Envisaged were: possible elim- ination of dual and overlapping capacities; amalgamation and co- ordination of plants and enterprises, mainly in an effort to save on transport and distribution costs; a report was made on how far labor hours could be increased, based on the fact that there were no new or unemployed workers to be absorbed;
detailed
data on obsolescence, which had already made itself prominent in mining and the steel industry (having become very much worse since 1937, particularly in the railroad industry).
Brady - Business as a System of Power
cit.
, pp.
307-9.
53 "Specifically this means legal authority to do a number of things: control in- vestment, whether by establishment of new plants or expansion of old; control bor- rowing on the market or increase in capital by self-financing; fix prices, quotas, and penalties; protect small enterprises, etc. Under these authorities, for example, con- struction of new plants was forbidden in the chalk industry. For differing period of time, production was limited and new plant construction was forbidden in the fol- lowing industries: jute-weaving, paper and pulp, textile goods, cement and hollow glass, cigar and cigar-boxes, high tension electric cable, zinc-rolled products, clocks and watches (with the exception of wrist-watches), nitrogen, superphosphates, stone objects and materials, peat moss, radio, smoking tobacco, horseshoes, hosiery dyeing, rubber tires, white lead, red oxide of lead, litharge, white zinc, lithopone, staining and earth dyes, pressed and rolled lead products, tubing, and insulation in a num- ber of cases, notably in such industries as cement, hollow glass, zinc-rolling, paper,
paper cartons, and stone objects. In the smoking-tobacco industry measures were taken to protect small producers by preventing expansion of the large. " Brady, The Spirit and Structure of German Fascism, pp. 340-41. See also various issues of News in Brief; Heinz Mullenseifen, Von der Kartellpolitik zur Marktordnung und Preisiiber- wachung (Berlin, 1935); and Marktordnungsgrundsatze der Reichsgruppe Industrie (undated).
42
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But while some of these measures are designed specifically to de- fend the interests of small business, nevertheless, in the main, the cartels may be regarded as "self-governing bodies" typically dom- inated by the large concerns. ^* Consequently the expansion of the cartel apparatus serves--in contradistinction to the pre-Nazi con- dition in many respects--to enhance the power of the great com- bines by rounding out and supplementing the controls which they require for the full instrumentation of their monopolistic inter- ests; their power is subject to check only by the regulatory power of the government.
5. Correlative with the outward expansion of the business or- ganization network through the Groups to include all industrial, commercial, and financial activity in the Reich has gone a reshap- ing of lines of control into a definite hierarchical pattern, which gathers together all effective power to determine and enforce deci- sions and center them in the upper reaches of the pyramid. Within the central offices the following facts determine the typical location of policy-determining power; (a) the center of gravity in the Na- tional Economic Chamber unquestionably resides in the member- ship of the National Industry Group; ^^ (b) the center of gravity in the National Industry Group with equal certainty is located in the heavy industries; (c) the heavy industries are led in every sig- nificant respect by the giant combines. These facts must be coupled to the rule that the intent and effect of the changed conditions in the general economic system at large is to (d) formalize and uni- versalize the cooptative principle in the recruiting of executive staffs. Keeping in mind, then, that the hierarchical principle of
5* "The class that has fared the worst (under the Nazis) so far is the middle class --officials, small shopkeepers and artisans--who were Hitler's first enthusiastic fol- lowers. . . . The shopkeeper, who hoped to get rich from the elimination of Jewish competition, has been forced to absorb the difference between increased wholesale and fixed retail prices, and small artisans are being crowded to the wall for lack of raw materials. . . . 34. 7 per cent of 375,741 retailers net less than 125 marks a month (fifty dollars at official exchange rates), which is considerably less than a skilled worker receives. As a result there is a great dying off of independent middle-class enter- prise. . . . German industry is undergoing a process of concentration which tends
to concentrate industrial control into a few mammoth concerns. " New York Times, Sept. 3, 1937. See the discussion in Neumann, op. cit. , p. 274, and on the elimination of small businesses, ibid. , pp. 263-65, 282-84.
55 This can be shown in a number of ways; by reference to leading officers, by identity of policies initiated and carried through; by the dominance of the heavy industries in rearmament, war, and reemployment programs, etc. The analyses of the personnel have been made by Neumann, op, cit. , pp. 388-92.
43
? 44
GERMAN INDUSTRY
organization in Germany (i) identifies at each point of delegation executive with judicial and legislative powers, and (2) traces all authority from the top down (all responsibility from the bottom up), it will be seen that the net effect is--subject only to govern- mental check--^^ to locate economic hegemony in the closely-knit managements of the large combines in the heavy industries. (R)^
6. The specific doctrinal content of the propaganda fed out to all parties of interest through the media available to the new con- trol apparatus is in many respects indistinguishable in basic as- sumptions, its view of human nature and society, its criteria of truth and falsehood, its social valuations, and its leading appeals and arguments from that which has been long characteristic of the "welfare capitalism" of such huge industrial combines as the Dye Trust, Krupp, Siemens and Halske-Siemens-Schuckert, and the A. E. G. The main differences are twofold. In the first place, propa- ganda directed to different interest groups--labor, the general public, farmers, and others--has been integrated, coordinated, and in large part centralized. And in the second place, the propaganda has been generalized to cover the whole of the German business system.
Thus the Nazis have provided means for achieving the ultimates in the tendencies underlying the organizational efforts which pre- ceded their entrance onto the scene. The pattern of control com- mon to all large-scale business enterprise is here expanded so as to encompass the entire range of economic activities, and to regiment and direct all parties of interest throughout the entire country. This hierarchical pattern--coupled with the concept of occupa- tionally and functionally self-contained, all-inclusive, definitely circumscribed, and centrally directed trade and group categories which are ranged in a graduated order of power, duties, and im- portance so as to include the activities of all Germany--constitutes the essence of the "Corporate State. " ^^
56 See chapters VIII and IX.
57 Excepting, in part only, agriculture, transportation, and handicrafts.
58 " 'Corporativism' is chiefly preoccupied with securing a smooth and undisturbed
function of Capitalism by bringing about, in each branch of industrial production, a benevolent harmonization, a renunciation of class-war, between owners' associa- tions and workers' syndicates. " Aurel Kolnai, The War against the West (New York, 1939)' P- 325- This is a half-truth which underestimates the importance of the "cor- porative" idea for other purposes. Added to Kolnai's statement is the idea of more
--
? GERMAN INDUSTRY
45
"status capitalism" and the state
At no point is there so much confusion and difference of opinion on the National Socialist system as in the nature of the relationship between the state and capitalistic enterprise. Detailed knowledge of the facts in and of themselves do not make the picture any easier to summarize for the uninformed reader. Certainly a great deal of capitalistic enterprise has been and is being liquidated in whole or in part. Many of the more important entrepreneurial activities and powers have been curtailed or eliminated entirely. Many fields of economic activity have been wholly preempted by the govern- ment, and the network of controls emanating from the leading offices of the state reach into every nook and cranny of the nation's economic life.
