Fascism and Keynesianism?

There is a tired and ignorant rhetorical trick of libertarians: to conflate Keynesianism with fascism, or the economics of fascism. There are two responses to this.

(1) First, the sleight of hand involved invoking fascism as a general system in this way is that (1) fascism is simply not the same thing as (2) a government with macroeconomic interventions. Fascism in general had these common characteristics, though not all regimes at all times:

(1) Authoritarianism and abolition of democracy;
(2) Use of violence and terror against perceived enemies in ways violating the rule of law;
(3) Extreme nationalism;
(4) Racism and racist oppression of certain minorities;
(5) Militarism.
(6) Sometimes (though not always) a higher degree of economic intervention than the regimes that preceded them.

The mixed economies after WWII have had “a higher degree of economic intervention than the regimes that preceded them,” but the belief that mixed economies are therefore “fascist” is lazy, unsound fallacious reasoning.

Libertarians rob the word “fascism” of meaning, insulting its victims, and failing to take account of the authoritarian, violent, militaristic nature of fascism and its history of war crimes and mass murder.

Calling for macroeconomic interventions to stabilise an economy is in no sense calling for fascism, nor can one claim that a modern Keynesian state is “fascist” merely on account of one trait: some degree of state intervention in the economy.

The fallacy involved here is arguably an insidious form of the fallacy of composition and hasty generalization, and it is easily illustrated. Augusto Pinochet would have called himself a supporter of the “free market” – and indeed he implemented a Friedmanite neoliberal program. Yet he ran Chile as a right wing military dictatorship. By using the same general type of contemptibly stupid libertarian illogic, we can now declare the following

(1) A communist state has nationalised industry;
(2) Augusto Pinochet’s Chile (1973–1990) had a nationalised industry called CODELCO (National Copper Corporation of Chile);
(3) Therefore Augusto Pinochet’s dictatorship was communist.

The error here is that something that is true of a part is not necessarily true of the whole: there is similarity between communism and Augusto Pinochet’s dictatorship in that both had at least one nationalized industry; but just because Augusto Pinochet’s regime had a nationalised copper company does not mean it was communist.

The charge that Keynesianism must be fascist, merely because both a Keynesian system and fascism have some degree of government economic intervention is just as illogical and unsound.

(2) Moreover, it is not even true that fascism had one, consistent universal economic system. There was diversity within fascist economics and at least two fascist states were essentially laissez faire on economics, as follows:

(1) Mussolini originally pursued standard neoclassical laissez faire policies:

“From 1922 to 1925, Mussolini’s regime pursued a laissez-faire economic policy under the liberal finance minister Alberto De Stefani. De Stefani reduced taxes, regulations, and trade restrictions and allowed businesses to compete with one another. But his opposition to protectionism and business subsidies alienated some industrial leaders, and De Stefani was eventually forced to resign.”
Sheldon Richman, “Fascism,” Concise Encyclopedia of Economics
http://www.econlib.org/library/Enc1/Fascism.html

(2) The Austro-fascism party of the Dollfuss and Schuschnigg regime in Austria pursued deflationary, neoclassical policies to a considerable extent:

“In tackling the economic crisis the Dollfuss-Schuschnigg dictatorship pursued harsh deflationary policies designed to balance the budget and stabilize the currency. The government’s program featured severe spending cuts, high interest rates, and frozen wages. ... In a sense the Christian Corporative regime demonstrated the viability of the Austrian state, but it did so at the cost of alienating a majority of the Austrian people. On the eve of Anschluss a third of the population was still out of work, while those fortunate enough to have jobs were bringing home paychecks considerably smaller than before the Great War.” (Bukey 2000: 17).

The laissez faire traits of Austro-fascism should came as no surprise when we realise that none other than Ludwig von Mises was an economic adviser of the Austro-fascist dictators.

Engelbert Dollfuss had been a member of the Austrian Christian Social Party, and became Chancellor of Austrian in 1932. In March 1933, Dollfuss took advantage of the political turmoil in the Austrian parliament, effectively abolished democracy, and established an authoritarian regime. While Dollfuss was an opponent of the Austrian branch of the Nazi party (the Austrian National Socialists or DNSAP), he banned other political parties and established his own peculiar fascist political alliance called the “Patriotic Front” (Vaterländische Front), which included the Christian Social Party and other nationalists and conservatives. Dollfuss was assassinated in July 25, 1934 by Austrian Nazis, but was succeeded by Kurt Schuschnigg, who was Chancellor from July 1934 to the Anschluss in March 1938.

