Role of capitalism in Italy and Germany-

Historians and other scholars disagree on the question of whether a specifically fascist type of
economic policy can be said to exist. David 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 argue that while fascist
economies share some similarities, there is no distinctive form of fascist economic organization.
Gerald Feldman and Timothy 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.
Scholars argue that fascists had no economic ideology, but they did follow popular opinion, the
interests of their donors and the necessities of World War II. In general, fascist governments
exercised control over private property but they did not nationalize it. Scholars also noted that
big business developed an increasingly close partnership with the Italian Fascist and German
fascist governments. Business leaders supported the government's political and military goals.
In exchange, the government pursued economic policies that maximized the profits of its
business allies. While other Western capitalist countries strove for increased state ownership of
industry during the same period, Nazi Germany transferred public ownership and public services
into the private sector.] Fascist regimes have been described as being authoritarian or totalitarian
capitalist.
The first fascist movements arose in the last years of World War I. They were a form of radical
nationalism carrying a promise of national rebirth; they blamed liberalism, socialism, and
materialism for the decadence they perceived in society and culture, and they expressed an
appreciation for violence and the role of leadership and willpower in shaping society. One
significant fascist economic belief was that prosperity would naturally follow once the nation has
achieved a cultural and spiritual re-awakening. Different members of a fascist party would often
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.
Fascism rose to power by taking advantage of the political and economic climate of the 1920s
and 1930s, particularly the deep polarization of some European societies (such as the Kingdom
of Italy and Weimar Germany), which were democracies with elected parliaments dominated by
supporters of laissez-faire capitalism and Marxist socialism, whose intense opposition to each
other made it difficult for stable governments to be formed. Fascists used this situation as an
argument against democracy, which they viewed as ineffective and weak. ] Fascist regimes
generally came into existence in times of crisis, when economic elites, landowners and
business owners feared that a revolution or uprising was imminent. Fascists allied themselves
with the economic elites, promising to protect their social status and to suppress any potential
socialist revolution. In exchange, the elites were asked to subordinate their interests to a
broader nationalist project, thus fascist economic policies generally protect inequality and
privilege while also featuring an important role for state intervention in the economy.
Fascists opposed both international socialism and free-market capitalism, arguing that their
views represented a third position.] They claimed to provide a realistic economic alternative that
was neither laissez-faire capitalism nor communism. They favored corporatism and class
collaboration, believing that the existence of inequality and social hierarchy was beneficial
(contrary to the views of socialists), while also arguing that the state had a role in mediating
relations between classes (contrary to the views of liberal capitalists). An important aspect of
fascist economies was economic dirigism, meaning an economy where the government often
subsidizes favorable companies and exerts strong directive influence over investment, as
opposed to having a merely regulatory role. In general, fascist economies were based on
private property and private initiative, but these were contingent upon service to the state.
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. Stanley Payne argues that fascist movements defended the principle of private
property because they held it to be "inherent to the freedom and spontaneity of the individual
personality", but that they also aimed to eliminate the autonomy or in some cases the existence
of large-scale capitalism. Jurgen Kuczynski characterizes a fascist economy as a type of
"monopoly capitalism", which preserves the "fundamental traits of capitalist production", such as
the fact that production is carried out for the market by privately owned firms which employ
workers for a certain wage. He argues that fascism is "nothing but a particular form of
government within capitalist society" which instead does feature a major role for the state as
was also the case in some early capitalist societies of previous centuries.
Fascism operated from a social Darwinist view of human relations that idolizes the seemingly
strongest individuals and represses the weaker individuals. In terms of economic practice, this
meant promoting the interests of successful businessmen while destroying trade unions and other
organizations of the proletarian.] Fascist governments declared the trade union movement
illegal and replaced it with labor organizations under the direct control of the government,
which ensured that workers could not undertake any effective economic action.
Membership in these labor organizations was compulsory, their leaders were appointed by the
ruling party rather than elected by the members] and they were presented as a new type of unions
which would serve to harmonize the interests of workers and businesses. However, in practice
they primarily served the interests of major business owners, who were able to lobby the ruling
party to appoint the leaders they desired. In order to maintain and increase the profits of industry,
fascist states eliminated the possibility of mass protest and then cut wages either directly or
indirectly. Strikes were strictly banned and prison sentences could be given to employees who
stopped working as a group.
Fascist governments in both Italy and Germany privatized state-owned enterprises at certain
times. These privatizations were carried out in the early stages of both regimes (1922–1925 for
Italy and 1934–1937 for Germany) and represented a reversal of the policies of the democratic
governments which had preceded them.
The democratic governments had brought a number of industries under state ownership and the
fascists decided to return them to private ownership. In doing so, they went against the
mainstream economic trends of their time, when most Western governments were increasing
state ownership. Fascist privatization policies were driven by a desire to secure the support of
wealthy industrialists as well as by the need to increase government revenues in order to balance
budgets. Significantly, fascist governments were among the first to undertake large-scale
privatizations in modern times.