Three additional developments make the picture doubly dif- ficult to interpret properly. First, the Nazi propaganda itself is ostensibly, and in many respects emphatically, anticapitalistic. The Nazis claim, in fact, to have abolished capitalism entirely, and to have established in its place a pre-Romanic system in which prop- erty rights held in fee simple are transmuted into the equivalent of the "fixed family inheritance," and where the content and quality of inheritance rights are (ultimately) fixed by the state to correspond with a hierarchically arranged system of social or class gradations in turn founded upon occupational differentiations as determined by bio-social inheritance factors. This idea they refer to as the Stdndestaat--literally a State of Estates, or of classes, or Social- economic Castes. ^^
Secondly--and perhaps more important--the infiltration of con- trols exercised from central headquarters, state or private, effects a metamorphosis in the very nature of the problems at stake. Prob- lems of monopoly controls, becoming politicized as an incidence to the wielding of coercive authority, are necessarily handled with a view to many factors other than mere price and marketing advan-
or less self-contained, employer-controlled, hierarchically arranged, occupational categories which serve for modern industrialism in much the same way the medieval guilds did for handicraft societies. See Chapter VIII and see also Neumann, op. cit. , pp. 228-38, "The Myth of the Corporate State. "
59 See, e. g. , Kolnai's discussion of the writings of Hans Bliiher, Houston Stewart Chamberlain, Nietzsche, and others, particularly Chapters I, II, III, VII, and VIII.
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tage. Only the historically untutored, or politically and philo- sophically naive could suppose that the power phase of coordinated monopoly controls would be handled in terms of "duopoly," "oli- gopoly," "imperfect competition," and the like. (R)? The proper terms of reference are those associated with what Weber refers to as BiXrokratie, Patrimonialisrnus, Patriarchalismus, and Feudalis-
And finally, the outbreak of the Second World War has placed Goring's much publicized Four Year Plan (Vierjahresplan) in the limelight, seeming thereby, to call for recalculation of all the varia- ble factors in an already overly confused picture. This complication is doubly baffling for the simple reason that it is so very difficult to learn much about the Four Year Plan--or, indeed, to learn whether there is even the substance of anything more than a comprehensive plan of military conquest at all.
Without entering very far into the issues involved at this point, it is possible to clarify the picture--even in the absence of much needed evidence at points--by recalling to the reader's mind that the Nazi state is made up not of one single central controlling bureaucracy, but of at least four such bureaucracies; these are, re- spectively, the civil service, the army, the party, and the economic. While differing from each other in points of view and interest in many places, these four bureaucracies are not separate and inde- pendent, but interlaced and interdependent. Civil and criminal law, and the whole of the legislative, executive, judicial and ad- ministrative machinery of the Third Reich have been centralized, unified,(R)^ ^nd brought into line with the basic hierarchical pattern of the Stdndestaat. Into this fabric has been introduced the Nazi party bureaucracy; it is at present almost impossible to determine
60 Irrespective of the logical or formal merits of such works as Edward Chamber- lain's The Theory of Monopolistic Competition (Cambridge, Mass. , 1933) or Joan Robinson's The Economics of Imperfect Competition (London, 1933), writers on eco- nomics have committed the fatal error of supposing that the simple hedonism and the circumspect marginalism of competitive equilibrium analysis could be trans- posed or merely modified by monopoly forms. The maximizing of profits rests in- creasingly on entirely different influences, powers, and factors than they are led to suppose. And even this objective may be so fundamentally altered by accretions to power, and by compromise with other desiderata of control, as to be almost entirely incompatible with the presumptive model behavior these authors are led to assume for their genus hotno monopolisticus.
61 Max Weber, Grundriss der Sozialokonomik (1925), in particular, pp. 650-753.
62 See Karl Loewenstein, "Law in the Third Reich," Yale Law Journal, XLV (March, 1936), 779-815.
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? GERMAN INDUSTRY
where one begins and the other ends. (R)^ The Nazification of the army, following the removal of von Fritsch and the old guard just before the invasion of Poland, served to fuse this rapidly expanding bureaucracy jointly with the state apparatus and the Nazi party. The organization of the National Economic Chamber, and its cor- relative labor, agricultural, and cultural "estates," ^* completes the picture by dovetailing with the other hierarchies at a thousand and one points, personalities, machinery, competencies, and functions.
The net product of this four-way fusion has been referred to by people interested in the economic angle as "status capitalism," meaning a monopolistically organized, militaristically minded, hierarchically graduated and "feudalistically" directed (R)^ autocracy in which the upper social reaches, after having made the necessary compromises with the nouveaux puissant demagogery of platform and political tract, band together to constitute a governing class within a state expanded on a footing highly reminiscent of Plato's microcosmic model, the Sparta of Lycurgus. It is in this setting that the concept of the "Junker" has come to the fore again. ^^ For the term "Junker" has been generalized to mean not merely the old landed aristocracy of the Prussian Marches, but something more nearly like the term "Tory" in England ^^--literally, a "nature- determined" and self-contained "ruling class. " (R)^
63 This holds, for example, with the whole of the Party Tribunal system, which has been incorporated into the regular legal machinery of Germany (Loewenstein, op. cit. ). An even more striking example is the incorporation of the NSBO (National Socialist Business Cell Organization) directly into the Labor Front. Similar examples could be multiplied almost indefinitely.
64 Analogous to the National Economic Chamber (which includes all economic activities and interests in Germany, transportation alone excluded), are the Na- tional Food Estate, which comprehends all agricultural activities and interests, the National Chamber of Culture, responsible for the whole "cultural" program, and the Federal Trustees of Labor (under the Ministry of Labor), the coordinating body for the interests and activities of labor.
65 Meaning, specifically, a suzerain relationship with each competency held "in fief" on a pseudo-contractual basis, fixed in custom, and resting upon means for in- suring throughout the social pyramid fixity of social station, fixity of occupation, and ultimately a high degree of fixity of residence.
66 See Karl Brandt, "Junkers to the Fore Again," Foreign Affairs, XIV (Oct. , 1935), 120-34. Brandt, of course, means more than is implied above. Actually, he finds a steady and cumulative infiltration of the old Junker ranks into the civil, military, economic, and party ranks--many of them in leading positions.
67 In fact, this is exactly what the Nazis (before the outbreak of war with England) defined the word "Tory" to mean. It is no accident that the top-flight finishing schools for Nazi party leaders reserve for their graduates the honorary title of "Junker. "
68 Actually, as in Plato's famous illustration of the metals and in Pareto's concep-
47
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Whereas in a feudal society the economic resources of the baronry were rooted in agricultural holdings, in the adapted capitalism of the Third Reich the gigantic strength of the new "Junker class" is drawn from industrial, commercial, and financial properties. And to the extent that the feudal nature of the economic relationships in medieval society was not compromised by virtue of the fact that the nobility possessed legal, civil, and military rights in addi- tion to the economic, so also this new fusion called "Fascist Totali- tarianism" is no less an expression of monopoly controls simply because similar elements are mixed into the "Junker" social com- position. ^^
In fact, a carefully reasoned analysis of the past developments summarized in this chapter will show not only that the Nazi state grew by fairly normal processes out of the evolution of capitalistic forms in Germany, but also that the bureaucratic fusions traced out above are not only consistent with, but absolutely essential to, a continuation of such previous lines of growth. Without them, capitalism in Germany unquestionably could not long have sur- vived under any circumstances. With them, it may be enabled to endure for a considerable period of time in the future.
From the standpoint of practical propaganda, it seemed advan- tageous to Nazi officialdom to describe this new arrangement as noncapitalistic, or even anticapitalistic. The "profit motive," it is said, no longer dominates business decisions. In its place has come "service to the community. " This is, of course, exactly what is meant by the American authors, Mooney and Reiley, when they lay down the dictum on behalf of highly organized American business that the real function of capitalism is to make "profits through service, profit in this sense meaning the compensatory material gain or reward obtained through service. " ^^ It reflects a point of view which is consonant with that expressed in the famous "You and Industry" series of the National Association of Manufacturers.
tion of the "circulating elite," provisions are made for especially gifted outside of- the-ruling-class recruits to rise to the top. These are regarded, however, primarily as sport cases--exceptions to the rule.
69 Of course, it may be correcdy upheld that this analogy with feudalism is un- happy, because feudalism is opposed to bureaucratization and contains the essential element of personal relationship. Nevertheless, it would seem to illuminate the na- ture of the property holdings and spheres of economic control in the Third Reich.
70 James D. Mooney and Alan C. Reiley, Onward Industry! (New York, 1931), p. 342.
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In making "business responsible to the community" through the revamped control network of the "'new social order," the Nazi leaders profess to be promoting "self-government" or "self- management" in industry. It is also interesting to note that much of the time spent by officials in German central business offices has to do with what they term problems of "fair trade practices," "fair prices," rules against "selling below cost," and the like/^
Now an inevitable corollary of making such a system of busi- ness "self-management" work is the possession of the necessary power to punish offenders. It was on this particular rock that the price and production control measures of NRA were rent asunder. The Nazis have made no such mistake. That many concerns would be liquidated when the central control apparatus possessed the necessary power to force "free riders" into line was inevitable. This accounts for many of the cases of forced liquidation of small con- cerns. But even the large and giant enterprise is not necessarily exempt from the laws of its own making, for the simple reason that domestication of warfare does not necessarily do away with the basis of conflict. It may, however, change a good many of the rules. Thus many of the largest businessmen in Germany were forced to
hand over their properties to competitors because they were Jews. And Thyssen, of the heavy industries, apparently chose to play a lone hand and got caught in a combine which he was unable to overcome. Like Schacht, at the critical point he played with the wrong crowd of "insiders," and, as has happened to many unsuc- cessful promoters in American business (Fisk, Drew, Gould), was forced outJ^
71 See in particular Marktordnungsgrundsdtze der Reichsgruppe Industrie, a primer of rules for "regulating the market" according to the new "fair trade practice rules. "
72 Insull, Mitchell, and Whitney are in a different class only because they were caught via regulatory machinery which the business community either assented to, or, opposing, had had forced on them by political forces which held that only through such controls could the business community, and with it the capitalistic system, be saved from the disaster its own malpractices were bringing down upon it. Numerous observers have found in the spectacular rise of the Hermann Goring Works proof of an inherent Nazi tendency towards "Socialization," Nothing could be farther from the truth, as the party-approved Berliner Tageblatt, Dec. 2, 1938 ("Vom Wachstum des 'Reichswerke'-Konzerns") has pointed out at some length. Kurt Lachmann in "The Hermann Goring Works," Social Research (Feb. , 1941), pp. 24-40, finds the
company a new version of the postwar Stinnes or Haniel groups, and a type of "in- dustrial empire building" which bears a dose "resemblance to the amassing of lands and fortunes by the feudal lords of the seventeenth century. " The analogy is intrigu-
49
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None of these considerations are inconsistent with the point made that, under the Nazis, previous trends in the evolution of centralized business control were carried on, with the principal dif- ference residing in the facts that under the new regime they could be brought to their logical conclusions more swiftly, more ruth- lessly, and more rationally than theretofore, and that all economic issues must now be openly decided in a political frame of reference.
But how far has the war altered the picture? Under the decree of October 26, 1936, giving Field Marshall Hermann Goring dicta-
ing, but actually the combination represents a somewhat "privitized" regrouping of industrial properties previously owned by the Reich, Prussia, various municipalities, properties taken over from the governments of conquered Austria (e. g. , Steyr- Daimler-Puch A. G. , Maschinen- und Waggon-Fabrik A. G. Simmering, and Donau- Dampt-Shiffahrts-Gesellschaft) Czechoslovakia (e. g. , Skoda), Poland, Roumania (most important of which is the Reshitza iron works), Norway, and--more recently--Bel- gian, Dutch, and French concerns.
German banks and "the industrialists" participated in the founding and expansion of the combination, though to what extent is unknown. It is significant, however, that the primary purpose of the new industrial complex--leaving aside liquidation of Goring's private debts--was the exploitation of low-grade domestic iron ores at government expense, for delivery to Krupp, Vereinigte Stahlwerke, and others, as raw steel for fulfilling armament contracts with fixed but generous profit allowances. Its subsequent expansion into a unified vertical combination and the regrouping of its holdings along functional lines (i) mining and smelting, (2) munitions and ma- chine building, (3) shipping on rivers and canals, is entirely in keeping with past practices of German industrial concentration. Private control is greater, and private interests are served more clearly, under the new regrouping than was the case of the properties before they were brought together in the new combination. It is very difficult, if not at present entirely impossible, to evaluate the status of other such public or semi-public corporate enterprises. Neumann, op. cit. , pp. 298-304, inter- prets the Goring set-up as a party combine with heavy-industry participation. Fig- ures are produced in this book.
The Labor Front now does the biggest travel business in the world. Ley recently announced plans for the mass production of cheap farm tractors to be produced, ap- parently, along lines similar to the Labor Front-financed "Peoples Car" plant at Fallersleben (now producing tanks). The Labor Front has also taken over some 9,000 consumer cooperatives in Germany, and is also, through the Labor Front Bank (which collects around 500,000,000 marks annually in dues), possessor of one of the largest European banking systems (Business Week, March 15, 1941, p. 96). On the Labor Front combine, see Neumann, op. cit. , p. 304.
Goring, Funk (head of the Reichsbank) and other leading Nazi officials have also organized a continental -wide oil trust, capitalized at $32,000,000. PM (March 4), 1941. On the Continental Oil Corporation, see Neumann, op. cit. , pp. 276-77, 356-68, 396-98.
Certain only is this, that (a) these trusts are privately directed by Nazi officials acting in collaboration with private interests for non-democratic purposes, and (b) that they are being organized on an European-wide basis. See Albert T. Lauterbach, "German Plans for a New Economic Order in Europe," in Germany's Challenge to America's Defense (Planning Pamphlet No. 4 of the National Economic and Social Planning Association).
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torial power to carry through the Second Four Year Plan, all eco-
nomic activities in Germany were brought into six special groups:
(1) ProductionofGermanRawMaterialsandSemi-Manufactures (2) AllocationofRawMaterials
(3) EmploymentofLabor
(4) Agricultural Production
Price Policies
(6) ForeignExchangeSupply.
On July 13, 1937, section (2) was dissolved, and there was created
in its place two divisions, those of Foreign Trade and of Iron and
Steel Utilization. Since that date the plan has apparently under-
gone many--and possibly in some respects far-reaching--changes.
Its general purpose called for exhaustive detail on the present and
potential resources of the Reich, and for ways and means of mo-
bilizing these to the fullest extent and with the maximum speed. An
observer, present in Germany during the elaboration of the various
phases of the Plan, details the functions of the new machinery as
^3
1. Supplyofdetailedinformationforachievingproductionpotentials, including data on working conditions.
Envisaged were: possible elim- ination of dual and overlapping capacities; amalgamation and co- ordination of plants and enterprises, mainly in an effort to save on transport and distribution costs; a report was made on how far labor hours could be increased, based on the fact that there were no new or unemployed workers to be absorbed; detailed data on obsolescence, which had already made itself prominent in mining and the steel industry (having become very much worse since 1937, particularly in the railroad industry). Particular emphasis was placed upon the development of synthetic or Ersatz industries.
2. The direction of the maximum of the available potential into mili- tary uses. A final and amazing estimate was made of just how far con- sumption--and more important--production of capital equipment for home use could be cut so that arms and exports would benefit.
3. Estimates of various national costs and subsidies involved in the use of admittedly poorer raw materials and minerals which exist at home, when substituted for better materials imported from abroad. Particular attention was paid to iron and lumber, but re-use of old materials also received a good deal of attention.
73 The author of these remarks, anonymous for obvious reasons, was in an un- usually fortunate position for observation of the whole plan as it was unfolded from 1936 on. His summary checks in the main with every bit of evidence I have been able to obtain from other sources.
(5)
follows:
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? GERMAN INDUSTRY
4. The financial end of operations: for the first year it was planned that 80 percent of the costs involved would be carried by private in- dustry, of which 30 percent was to be based on existing assets, and 50 percent handled through new financing (stocks and bonds): banks would supply 8 percent and the government 12 percent by subsidy.
5. A detailed plan for possible markets abroad, and a statement of why Germany was having difficulties in foreign markets (mostly attribu- table to lowered qualities).
6. Unified control by staff under the direction of Field Marshall Her- mann Goring.
Great as these and subsequent changes have been, yet the Second Four Year Plan seems clearly, and in all leading particulars, to have been directly in line with the First Four Year Plan. Although the earlier plan (1932-36) had as its declared objective the aboli- tion of unemployment and the creation of German self-sufficiency, it was during this period that all the important Nazi social, eco- nomic and legal organizations were established, the basic new price and marketing controls elaborated, the foundations for remili- tarization laid and the task of rearming actually begun. The Second Four Year Plan (1936-40) bridged the gap between a militarized peace and full belligerent status, but involved little more than further elaboration and strengthening of previous machinery, to- gether with a more deliberate reorientation of all efforts toward the impending war. The Third Four Year Plan (sometimes referred to as the Second Four Year Plan in the Nazi literature) looks towards the dual objectives of still more complete coordination of civil and belligerent control efforts on the one hand, and towards the reor- ganization of occupied territories with a view to the "organic" in- corporation into the imperial network of the German dominated "new order in Europe" on the other.
Thus the Four Year Plans have followed a fairly consistent pat- tern from the beginning. Tracing what little may be learned about them from their inception, it seems that there is little, at bottom, to distinguish them from other war plans of the First World War, particularly those of Hohenzollern Germany, except the much higher levels of organization and control and the greatly expanded perspectives of imperial aggression. So far as industrial and business organization is concerned, practically every significant idea elab- orated in the new system is to be found, at least in germinal form,
52
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in the Central Purchasing Corporation (Zentraleinkaufsgesellschaft --ZEG) and the series of semi-autonomous "mixed" control com- mittees and compulsory syndicates which dominated the war con- trol measures in Germany from 1 9 5 on through to the cessation of
1
hostilities/*
The Four Year Plans appear thus as straight-line development
from these predecessor plans. Both anticipated the whole of eco- nomic activity coordinated to the needs of the war, with separate all-inclusive planning and control bodies for each important trade, industry, or functional activity (e. g. , price control), and with all these dovetailed through an appropriate machinery. The First World War supplied experimental results on a big scale. Marshal Goring is bringing all the isolated strands together on a new and more comprehensive basis. Now business leaders are sitting down with governmental officials, military chieftains, and imperial party leaders, and are working out policies governing all economic activi- ties in the entire Reich.
But the larger significance of these business-government rela- tionships is found in the fact that during the between-wars inter- lude there was no fundamental departure from the basic organiza- tional patterns of the World War. Many of the forced syndicates, notably those in coal, lignite, and potash, continued in force. The war stepped up the speed of cartelization tremendously, but the postwar period carried on the process. The "mixed" corporations, some of which sprang into existence during the war, continued to dot the economic landscape, particularly in the fields of power, gas, coal, iron and steel, and shipping. War-type price controls, pro- duction controls, internal and external market allocations, pooling of patents, technical innovations such as standardization and typi- fication (of assembled products) were not given up. Rigidity of con- trol was in many respects relaxed, and there was certainly a marked decline in the role of the government and the military.
Yet certain leading ideas remained, first of a completely coor- dinated economic system, based upon the full "cooperative" par- ticipation of the upper business baronry in politico-economic decisions; this was in turn to be divided into all-inclusive "self-
74 See "Kriegswirtschaftslehre und Kriegswirtschaftspolitik," Handworterbuch der Staatswissenschaft (4th ed. , Jena, 1928), V, 984-1022.
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governing" trade and industrial central policy-controlling bodies, which should be endowed with legal or quasi-legal power to en- force decisions in the name of the state, and which, finally, would be guaranteed successful results through an elaborate system of governmental subsidies, allowances, and guarantees. In the inter- lude of peace, business leaders had acquired the habit of looking back at the experience of the war as the training ground and the ger- minal source of ideas for the coordinative efforts which time and circumstance were persuading them to extend to the outermost reaches of the German economic system.
At the critical juncture the Nazi solution, with its abolition of trade unions and its wholesale destruction of democratic institu- tions, seemed a necessary and logical fulfillment of these processes of growth. Therefore, though not without some occasional mis- givings, German business leaders embraced it. Now they face the prospect of being able to expand their private economic empires, by the aid, advice, and consent of the new German-dominated to- talitarian system which they expect shortly to extend to the outer- most bounds of Europe and Africa, upon a continental and inter- continental basis.
How far such expansion will mean further modification of part capitalistic forms of organization remains to be seen. Regimenta- tion through the instrumentality of the state will doubtless con- tinue, but there is as yet no reason for believing that it will depart far from the present principles of "self-government in business" " which did so much to bring the regimentation on. But it is impor-
ts The wartime control of industry rests today: a) with the general deputies under the Four Year Plan, primarily concerned with nationalization (now coordinated by Wilhelm Fanger, president of the Mannesman combine and leader of the national group industry); b) with the Reichsstellen for raw-material allocation. The Reichs- stellen are now merely raw-material allocation offices; however, they are slowly being dissolved and their functions taken over by the existing cartels or by newly created cartels (coal and cellulose, wool and steel). See Economist, April 4, 1942 (radio broad- cast from Germany); c) with the national Price Commissioner; d) with the general commissioner for labor supply; e) with the Reichsbank (for capital issues); f) with the Wehrwirtschaft (Riistungsamt) of the Supreme Command of the Armed Forces, which is represented especially in the combing-out commission for the adequate dis- tribution of labor; g) with the National Economic Chamber; h) the supreme au- thority is vested in the ministerial council for the defense of the nation. This has i) delegated a large part of its authority to the minister of economics, W. Funk, as gen- eral commissioner for economic affairs. See Neumann, op. cit. , p. 252, and the scheme, P- 253-
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tant to note that given this principle fused with the companion Nazi ideology of class and racial predation it follows from extension of the old patterns over the new terrain that Wirtschaft and Krieg become but two internally related phases of the many faceted and inherently expansionist Herrenstaat.
55
? Chapter II
THE FASCIST SYSTEM OF COLLATERAL SYNDICATES
THE ROLE and significance of the Fascist Confederation of Indus- tries is inextricably bound up with the development of Fas- cism and the unfolding of its appropriate institutional expression, the Corporate State. This is true because, at bottom, it is not only fair but also entirely accurate to speak of Fascism as a "revolution from the right," or, more simply, as "counterrevolution. " ^ And in counterrevolution the forces centered around the more compactly organized, possessing classes must of necessity choose the issues and shape--with whatever compromises the Realpolitik of Domination
may enforce--the course of future events.
But why should such vigorous and sweeping counterrevolution-
ary action occur first in Italy, one of the least industrialized amongst the capitalistic states? There is an interesting historical analogy here with the contemporary situation in Russia, which helps to throw the Italian situation at the end of the war into sharp relief. In Fascism capitalistic institutions were able to triumph; in Com- munism they faced defeat. Yet both Italy and Russia were among the "weakest links" in the chain of capitalist nations. In each case, at a critical point the pendulum seems barely to have swung the way it did. It is probably not too far from the truth to say that had Russia not turned Socialist in 1917 it would have adopted some form of "Fascism," and had Italy in 1922 not fallen unexpectedly to the Fascists it would have become a Socialist state (though the "March on Rome" came after the high tide of postwar revolution- ary Socialism).
iSee Carl Schmidt, The Plough and the Sword (New York, 1938), Chapter III, "Counterrevolution. "
? THE FASCIST SYSTEM
Both countries were primarily agricultural. ^ In both, rural life was characterized by deep contrasts between vast estates owned by politically powerful and immensely wealthy families on the one hand, and an overwhelming majority of more or less propertyless, poverty-stricken, ignorant, and repressed peasantry on the other. In both, important feudal carry-overs survived intact down to the outbreak of the World War. In neither had Parliamentary institu- tions or the first grudging concessions to popular sovereignty seri- ously affected the vast proportion of the population. Both were still political patchworks, and in neither had largely borrowed, nation- alistic sentiments penetrated far beneath the thin upper layers of class-conscious jingoism. ^
In both, the level of industrialization was, comparatively speak- ing, low, and what industrial nuclei had developed were highly localized. Of these, most were foreign transplantations, represent- ing primarily English, French, and German capital. What local capital was involved in each case came largely from the great land- owning families, with which rising industrial, trading, and finance capital was, consequently, closely associated from the beginning. * Industrialization came comparatively late, and in both cases, once begun, the pace of growth and development was unsually swift. At a time when industrial technique of its own momentum was be-
2 See the summary given in Robert Michels, Italien von Heute (Leipzig, 1930), pp. 19-20, of Bakunin's description of Italian social classes in 1870. It needs only minor alterations to be held valid for Italy of 1914 or 1940.
3 "Before the World War Italian nationalism was the concern of a group of snob- bish writers rather than of serious thinkers. Every effort was made to adapt the philosophy of the German imperialist Treitschke, or that of French prototypes such as Maurras and Barr^s, to Italian conditions. " William Ebenstein, Fascist Italy (New York, 1939), p. 4. "The state has been dominated by classes. But now we begin to conceive of the state as an emanation of the entire nation. The state is the active organ of the entire nation, for the entire nation. " E. Corradini (founder of the Na- tionalist Association) // volere d'ltalia (Naples, 1911), p. 175. The lack at that time of any deeply felt national or articulate and cohesive social ideologies among the two peoples goes far to explain why, of all the soldiers fighting in the World War, the Italians and the Russians were equally and by all odds the worst. The slaughter of the Masurian Lakes was paralleled by the demoralizing catastrophe of Caporetto --a catastrophe which appears to have been repeated in but slightly different form on the plains below the Guadarramas during the Spanish Civil War.
4 The more important and more highly organized latifondi were located in the rich Po Valley. At the two ends of the Valley are to be found the more important in- dustrial and commercial centers of Italy. The great landowners constituted the social and economic aristocracy in the great cities where industrial undertakings first struck root. From the same closely knit social circles came the leadership for the great em- ployers' associations in both agriculture and industry.
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coming large-scale, and capitalism of its own native driving power was resorting everywhere to monopoly devices, this forced-draft growth tended at once to sharpen the social cleavages and to strengthen and unify the forces of antidemocratic reaction. By the "accidents of history" monopoly forms of capitalism, mercantilistic sentiments, and feudal social institutions were in both immediately juxtaposed.
In Russia proletarian forces won the throw of the die; in Italy, property. For the spread of the Socialist-Communist state Russia lacked industrialism; for the dominance of capitalist institutions and controls Italy lacked a widespread business system. Russia undertook to solve her problem by a backward step into NEP, in order to lead more easily into the industrialization program of the Socialist Five Year Plan. Italy devised the Corporate System. ^ And the Corporate System is to be understood as that morganatic alli- ance between organized, Italian, patrimonial capitalism and the type of feudal controls long advocated by the Papacy, from which it was hoped to find at once an end to class war and full defense of the existing social-economic status quo.
ANTECEDENTS OF THE CORPORATE STATE
Without dipping farther into the historical background than is necessary to make clear the component elements out of which this apparently novel "experiment" was compounded, attention may be focused on three factors of unique importance; ^ (a) the "social program" of the Catholic hierarchy; (b) the rise and peculiar com- position of the pre-Fascist labor movement; and (c) the strategic power of the closely cooperating central associations of industry and agriculture.
The social program of the Catholic hierarchy. --This was evolved as means for counteracting the rise of class-conscious trade unions dominated by left wing and materialistic--in particular by Marx-
5 The essence of the Fascist corporate system is found in hierarchical implementa- tion of patrimonial class domination by monopolistically oriented and compactly organized vested-interest groups.
6 The "Nationalist" movement, though important, can be ignored for our present purposes. Like Fascism, which it preceded, it was not in itself a causal or contributory force, but the result of such force. Nor was its strength, as expressed in numbers or influence, of much importance.
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? THE FASCIST SYSTEM
59
ian--social philosophies. It may be divided into three phases: from the first third of the 19th century to the delivery of the Papal Encyclical Rerurri Novarum in 1891; from Rerum Novarum to the inauguration of the Fascist system in 1922; after the Papal Ency- clical in commemoration of Rerum Novarum, delivered in 1931 and known as Quadragesimo AnnoJ Beginning, in the first phase, as a general criticism of conditions created out of the capitalistic milieu, the papal position had shifted until by 1931 it not only for- mally endorsed Mussolini's fascism per se, but also recommended the formula as a panacea for all other industrial countries as well.
In the first phase. Catholic writers took their place among vari- ous proponents who hoped to solve the issues of class conflict and industrialism by recourse to doctrines inspired by Christianity. ^ Le Play, the French engineer, hoped to transform the employer into a benevolent master who would care for his workmen as father to his children. Protestant writers such as Kingsley, Carlyle, and Ruskin wanted something less patriarchal, but saw in various forms of class collaboration good Tory means for turning the lion of indus- trial capitalism into the lamb of social harmony. The leading Cath- olic writers, however, went straight to the Middle Ages--the period in which the Church dominated the whole of European society for their inspiration.
Under one form or another a series of Catholic spokesmen ^ ad- vocated recrudescence of the medieval conception of a corporatively organized society. Many of these initial expositions were the work of French emigres returning to the homeland following the Treaty of Vienna in 1815 and the inauguration of the Holy Alliance. On the
7 The intervening period, 1922 to 1931, might, in turn, be divided into two inter- vals: a period of partial and at times bitter conflict between church and state reach- ing from the inauguration of Fascism to the Lateran Accord in 1929; and from the Lateran Accord, which recognized Catholicism as the official religion in return for Papal support of Fascist leadership in the upbuilding of the new Roman Empire, to recommendation of corporate ideas by the papacy as'the solution of the "Social question" in general. Most notable of its successes has been the "clerical fascism" of the ill-starred Austrian totalitarians, Dollfuss and Schuschnigg, and the system of General Franco which emerged from the Spanish Civil War.
8 See "Doctrines Inspired by Christianity," in C. Gide and C. Rist, History of Economic Doctrines, pp. 483-514.
9 An early representative of these was Philip Buchez, Essai d'un traite complet de philosophic, du point de vue du catholicisme et du progres (Paris, 1838-40), and Abb^ de Lamennais, La Question du travail (1848).
? 6o THE FASCIST SYSTEM
other wing a few were highly reminiscent of the social-communism
advocated so vehemently by the early church fathers/^ since they
appeared in large part as attacks on the institution of private prop-
erty and in defense of workers' rights to a fair wage and a decent
standard of living. But Catholic writers of a more "practical" turn
of mind advocated simply mixed or collateral syndicates in which
the principles of hierarchy would dominate and the employer would
play the role of "leader" or "master" to his flock. The model was the
Church/^ and "the corporations which would be set up under the
aegis of religion would aim at making all their members contented
with their lot, patient in toil, and disposed to lead a tranquil, happy
^2
life. "
Though never entirely free of important schismatic differences,
the Social-Catholic movement maintained almost from the begin- ning a fairly coherent reform program. Prior to the revolutionary upheavals of 1848 it was predominantly antiliberal, generally op- posing both laissez faire and free competition on the grounds that the doctrines of the Physiocrats and the early French liberals on the one hand and the socially irresponsible practices of certain traders and manufacturers on the other largely accounted for the French Revolution, its tempestuous aftermath, the rise of anticlericalism, and the spread of class antagonisms. The "free thinking" bour- geoisie were distrusted almost as much as the popular democracy for which it appeared inevitably to prepare the way. ^^
The events of 1 848 convinced Catholic thinkers that socialism, as the residuary legatee of liberal and democratic doctrines, was the
10 Such as Tertullian, St. Ambrose, St. Cyprian, Gregory of Nazianze. See the pro- gram of Vicomte de Villeneuve-Bargemont as outlined by Thomas Parker Moon, The Labor Problem and the Social Catholic Movement in France (New York, 1921), pp. 19-25. See also Paul K. Grosser, Ideologies and American Labor, New York, 1941.
11 "The corporation is simply the model of the Ghurch. Just as for the Ghurch all the faithful are equal in the sight of God, so here. But equality ends there. For the rest of it is a hierarchy. " Quoted by Gide and Rist, op. cit. , p. 500, from Segur- Lamoignon, L'Association catholique, July 13, 1894.
12 Gide and Rist, loc. cit. , quoted from the Encyclical of Leo XII, December 28, 1878, called Quod Apostolici.
13 Veuillot, a clerical journalist, was opposed to the "free thinking bourgeoisie" but held that, while misery must be destroyed, "poverty is a divine institution" and charity the true social science. He proposed a Holy Roman Democracy to parallel the Holy Roman Empire; the latter, of course, was to lead the former by authorita- tive principles and both were to be hierarchically directed from above. The Confed- eration of Italian Industries was later to refer to its own program, patterned along these lines, as "authoritarian democracy. " Moon, op. cit. , p. 30.
? THE FASCIST SYSTEM 61
greatest of all the Church's enemies. Moderates like Melun and Le Play lost out, and, under the stimulus of the official patronage of Napoleon the Third, the movement began to take more definite shape around three leading objectives; first, to overcome the radical- ization of the working classes through an ideological conquest of the "workers' souls"; second, to transform the employer from a hard- hearted profit seeker into an aristocratic and paternal "leader" of his men; and third, to revive the medieval guild or corporate form of organization.
The first objective called for universal indoctrination with official Catholic Christianity, the second for various forms of benevolent social legislation, and the third for integral or mixed syndicalism. Under Count Albert De Mun and Count La Tour du Pin, these three phases were forged into an effective political program which was shortly taken up abroad--particularly in Germany under the leadership of Baron Wilhelm Emmanuel von Ketteler
soon received official papal blessing.
Industrial organization, De Mun held, should take the form of
"the Catholic Guild, which is neither a trade-union, nor a tribunal of arbitration, but a center of Christian activity where the interest of the profession is superior to private interest, where antagonism between capitalist and workingman gives way to patronage exercised in a Christian spirit and freely accepted. . . . It is always the same thought: limit competition, associate common interests, impose upon the employer the duty of patronage, uplift labor and the con- dition of the laborer. " ^*
Contemporaneously with De Mun's agitation (in the seventies and eighties), a great deal of interest in programs for class collabora- tion was aroused by the "experiment" of the French spinning firm of Harmel at Val-des-Bois. In the words of a very sympathetic ob- server, the "Christian Guild" of the Harmels was evolved as follows:
The simple principle of union by itself was considered inadequate; it tended to create labor-unions hostile to capital and bent on class war- fare. The principle of democratic control of industry would logically lead to the elimination of the employer. The principle of capitalistic paternalism, if taken alone, was inadequate because it failed to awaken any vital response among the workingmen. The Harmels attempted to
14 Ibid. , pp. 99-100.
--and which
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? 62 THE FASCIST SYSTEM
make a Christian synthesis of these principles. In the first place, the workers were permitted, nay encouraged, to form various associations
a men's club, a woman's association, a girls' society, a mutual benefit society. Democratic control was practiced in the management of these associations, and was represented by elected shop-committees, but was not carried to the extreme. The Guild Board, an elective council of workingmen, was consulted on such questions as shop-management and wage-schedules, but had no sovereign authority in these matters; the policy of the employers was to act with democratic advice and consent, but not to abdicate their authority. The third principle, paternalism, received expression in manifold efforts on the part of the employers to promote the material and moral welfare of the workingmen, to foster and guide even the institutions controlled by the workers. The paternal influence may be seen in the fact that one of the employers acted as chairman of the Guild Board, and the supervision of general guild in-
terests was entrusted to a committee composed of the members of the firm, the chaplain, the school-director, and representatives of the vari- ous workingmen's associations. In this fashion the three principles of association, democratic control, and capitalist paternalism were com- bined and balanced in a complex organism consisting of first, employ- ers, second, the general committee of employers and representatives of the workingmen's institutions, third the workingmen's Guild Board, fourth, shop committees, fifth, various economic, social and religious associations among the work-people. ^^
Here is a precis not only for much of the social legislation that was to follow, but also for the more benevolent type of company union as well as the more violently counterrevolutionary Fascist syndicates of the Mussolini regime. Gone completely was the attitude of hos- tility toward capitalist and employer wherever he could be per- suaded to add to his entrepreneurial functions those of father and leader to his employees. And also, by the same token, gone com- pletely was the hostility to labor organization wherever workers could be gathered into associations, governed and directed by em- ployer interests from above in a fixed hierarchy of command and subordination and deliberately modeled after the pattern of the
Universal Church.
Until late in the century the papacy had paid relatively little at-
tention to the Social-Catholic movement. The general idea, of course, of universal guild organization under the benevolent super- vision of the Church has never been abandoned. From time to time
15 Ibid. , pp. 1 14-15.
? THE FASCIST SYSTEM
references had been made to guilds in various papal utterances, such as, for example, Humanum genus in 1854, Quod Apostolici mu- neris in 1878, and Aeterni Patris in 1879. But it was with the ency- clical letter of Pope Leo XIII on "The Condition of Labor" (Rerum Novarum)in1891 thatrecrudescenceofthecorporateorganization of society became the official doctrine. The Encyclical was directed specifically at the Socialists, and in condemning their social doc- trines Leo XIII saw fit for the first time to commit the Church to full support of capitalistic institutions. Social inequality, private ownership of the means of production, free competition, laissez faire, the accumulation of great wealth, and the rest, were justified as "just" and according to the "laws of nature. " Conversely, "class war" was declared "irrational," since "in a state it is ordained by nature that these two classes (the rich and the poor) should exist in harmony and agreement. " The employer was to treat his labor "justly" and render him that which was due. The multitudes must, he said, be kept "within the line of duty.
53 "Specifically this means legal authority to do a number of things: control in- vestment, whether by establishment of new plants or expansion of old; control bor- rowing on the market or increase in capital by self-financing; fix prices, quotas, and penalties; protect small enterprises, etc. Under these authorities, for example, con- struction of new plants was forbidden in the chalk industry. For differing period of time, production was limited and new plant construction was forbidden in the fol- lowing industries: jute-weaving, paper and pulp, textile goods, cement and hollow glass, cigar and cigar-boxes, high tension electric cable, zinc-rolled products, clocks and watches (with the exception of wrist-watches), nitrogen, superphosphates, stone objects and materials, peat moss, radio, smoking tobacco, horseshoes, hosiery dyeing, rubber tires, white lead, red oxide of lead, litharge, white zinc, lithopone, staining and earth dyes, pressed and rolled lead products, tubing, and insulation in a num- ber of cases, notably in such industries as cement, hollow glass, zinc-rolling, paper,
paper cartons, and stone objects. In the smoking-tobacco industry measures were taken to protect small producers by preventing expansion of the large. " Brady, The Spirit and Structure of German Fascism, pp. 340-41. See also various issues of News in Brief; Heinz Mullenseifen, Von der Kartellpolitik zur Marktordnung und Preisiiber- wachung (Berlin, 1935); and Marktordnungsgrundsatze der Reichsgruppe Industrie (undated).
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? GERMAN INDUSTRY
But while some of these measures are designed specifically to de- fend the interests of small business, nevertheless, in the main, the cartels may be regarded as "self-governing bodies" typically dom- inated by the large concerns. ^* Consequently the expansion of the cartel apparatus serves--in contradistinction to the pre-Nazi con- dition in many respects--to enhance the power of the great com- bines by rounding out and supplementing the controls which they require for the full instrumentation of their monopolistic inter- ests; their power is subject to check only by the regulatory power of the government.
5. Correlative with the outward expansion of the business or- ganization network through the Groups to include all industrial, commercial, and financial activity in the Reich has gone a reshap- ing of lines of control into a definite hierarchical pattern, which gathers together all effective power to determine and enforce deci- sions and center them in the upper reaches of the pyramid. Within the central offices the following facts determine the typical location of policy-determining power; (a) the center of gravity in the Na- tional Economic Chamber unquestionably resides in the member- ship of the National Industry Group; ^^ (b) the center of gravity in the National Industry Group with equal certainty is located in the heavy industries; (c) the heavy industries are led in every sig- nificant respect by the giant combines. These facts must be coupled to the rule that the intent and effect of the changed conditions in the general economic system at large is to (d) formalize and uni- versalize the cooptative principle in the recruiting of executive staffs. Keeping in mind, then, that the hierarchical principle of
5* "The class that has fared the worst (under the Nazis) so far is the middle class --officials, small shopkeepers and artisans--who were Hitler's first enthusiastic fol- lowers. . . . The shopkeeper, who hoped to get rich from the elimination of Jewish competition, has been forced to absorb the difference between increased wholesale and fixed retail prices, and small artisans are being crowded to the wall for lack of raw materials. . . . 34. 7 per cent of 375,741 retailers net less than 125 marks a month (fifty dollars at official exchange rates), which is considerably less than a skilled worker receives. As a result there is a great dying off of independent middle-class enter- prise. . . . German industry is undergoing a process of concentration which tends
to concentrate industrial control into a few mammoth concerns. " New York Times, Sept. 3, 1937. See the discussion in Neumann, op. cit. , p. 274, and on the elimination of small businesses, ibid. , pp. 263-65, 282-84.
55 This can be shown in a number of ways; by reference to leading officers, by identity of policies initiated and carried through; by the dominance of the heavy industries in rearmament, war, and reemployment programs, etc. The analyses of the personnel have been made by Neumann, op, cit. , pp. 388-92.
43
? 44
GERMAN INDUSTRY
organization in Germany (i) identifies at each point of delegation executive with judicial and legislative powers, and (2) traces all authority from the top down (all responsibility from the bottom up), it will be seen that the net effect is--subject only to govern- mental check--^^ to locate economic hegemony in the closely-knit managements of the large combines in the heavy industries. (R)^
6. The specific doctrinal content of the propaganda fed out to all parties of interest through the media available to the new con- trol apparatus is in many respects indistinguishable in basic as- sumptions, its view of human nature and society, its criteria of truth and falsehood, its social valuations, and its leading appeals and arguments from that which has been long characteristic of the "welfare capitalism" of such huge industrial combines as the Dye Trust, Krupp, Siemens and Halske-Siemens-Schuckert, and the A. E. G. The main differences are twofold. In the first place, propa- ganda directed to different interest groups--labor, the general public, farmers, and others--has been integrated, coordinated, and in large part centralized. And in the second place, the propaganda has been generalized to cover the whole of the German business system.
Thus the Nazis have provided means for achieving the ultimates in the tendencies underlying the organizational efforts which pre- ceded their entrance onto the scene. The pattern of control com- mon to all large-scale business enterprise is here expanded so as to encompass the entire range of economic activities, and to regiment and direct all parties of interest throughout the entire country. This hierarchical pattern--coupled with the concept of occupa- tionally and functionally self-contained, all-inclusive, definitely circumscribed, and centrally directed trade and group categories which are ranged in a graduated order of power, duties, and im- portance so as to include the activities of all Germany--constitutes the essence of the "Corporate State. " ^^
56 See chapters VIII and IX.
57 Excepting, in part only, agriculture, transportation, and handicrafts.
58 " 'Corporativism' is chiefly preoccupied with securing a smooth and undisturbed
function of Capitalism by bringing about, in each branch of industrial production, a benevolent harmonization, a renunciation of class-war, between owners' associa- tions and workers' syndicates. " Aurel Kolnai, The War against the West (New York, 1939)' P- 325- This is a half-truth which underestimates the importance of the "cor- porative" idea for other purposes. Added to Kolnai's statement is the idea of more
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? GERMAN INDUSTRY
45
"status capitalism" and the state
At no point is there so much confusion and difference of opinion on the National Socialist system as in the nature of the relationship between the state and capitalistic enterprise. Detailed knowledge of the facts in and of themselves do not make the picture any easier to summarize for the uninformed reader. Certainly a great deal of capitalistic enterprise has been and is being liquidated in whole or in part. Many of the more important entrepreneurial activities and powers have been curtailed or eliminated entirely. Many fields of economic activity have been wholly preempted by the govern- ment, and the network of controls emanating from the leading offices of the state reach into every nook and cranny of the nation's economic life.
