Dr. J.’s BF Commentary No. 136: Financing Fascism, I

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While history does not repeat itself exactly, the past offers enormously important clues as to what we might be facing.

Crossposted with http://blog.buzzflash.com/jonas/186

By Steven Jonas, MD, MPH  Dateline: Thu, 03/25/2010  [print_link]

The German Fascists' (Nazis) obsession with racial purity found a convenient scapegoat in the Jewish minority, which was systematically harassed, robbed, and eventually murdered. This poster decries "the Jewish defilement" of German women.

Fascism may be briefly defined as: “A politico-economic system in which there is: total executive branch control of both the legislative and administrative powers of government; no independent judiciary; no Constitution that embodies the Rule of Law standing above the people who run the government; no inherent personal rights or liberties; a single national ideology that first demonizes and then criminalizes all political, religious, and ideological opposition to it; the massive and regular use of hate, fear, racial and religious prejudice, the Big Lie technique, mob psychology, mob actions and ultimately individual and collective violence to achieve political and economic ends; and corporate domination of economic, fiscal, and regulatory policy.”

Fascism is a form of government and societal organization that, beginning at the conclusion of World War I, arose in a number of countries around the world.  (If you want to read a description of the fascist state written before the appearance of the first one in Hungary under Admiral Miklos Horthy in 1919, see Jack London’s fictional  The Iron Heel, originally published in 1908.  It is amazingly prescient, although London predicted that the form would appear first in the United States.)  The three most prominent fascist states were, in order of historical appearance, pre-World War II Italy (its fascist dictator Benito Mussolini gave the name to the governmental form), Japan, and Germany.  They were the united opponents of the Western capitalist democracies and the Soviet Union in World War II.  Fascism in one form or another persisted through or newly appeared after the conclusion of the WW II in such countries as Spain, Portugal, Argentina, Brazil, Chile, Uruguay, and Paraguay.  They were all considered, as it happens, allies of the United States and its partners in the “fight against communism.”

The most prominent member of this list is, of course, Nazi Germany (1933-45).  The Nazis indeed produced a unique form of fascism.  It was one in which racial hatred became one of the most prominent features of its focus and program with the ultimate objective of murdering as many members of the designated “inferior races” as they could capture and imprison.  Indeed, in Eastern Europe towards the end of World War II, in military retreat, the Nazis actually diverted manpower, transport, and supply resources from fighting the Soviet Army to continuing to exterminate as many Jews as they possibly could.

One of the mysteries of the Nazi rise to and maintenance of their complete control over the German nation was how they managed to finance it, their reign beginning as it did in the depths of the Great Depression on January 30, 1933.  They accomplished this feat through the use of a number of different modalities.  How they did it holds some important lessons for certain forces in certain modern major powers that might be considering the attempted imposition of fascism upon their respective nations.  So how indeed did the Nazis do it?

First, under the terms of the Versailles Treaty, which formally concluded World War I, Germany was saddled with enormous reparation payments.  It did manage to make them for the most part, but they were finally discontinued in 1932, before the Nazis took power.  That created a substantial sum from domestic output available for national domestic spending.  Second, there were significant foreign investments being made in Germany, especially by right-wing capitalists from abroad.  Indeed, George W. Bush’s grandfather, Prescott Bush, a banker, was still doing business with the Nazi government as late as February, 1942, after war had been declared between Germany and the United States.  He stopped only when President Roosevelt threatened him with prosecution under the Trading with the Enemy Act.  (A GW Bush great-grandfather, George Herbert Walker, began contributing to the Nazi Party in 1923.)

Third, because of the quality of its manufactured goods and such specialty items as machine tools, Germany maintained a significant foreign trade, even during the Great Depression.  Fourth, Hjalmar Horace Greeley Schacht (now there’s a German name for you!) was the President of the German central bank, the Reichsbank, under the Weimar Republic (1919-1933) and held the same position for a time under Hitler.  Schacht devised a scheme for printing money that didn’t look like the plain old open, flat-out printing of money that had led to the German hyper-inflation of 1923.  It was similar in certain ways to the approach  that Benjamin Bernanke, the Chairman of the US Federal Reserve Bank, devised in 2009 to help deal with the banking/investment industry-induced Great Recession of that time.  Fifth, the Nazis were able to obtain a certain amount of foreign loans, from such friendly foreign bankers as the Bushes and the Harrimans.

The Nazis and their capitalist and Prussian supporters were statists.  They believed in the power of government not only to completely repress and suppress any opposition but also to act positively in dealing with economic problems.  In fact they were Keynesians.  They believed in pump-priming.  And so, Hitler very quickly implemented a massive public works program: building the famed “Autobahns,” the world’s first super-highway system. The blue-prints had been completed under one of the last pre-Nazi democratically-elected governments in 1932 but Hitler put many men to work on them, beginning in 1933.  The men were not particularly well-paid and all trade unions had been banned by April, 1933, but it was work.  Other public works programs were also implemented.  In a non-economic approach to dealing with unemployment, early on the Nazis began a program to remove women from the labor market, under the slogan “Kinder, Kuchen, und Kirche” (children, kitchen and church) as being the “correct “ role for “Aryan” women.  National military conscription, at low wages, further tightened the labor market beginning in 1935.  German capital itself began to release funds which it had withheld when the massive, very profitable, rearmament program began, also in 1935.

As the Nazis progressed at home and then abroad, additional means and conquests strengthened their economic hand: the outright theft of Jewish property; the re-militarization of the Rhineland (1936) with the resultant full control over its productive resources and raw materials; the “Anschluss” (forced merger, fully supported by the Nazis of Hitler’s homeland) with Austria (1938); the conquest of Czechoslovakia fully supported by the Western powers (1938-39) which gave them control of, among other major productive resources, the Skoda automobile and munitions works (now, most ironically, owned by Volkswagen); the access to Rumanian oil by alliance; their further conquests to the East and the West; and then the increasing use, during the War, of slave labor.

Next week we shall look at possible parallels for the United States, to pick a country at random, and what limits might be placed on fascist ambitions here (not that there are any, of course) by the current perilous state of the US economy.

Steven Jonas, MD, MPH is a Professor of Preventive Medicine at Stony Brook University (NY) and author/co-author/editor of 30 books. In addition to being a columnist for BuzzFlash, Dr. Jonas is also Managing Editor and a Contributing Author for TPJmagazine; a Featured Writer for Dandelion Salad; a Senior Columnist for The Greanville POST; a Contributor to TheHarderStuff newsletter; a Contributor to The Planetary Movement; and a Contributing Columnist for the Project for the Old American Century, POAC.