to Italy under

Mussolini, but also to Nazi Germany and Portugal during Estado Novo.

Communism, other than being known for its horrific consequences when tried is also widely

known as an economic theory drawn by Marx and Engels in Das Kapital and can usually be

defined by catchy phrases as: “Moneyless, classless society”, “Abolishment of the private means of production” or even “The dictatorship of the proletariat”.

There are no such slogans for the fascist economic system, with terms like corporatism or state-directed capitalism being widely used as definitions. These are certainly not wrong, but I will go further than that and argue why fascism follows The Economics of Pragmatism.

Fascists, despite not having a “bible” such as Das Kapital, do seem to follow a playbook. The

suppression of worker unions is a must, as they act as an organized opposition to the regime,

capable of mobilizing millions and paralyzing industries. By dismantling unions, the regime

ensures faster mobilization of workers without the fear of disruptions or wage demands, while

also creating an artificial image of unity where workers feel alone in their discontent.

In 1933, weeks after reaching power, the Nazis arrested labour leaders, outlawed strikes and

forced workers into the Deutsche Arbeitsfront, a monopolist state-led union that made sure

workers had no real bargaining power. As a result, from 1933-1939 wages remained frozen,

while working hours increased, so real wages fell even as GDP was growing through

rearmament.

The reorganisation of society into state-controlled corporations that brought together workers

and employers under official control is the fascist feature of corporatism. The success of this

mechanism depended on the relationship between the leader and the large industrialists, who

were usually appeased by being presented with “calmer” workers at lower wages. Hand in hand with corporatism was the strive for autarky, complete national self-sufficiency. Regimes claimed that if they were able to control the labour markets and production, they would be able to shield the nation from the outside instability. The strive for independence served as a

justification for waves of nationalisations by regimes that thrived on the hate of socialists and

praised private property, serving as the best example fascism’s pragmatic dimension.

In 1927, Mussolini signed corporatism into law with the Carta del Lavoro, which led to the

dissolution of unions, strikes being declared illegal and many disputes being moved to state

courts. In the same year, he revalued the national currency to increase national prestige, having to cut wages by more than 20% to make it work. This was done using the set-up corporatist system which left workers with no legal means to resist. Autarky meant heavy subsidies for wheat and import bans: output rose (5.5 to 7 million tons) but bread grew costlier and the policy was judged as a disaster. By 1939, through a series of nationalisations, the state directly controlled 20% of Italian Industry, making it the largest industrial owner in Europe outside the USSR.

The nationalistic character of fascism is always related to conflict and militarisation. This has

two effects, the increase of public debt and the lack of investment in human capital, a long-

term sentence for the country’s economic development. Whether it is in education, health, or

infrastructure, funds must be diverted from somewhere to fund the war effort.

Portugal’s dictator Salazar is still remembered by a somewhat nostalgic part of the population

as a “balanced budget “politician. To be accurate, he did have a crucial role in stabilizing the

currency and reducing deficits in the 1930’s as a finance minister. The previous description is

still, however, very ignorant of the impact he would have in the 36 years he led Portugal as a

dictator. The spending with the backward-looking attempt to keep a grasp on the colonial empire took up 40% of the budget, while growth lagged far behind the European Community. By 1970,1 in 4 adults was illiterate, compared to 1 in 10 in neighbouring Spain and only 1 in 100 in France. Infant mortality was almost double that of Spain and almost four times larger than that of France. GDP per capita was 56% of the European Community’s average, again showing how far behind neighbours we were.

These cases show that fascism and communism follow different logics. In communism,

economic theory shapes politics which in turn produces repression, whereas in fascism,

political power shapes economics as way to produce repression. It is with this logic that I look

to characterise fascism’s economic system as a purely pragmatic way of reaching political goals.