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, was a major goal of most fascist governments. Furthermore, fascism was highly
militaristic and as such fascists often significantly increased military spending. Recruitment into
the military was one of the main policies used by fascist governments to reduce unemployment.
Fascism had complicated relations with capitalism, which changed over time and differed
between fascist states. Fascists have commonly sought to eliminate the autonomy of large-scale
capitalism and relegate it to the state. However, fascism does support private property rights and
the existence of a market economy and very wealthy individuals. Thus, fascist ideology included
both pro-capitalist and anti-capitalist elements. In practice, the economic policies of fascist
governments were largely based on pragmatic goals rather than ideological principles, and
they were mainly concerned with building a strong national economy, promoting self-
sufficiency and being able to support a major war effort.
Political Economy of Fascist Italy-
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 under a multiparty coalition
government (1922–1925) the Fascists had a generally laissez-faire economic policy under the
finance minister Alberto De Stefani, a former stalwart leader in the Center Party. Free
competition was encouraged and De Stefani initially also reduced taxes, regulations and trade
restrictions on the whole. De Stefani reduced government expenditure and balanced the budget.
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, but 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.
This was also a period when the Italian Fascist government undertook a large-scale privatization
policy, which was among the first such policies in the modern world. Fascist Italy was the only
country that sold state-owned enterprises and assets to private firms in the 1920s; the next
country to adopt this approach was Nazi Germany in the 1930s. The Italian privatizations
included the sale of most state-owned telephone networks and services as well as the former state
monopoly on match sale.
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. 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 and prices fell and
production slowed. There was increase in unemployment. Trying to handle the crisis, the Fascist
government nationalized the holdings of large banks which had accrued significant industrial
securities.
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, Mussolini insisted that self-sufficiency 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 1934, Mussolini boasted that three-quarters of
Italian businesses "is in the hands of the state".
Italian Fascists and their precursors had always been focused on the need to bring about a more
productive society through the economic collaboration of the classes, opposing class struggle.
They believed in the critical importance of economic productivity as a revolutionary force and
they were "productivists, rather than distributionists".
Nevertheless, the Fascist government also made efforts to appear concerned with the real
interests of its subjects in order to create a "consensual, charismatic regime" and to render the
masses of the peninsula governable. Fascist ideologues argued that the discontent of the lower
classes represented a potential threat to the "well-being, the internal security, the power and
the existence of the state" and therefore measures had to be taken to alleviate this discontent.
They also argued that a "minimal concern for the well-being of the labor force" served the
national interest, by improving productive potential. For these reasons, the government
pursued a complex social welfare and assistance program, which "compared favorably with
the more advanced European nations" despite the lower level of industrial development on the
Italian peninsula.
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.
Throughout the 1930s, the Italian economy maintained the corporatist model that had been
established during the Great Depression. At the same time, Mussolini had also grown 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. On the other
hand, the Allies and the Germans 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 Germany-
Adolf Hitler regarded economic issues as relatively unimportant. In 1922, Hitler proclaimed that
"world history teaches us that no people have 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, 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, Gottfried Feder proposed a new 39-point program (1924) 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, Hitler also 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 called his political party "National Socialist", 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".
Hitler made very different statements about his economic views on different occasions and at one
point was 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". At another point, Hitler said in private that "I absolutely insist on protecting
private property. [...] In this sense, 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. In spite of this, he
later asserted: "It is my firm conviction that property rights must be unconditionally respected.
Any tampering with them would eliminate one of the most vital incentives to human activity and
would jeopardize future endeavor". 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 a 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.
Before World War II, the Nazis placed non-Nazi Party professionals in charge of economic
policy. The Nazis outlawed independent trade unions and banned strikes, creating the German
Labour Front (DAF), which became one of the largest organizations in Germany, comprising
over 35,000 full-time employees by 1939.
In the 1930s, Nazi Germany transferred many companies and services from state ownership into
the private sector, while other Western capitalist countries were moving in the opposite direction
and strove for increased state ownership of industry. In most cases, this was a return to the
private sector of firms which had been taken into state ownership by the democratic government
of the Weimar Republic as a result of the Great Depression. The firms returned to private
ownership by the Nazi government "belonged to a wide range of sectors: steel, mining, banking,
local public utilities, shipyards, ship-lines, railways, etc." and in addition, some public services
began to be provided by semi-private entities that were connected to the Nazi Party rather than
the German state.
There were two primary reasons for the Nazi privatization policy. First, especially in the early
years of the Nazi regime, it was used as a way to build good relations between the government
and business interests.[114] Second, the Nazi government greatly increased public expenditure,
especially on military re-armament and infrastructure projects. Existing sources of revenue were
not sufficient to cover the new expenses, so the government was forced to sell assets in order to
gain funds.[
Unlike Italy, Germany did not strive to achieve full self-sufficiency, even though in May 1933
Hitler's regime had defaulted unilaterally on Germany's foreign debt along with a decree for
sweeping capital controls that made it difficult to engage in foreign trade.[125] 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.
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.
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, therefore 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