Around March 1934, Mises moved to Geneva, Switzerland, where he taught at the Graduate Institute of International Studies. However, he continued to visit Austria in subsequent years, and still worked part time for the Vienna Chamber of Commerce (Hülsmann 2007: 684). Before 1934 Mises had become an adviser to Dollfuss (see Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997).

Even as late as autumn 1937 Mises considered returning to Austria to work for the Austrian Chamber of Commerce full time (Hülsmann 2007: 723), and only finally fled Austria permanently on one of his regular visits in March 1938 before the Nazi takeover. Hans-Hermann Hoppe, one of the Austrian apologists for Mises, tells us, quite shamelessly, that Mises was a close adviser of Dollfuss:

“Engelbert Dollfuss, the Austrian Chancellor who tried to prevent the Nazis from taking over Austria. During this period Mises was chief economist for the Austrian Chamber of Commerce. Before Dollfuss was murdered for his politics, Mises was one of his closest advisers.”
Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997
http://mises.org/freemarket_detail.aspx?control=137

Can you imagine what Austrians would say if Keynes had been “one of [the] ... closest advisers” of some fascist dictator?

But I will leave open the question of to what extent Mises was advising Dolfuss to undertake the actual polices he implemented.

But we can also quote from J. G. Hülsmann’s biography of Mises:

“Mises later said that it was the growing power of the Nazi party in Austria that prompted him to leave the country. With this remark, he did not refer to the government of Engelbert Dollfuss, which had reintroduced authoritarian corporatism into Austrian politics to resist the socialism of both the Marxist and the Nazi variety. Mises meant the Austrian branch of the National Socialist German Workers Party, which enjoyed strong backing from Berlin and fought a daily battle to conquer the streets of Vienna. Dollfuss’s authoritarian policies were in his view only a quick fix to safeguard Austria’s independence—unsuitable in the long run, especially if the general political mentality did not change” (Hülsmann 2007: 683–684).

Now if you think that fascism is a “quick fix” for your country, despite opposing it on other occasions and later in life, it is clear your attitude is ambiguous, at say the least.

If correct, then Mises saw Dollfuss’s fascism in much the same way as Mussolini’s fascism: as an “emergency makeshift.” This is completely consistent with Mises’s praise of Mussolini’s fascist regime in 1927 and fascism as a general movement in
Liberalism: A Socio-Economic Exposition (2nd edn; 1978 [1927] trans. R. Raico):

“So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error” (Mises 1978: 51).

A final point: there is absolutely no contradiction in saying that

(1) Mises in other places and later in life opposed fascism and
(2) here in Liberalism: A Socio-Economic Exposition (2nd edn; 1978 [1927] trans. R. Raico) heaped the most vile praise on Mussolini’s fascism.

And Mises wrote this in 1927, years after Mussolini took power in 1922, when the dictator had been using violence and coercion to maintain his rule, long after any threat from communism (real or imagined) had been dealt with.


MY POSTS ON MISES AND FASCISM

For further reading, see here:

“Mises on Fascism in 1927: An Embarrassment,” October 27, 2010.

“Keynes’s Opinion of Communism and Marxism,” August 22, 2011.

“Mises the Hypocrite: When Reality Trumps Praxeology,” March 8, 2011.

“Keynes’s Remarks in the German Edition of the General Theory,” June 7, 2011.

APPENDIX: FASCISM IN EUROPE
These are the major fascist regimes in Europe in the 1920s and 1930s:

(1) Italy under Mussolini from 1922.

(2) Austria under Dollfuss (who began ruling by decree in 1933).

(3) Spain under the Falange (formed in 1933), began fighting in 1936;

(4) Portugal under Antonio Salazar from 1933.

(5) Germany under the Nazi party. Hitler became Chancellor in 1933.

(6) Hungary under the Scythe Cross (formed 1931): in 1932 Gyula Gombos, a fascist, became Prime minister.

A full understanding of the economics of fascism would require a careful examination of the economics of all these fascist nations. As we have seen, at least two of them pursued laissez faire: Austria and Italy (at least in the early part of the regime).

BIBLIOGRAPHY

Bukey, Evan Burr. 2000. Hitler’s Austria: Popular Sentiment in the Nazi Era, 1938-1945, University of North Carolina Press.

Hoppe, Hans Hermann. 1997. “The Meaning of the Mises Papers,” Mises.org, April.
http://mises.org/freemarket_detail.aspx?control=137

Hülsmann, J. G. 2007. Mises: The Last Knight of Liberalism, Ludwig von Mises Institute, Auburn, Ala.

Mises, L. von, 1927. Liberalismus, G. Fischer, Jena.

Mises, L. von, 1978. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas.