It is true that free competition brings about economic equilibrium; it is true that economic equilib- rium is the result of a sound economy; it is true that this sound economy
improves
the welfare of all classes; but there is to be found in present society no such thing as free competition.
Brady - Business as a System of Power
" Quoted in ILO, Freedom of Association, IV, 8.
35 "Metayage, a system of land tenure in Western Europe and also in the United States, in which the farmer pays a certain proportion (generally half) of the produce to the owner (as rent), the owner generally furnishing the stock and seed or a part thereof. " Murray, New English Dictionary.
36 "The economic life of Italy is basically rural. . . . The total gainfully occupied population of ten and more years of age is 17,262,521; 8,083,332 are occupied in agriculture. The total population of the country in 1931 was 41,176,671, of which num- ber nearly 48 percent was comprised in families whose head was employed in agri- culture. . . . Data for any of the last thirty or forty years would not give a substan- tially different picture of the economic structure of the rural population. " Schmidt, The Plough and the Sword, pp. 1, 10.
37 "According to the occupational census of 1931, roughly 8,000,000 persons over the age of 10 are engaged in agriculture. Of this number about 3,000,000 are classed as 'operating owners,' 900,000 as 'cash-tenants,' 1,700,000 as 'share-tenants,' 2,500,000 as 'wage-workers,' and 27,000 as 'managers. ' " Idem.
38 "The 3,800,000 dwarf and small holdings comprise but 32. 7 percent of all the
70
? THE FASCIST SYSTEM
tionship between the possessing and the landless classes was of a distinctly feudal stamp.
This feudal stamp was not lost when the great Po Valley estates went over to modern forms of highly mechanized industrial agri- culture during and following the war. Relationships between mas- ter and men continued in much the same atmosphere as before, with the main difference that the latter had lost whatever social claims they had once possessed, and that the former, much as in the case of large-scale agriculture on the American Pacific Coast, had been freed of certain more or less compelling obligations assumed under the technically more primitive arrangement. That is to say, the mood, the social outlook, the plans and programs of the leading figures in the General Confederation of Agriculture were of the patronal, patrimonial, feudal stamp.
Not until after the war did employer interests in the industrial field succeed in attaining the level of central organization achieved by agricultural employers in 1911. Earlier efforts had been made from time to time, the last preceding attempt in 1910 having, even at that late date, proved premature. ^^ In 1920 the General Confed- eration of Italian Industry was organized as a central policy-forming body for some one hundred member bodies,
divided among federal organizations [of which twenty-five were na- tional] and local organizations and was made up of two sections:
(a) The Economic Section, which protected all kinds of industrial in-
terests and set up as its aim the defense of those interests by means of direct co-operation in the drafting of laws and also by supporting the interests of its members against the state;
(b) The Trade Union Section, which studied and solved problems connected with the relationships between industrialists and the staff dependent on them, and also problems connected with social legislation. *^
All commentators agree that the Confederation was a highly or-
ganized institution, exercising "a powerful influence on the whole
farm land in the country, whereas the 400,000 large farms control 67. 3 percent thereof. These figures evince the extreme concentration of land ownership in rela- tively few hands. " Ibid. , p. 13.
39 A parallel attempt made in that year to form the Association of Italian Joint Stock Companies (Associazone fra le Societa Italiana per Acione) was more success- ful. It maintained an independent existence through the war, and was instrumental in the accouchement of the Confederation of Italian Industry. See Pitigliani, The Italian Corporative State, pp. 144-45.
40 ILO, Freedom of Association, IV, 9.
71
? THE FASCIST SYSTEM
of national life" from the day of its inception. As with its agricul- tural counterpart, it united in a single body both social (primarily antilabor) and economic interests. Headquarters were maintained at Milan, the leading industrial city of north Italy, which, being located in the center of the upper Po Valley, brought them into immediate juxtaposition with the Agricultural Confederation. And the leading figures in the Confederation were the captains in com- mand of that impressive network of large-scale industrial enterprises which were concentrated in that area.
Not only did the big industrialists lead in the inner councils of the Confederation, but the establishments over which they held control fell largely, and in some respects entirely, in the general classification of the *'new" industries which had arisen out of chemi- cal and engineering research after the turn of the century. Italy was a comparatively late industrial arrival, and she lacked, furthermore, material resources for the large-scale development of many of the older industries. The newer industries required large initial out- lays in scientific research and experimental development; their capi- tal needs were heavy and, once launched, they were closely protected under patent and similar monopoly controls.
Within the northern Italian manufacturing nucleus the most im- portant industries were heavy chemicals, machines, textiles, and engineering. Most of the big concerns, such as Snia Viscosa in rayon. Fiat and Isotta Fraschini in automobiles and allied lines, Ercole Marelli and Pirelli in electrical manufacturing, Breda in railroad equipment, and the giant Montecatini in the chemicals, ordnance and metal field, date either from immediately before the First World War, or rose to importance during and immediately after that catastrophe. *^ Most of them were financed in whole or in part
41 Snia Viscosa: founded July 18, 1917, headquarters and larger plants at Milan, capital in 1938, 525,000,000 lire; Fiat: founded in 1906, headquarters in Milan (auto- mobiles, diesel engines, parts, railroad stock, airplanes and engines, etc. ), capital in 1939, 400,000,000 lire, employed 54,000 workmen; Montecatini: founded in 1888, headquarters in Milan (copper, pyrites, sulphur, fertilizers, dyes, varnishes, rayon, aluminum, pharmaceutica, etc. ), capital in 1938, 1,300,000,000 lire; Ercole Marelli: successor in 1920 to parent company founded 1891, headquarters in Milan (electrical equipment, motors, generators, pumps, etc. ), capital in 1938, 80,000,000 lire; Isotta Fraschini: headquarters in Milan (steel, automobiles, engineering, ordnance, bronze, aluminum, magnesium, etc. ), capital in 1938, 120,000,000 lire; Pirelli: founded in 1920, headquarters in Milan (electrical cables, automobile tires, etc. ), capital in 1938, 263,981,500 lire, 20,400 employees; Breda: successor in 1899 to parent company or-
72
? THE FASCIST SYSTEM
73 by foreign capital/^ catered directly or in large part to a demand dominated by the rapidly expanding transportation, communica- tion, and power networks which were of at least a semipublic char- acter on the one hand, or sold directly to the various governmental bodies concerned with public construction and war needs on the other. All of these factors made not only for large scale develop- ment, but also for expansion on a monopolistic or semimonopolistic
footing from the very beginning. *^
Under auspices such as these--and it cannot be too strongly em-
phasized that in Italian industrial councils the great preponderance of power and influence lay in these circles--the natural, normal, matter-of-course attitude of the leadership of the General Confed- eration of Italian industries should have been monopoly-oriented in all economic affairs, and patronal or feudal in all social matters. That is to say, the exigencies of background and organization were such as to cause complete accord with the General Confederation of Agriculture (most conservative and reactionary and at the same time most highly developed of agricultural employer associations any- where in the world) in the normal course of peacetime events. How much more logical then, that, given the recent, vivid experience with the autocratic controls of war-time, they should face a new emergency with the mood, the outlook, and the will to improvise the necessary weapons for consolidating a common front of em- ployer interests against the threat of revolutionary action from below.
ganized in 1850, headquarters in Milan (steam and electric locomotives, railroad rolling stock, ships, airplanes, etc. ) capital in 1938, 127,800,000 lire, 17,073 employees. 42 There were, in addition, a good many important, wholly foreign owned, subsidi- aries, such as the Societa Generale Italiana Viscosa (capital in 1938 of 75,000,000 lire, and wholly owned by the British firm. General Rayon Ltd. ) and the branch systems of Ford and General Motors. Most of these concerns have branches and affiliates scattered all over Europe, and corporate holdings, spheres of influence, etc. , interlace with other foreign holdings until it is practically impossible at any one point to
unravel the skein.
43 A situation arose, in other words, not greatly unlike that which W. Sombart
traces at such length in Der Moderne Kapitalismus (Leipzig, 1902), I, Part II, through the early mercantilistic and cameralistic phases of capitalism, when the army and public authorities dominated so many of the leading supply industries. Added to this is the point Veblen has argued so cogently for Germany--in his Imperial Germany and the Industrial Revolution (New York, 1915)--that the borrowing country borrows the latest, most advanced techniques of production and marketing. The Italians borrowed from abroad large-scale production methods and monopoly forms of organization.
? THE FASCIST SYSTEM
74
Not, of course, that there is any direct proof that the General Con-
federation of Italian Industries singly or in association with other employer bodies did actually "think up" the Fascist state. Nor, even, that there was uniform agreement within these circles on just exactly what and how to face the critical situation that arose in the postwar confusion. ** But that they did find in Fascism something which they could support and from which they could derive great advantages to themselves there is no longer any question whatsoever. For present purposes, the significant fact is that the organizational structure, spun after much trial and error under the Fascist regime, is a straight-line development from that which had been evolved out of these employer circles in the past, and that the system which fol- lowed the March on Rome was coherent not only with former growth trends, but also with the attitudes and ideologies which had become dominant in organized Italian business.
The Corporate State. --Again it is not necessary to recapitulate in detail the numerous, and for present purposes, largely accurate sum- maries that have been made of the machinery of the corporate state, or the steps by which this machinery has been brought to its current state of development. The system is not yet complete, enthusiastic proponents avow, and is not likely to reach that state for a long time to come, if ever. Many of them like to stress that it is of the very nature of Fascist institutions that these neither do nor can achieve settled and permanent forms, since they are devised as flexible in- struments to encourage growth and change and not as glove-fits for a static condition.
It may be in point, however, to indicate briefly a few of the fea- tures of the new system which make it appear not so new or out of line with recognizable trends abroad. In its most recent annual pub- lication, the Fascist Confederation of Industrialists, successor in 1926 to the General Confederation of Italian Industry discussed above, speaks of the new system as a "guild economy," this being, they say, "the nearest English equivalent to the Italian 'corpora-
4* There were conflicts at numerous points between organized industry and agri- culture, between heavy and light industry, between industrial and financial interests. See Daniel Gu^rin, Fascism and Big Business (New York, 1939), for a discussion (very inadequate) of the conflict of interests between the Banca Commerciale Italiana, representing light industry, and the Banca Italiana di Sconto, representing heavy industry, in the early days of the Fascist dictatorship. See also Rossi, The Rise of Italian Fascism.
? THE FASCIST SYSTEM
75
zione. ' " And they cite a dictionary definition of the word "guild" which terms it "a corporation or association of persons engaged in kindred pursuits for mutual protection and aid. " If then, you "ex- tend this definition to a whole nation of producers . . . you have a fairly adequate conception of Italian guild economy. " *^
"An Outline Study" of "The Organization of Production and the Syndical Corporative System," especially prepared for the American public by the official New York representative of the Italian propa- ganda ministry, makes much the same point. Finding a "general identity of motive and a somewhat similar process of development among all associations of producers from the dawn of history down to our modern age," the writer, significantly enough, traces the rise of ideas and elements leading to and incorporated in Italian Fascism from most ancient times through associations fixed in social status, occupationally circumscribed, self-contained, and exclusive, and making for "harmony" in society. The associations succeed in this by virtue of the subjection of their members to a regime of class stratification, characterized by relative vertical immobility, and rigorously controlled from above by a self-appointed and cooptative "elite. " Governance proceeds via the instrumentalities of hierarchi- cal privilege and prerogative provided by the political apparatus and is exercised "authoritatively" (antidemocratically) over such occupationally organized servile and semiservile strata below. *^
Direct precedents are traced to the Papal Encyclicals of Rerum Novarum and Quadragesimo AnnOj to the earlier organizations of labor and capital which preceded these, and to the model of D'Annunzio's "10 corporations of producers"; in its turn, D'An- nunzio's model was adapted from the Quadragesimo AnnOj in terms of the "integral syndicalism" advocated by the Rerum Novarum.
45 Fascist Era, Year XVII, p. 33.
46 China: "Corporative life has always been the cornerstone of the static civiliza- tion of China. " Its universal system of "organized groups of producers" was on a "voluntary," "caste" footing which "combined Church, school, court and town-hall of occidental communities" and which was characterized by "absence of sharp fric- tion between the employer and the employee. " India: "Division of labor has also been the keystone of society" practicing "rigid separation of groups from a social and religious standpoint. " Egypt: had a "system of organized and coordinated labor" with "privileged classes" and "state controlled corporations," etc. The Near East, ancient Rome and the medieval guilds: the latter are termed "functional democra- cies," an idea which may have led to the description of Fascism by the engaging expression "authoritarian democracy. " See The Organization of Production and the
? THE FASCIST SYSTEM
In the evolution of Fascist corporative ideas, the exact role of the Fiume programs, known as the "Carta del Quarnaro," is not clear. Announced in a burst of lyric enthusiasm as the Constitution of the Free State of Fiume by the poet Gabriele D'Annunzio, Sep- tember 8, 1920, it proposed to do away with all past parliamentary institutions and the old state bureaucracy and to substitute for the "citizen" the "producer. " All former state functions were to be decentralized and managed by ten compulsory but "autonomous" (self-governed) corporations of producers, divided along parallel lines by employer and employee interests and grouped according to major occupational interests. ^^ Property was not to be abolished but capitalists were to become "wise leaders seeking to further the in- terests of their company" *^ according to the principle that the "sole
Syndical Corporative System (Italian Library of Information, New York, 1941), and Fascist Era, p. 32.
47 According to Article 19 of the Carta del Quarnaro, the corporations or guilds were to be constituted as follows:
"In the first guild are enrolled the salaried workmen in industry, agriculture, commerce, and transportation; and the artisans and small proprietors who perform their own rural task or who have a few casual helpers.
"The second Guild comprises the technical and executive staff of every private industrial and rural establishment, excluding the proprietors themselves.
"In the third are enrolled all those attached to commercial establishments, who are not strictly workmen; and in this too joint-proprietors are excluded.
"The fourth Guild unites the promoters of industry, agriculture, commerce, and transportation, provided they are not merely proprietors, but according to the spirit of the new laws, wise leaders seeking to further the interests of their company.
"The fifth is composed of all public, communal, and civil employees of all ranks.
"The sixth comprises the intellect of the land: the young student body and its in- structors; teachers in the public school and students in the higher institutions, sculp- tors, painters, decorators, architects, musicians, and all those who carry on the fine arts, scenic arts, and decorative arts.
"In the seventh are enrolled all those who practice professions of their own choice which have not been included in the preceding classifications.
"The eighth is composed of cooperative societies in production, labor consump- tion, whether industrial or agricultural; and only the executives of these same soci- eties can be represented.
"The ninth comprises all sea-faring people.
"The tenth has neither art, nor number, nor title. Its coming is expected like that of the tenth Muse. It is reserved to the mysterious forces of the people consecrated to the unknown genius, to the apparition of the new man, to the ideal transfigura- tion of labor and time, to the complete liberation of the spirit over pain and agony, over blood and sweat. It is represented, in the civic sanctuary, by a burning torch upon which is inscribed an old Tuscan work of the time of Communes, a remarkable allusion to a spiritualized form of human labor: Fatica Senza Fatica [Toil without Toil]. " From a mimeographed translation in the library of the Casa Italiana, Co- lumbia University.
48 Idem.
76
? THE FASCIST SYSTEM
lawful claim to dominion over any means of production and ex- change is labor. Labor alone is master of the thing made most advan- tageous and more profitable to general economy. " *^ The state was not to intervene in the internal life of the corporations so long as relations within and amongst the corporations were felicitous and peaceful.
Two fundamental ideas underlie the Fascist redaction of ideas borrowed from these sources. First is the conception that readers of an historical turn of mind will recall underlay the attempt of Col- bert, the great French mercantilist, to smash feudal localization and trade restrictions by (a) generalizing the structure of guild controls so that they would not serve as barriers between different sections of the country, but would become coextensive with the national do- main, and by (b) endowing such expanded trade organizations, either as a whole or segmentally by concerns or groups, with mercan- tilistic prerogatives of regulated self-governance and monopolistic privilege. ^^ For the medieval guilds in the Colbertian effort, sub- stitute the preceding organizations of business and labor in the Fascist system. The Fascist systematization of the whole of the ma- chinery taken over along definite model and hierarchical lines is thus seen to represent peculiarities of organizational procedure, and not differences of theory.
In the second place, the Fascist innovations centered around the plan to expand the structure of controls of the legal business cor- poration to the whole of the associations and federations with which such corporations were associated; this was to be done, how- ever, without at the same time endowing the parallel organizations of labor with power to counteract the expanded controls--^which, of course, would have defeated the main purpose. Under the old regime, the individual corporation possessed, wherever it was free to act as it desired, a system of rigorous and thoroughly despotic controls over policy formation and execution. Outside of the in- dividual corporation and amongst corporations of like business interests, power shaded off into a loose penumbra of more or less unenforceable ''communities of interests. " The Fascists sought to substitute in place of the penumbra the more compact, "dense,"
49 Ibid. , Article 9.
50 See Eli Heckscher, Mercantilism (London, 1935).
77
? THE FASCIST SYSTEM
and imperative regime of command and subordination of the busi- ness corporation.
This regime was to relate to the whole range of economic and social issues which concerned the conduct of economic activity. It had to do, in other words, with prices, production, markets, cost systems, plant expansion, taxation, subsidies and subventions, tar- iffs, and the rest, as well as with labor problems. But if extension of the characteristic internal regime of the business corporation to the whole of each trade or industry or "category" or "cycle of production," was to be carried through, what was to become of the trade unions? Were these, in compliance with the first concep- tion, to be expanded parallel with the employers' associations? And if so, how reconcile the new set-up with the second con- ception?
The answer was found in taking the form of the first and the essence of the second. More simply, the powers of the business cor- poration were expanded to cover the entire industry, and the trade unions, now deprived of all power of independent action, were forthwith expanded into all-exclusive bodies under the au- thority of a central administration, which was sympathetic with and closely allied in aims, programs, and point of view with the business interests--if it was not at times and places, as some critics aver, wholly dominated by these interests.
However, the structure of the system devised over the inter- vening years has, in ways but slightly different from the mechanism of the Hitlerian variant, shown that the attempt to carry through some such a program of coordinated, definitive and all-inclusive class controls, presents but a limited series of organizational alter- natives. Hierarchy is of the essence of its structure. Authority comes from the top down in all things, and responsibility from the bottom up. Coverage is of necessity "totalitarian" ^^ that is, over all persons in all sections of the country and in all their activities.
There are five major bureaucracies to be codrdinated in the new system: those of the economic world, the army, the Church, the civil service, and the Fascist party. Coordination--which may and probably does mean to a considerable degree social-economic fu- sion through marriage, group associations, and other devices, in
81 See Chapter VIII, below.
78
? THE FASCIST SYSTEM
79
the upper reaches of the hierarchy--^required the following modi- fications and compromises:
(1) all occupational or economic groupings in whatever field are organized in all-inclusive categories directed by policies coherent with the interests of, if not actually formulated in detail by, the great leaders of industry, commerce, finance, and agriculture;
(2) the relationships among these are militarized according to the pattern known in management literature as "military organ- ization," and are enforced by a coordinated military and policy system;
(3) the Church undertakes to inculcate in both "leader" and "led" a mood of satisfaction and contentment with the pastor ("trustee of God")-to-his-flock relationship and with the super- session of transcendental over materialistic biases and values;
(4) all relationships are formulized by and through an all- pervading bureaucracy, which circumscribes rounds of duties and responsibilities, in the performance of which--as interpreted by superior officers in the hierarchy--it is vested with state authority;
(5) the Fascist Party sees to it that these various phases of coordi- nated class domination are fused by moving them along the path of imperial expansion, a path kept open by a cumulatively enliv- ened nationalistic sentiment and the imminent danger of war.
The resultant structure of control, so far as it bears on the sub- ject matter of the present study, is less complex than it appears at first. The main outlines are simple. Four "principles" are said to dominate: organization by occupational, or trade "categories"; organization by regions; organization by social position; and or- ganization by hierarchy.
(1) Occupational categories mean exactly what they imply--the basis of segregation is the more or less clearly delineated trade, industrial, or occupational zones. These are called syndicates.
(2) Some 13,464 in number, the syndicates are in turn grouped (a) into provincial and interprovincial Unions, of which there may be ^2 some 882 altogether, and (b) into national category federa- tions, of which there are 1 50 all told.
52 "May be," since there is a provincial Union in each of 98 provinces (including four for Libya) for each of the 8 "main branches of activity" only if, however, these activities are to be found in each province. Since it appears that such a provincial Union is established wherever there is to be found more than one local organization,
? 8o THE FASCIST SYSTEM
(3) The ^'integral syndicalism" principle calls for all-inclusive parallel employer and employee organizations all the way down the line, except that (a) the basis of category division need not be exactly the same, that is, the labor category may be broader or nar- rower than the corresponding employer category ^^ and conse- quently the number of categories may be larger or smaller, and (b) the arts and professions fall more or less entirely outside the employer-employee bifurcation.
(4) Finally, the hierarchical principle holds throughout, and in three general aspects, (a) Structurally, proceeding from the local, syndical, employer or employee interest, with but local, syndical, employer or employee power and authority, on up through the provincial and interprovincial Unions on the one hand, and the national Federations, Confederations of Federations, and the Na- tional Council of Corporations on the other. This part of the Italian system is strikingly like the system devised by the Nazis and outlined in Chapter I. (b) As between the employer and the worker categories, it would appear from all the available evidence that employer interests definitely hold the upper hand, and that through this rather complicated machinery, the rule which makes the employer Herr im Hause within the factory relationship like- wise holds in the social field. The model here, as previously pointed out, was Catholic "integral syndicalism," and Salvemini is unques- tionably correct in comparing these directly with "company unions. " ^* (c) Authority throughout the entire pyramid stems from the top, with the head of the government (Mussolini) in theory the fountainhead of all delegated offices and competencies. The system, in short, is entirely and exclusively cooptative at the top; from that point downwards it is appointive with tenure, du-
there must be the number indicated unless such economic provinces (without more than one) are to be found in Italy, which is improbable. I have been unable to learn anything whatsoever about the number or the functions of the "Interprovincial Unions. "
53 Thus, there are 5,826 workers' "Local Syndical Associations" for 6,595 in the employer classification. In the next layer, there are 32 National Federations for the former to 96 for the latter. There are equal numbers of National Confederations (4 each), and the principle of "equal representation" holds for the National Council of Corporations, though the basis of classifications bears no necessary relationship to that obtaining below.
54 Salvemini, Under the Axe of Fascism, Chapter VII, "Company Unions, Nazi Unions, and Fascist Unions. "
? THE FASCIST SYSTEM 81
ties, and responsibilities subject to instantaneous alteration in any fashion whatsoever from on top--which means, of course, no re- course whatever, from below, grounded in substantive rights. ^^
Legal authority begins in theory with the National Federations (Juridical Associations of the "First Degree") and expands in power and influence upwards through the Confederations (Juridical As- sociations of the "Second Degree") and the National Council of Corporations; it comes to a head in the sovereign Chamber of Fasces and Corporations. All powers and authorities derive from this fountainhead. But the fountainhead is--as all such human institutions are--in turn, controlled by dominant pressure groups. Who are they?
Several analyses have been made of the social composition of the inner controlling groups. ^^ All of them reach the common con- clusion that the leading personalities are those associated with the great landowning, industrial, commercial, and financial houses and associations on the one hand, and the central leadership of the closely allied, socially compact, and self-perpetuating military, clerical, civil service, and party hierarchies on the other. Who, or what particular group, at any given time holds the upper hand can only be determined by independent analysis of the interplay of facts, forces, and personalities on each separate occasion. But it is beyond dispute that the net result, judged in the light of all the available facts, is coherent with the interests, the points of view,
the lines of growth inherent in monopoly-oriented, capitalistic enterprise, thus transmuted through acquisition of political power into a regime of exclusive privilege and patrimonial command.
Finally, it may be noted that there are not lacking Fascist theore- ticians able to find that these conditions are not only coherent with, but absolutely indispensable for the realization of, the economic
55 Except as guaranteed in the Labor Charter and in various decrees. These, how- ever, come entirely from on top, and are revocable at will--which is to say that they exist on tolerance and thus, in event of any point of dispute with the hierarchy of command, ultimately not at all. Most of the "labor leaders" are actually not laborers, being typically of "middle class" origins. In any event, they must be Fascist party members, they are appointed upon recommendation of Fascist party selected panels through the Fascist party hierarchy, and they owe no responsibility whatsoever to the syndicates which they do not represent but command.
56 See Salvemini, op. cit. , pp. 43-49, Ebenstein, Fascist Italy, Schmidt, The Plough and the Sword, and Louis R. Franck, Les Etapes de I'economie fasciste italienne (Paris,
1939), pp. 43-45.
? 82 THE FASCIST SYSTEM
equilibrium which constitutes the long sought good of free com- petition. As argued, for example, by Amoroso, one of the leading Fascist academicians, the conditions which, under the regime of free competition, fix the point of equilibrium in the determination of wages are identical with those laid down in the Charter of Labor.
Why, then, is the Charter of Labor and the intervention of the state, required, one may ask! As summarized by an Italian student of corporative economy in the graduate school at Columbia Uni- versity, Giorgio Pelligrini, the answer of Amoroso and his com- patriots would run about as follows:
Ideal conditions of free competition cannot be realized in the present (unregulated) economic organization.
It is true that free competition brings about economic equilibrium; it is true that economic equilib- rium is the result of a sound economy; it is true that this sound economy improves the welfare of all classes; but there is to be found in present society no such thing as free competition. Liberalism, which pretends to be the champion of free competition, in reality brings about the division of society into two groups--the bourgeoisie and the proletariat --and strengthens the first against the second. Socialism, which pre- tends to cure the evil, in reality destroys free competition directly, and with it economic equilibrium and thereby sound economy. Corpora- tivism, instead, with the institution of organs whose sole aim is the elimination of all the influences contrary to a stable economic equi- librium, brings about the ideal conditions for the free play of economic forces, and, therefore, is the only sound economy.
If, as the Fascist Confederation of Industries comments, the con- fessedly antidemocratic principles of Fascist political regimenta- tion may be termed "authoritarian democracy," perhaps the view of Amoroso may properly be captioned "regimented free compe- tition"! It is doubtful if, under the new National Socialist guid- ance. Fascist logicians will be encouraged to resort further to many dubious circumlocutions. Verbundene Wirtschaft goes better with the institution of the lock-step in word as well as deed.
? Chapter III
JAPAN: KOKUTAI AND THE "CO-PROSPERITY SPHERE"
icrj^HE ECONOMIC WORLD nccds a guiding hand to direct its diverse JL energies," explained Mr. Ogura, head of the immense Sumi- tomo interests upon his appointment by ex-premier Konoye as "economic dictator of Japan. " Expected, as reported in American newspapers, "to become a sort of Japanese Knudsen," flanked at will by a " 'brain trust' . . . not of bureaucrats, but of business men" ^ of his own choosing, Ogura was vested with the powers of a supreme economic coordinator, in what has been described as "a complete corporative State built into the existing constitutional structure of Japan. " While one organ of state policy, the Supreme
Cultural Council, is to see that "all people will think only reformed thoughts," Mr. Ogura is to draw on all his business experience in order that the principle, "the public service first," may be sup- ported naturally through continuation by the Supreme Economic Council of control over Japanese industry under the system of
^
japan's peculiar institutional machinery
However strange this may sound to Western ears--and it is not so strange now as it would have seemed a short time ago--it repre- sents in principle nothing essentially new for the Japanese. Con- trol over business policies has always been highly centralized in the Island Kingdom, and that centralization is traceable, genetically, to environmental forces almost the complete inverse of those fos- tering similar movements in the United States and England. Tap-
1 New York Times, April i, 1941.
2 Hugh Byas, "Japan's Fascist March," New York Times, Dec. 15, 1940.
"private enterprise. "
? 84
KOKUTAI AND CO-PROSPERITY
roots for centralization in these latter were struck in periods for- mally committed to unmitigated free competition and laissez faire. But in Japan, feudalistic carry-overs, mercantilistic practices, and monopoly-oriented capitalism have from the beginning stood side by side.
Throughout the period of the Meiji Restoration, the setting for the rise of Capitalism has been predominantly patriarchal, anti- democratic, antiliberal, anti-laissez faire, and those superficial con- cessions to Western petit-bourgois economic and political institu- tions, which on occasion faintly leavened the modern era, have, particularly in the light of more recent events, served only the more heavily to underscore the fact. ^ The principle of Kokutai--"the state body corporate"--carried over from ancient times has, under an economics dominated by large-scale governmentally fostered, industrial capitalism, served to knit seemingly disparate elements of old and new into an efficient and generically totalitarian state. Current lines of development are converging swiftly and unmis- takably to create a national system similar at bottom to that advo- cated by lawgivers of the Axis Powers, although the system does not approach full articulation in the best approved authoritarian manner.
Thus business enterprise in Japan has, from the earliest days, unfolded its activities in an atmosphere largely, and at times wholly, dominated by principles, controls, and social philosophies which are internally coherent with what we in the Western world have come more recently to identify as Fascism. The oriental symbolism, in keeping with a deep and tenacious past, is more heavily blooded with the naive chivalric pietism of a society still organized on lines
3 How superficial were the changes wrought in the social, political, and economic life of Japan by the "Enlightenment" (period of the Meiji Restoration) is nowhere better illustrated than in a series of articles, remarkable for their complete candor, contributed by various Japanese professors to a special Japanese edition of Welt- wirtschaftliches Archiv, Vol. XLVI, July, 1937. All the social legislation--even Parlia- mentary forms of election and representation--are treated very much as was Bis- marck's famous social legislation of the '80s, as authoritative reforms, concessions, and tactics, and not as evidence of either conversion of the Japanese people to democratic- liberal principles, or as moves occasioned by fear of popular antagonism from the submerged ranks at the bottom of the social pyramid. It is worth recalling, in this connection, that what the Japanese did copy along these lines was not taken in the main from England or the United States, but from Imperial Germany. See also Thorstein Veblen, "The Opportunity of Japan," in Essays in Our Changing Order
(New York, 1934).
? KOKUTAI AND CO-PROSPERITY
of status, and with the simpler patriarchal or familial charisma of its characteristic emperor and ancestor worship. Tenno (the em- peror), for example, is at once father, ruler, and high priest in a patently theocratic state still governed by rules of honorific eti- quette and graduated subservience. But if this renders the task of domination in a caste-minded society far easier for the oriental Fuhrer than for his Western counterparts, it is largely because in Japan industrial, commercial, and financial capitalism has been absorbed into the old social system without seriously and for long challenging or greatly modifying the preceding structure of con- trols.
It is especially necessary to emphasize this point now, for there exists a common disposition to look upon more recent develop- ments in Japan as either a complete reversal of policies dominant since the latter half of the nineteenth century,* or as the product of a somewhat vaguely conceived military coup d'etat. Neither, of course, is correct. The answer to the former is that Japan borrowed freely, adopted and adapted at need, but that she did not, with the decline of the Shogunate and formal repudiation of feudal controls, fundamentally alter at any significant point the nature or func- tioning of her hierarchical social order, and that as a result of this lack of change the new order represents somewhat less than a straight-line, but still a consistent, development from the pre- Meiji, pre-Perry times. And the answer to the latter is that mili- tarism, far from being antagonistic to either the new or the old, was actually part and parcel of both. In the hands of the Choshu and
4 See H. G. Moulton and J. Ko, Japan, an Economic and Financial Appraisal (Washington, D. C. , 1931), where the Restoration is regarded as a sharp and complete break with the past. Professor Saburo Shiomi refers to the occasion, "When Japan broke away from feudalism in 1848" and a few pages later on tells how "the old patriarchal conception of the family as a complete social and economic unit has been incorporated in the guild system. " "Aufbau der Industriewirtschaft and Technischer Fortschritt in Japan," Weltwirtschajtliches Archiv, XLVI Quly, 1937), 118-56. The "outward forms of feudalism," Professor Allen points out, were "gone for ever" with the crushing of the Satsuma rebellion in 1877. But he quotes a Japanese writer who appraises the significance of what was "set up in its stead" as "a bureaucracy that retained the spirit of the Shogunate. It is not too much to say that the political and social institutions of the new Japan were only another expression of the Tokugawa system. " To which Professor Allen adds, "The main result of the Restoration was, in fact, the substitution of what came to be called the Sat-Cho group for Tokugawa. It was a change of governors rather than a change in the system of government. " G. C. Allen, Modern Japan and Its Problems (London, 1928), pp. 62, 64.
85
? 86 KOKUTAI AND CO-PROSPERITY
Satsuma clans, the military order was so clearly shaped as a phase of the peculiar expansionist dynamism of totalitarian ideology, in- terests, and process, that the one is unthinkable in the absence of the other. In Japan, because of this continuity with the past, the identification of the old social order and the new economic and political forms of business ramification and military expansion is made more easily and more painlessly than was the case even in the Nazified streamlining of Prussianized Germany.
Not, of course, that there is or has been absence of conflict of interests and ideologies in contemporary Japan. Far from it. How bitter the internecine warfare has been between military and naval branches of the armed services, between civil administration and military juntas, between small business, labor and peasantry on the one hand and the huge and omnivorous combines on the other, or even amongst these latter themselves, it is extremely difficult, at least on the evidence available to foreigners, to say. It appears not only that such cleavages do exist, but also that they have been at times far-reaching and sanguinary. But they have never been suf- ficiently deep or fundamental to alter seriously the structure of Japanese society nor the sanctions upon which its castelike hier- archical controls rest.
The social framework of this system represents a fusion of feu- dalism and the concept of the patriarchally governed, absolute state. Stigmata of feudalism are to be found in connection with a peculiar social-occupational gradation on the one hand and a sys- tem of guild and guild-like associational groupings on the other. Some of the latter--such as various trade unions and cooperative societies--were for a period of time during the twenties more or less "free" of constraints exercised from above. During the thirties, however, and especially with the outbreak of war on the Asiatic mainland, such partial freedoms have been gradually worn away until, to all intents and purposes, freedom of association in the liberal-democratic sense no longer exists. With minor exceptions, all occupational categories in industry, trade, and agriculture are organized into more or less all-inclusive unions, associations, fed- erations, and guilds. But behind all such associational forms is a backdrop which represents a blend of the feudal spirit of "servile
? KOKUTAI AND CO-PROSPERITY
solidarity" and the patriarchal norms of an "autonomous co- optative bureaucracy. " ^
At the gravitational center of this somewhat confusing mesh- work of partially modernized clans, guilds, military cliques, family dominated bureaucracies and businesses, on the one hand, and hierarchically graduated occupational strata, classifications, "cor- porations" and federations, on the other, stands the omnicompetent tutelary and administrative authority of the state--a state in both theory and practice more absolute than those of the European "age of the benevolent despots. " In the Japanese symbolism, this power comes to focus in the person of the Emperor who, in addition to being supreme head of the lay state and commander-in-chief of the armed forces, is also the ceremonial director of the official religion of Shinto. Via Shinto--in itself a sort of combined system of social etiquette and personal ethic pieced together from Buddhism, Con- fucianism, Taoism, and other elements of adapted belief and rules of status--the Imperial House becomes the recognized symbol of the dominance of the family and patriarchal system of Japan. ^
Thus the Imperial House stands for the principle of Bushido, or the ethic and practice of the spirit of complaisant subordination to the universal rules of status which becomes complete only with un- questioning acceptance by the mass of the population of the atti- tudes, the duties, and the compulsions expressed in "the state of being willing and ready to die at any moment at the bidding of a recognized superior. " Bushido, writes an ardent proponent, "is the result of the feudal ages--entirely governed and thoroughly
5 Veblen, Essays in Our Changing Order.
6 "History records that all manner of foreign ideas have, from time to time, flooded the nation, but standing like a sun, about which these new ideas found their proper and subordinate place, has, through long ages, stood the Imperial House. Indeed no foreign idea--Buddhism, Christianity, Democracy, Socialism,--may survive in this country and find root in the consciousness of the Japanese unless it subordinates it- self to that undefinable yet all-pervasive soul element of the Yamato race, which stands crystallized and symbolized in the person and tradition of His Imperial Maj- esty. For deep in our race is rooted a reverence for the Emperor as the descendant of the very gods to whom we owe our being. Indeed, even to speak the words 'Tenno Heika' or 'Shison' conveys to us a very solemn and deep impression and stirs to depths our profoundest emotions. To explain or rationalize this attitude is un- necessary; it is fact and true because it exists. " Quoted from the Japan Times in Professor Taid O'Conroy, The Menace of Japan (New York, 1934), p. 71. See also Uichi Iwasaki, The Working Forces in Japanese Politics (New York, 1921).
87
? 88 KOKUTAI AND CO-PROSPERITY
permeated by sovereign authority and humble obedience. " ^ While Bushido, as the principle underlying the etiquette of a past age of feudal knighthood, has been greatly undermined during the modern era,^ it has apparently been quite easy to translate its ancient sanctions into modern terms. Throughout the Japanese literature dedicated to preservation and strengthening of the status quo runs the language borrowed from Bushido: "loyalty," "honor," "obedience," "sacrifice," "duty," "humility," "unity," "harmony," "patriotism," "authority," and similar terms. These are the terms, and the blending underneath them is in line with the ideas and points of view, of course, which are typical of Fascist ideology in Europe. They express the habitual turn of mind of a caste-ordered society, well-schooled in the techniques required to divert, canalize, and control popular strivings from below. Their utility to the
central authorities in the promotion of imperial expansion abroad and the structures of autocratically governed self-sufficiency at home are entirely obvious.
The ease of transition from the old to the new has been further facilitated by the fact that the interlude between the Meiji restora- tion and the consolidation of the current system did not see the rise of sufficiently powerful antagonistic popular movements to shake the transmuted structure of traditional class control. There was, to repeat, no real "liberal period" but rather a time of blend- ing of inherited social biases with altered interest groupings. But the incubus of the past was too heavy and the period of time before the new lines of autocratic control became clear was too short for labor unions, farmer groups, consumers' cooperatives,^ or even the more general and confused liberal middle-class parties, to strike deep roots.
7 Professor Yasuma Takata, "Kulturelle und geistige Voraussetzungen fiir Japans Aufstieg. " Weltwirtschaftliches Archiv, XLVI (July, 1937), 1-13.
8 See Bushido, the Soul of Japan (Philadelphia, 1900), written by Inazo Nitobe of the Imperial University, who translates the term to mean "Military Knights' Ways" or "Precepts of Knighthood. " Bushido is not, however, to be compared with the humane chivalry of the Arthurian legend; it represents, on the contrary, "the essen- tial readiness of the warrior to lay down his life in battle since he regarded life as a transitory gift the enjoyment of which, like the blossom of the cherry tree, was necessarily of short duration. " London Times, March 18, 1942.
9 Cooperatives were very extensive in the countryside and actively fostered by nu- merous government agencies (federal and local). But all were carefully controlled and have functioned in the manner of mutual-aid societies to relieve the monotony and poverty of the agrarian way of life.
? KOKUTAI AND CO-PROSPERITY
Thus the new Japanese totalitarianism has been easier to achieve than in any other major industrial-capitalistic country. More than that, it has provided an environment which not only enormously facilitates the centralization of policy-forming power in business, but also identifies immediately the feudal and patriarchal-minded hierarchies of business with the political and military bureaucra- cies. Japanese capitalism, in short, has been in large part and from its very beginning an upstart phase--but part and parcel, neverthe- less--of the Japanese political and social system of status--a system on the economic side, in a word, of status-minded monopoly capi- talism. Its closest historical parallel is probably the system forecast in the Kameralism of Frederick the Great; in contemporary times its approximates the patterns of Nazi Germany.
At the center of the system on the economic side stand the great state-encouraged, monopolistically-oriented, and patriarchally- governed family enterprises known as the Zaibatsu. Around, and in large part directly subservient to, these are the lesser enterprises, business and agricultural federations, handicraft guilds, colonial development corporations, "mixed enterprises" and other forms of economic organization and control.
THE ZAIBATSU: AT THE CENTER OF THE WEB OF CONTROL
The numbers of the Zaibatsu are limited, but they differ with the sources quoted. G. C. Allen ^^ and Neil Skene Smith ^^ refer to the "Big 4. " The Japan-Manchoukuo Year Book ^^ (semiofficial) re- fers to the "Big 3," the "Big 8," and the "Big 14. " The first seems to be the more commonly accepted number, since generically the term Zaibatsu means "money cliques," and "of these, four are out- standing--namely, Mitsui, Mitsubishi, Sumitomo, and Yasuda. " More loosely the term is applied to large-scale business combina- tions in general. ^^
10 G. C. Allen, "The Concentration of Economic Control in Japan," Economic Journal, XLVII (June, 1937), 271-86.
11 Neil Skene Smith, "Japan's Business Families," The Economist, June 18, 1938, pp. 651-56.
12 See in particular the 1938 issue dealing with Konzerns of Japan.
13 Such as Okura, "concerned chiefly with trading, mining, textiles and motor- transport; Asano with cement, mining, iron and steel and heavy engineering; Kuhara with heavy engineering, chemicals, mining and aquatic products; Ogawa-Tanaka
89
? KOKUTAI AND CO-PROSPERITY
The dominating role of the **Big 4" is without adequate parallel in any other major capitalist country. Smith cites estimates which "have suggested that sums equal to 60 per cent of the 2 1,000 million yen (? 2,100 millions, at par) invested in all Japanese joint-stock companies are controlled by these concerns; and that Mitsui alone accounts for 5,000 millions yen (? 500 millions), or nearly 25 pei cent of the total. " ^* Adding to the "Big 4" the banking interests oi the Shibusawa and Kawasaki concerns, the six groups held in 1938 57 percent of all funds deposited in banks, trust companies, life, marine, fire, and accident insurance companies ^^--a figure, by the way, which contrasts with an estimated 45 percent equivalent for 1929-
Their range of interests extends to all the modern industries of Japan and to some of the traditional trades also. Shipping, shipbuilding, foreign trade, warehousing, colonial enterprise, engineering, metal manufacture, mining, textiles, and sugar- and flour-milling all fall within their sphere. . . . A glance at a few of the leading trades will show the extent to which the concentration of control over industry and trade has been achieved. For this purpose we may confine ourselves to Mitsui, Mitsubishi and Sumitomo. These three control about half the copper production and nearly the same proportion of the coal out- put, and Mitsui Bussan (the trading company of Mitsui) alone deals in about one-third of the coal marketed in Japan. More than half of the tonnage of merchant ships is owned by them. Of the steamers building in 1936 55 per cent of the gross tonnage was being constructed in yards belonging to Mitsui and Mitsubishi. The Oji Company controlled by Mitsui has about 75 per cent of the capacity of the paper industry and Mitsubishi owns the greater part of the remainder. These two firms possess 70 per cent of the flour-milling capacity and practically all the
with chemicals; Kawasaki with banking, insurance, rayon and shipbuilding; Shiba- sawa with banking, shipbuilding and engineering; Furukawa with copper-mining and refining and electrical plant; Mori with chemicals and electric-power genera- tion. " Allen, "The Concentration of Economic Control in Japan," p. 272.
14 Smith, "Japan's Business Families. "
15 The shares of the Big Six and the Big Four respectively in the following were, in 1938: Bank Deposits, 59% and 40%; Property in Trust by Trust Companies, 68% and 66%; reserves of life insurance companies, 28% and 20%; and reserves of marine, fire, and accident insurance companies, 82% and 73%. Again, recent war years have seen a huge expansion of the Zaibatsu. This can be seen by comparing the data of the 1940 (p. 1140) and 1941 (p. 1134) issues of the Japan-Manchoukuo Year Book. From June, 1939, to June, 1940, the estimated worth of companies controlled by the Zaibatsu jumped from 1,857 niillion yen to 2,368 million yen for Mitsui, 1,745 million yen to 2,050 million yen for Mitsubishi, 1,712 million yen to 2,390 for Mangyo, 624 million yen to 1,330 for Sumitomo, and 484 million yen to 540 for Yasuda.
90
? KOKUTAI AND CO-PROSPERITY
sugar-refining mills. Much of the chemical industry is in their hands, including the bulk of the ammonium-sulphate and artificial fertiliser production. Mitsubishi dominates the aircraft industry, and through its control over the Asahi Glass Company monopolises the sheet-glass output. About half of the goods in warehouses are in those owned by the three great Zaibatsu, who also conduct about one-third of the for- eign trade. Mitsui Bussan alone is responsible for nearly one-fifth of this trade; it imports a quarter of the raw wool used in Japan, and about the same proportion of the raw-silk exports passes through its hands. Toyo Menkwa, another Mitsui concern, until recently handled one- third of the raw cotton imports and one-fifth of the exports of cotton textiles. Most of the enterprises which have been founded to develop the raw material resources of the colonies, Manchukuo, China, and the South Sea countries have been established by the Zaibatsu; for instance, much of the Manchurian soyabean trade is conducted by them or their subsidiaries. The great cotton-spinning industry is less dependent upon the Zaibatsu than are the other large-scale trades. Yet even here Mitsui has interests in Kanegafuchi Boseki, and Mitsubishi in Fuji Gasu Bo- seki, which are among the six largest companies in the country; while Mitsui, through its subsidiary, Toyo Menkwa, has control over several smaller concerns. Mitsubishi controls much of the canned-fish trade, one of the three large brewery companies in Japan and one of the two large foreign-style confectionery manufacturing companies. The Zai- batsu are predominant in the heavy engineering industry. Their in- terests extend to woollen textiles, rayon, cement and petrol-refining and dealing. In all the new industries as they have appeared the Zaibatsu have usually taken the initiative. At present Sumitomo is developing the aluminum industry, and Mitsui the hydrogenation process. ^^
Such data take on added significance when it is realized that the Zaibatsu "are pre-eminent at once in finance and also in industry and commerce. " In this respect, Japanese industrial development is similar to that of Germany, where the interdependence between banking and industry has been extremely close from the very be- ginning. Yet the degree of control over both fields is not only more closely held in Japan than in Germany, but the fact that in Japan, as in no other country of the world, the general public puts its money into savings accounts as fixed deposits rather than into in- dustrial securities tends still further to enhance the importance of this interlinkage. "The small producers," Allen points out, "who in the aggregate are responsible for the larger proportion of the output of consumable goods, are financed by merchants, who, in
16 Allen, "The Concentration of Economic Control in Japan," pp. 276, 277, 278.
91
? KOKUTAI AND CO-PROSPERITY
turn, obtain the bulk of their resources from the great banks. Those who control the financial institutions can, therefore, play a dominant part in the development of industry. " ^^ In this manner not only have many small firms come under the influence of the "Big 4," but also several of the other large concerns such as Okura, Asano, and the chemical properties of Nobuteru Mori.
"One can scarcely go into any corner of the Japanese Empire," writes Chamberlain, "without finding one of the big capitalist com- bines firmly entrenched and skimming the cream of whatever prof- its are to be made. " ^^ How wide-spread this "skimming" process has become can readily be visualized by the curious able to examine carefully the chart of the holdings and affiliations of the house of Mitsui reproduced in the Japan-Manchoukuo Year Book for 1938.
The importance of the Zaibatsu is further enhanced by the fact that the expansion of their interests and controls has been accom- panied by a general trend towards concentration throughout all phases of Japanese economic life, as shown by the following data: ^^
98
Total number of companies Number of big companies (with capital of over 5
million yen)
Proportion of big companies
to total (in percent) Paid-up capital of all com-
panies (million yen) Paid-up capital of big com- panies (capital over 5 mil-
lion yen)
Proportion of capital of big
companies to total capital (in percent)
1909 1 1^549
38 0. 3 1,367
495
36. 2
1913 1918 1923 1927 1933 15406 23,028 32,089 38,516 71,196
59 293 589 687 7>>3 0. 4 1-3 1. 8 1. 8 1. 0
17 Ibid. , p. 275.
18 W. H. Chamberlin, Japan over Asia (Boston, 1937), p. 228.
19 Data from Resume statistique de I'empire du Japon (Tokyo, 1912). P- 108; ibid.
(1924), p. 72; ibid. (1930), p. 46; ibid. (1934), p. 44; ibid. (1936), pp. 46-47. According to an investigation by the Industrial Bank of Japan, quoted in the Osaka Mainichi and Tokyo Nichi Nichi (English), July 26, 1941:
1st half of 1940 2nd" " "
No. of Am't of capital mergers involved (in yen)
69 1,802,353,000 143 2,093,143,000
1st " " 1941 172 The Bank gives the following reasons for the increase:
3,024,770,000
1,983 4.
35 "Metayage, a system of land tenure in Western Europe and also in the United States, in which the farmer pays a certain proportion (generally half) of the produce to the owner (as rent), the owner generally furnishing the stock and seed or a part thereof. " Murray, New English Dictionary.
36 "The economic life of Italy is basically rural. . . . The total gainfully occupied population of ten and more years of age is 17,262,521; 8,083,332 are occupied in agriculture. The total population of the country in 1931 was 41,176,671, of which num- ber nearly 48 percent was comprised in families whose head was employed in agri- culture. . . . Data for any of the last thirty or forty years would not give a substan- tially different picture of the economic structure of the rural population. " Schmidt, The Plough and the Sword, pp. 1, 10.
37 "According to the occupational census of 1931, roughly 8,000,000 persons over the age of 10 are engaged in agriculture. Of this number about 3,000,000 are classed as 'operating owners,' 900,000 as 'cash-tenants,' 1,700,000 as 'share-tenants,' 2,500,000 as 'wage-workers,' and 27,000 as 'managers. ' " Idem.
38 "The 3,800,000 dwarf and small holdings comprise but 32. 7 percent of all the
70
? THE FASCIST SYSTEM
tionship between the possessing and the landless classes was of a distinctly feudal stamp.
This feudal stamp was not lost when the great Po Valley estates went over to modern forms of highly mechanized industrial agri- culture during and following the war. Relationships between mas- ter and men continued in much the same atmosphere as before, with the main difference that the latter had lost whatever social claims they had once possessed, and that the former, much as in the case of large-scale agriculture on the American Pacific Coast, had been freed of certain more or less compelling obligations assumed under the technically more primitive arrangement. That is to say, the mood, the social outlook, the plans and programs of the leading figures in the General Confederation of Agriculture were of the patronal, patrimonial, feudal stamp.
Not until after the war did employer interests in the industrial field succeed in attaining the level of central organization achieved by agricultural employers in 1911. Earlier efforts had been made from time to time, the last preceding attempt in 1910 having, even at that late date, proved premature. ^^ In 1920 the General Confed- eration of Italian Industry was organized as a central policy-forming body for some one hundred member bodies,
divided among federal organizations [of which twenty-five were na- tional] and local organizations and was made up of two sections:
(a) The Economic Section, which protected all kinds of industrial in-
terests and set up as its aim the defense of those interests by means of direct co-operation in the drafting of laws and also by supporting the interests of its members against the state;
(b) The Trade Union Section, which studied and solved problems connected with the relationships between industrialists and the staff dependent on them, and also problems connected with social legislation. *^
All commentators agree that the Confederation was a highly or-
ganized institution, exercising "a powerful influence on the whole
farm land in the country, whereas the 400,000 large farms control 67. 3 percent thereof. These figures evince the extreme concentration of land ownership in rela- tively few hands. " Ibid. , p. 13.
39 A parallel attempt made in that year to form the Association of Italian Joint Stock Companies (Associazone fra le Societa Italiana per Acione) was more success- ful. It maintained an independent existence through the war, and was instrumental in the accouchement of the Confederation of Italian Industry. See Pitigliani, The Italian Corporative State, pp. 144-45.
40 ILO, Freedom of Association, IV, 9.
71
? THE FASCIST SYSTEM
of national life" from the day of its inception. As with its agricul- tural counterpart, it united in a single body both social (primarily antilabor) and economic interests. Headquarters were maintained at Milan, the leading industrial city of north Italy, which, being located in the center of the upper Po Valley, brought them into immediate juxtaposition with the Agricultural Confederation. And the leading figures in the Confederation were the captains in com- mand of that impressive network of large-scale industrial enterprises which were concentrated in that area.
Not only did the big industrialists lead in the inner councils of the Confederation, but the establishments over which they held control fell largely, and in some respects entirely, in the general classification of the *'new" industries which had arisen out of chemi- cal and engineering research after the turn of the century. Italy was a comparatively late industrial arrival, and she lacked, furthermore, material resources for the large-scale development of many of the older industries. The newer industries required large initial out- lays in scientific research and experimental development; their capi- tal needs were heavy and, once launched, they were closely protected under patent and similar monopoly controls.
Within the northern Italian manufacturing nucleus the most im- portant industries were heavy chemicals, machines, textiles, and engineering. Most of the big concerns, such as Snia Viscosa in rayon. Fiat and Isotta Fraschini in automobiles and allied lines, Ercole Marelli and Pirelli in electrical manufacturing, Breda in railroad equipment, and the giant Montecatini in the chemicals, ordnance and metal field, date either from immediately before the First World War, or rose to importance during and immediately after that catastrophe. *^ Most of them were financed in whole or in part
41 Snia Viscosa: founded July 18, 1917, headquarters and larger plants at Milan, capital in 1938, 525,000,000 lire; Fiat: founded in 1906, headquarters in Milan (auto- mobiles, diesel engines, parts, railroad stock, airplanes and engines, etc. ), capital in 1939, 400,000,000 lire, employed 54,000 workmen; Montecatini: founded in 1888, headquarters in Milan (copper, pyrites, sulphur, fertilizers, dyes, varnishes, rayon, aluminum, pharmaceutica, etc. ), capital in 1938, 1,300,000,000 lire; Ercole Marelli: successor in 1920 to parent company founded 1891, headquarters in Milan (electrical equipment, motors, generators, pumps, etc. ), capital in 1938, 80,000,000 lire; Isotta Fraschini: headquarters in Milan (steel, automobiles, engineering, ordnance, bronze, aluminum, magnesium, etc. ), capital in 1938, 120,000,000 lire; Pirelli: founded in 1920, headquarters in Milan (electrical cables, automobile tires, etc. ), capital in 1938, 263,981,500 lire, 20,400 employees; Breda: successor in 1899 to parent company or-
72
? THE FASCIST SYSTEM
73 by foreign capital/^ catered directly or in large part to a demand dominated by the rapidly expanding transportation, communica- tion, and power networks which were of at least a semipublic char- acter on the one hand, or sold directly to the various governmental bodies concerned with public construction and war needs on the other. All of these factors made not only for large scale develop- ment, but also for expansion on a monopolistic or semimonopolistic
footing from the very beginning. *^
Under auspices such as these--and it cannot be too strongly em-
phasized that in Italian industrial councils the great preponderance of power and influence lay in these circles--the natural, normal, matter-of-course attitude of the leadership of the General Confed- eration of Italian industries should have been monopoly-oriented in all economic affairs, and patronal or feudal in all social matters. That is to say, the exigencies of background and organization were such as to cause complete accord with the General Confederation of Agriculture (most conservative and reactionary and at the same time most highly developed of agricultural employer associations any- where in the world) in the normal course of peacetime events. How much more logical then, that, given the recent, vivid experience with the autocratic controls of war-time, they should face a new emergency with the mood, the outlook, and the will to improvise the necessary weapons for consolidating a common front of em- ployer interests against the threat of revolutionary action from below.
ganized in 1850, headquarters in Milan (steam and electric locomotives, railroad rolling stock, ships, airplanes, etc. ) capital in 1938, 127,800,000 lire, 17,073 employees. 42 There were, in addition, a good many important, wholly foreign owned, subsidi- aries, such as the Societa Generale Italiana Viscosa (capital in 1938 of 75,000,000 lire, and wholly owned by the British firm. General Rayon Ltd. ) and the branch systems of Ford and General Motors. Most of these concerns have branches and affiliates scattered all over Europe, and corporate holdings, spheres of influence, etc. , interlace with other foreign holdings until it is practically impossible at any one point to
unravel the skein.
43 A situation arose, in other words, not greatly unlike that which W. Sombart
traces at such length in Der Moderne Kapitalismus (Leipzig, 1902), I, Part II, through the early mercantilistic and cameralistic phases of capitalism, when the army and public authorities dominated so many of the leading supply industries. Added to this is the point Veblen has argued so cogently for Germany--in his Imperial Germany and the Industrial Revolution (New York, 1915)--that the borrowing country borrows the latest, most advanced techniques of production and marketing. The Italians borrowed from abroad large-scale production methods and monopoly forms of organization.
? THE FASCIST SYSTEM
74
Not, of course, that there is any direct proof that the General Con-
federation of Italian Industries singly or in association with other employer bodies did actually "think up" the Fascist state. Nor, even, that there was uniform agreement within these circles on just exactly what and how to face the critical situation that arose in the postwar confusion. ** But that they did find in Fascism something which they could support and from which they could derive great advantages to themselves there is no longer any question whatsoever. For present purposes, the significant fact is that the organizational structure, spun after much trial and error under the Fascist regime, is a straight-line development from that which had been evolved out of these employer circles in the past, and that the system which fol- lowed the March on Rome was coherent not only with former growth trends, but also with the attitudes and ideologies which had become dominant in organized Italian business.
The Corporate State. --Again it is not necessary to recapitulate in detail the numerous, and for present purposes, largely accurate sum- maries that have been made of the machinery of the corporate state, or the steps by which this machinery has been brought to its current state of development. The system is not yet complete, enthusiastic proponents avow, and is not likely to reach that state for a long time to come, if ever. Many of them like to stress that it is of the very nature of Fascist institutions that these neither do nor can achieve settled and permanent forms, since they are devised as flexible in- struments to encourage growth and change and not as glove-fits for a static condition.
It may be in point, however, to indicate briefly a few of the fea- tures of the new system which make it appear not so new or out of line with recognizable trends abroad. In its most recent annual pub- lication, the Fascist Confederation of Industrialists, successor in 1926 to the General Confederation of Italian Industry discussed above, speaks of the new system as a "guild economy," this being, they say, "the nearest English equivalent to the Italian 'corpora-
4* There were conflicts at numerous points between organized industry and agri- culture, between heavy and light industry, between industrial and financial interests. See Daniel Gu^rin, Fascism and Big Business (New York, 1939), for a discussion (very inadequate) of the conflict of interests between the Banca Commerciale Italiana, representing light industry, and the Banca Italiana di Sconto, representing heavy industry, in the early days of the Fascist dictatorship. See also Rossi, The Rise of Italian Fascism.
? THE FASCIST SYSTEM
75
zione. ' " And they cite a dictionary definition of the word "guild" which terms it "a corporation or association of persons engaged in kindred pursuits for mutual protection and aid. " If then, you "ex- tend this definition to a whole nation of producers . . . you have a fairly adequate conception of Italian guild economy. " *^
"An Outline Study" of "The Organization of Production and the Syndical Corporative System," especially prepared for the American public by the official New York representative of the Italian propa- ganda ministry, makes much the same point. Finding a "general identity of motive and a somewhat similar process of development among all associations of producers from the dawn of history down to our modern age," the writer, significantly enough, traces the rise of ideas and elements leading to and incorporated in Italian Fascism from most ancient times through associations fixed in social status, occupationally circumscribed, self-contained, and exclusive, and making for "harmony" in society. The associations succeed in this by virtue of the subjection of their members to a regime of class stratification, characterized by relative vertical immobility, and rigorously controlled from above by a self-appointed and cooptative "elite. " Governance proceeds via the instrumentalities of hierarchi- cal privilege and prerogative provided by the political apparatus and is exercised "authoritatively" (antidemocratically) over such occupationally organized servile and semiservile strata below. *^
Direct precedents are traced to the Papal Encyclicals of Rerum Novarum and Quadragesimo AnnOj to the earlier organizations of labor and capital which preceded these, and to the model of D'Annunzio's "10 corporations of producers"; in its turn, D'An- nunzio's model was adapted from the Quadragesimo AnnOj in terms of the "integral syndicalism" advocated by the Rerum Novarum.
45 Fascist Era, Year XVII, p. 33.
46 China: "Corporative life has always been the cornerstone of the static civiliza- tion of China. " Its universal system of "organized groups of producers" was on a "voluntary," "caste" footing which "combined Church, school, court and town-hall of occidental communities" and which was characterized by "absence of sharp fric- tion between the employer and the employee. " India: "Division of labor has also been the keystone of society" practicing "rigid separation of groups from a social and religious standpoint. " Egypt: had a "system of organized and coordinated labor" with "privileged classes" and "state controlled corporations," etc. The Near East, ancient Rome and the medieval guilds: the latter are termed "functional democra- cies," an idea which may have led to the description of Fascism by the engaging expression "authoritarian democracy. " See The Organization of Production and the
? THE FASCIST SYSTEM
In the evolution of Fascist corporative ideas, the exact role of the Fiume programs, known as the "Carta del Quarnaro," is not clear. Announced in a burst of lyric enthusiasm as the Constitution of the Free State of Fiume by the poet Gabriele D'Annunzio, Sep- tember 8, 1920, it proposed to do away with all past parliamentary institutions and the old state bureaucracy and to substitute for the "citizen" the "producer. " All former state functions were to be decentralized and managed by ten compulsory but "autonomous" (self-governed) corporations of producers, divided along parallel lines by employer and employee interests and grouped according to major occupational interests. ^^ Property was not to be abolished but capitalists were to become "wise leaders seeking to further the in- terests of their company" *^ according to the principle that the "sole
Syndical Corporative System (Italian Library of Information, New York, 1941), and Fascist Era, p. 32.
47 According to Article 19 of the Carta del Quarnaro, the corporations or guilds were to be constituted as follows:
"In the first guild are enrolled the salaried workmen in industry, agriculture, commerce, and transportation; and the artisans and small proprietors who perform their own rural task or who have a few casual helpers.
"The second Guild comprises the technical and executive staff of every private industrial and rural establishment, excluding the proprietors themselves.
"In the third are enrolled all those attached to commercial establishments, who are not strictly workmen; and in this too joint-proprietors are excluded.
"The fourth Guild unites the promoters of industry, agriculture, commerce, and transportation, provided they are not merely proprietors, but according to the spirit of the new laws, wise leaders seeking to further the interests of their company.
"The fifth is composed of all public, communal, and civil employees of all ranks.
"The sixth comprises the intellect of the land: the young student body and its in- structors; teachers in the public school and students in the higher institutions, sculp- tors, painters, decorators, architects, musicians, and all those who carry on the fine arts, scenic arts, and decorative arts.
"In the seventh are enrolled all those who practice professions of their own choice which have not been included in the preceding classifications.
"The eighth is composed of cooperative societies in production, labor consump- tion, whether industrial or agricultural; and only the executives of these same soci- eties can be represented.
"The ninth comprises all sea-faring people.
"The tenth has neither art, nor number, nor title. Its coming is expected like that of the tenth Muse. It is reserved to the mysterious forces of the people consecrated to the unknown genius, to the apparition of the new man, to the ideal transfigura- tion of labor and time, to the complete liberation of the spirit over pain and agony, over blood and sweat. It is represented, in the civic sanctuary, by a burning torch upon which is inscribed an old Tuscan work of the time of Communes, a remarkable allusion to a spiritualized form of human labor: Fatica Senza Fatica [Toil without Toil]. " From a mimeographed translation in the library of the Casa Italiana, Co- lumbia University.
48 Idem.
76
? THE FASCIST SYSTEM
lawful claim to dominion over any means of production and ex- change is labor. Labor alone is master of the thing made most advan- tageous and more profitable to general economy. " *^ The state was not to intervene in the internal life of the corporations so long as relations within and amongst the corporations were felicitous and peaceful.
Two fundamental ideas underlie the Fascist redaction of ideas borrowed from these sources. First is the conception that readers of an historical turn of mind will recall underlay the attempt of Col- bert, the great French mercantilist, to smash feudal localization and trade restrictions by (a) generalizing the structure of guild controls so that they would not serve as barriers between different sections of the country, but would become coextensive with the national do- main, and by (b) endowing such expanded trade organizations, either as a whole or segmentally by concerns or groups, with mercan- tilistic prerogatives of regulated self-governance and monopolistic privilege. ^^ For the medieval guilds in the Colbertian effort, sub- stitute the preceding organizations of business and labor in the Fascist system. The Fascist systematization of the whole of the ma- chinery taken over along definite model and hierarchical lines is thus seen to represent peculiarities of organizational procedure, and not differences of theory.
In the second place, the Fascist innovations centered around the plan to expand the structure of controls of the legal business cor- poration to the whole of the associations and federations with which such corporations were associated; this was to be done, how- ever, without at the same time endowing the parallel organizations of labor with power to counteract the expanded controls--^which, of course, would have defeated the main purpose. Under the old regime, the individual corporation possessed, wherever it was free to act as it desired, a system of rigorous and thoroughly despotic controls over policy formation and execution. Outside of the in- dividual corporation and amongst corporations of like business interests, power shaded off into a loose penumbra of more or less unenforceable ''communities of interests. " The Fascists sought to substitute in place of the penumbra the more compact, "dense,"
49 Ibid. , Article 9.
50 See Eli Heckscher, Mercantilism (London, 1935).
77
? THE FASCIST SYSTEM
and imperative regime of command and subordination of the busi- ness corporation.
This regime was to relate to the whole range of economic and social issues which concerned the conduct of economic activity. It had to do, in other words, with prices, production, markets, cost systems, plant expansion, taxation, subsidies and subventions, tar- iffs, and the rest, as well as with labor problems. But if extension of the characteristic internal regime of the business corporation to the whole of each trade or industry or "category" or "cycle of production," was to be carried through, what was to become of the trade unions? Were these, in compliance with the first concep- tion, to be expanded parallel with the employers' associations? And if so, how reconcile the new set-up with the second con- ception?
The answer was found in taking the form of the first and the essence of the second. More simply, the powers of the business cor- poration were expanded to cover the entire industry, and the trade unions, now deprived of all power of independent action, were forthwith expanded into all-exclusive bodies under the au- thority of a central administration, which was sympathetic with and closely allied in aims, programs, and point of view with the business interests--if it was not at times and places, as some critics aver, wholly dominated by these interests.
However, the structure of the system devised over the inter- vening years has, in ways but slightly different from the mechanism of the Hitlerian variant, shown that the attempt to carry through some such a program of coordinated, definitive and all-inclusive class controls, presents but a limited series of organizational alter- natives. Hierarchy is of the essence of its structure. Authority comes from the top down in all things, and responsibility from the bottom up. Coverage is of necessity "totalitarian" ^^ that is, over all persons in all sections of the country and in all their activities.
There are five major bureaucracies to be codrdinated in the new system: those of the economic world, the army, the Church, the civil service, and the Fascist party. Coordination--which may and probably does mean to a considerable degree social-economic fu- sion through marriage, group associations, and other devices, in
81 See Chapter VIII, below.
78
? THE FASCIST SYSTEM
79
the upper reaches of the hierarchy--^required the following modi- fications and compromises:
(1) all occupational or economic groupings in whatever field are organized in all-inclusive categories directed by policies coherent with the interests of, if not actually formulated in detail by, the great leaders of industry, commerce, finance, and agriculture;
(2) the relationships among these are militarized according to the pattern known in management literature as "military organ- ization," and are enforced by a coordinated military and policy system;
(3) the Church undertakes to inculcate in both "leader" and "led" a mood of satisfaction and contentment with the pastor ("trustee of God")-to-his-flock relationship and with the super- session of transcendental over materialistic biases and values;
(4) all relationships are formulized by and through an all- pervading bureaucracy, which circumscribes rounds of duties and responsibilities, in the performance of which--as interpreted by superior officers in the hierarchy--it is vested with state authority;
(5) the Fascist Party sees to it that these various phases of coordi- nated class domination are fused by moving them along the path of imperial expansion, a path kept open by a cumulatively enliv- ened nationalistic sentiment and the imminent danger of war.
The resultant structure of control, so far as it bears on the sub- ject matter of the present study, is less complex than it appears at first. The main outlines are simple. Four "principles" are said to dominate: organization by occupational, or trade "categories"; organization by regions; organization by social position; and or- ganization by hierarchy.
(1) Occupational categories mean exactly what they imply--the basis of segregation is the more or less clearly delineated trade, industrial, or occupational zones. These are called syndicates.
(2) Some 13,464 in number, the syndicates are in turn grouped (a) into provincial and interprovincial Unions, of which there may be ^2 some 882 altogether, and (b) into national category federa- tions, of which there are 1 50 all told.
52 "May be," since there is a provincial Union in each of 98 provinces (including four for Libya) for each of the 8 "main branches of activity" only if, however, these activities are to be found in each province. Since it appears that such a provincial Union is established wherever there is to be found more than one local organization,
? 8o THE FASCIST SYSTEM
(3) The ^'integral syndicalism" principle calls for all-inclusive parallel employer and employee organizations all the way down the line, except that (a) the basis of category division need not be exactly the same, that is, the labor category may be broader or nar- rower than the corresponding employer category ^^ and conse- quently the number of categories may be larger or smaller, and (b) the arts and professions fall more or less entirely outside the employer-employee bifurcation.
(4) Finally, the hierarchical principle holds throughout, and in three general aspects, (a) Structurally, proceeding from the local, syndical, employer or employee interest, with but local, syndical, employer or employee power and authority, on up through the provincial and interprovincial Unions on the one hand, and the national Federations, Confederations of Federations, and the Na- tional Council of Corporations on the other. This part of the Italian system is strikingly like the system devised by the Nazis and outlined in Chapter I. (b) As between the employer and the worker categories, it would appear from all the available evidence that employer interests definitely hold the upper hand, and that through this rather complicated machinery, the rule which makes the employer Herr im Hause within the factory relationship like- wise holds in the social field. The model here, as previously pointed out, was Catholic "integral syndicalism," and Salvemini is unques- tionably correct in comparing these directly with "company unions. " ^* (c) Authority throughout the entire pyramid stems from the top, with the head of the government (Mussolini) in theory the fountainhead of all delegated offices and competencies. The system, in short, is entirely and exclusively cooptative at the top; from that point downwards it is appointive with tenure, du-
there must be the number indicated unless such economic provinces (without more than one) are to be found in Italy, which is improbable. I have been unable to learn anything whatsoever about the number or the functions of the "Interprovincial Unions. "
53 Thus, there are 5,826 workers' "Local Syndical Associations" for 6,595 in the employer classification. In the next layer, there are 32 National Federations for the former to 96 for the latter. There are equal numbers of National Confederations (4 each), and the principle of "equal representation" holds for the National Council of Corporations, though the basis of classifications bears no necessary relationship to that obtaining below.
54 Salvemini, Under the Axe of Fascism, Chapter VII, "Company Unions, Nazi Unions, and Fascist Unions. "
? THE FASCIST SYSTEM 81
ties, and responsibilities subject to instantaneous alteration in any fashion whatsoever from on top--which means, of course, no re- course whatever, from below, grounded in substantive rights. ^^
Legal authority begins in theory with the National Federations (Juridical Associations of the "First Degree") and expands in power and influence upwards through the Confederations (Juridical As- sociations of the "Second Degree") and the National Council of Corporations; it comes to a head in the sovereign Chamber of Fasces and Corporations. All powers and authorities derive from this fountainhead. But the fountainhead is--as all such human institutions are--in turn, controlled by dominant pressure groups. Who are they?
Several analyses have been made of the social composition of the inner controlling groups. ^^ All of them reach the common con- clusion that the leading personalities are those associated with the great landowning, industrial, commercial, and financial houses and associations on the one hand, and the central leadership of the closely allied, socially compact, and self-perpetuating military, clerical, civil service, and party hierarchies on the other. Who, or what particular group, at any given time holds the upper hand can only be determined by independent analysis of the interplay of facts, forces, and personalities on each separate occasion. But it is beyond dispute that the net result, judged in the light of all the available facts, is coherent with the interests, the points of view,
the lines of growth inherent in monopoly-oriented, capitalistic enterprise, thus transmuted through acquisition of political power into a regime of exclusive privilege and patrimonial command.
Finally, it may be noted that there are not lacking Fascist theore- ticians able to find that these conditions are not only coherent with, but absolutely indispensable for the realization of, the economic
55 Except as guaranteed in the Labor Charter and in various decrees. These, how- ever, come entirely from on top, and are revocable at will--which is to say that they exist on tolerance and thus, in event of any point of dispute with the hierarchy of command, ultimately not at all. Most of the "labor leaders" are actually not laborers, being typically of "middle class" origins. In any event, they must be Fascist party members, they are appointed upon recommendation of Fascist party selected panels through the Fascist party hierarchy, and they owe no responsibility whatsoever to the syndicates which they do not represent but command.
56 See Salvemini, op. cit. , pp. 43-49, Ebenstein, Fascist Italy, Schmidt, The Plough and the Sword, and Louis R. Franck, Les Etapes de I'economie fasciste italienne (Paris,
1939), pp. 43-45.
? 82 THE FASCIST SYSTEM
equilibrium which constitutes the long sought good of free com- petition. As argued, for example, by Amoroso, one of the leading Fascist academicians, the conditions which, under the regime of free competition, fix the point of equilibrium in the determination of wages are identical with those laid down in the Charter of Labor.
Why, then, is the Charter of Labor and the intervention of the state, required, one may ask! As summarized by an Italian student of corporative economy in the graduate school at Columbia Uni- versity, Giorgio Pelligrini, the answer of Amoroso and his com- patriots would run about as follows:
Ideal conditions of free competition cannot be realized in the present (unregulated) economic organization.
It is true that free competition brings about economic equilibrium; it is true that economic equilib- rium is the result of a sound economy; it is true that this sound economy improves the welfare of all classes; but there is to be found in present society no such thing as free competition. Liberalism, which pretends to be the champion of free competition, in reality brings about the division of society into two groups--the bourgeoisie and the proletariat --and strengthens the first against the second. Socialism, which pre- tends to cure the evil, in reality destroys free competition directly, and with it economic equilibrium and thereby sound economy. Corpora- tivism, instead, with the institution of organs whose sole aim is the elimination of all the influences contrary to a stable economic equi- librium, brings about the ideal conditions for the free play of economic forces, and, therefore, is the only sound economy.
If, as the Fascist Confederation of Industries comments, the con- fessedly antidemocratic principles of Fascist political regimenta- tion may be termed "authoritarian democracy," perhaps the view of Amoroso may properly be captioned "regimented free compe- tition"! It is doubtful if, under the new National Socialist guid- ance. Fascist logicians will be encouraged to resort further to many dubious circumlocutions. Verbundene Wirtschaft goes better with the institution of the lock-step in word as well as deed.
? Chapter III
JAPAN: KOKUTAI AND THE "CO-PROSPERITY SPHERE"
icrj^HE ECONOMIC WORLD nccds a guiding hand to direct its diverse JL energies," explained Mr. Ogura, head of the immense Sumi- tomo interests upon his appointment by ex-premier Konoye as "economic dictator of Japan. " Expected, as reported in American newspapers, "to become a sort of Japanese Knudsen," flanked at will by a " 'brain trust' . . . not of bureaucrats, but of business men" ^ of his own choosing, Ogura was vested with the powers of a supreme economic coordinator, in what has been described as "a complete corporative State built into the existing constitutional structure of Japan. " While one organ of state policy, the Supreme
Cultural Council, is to see that "all people will think only reformed thoughts," Mr. Ogura is to draw on all his business experience in order that the principle, "the public service first," may be sup- ported naturally through continuation by the Supreme Economic Council of control over Japanese industry under the system of
^
japan's peculiar institutional machinery
However strange this may sound to Western ears--and it is not so strange now as it would have seemed a short time ago--it repre- sents in principle nothing essentially new for the Japanese. Con- trol over business policies has always been highly centralized in the Island Kingdom, and that centralization is traceable, genetically, to environmental forces almost the complete inverse of those fos- tering similar movements in the United States and England. Tap-
1 New York Times, April i, 1941.
2 Hugh Byas, "Japan's Fascist March," New York Times, Dec. 15, 1940.
"private enterprise. "
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KOKUTAI AND CO-PROSPERITY
roots for centralization in these latter were struck in periods for- mally committed to unmitigated free competition and laissez faire. But in Japan, feudalistic carry-overs, mercantilistic practices, and monopoly-oriented capitalism have from the beginning stood side by side.
Throughout the period of the Meiji Restoration, the setting for the rise of Capitalism has been predominantly patriarchal, anti- democratic, antiliberal, anti-laissez faire, and those superficial con- cessions to Western petit-bourgois economic and political institu- tions, which on occasion faintly leavened the modern era, have, particularly in the light of more recent events, served only the more heavily to underscore the fact. ^ The principle of Kokutai--"the state body corporate"--carried over from ancient times has, under an economics dominated by large-scale governmentally fostered, industrial capitalism, served to knit seemingly disparate elements of old and new into an efficient and generically totalitarian state. Current lines of development are converging swiftly and unmis- takably to create a national system similar at bottom to that advo- cated by lawgivers of the Axis Powers, although the system does not approach full articulation in the best approved authoritarian manner.
Thus business enterprise in Japan has, from the earliest days, unfolded its activities in an atmosphere largely, and at times wholly, dominated by principles, controls, and social philosophies which are internally coherent with what we in the Western world have come more recently to identify as Fascism. The oriental symbolism, in keeping with a deep and tenacious past, is more heavily blooded with the naive chivalric pietism of a society still organized on lines
3 How superficial were the changes wrought in the social, political, and economic life of Japan by the "Enlightenment" (period of the Meiji Restoration) is nowhere better illustrated than in a series of articles, remarkable for their complete candor, contributed by various Japanese professors to a special Japanese edition of Welt- wirtschaftliches Archiv, Vol. XLVI, July, 1937. All the social legislation--even Parlia- mentary forms of election and representation--are treated very much as was Bis- marck's famous social legislation of the '80s, as authoritative reforms, concessions, and tactics, and not as evidence of either conversion of the Japanese people to democratic- liberal principles, or as moves occasioned by fear of popular antagonism from the submerged ranks at the bottom of the social pyramid. It is worth recalling, in this connection, that what the Japanese did copy along these lines was not taken in the main from England or the United States, but from Imperial Germany. See also Thorstein Veblen, "The Opportunity of Japan," in Essays in Our Changing Order
(New York, 1934).
? KOKUTAI AND CO-PROSPERITY
of status, and with the simpler patriarchal or familial charisma of its characteristic emperor and ancestor worship. Tenno (the em- peror), for example, is at once father, ruler, and high priest in a patently theocratic state still governed by rules of honorific eti- quette and graduated subservience. But if this renders the task of domination in a caste-minded society far easier for the oriental Fuhrer than for his Western counterparts, it is largely because in Japan industrial, commercial, and financial capitalism has been absorbed into the old social system without seriously and for long challenging or greatly modifying the preceding structure of con- trols.
It is especially necessary to emphasize this point now, for there exists a common disposition to look upon more recent develop- ments in Japan as either a complete reversal of policies dominant since the latter half of the nineteenth century,* or as the product of a somewhat vaguely conceived military coup d'etat. Neither, of course, is correct. The answer to the former is that Japan borrowed freely, adopted and adapted at need, but that she did not, with the decline of the Shogunate and formal repudiation of feudal controls, fundamentally alter at any significant point the nature or func- tioning of her hierarchical social order, and that as a result of this lack of change the new order represents somewhat less than a straight-line, but still a consistent, development from the pre- Meiji, pre-Perry times. And the answer to the latter is that mili- tarism, far from being antagonistic to either the new or the old, was actually part and parcel of both. In the hands of the Choshu and
4 See H. G. Moulton and J. Ko, Japan, an Economic and Financial Appraisal (Washington, D. C. , 1931), where the Restoration is regarded as a sharp and complete break with the past. Professor Saburo Shiomi refers to the occasion, "When Japan broke away from feudalism in 1848" and a few pages later on tells how "the old patriarchal conception of the family as a complete social and economic unit has been incorporated in the guild system. " "Aufbau der Industriewirtschaft and Technischer Fortschritt in Japan," Weltwirtschajtliches Archiv, XLVI Quly, 1937), 118-56. The "outward forms of feudalism," Professor Allen points out, were "gone for ever" with the crushing of the Satsuma rebellion in 1877. But he quotes a Japanese writer who appraises the significance of what was "set up in its stead" as "a bureaucracy that retained the spirit of the Shogunate. It is not too much to say that the political and social institutions of the new Japan were only another expression of the Tokugawa system. " To which Professor Allen adds, "The main result of the Restoration was, in fact, the substitution of what came to be called the Sat-Cho group for Tokugawa. It was a change of governors rather than a change in the system of government. " G. C. Allen, Modern Japan and Its Problems (London, 1928), pp. 62, 64.
85
? 86 KOKUTAI AND CO-PROSPERITY
Satsuma clans, the military order was so clearly shaped as a phase of the peculiar expansionist dynamism of totalitarian ideology, in- terests, and process, that the one is unthinkable in the absence of the other. In Japan, because of this continuity with the past, the identification of the old social order and the new economic and political forms of business ramification and military expansion is made more easily and more painlessly than was the case even in the Nazified streamlining of Prussianized Germany.
Not, of course, that there is or has been absence of conflict of interests and ideologies in contemporary Japan. Far from it. How bitter the internecine warfare has been between military and naval branches of the armed services, between civil administration and military juntas, between small business, labor and peasantry on the one hand and the huge and omnivorous combines on the other, or even amongst these latter themselves, it is extremely difficult, at least on the evidence available to foreigners, to say. It appears not only that such cleavages do exist, but also that they have been at times far-reaching and sanguinary. But they have never been suf- ficiently deep or fundamental to alter seriously the structure of Japanese society nor the sanctions upon which its castelike hier- archical controls rest.
The social framework of this system represents a fusion of feu- dalism and the concept of the patriarchally governed, absolute state. Stigmata of feudalism are to be found in connection with a peculiar social-occupational gradation on the one hand and a sys- tem of guild and guild-like associational groupings on the other. Some of the latter--such as various trade unions and cooperative societies--were for a period of time during the twenties more or less "free" of constraints exercised from above. During the thirties, however, and especially with the outbreak of war on the Asiatic mainland, such partial freedoms have been gradually worn away until, to all intents and purposes, freedom of association in the liberal-democratic sense no longer exists. With minor exceptions, all occupational categories in industry, trade, and agriculture are organized into more or less all-inclusive unions, associations, fed- erations, and guilds. But behind all such associational forms is a backdrop which represents a blend of the feudal spirit of "servile
? KOKUTAI AND CO-PROSPERITY
solidarity" and the patriarchal norms of an "autonomous co- optative bureaucracy. " ^
At the gravitational center of this somewhat confusing mesh- work of partially modernized clans, guilds, military cliques, family dominated bureaucracies and businesses, on the one hand, and hierarchically graduated occupational strata, classifications, "cor- porations" and federations, on the other, stands the omnicompetent tutelary and administrative authority of the state--a state in both theory and practice more absolute than those of the European "age of the benevolent despots. " In the Japanese symbolism, this power comes to focus in the person of the Emperor who, in addition to being supreme head of the lay state and commander-in-chief of the armed forces, is also the ceremonial director of the official religion of Shinto. Via Shinto--in itself a sort of combined system of social etiquette and personal ethic pieced together from Buddhism, Con- fucianism, Taoism, and other elements of adapted belief and rules of status--the Imperial House becomes the recognized symbol of the dominance of the family and patriarchal system of Japan. ^
Thus the Imperial House stands for the principle of Bushido, or the ethic and practice of the spirit of complaisant subordination to the universal rules of status which becomes complete only with un- questioning acceptance by the mass of the population of the atti- tudes, the duties, and the compulsions expressed in "the state of being willing and ready to die at any moment at the bidding of a recognized superior. " Bushido, writes an ardent proponent, "is the result of the feudal ages--entirely governed and thoroughly
5 Veblen, Essays in Our Changing Order.
6 "History records that all manner of foreign ideas have, from time to time, flooded the nation, but standing like a sun, about which these new ideas found their proper and subordinate place, has, through long ages, stood the Imperial House. Indeed no foreign idea--Buddhism, Christianity, Democracy, Socialism,--may survive in this country and find root in the consciousness of the Japanese unless it subordinates it- self to that undefinable yet all-pervasive soul element of the Yamato race, which stands crystallized and symbolized in the person and tradition of His Imperial Maj- esty. For deep in our race is rooted a reverence for the Emperor as the descendant of the very gods to whom we owe our being. Indeed, even to speak the words 'Tenno Heika' or 'Shison' conveys to us a very solemn and deep impression and stirs to depths our profoundest emotions. To explain or rationalize this attitude is un- necessary; it is fact and true because it exists. " Quoted from the Japan Times in Professor Taid O'Conroy, The Menace of Japan (New York, 1934), p. 71. See also Uichi Iwasaki, The Working Forces in Japanese Politics (New York, 1921).
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permeated by sovereign authority and humble obedience. " ^ While Bushido, as the principle underlying the etiquette of a past age of feudal knighthood, has been greatly undermined during the modern era,^ it has apparently been quite easy to translate its ancient sanctions into modern terms. Throughout the Japanese literature dedicated to preservation and strengthening of the status quo runs the language borrowed from Bushido: "loyalty," "honor," "obedience," "sacrifice," "duty," "humility," "unity," "harmony," "patriotism," "authority," and similar terms. These are the terms, and the blending underneath them is in line with the ideas and points of view, of course, which are typical of Fascist ideology in Europe. They express the habitual turn of mind of a caste-ordered society, well-schooled in the techniques required to divert, canalize, and control popular strivings from below. Their utility to the
central authorities in the promotion of imperial expansion abroad and the structures of autocratically governed self-sufficiency at home are entirely obvious.
The ease of transition from the old to the new has been further facilitated by the fact that the interlude between the Meiji restora- tion and the consolidation of the current system did not see the rise of sufficiently powerful antagonistic popular movements to shake the transmuted structure of traditional class control. There was, to repeat, no real "liberal period" but rather a time of blend- ing of inherited social biases with altered interest groupings. But the incubus of the past was too heavy and the period of time before the new lines of autocratic control became clear was too short for labor unions, farmer groups, consumers' cooperatives,^ or even the more general and confused liberal middle-class parties, to strike deep roots.
7 Professor Yasuma Takata, "Kulturelle und geistige Voraussetzungen fiir Japans Aufstieg. " Weltwirtschaftliches Archiv, XLVI (July, 1937), 1-13.
8 See Bushido, the Soul of Japan (Philadelphia, 1900), written by Inazo Nitobe of the Imperial University, who translates the term to mean "Military Knights' Ways" or "Precepts of Knighthood. " Bushido is not, however, to be compared with the humane chivalry of the Arthurian legend; it represents, on the contrary, "the essen- tial readiness of the warrior to lay down his life in battle since he regarded life as a transitory gift the enjoyment of which, like the blossom of the cherry tree, was necessarily of short duration. " London Times, March 18, 1942.
9 Cooperatives were very extensive in the countryside and actively fostered by nu- merous government agencies (federal and local). But all were carefully controlled and have functioned in the manner of mutual-aid societies to relieve the monotony and poverty of the agrarian way of life.
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Thus the new Japanese totalitarianism has been easier to achieve than in any other major industrial-capitalistic country. More than that, it has provided an environment which not only enormously facilitates the centralization of policy-forming power in business, but also identifies immediately the feudal and patriarchal-minded hierarchies of business with the political and military bureaucra- cies. Japanese capitalism, in short, has been in large part and from its very beginning an upstart phase--but part and parcel, neverthe- less--of the Japanese political and social system of status--a system on the economic side, in a word, of status-minded monopoly capi- talism. Its closest historical parallel is probably the system forecast in the Kameralism of Frederick the Great; in contemporary times its approximates the patterns of Nazi Germany.
At the center of the system on the economic side stand the great state-encouraged, monopolistically-oriented, and patriarchally- governed family enterprises known as the Zaibatsu. Around, and in large part directly subservient to, these are the lesser enterprises, business and agricultural federations, handicraft guilds, colonial development corporations, "mixed enterprises" and other forms of economic organization and control.
THE ZAIBATSU: AT THE CENTER OF THE WEB OF CONTROL
The numbers of the Zaibatsu are limited, but they differ with the sources quoted. G. C. Allen ^^ and Neil Skene Smith ^^ refer to the "Big 4. " The Japan-Manchoukuo Year Book ^^ (semiofficial) re- fers to the "Big 3," the "Big 8," and the "Big 14. " The first seems to be the more commonly accepted number, since generically the term Zaibatsu means "money cliques," and "of these, four are out- standing--namely, Mitsui, Mitsubishi, Sumitomo, and Yasuda. " More loosely the term is applied to large-scale business combina- tions in general. ^^
10 G. C. Allen, "The Concentration of Economic Control in Japan," Economic Journal, XLVII (June, 1937), 271-86.
11 Neil Skene Smith, "Japan's Business Families," The Economist, June 18, 1938, pp. 651-56.
12 See in particular the 1938 issue dealing with Konzerns of Japan.
13 Such as Okura, "concerned chiefly with trading, mining, textiles and motor- transport; Asano with cement, mining, iron and steel and heavy engineering; Kuhara with heavy engineering, chemicals, mining and aquatic products; Ogawa-Tanaka
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The dominating role of the **Big 4" is without adequate parallel in any other major capitalist country. Smith cites estimates which "have suggested that sums equal to 60 per cent of the 2 1,000 million yen (? 2,100 millions, at par) invested in all Japanese joint-stock companies are controlled by these concerns; and that Mitsui alone accounts for 5,000 millions yen (? 500 millions), or nearly 25 pei cent of the total. " ^* Adding to the "Big 4" the banking interests oi the Shibusawa and Kawasaki concerns, the six groups held in 1938 57 percent of all funds deposited in banks, trust companies, life, marine, fire, and accident insurance companies ^^--a figure, by the way, which contrasts with an estimated 45 percent equivalent for 1929-
Their range of interests extends to all the modern industries of Japan and to some of the traditional trades also. Shipping, shipbuilding, foreign trade, warehousing, colonial enterprise, engineering, metal manufacture, mining, textiles, and sugar- and flour-milling all fall within their sphere. . . . A glance at a few of the leading trades will show the extent to which the concentration of control over industry and trade has been achieved. For this purpose we may confine ourselves to Mitsui, Mitsubishi and Sumitomo. These three control about half the copper production and nearly the same proportion of the coal out- put, and Mitsui Bussan (the trading company of Mitsui) alone deals in about one-third of the coal marketed in Japan. More than half of the tonnage of merchant ships is owned by them. Of the steamers building in 1936 55 per cent of the gross tonnage was being constructed in yards belonging to Mitsui and Mitsubishi. The Oji Company controlled by Mitsui has about 75 per cent of the capacity of the paper industry and Mitsubishi owns the greater part of the remainder. These two firms possess 70 per cent of the flour-milling capacity and practically all the
with chemicals; Kawasaki with banking, insurance, rayon and shipbuilding; Shiba- sawa with banking, shipbuilding and engineering; Furukawa with copper-mining and refining and electrical plant; Mori with chemicals and electric-power genera- tion. " Allen, "The Concentration of Economic Control in Japan," p. 272.
14 Smith, "Japan's Business Families. "
15 The shares of the Big Six and the Big Four respectively in the following were, in 1938: Bank Deposits, 59% and 40%; Property in Trust by Trust Companies, 68% and 66%; reserves of life insurance companies, 28% and 20%; and reserves of marine, fire, and accident insurance companies, 82% and 73%. Again, recent war years have seen a huge expansion of the Zaibatsu. This can be seen by comparing the data of the 1940 (p. 1140) and 1941 (p. 1134) issues of the Japan-Manchoukuo Year Book. From June, 1939, to June, 1940, the estimated worth of companies controlled by the Zaibatsu jumped from 1,857 niillion yen to 2,368 million yen for Mitsui, 1,745 million yen to 2,050 million yen for Mitsubishi, 1,712 million yen to 2,390 for Mangyo, 624 million yen to 1,330 for Sumitomo, and 484 million yen to 540 for Yasuda.
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sugar-refining mills. Much of the chemical industry is in their hands, including the bulk of the ammonium-sulphate and artificial fertiliser production. Mitsubishi dominates the aircraft industry, and through its control over the Asahi Glass Company monopolises the sheet-glass output. About half of the goods in warehouses are in those owned by the three great Zaibatsu, who also conduct about one-third of the for- eign trade. Mitsui Bussan alone is responsible for nearly one-fifth of this trade; it imports a quarter of the raw wool used in Japan, and about the same proportion of the raw-silk exports passes through its hands. Toyo Menkwa, another Mitsui concern, until recently handled one- third of the raw cotton imports and one-fifth of the exports of cotton textiles. Most of the enterprises which have been founded to develop the raw material resources of the colonies, Manchukuo, China, and the South Sea countries have been established by the Zaibatsu; for instance, much of the Manchurian soyabean trade is conducted by them or their subsidiaries. The great cotton-spinning industry is less dependent upon the Zaibatsu than are the other large-scale trades. Yet even here Mitsui has interests in Kanegafuchi Boseki, and Mitsubishi in Fuji Gasu Bo- seki, which are among the six largest companies in the country; while Mitsui, through its subsidiary, Toyo Menkwa, has control over several smaller concerns. Mitsubishi controls much of the canned-fish trade, one of the three large brewery companies in Japan and one of the two large foreign-style confectionery manufacturing companies. The Zai- batsu are predominant in the heavy engineering industry. Their in- terests extend to woollen textiles, rayon, cement and petrol-refining and dealing. In all the new industries as they have appeared the Zaibatsu have usually taken the initiative. At present Sumitomo is developing the aluminum industry, and Mitsui the hydrogenation process. ^^
Such data take on added significance when it is realized that the Zaibatsu "are pre-eminent at once in finance and also in industry and commerce. " In this respect, Japanese industrial development is similar to that of Germany, where the interdependence between banking and industry has been extremely close from the very be- ginning. Yet the degree of control over both fields is not only more closely held in Japan than in Germany, but the fact that in Japan, as in no other country of the world, the general public puts its money into savings accounts as fixed deposits rather than into in- dustrial securities tends still further to enhance the importance of this interlinkage. "The small producers," Allen points out, "who in the aggregate are responsible for the larger proportion of the output of consumable goods, are financed by merchants, who, in
16 Allen, "The Concentration of Economic Control in Japan," pp. 276, 277, 278.
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turn, obtain the bulk of their resources from the great banks. Those who control the financial institutions can, therefore, play a dominant part in the development of industry. " ^^ In this manner not only have many small firms come under the influence of the "Big 4," but also several of the other large concerns such as Okura, Asano, and the chemical properties of Nobuteru Mori.
"One can scarcely go into any corner of the Japanese Empire," writes Chamberlain, "without finding one of the big capitalist com- bines firmly entrenched and skimming the cream of whatever prof- its are to be made. " ^^ How wide-spread this "skimming" process has become can readily be visualized by the curious able to examine carefully the chart of the holdings and affiliations of the house of Mitsui reproduced in the Japan-Manchoukuo Year Book for 1938.
The importance of the Zaibatsu is further enhanced by the fact that the expansion of their interests and controls has been accom- panied by a general trend towards concentration throughout all phases of Japanese economic life, as shown by the following data: ^^
98
Total number of companies Number of big companies (with capital of over 5
million yen)
Proportion of big companies
to total (in percent) Paid-up capital of all com-
panies (million yen) Paid-up capital of big com- panies (capital over 5 mil-
lion yen)
Proportion of capital of big
companies to total capital (in percent)
1909 1 1^549
38 0. 3 1,367
495
36. 2
1913 1918 1923 1927 1933 15406 23,028 32,089 38,516 71,196
59 293 589 687 7>>3 0. 4 1-3 1. 8 1. 8 1. 0
17 Ibid. , p. 275.
18 W. H. Chamberlin, Japan over Asia (Boston, 1937), p. 228.
19 Data from Resume statistique de I'empire du Japon (Tokyo, 1912). P- 108; ibid.
(1924), p. 72; ibid. (1930), p. 46; ibid. (1934), p. 44; ibid. (1936), pp. 46-47. According to an investigation by the Industrial Bank of Japan, quoted in the Osaka Mainichi and Tokyo Nichi Nichi (English), July 26, 1941:
1st half of 1940 2nd" " "
No. of Am't of capital mergers involved (in yen)
69 1,802,353,000 143 2,093,143,000
1st " " 1941 172 The Bank gives the following reasons for the increase:
3,024,770,000
1,983 4.