Three additional developments make the picture doubly dif- ficult to interpret properly. First, the Nazi propaganda itself is ostensibly, and in many respects emphatically, anticapitalistic. The Nazis claim, in fact, to have abolished capitalism entirely, and to have established in its place a pre-Romanic system in which prop- erty rights held in fee simple are transmuted into the equivalent of the "fixed family inheritance," and where the content and quality of inheritance rights are (ultimately) fixed by the state to correspond with a hierarchically arranged system of social or class gradations in turn founded upon occupational differentiations as determined by bio-social inheritance factors. This idea they refer to as the Stdndestaat--literally a State of Estates, or of classes, or Social- economic Castes. ^^
Secondly--and perhaps more important--the infiltration of con- trols exercised from central headquarters, state or private, effects a metamorphosis in the very nature of the problems at stake. Prob- lems of monopoly controls, becoming politicized as an incidence to the wielding of coercive authority, are necessarily handled with a view to many factors other than mere price and marketing advan-
or less self-contained, employer-controlled, hierarchically arranged, occupational categories which serve for modern industrialism in much the same way the medieval guilds did for handicraft societies. See Chapter VIII and see also Neumann, op. cit. , pp. 228-38, "The Myth of the Corporate State. "
59 See, e. g. , Kolnai's discussion of the writings of Hans Bliiher, Houston Stewart Chamberlain, Nietzsche, and others, particularly Chapters I, II, III, VII, and VIII.
? GERMAN INDUSTRY
tage. Only the historically untutored, or politically and philo- sophically naive could suppose that the power phase of coordinated monopoly controls would be handled in terms of "duopoly," "oli- gopoly," "imperfect competition," and the like. (R)? The proper terms of reference are those associated with what Weber refers to as BiXrokratie, Patrimonialisrnus, Patriarchalismus, and Feudalis-
And finally, the outbreak of the Second World War has placed Goring's much publicized Four Year Plan (Vierjahresplan) in the limelight, seeming thereby, to call for recalculation of all the varia- ble factors in an already overly confused picture. This complication is doubly baffling for the simple reason that it is so very difficult to learn much about the Four Year Plan--or, indeed, to learn whether there is even the substance of anything more than a comprehensive plan of military conquest at all.
Without entering very far into the issues involved at this point, it is possible to clarify the picture--even in the absence of much needed evidence at points--by recalling to the reader's mind that the Nazi state is made up not of one single central controlling bureaucracy, but of at least four such bureaucracies; these are, re- spectively, the civil service, the army, the party, and the economic. While differing from each other in points of view and interest in many places, these four bureaucracies are not separate and inde- pendent, but interlaced and interdependent. Civil and criminal law, and the whole of the legislative, executive, judicial and ad- ministrative machinery of the Third Reich have been centralized, unified,(R)^ ^nd brought into line with the basic hierarchical pattern of the Stdndestaat. Into this fabric has been introduced the Nazi party bureaucracy; it is at present almost impossible to determine
60 Irrespective of the logical or formal merits of such works as Edward Chamber- lain's The Theory of Monopolistic Competition (Cambridge, Mass. , 1933) or Joan Robinson's The Economics of Imperfect Competition (London, 1933), writers on eco- nomics have committed the fatal error of supposing that the simple hedonism and the circumspect marginalism of competitive equilibrium analysis could be trans- posed or merely modified by monopoly forms. The maximizing of profits rests in- creasingly on entirely different influences, powers, and factors than they are led to suppose. And even this objective may be so fundamentally altered by accretions to power, and by compromise with other desiderata of control, as to be almost entirely incompatible with the presumptive model behavior these authors are led to assume for their genus hotno monopolisticus.
61 Max Weber, Grundriss der Sozialokonomik (1925), in particular, pp. 650-753.
62 See Karl Loewenstein, "Law in the Third Reich," Yale Law Journal, XLV (March, 1936), 779-815.
46
? GERMAN INDUSTRY
where one begins and the other ends. (R)^ The Nazification of the army, following the removal of von Fritsch and the old guard just before the invasion of Poland, served to fuse this rapidly expanding bureaucracy jointly with the state apparatus and the Nazi party. The organization of the National Economic Chamber, and its cor- relative labor, agricultural, and cultural "estates," ^* completes the picture by dovetailing with the other hierarchies at a thousand and one points, personalities, machinery, competencies, and functions.
The net product of this four-way fusion has been referred to by people interested in the economic angle as "status capitalism," meaning a monopolistically organized, militaristically minded, hierarchically graduated and "feudalistically" directed (R)^ autocracy in which the upper social reaches, after having made the necessary compromises with the nouveaux puissant demagogery of platform and political tract, band together to constitute a governing class within a state expanded on a footing highly reminiscent of Plato's microcosmic model, the Sparta of Lycurgus. It is in this setting that the concept of the "Junker" has come to the fore again. ^^ For the term "Junker" has been generalized to mean not merely the old landed aristocracy of the Prussian Marches, but something more nearly like the term "Tory" in England ^^--literally, a "nature- determined" and self-contained "ruling class. " (R)^
63 This holds, for example, with the whole of the Party Tribunal system, which has been incorporated into the regular legal machinery of Germany (Loewenstein, op. cit. ). An even more striking example is the incorporation of the NSBO (National Socialist Business Cell Organization) directly into the Labor Front. Similar examples could be multiplied almost indefinitely.
64 Analogous to the National Economic Chamber (which includes all economic activities and interests in Germany, transportation alone excluded), are the Na- tional Food Estate, which comprehends all agricultural activities and interests, the National Chamber of Culture, responsible for the whole "cultural" program, and the Federal Trustees of Labor (under the Ministry of Labor), the coordinating body for the interests and activities of labor.
65 Meaning, specifically, a suzerain relationship with each competency held "in fief" on a pseudo-contractual basis, fixed in custom, and resting upon means for in- suring throughout the social pyramid fixity of social station, fixity of occupation, and ultimately a high degree of fixity of residence.
66 See Karl Brandt, "Junkers to the Fore Again," Foreign Affairs, XIV (Oct. , 1935), 120-34. Brandt, of course, means more than is implied above. Actually, he finds a steady and cumulative infiltration of the old Junker ranks into the civil, military, economic, and party ranks--many of them in leading positions.
67 In fact, this is exactly what the Nazis (before the outbreak of war with England) defined the word "Tory" to mean. It is no accident that the top-flight finishing schools for Nazi party leaders reserve for their graduates the honorary title of "Junker. "
68 Actually, as in Plato's famous illustration of the metals and in Pareto's concep-
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? 48 GERMAN INDUSTRY
Whereas in a feudal society the economic resources of the baronry were rooted in agricultural holdings, in the adapted capitalism of the Third Reich the gigantic strength of the new "Junker class" is drawn from industrial, commercial, and financial properties. And to the extent that the feudal nature of the economic relationships in medieval society was not compromised by virtue of the fact that the nobility possessed legal, civil, and military rights in addi- tion to the economic, so also this new fusion called "Fascist Totali- tarianism" is no less an expression of monopoly controls simply because similar elements are mixed into the "Junker" social com- position. ^^
In fact, a carefully reasoned analysis of the past developments summarized in this chapter will show not only that the Nazi state grew by fairly normal processes out of the evolution of capitalistic forms in Germany, but also that the bureaucratic fusions traced out above are not only consistent with, but absolutely essential to, a continuation of such previous lines of growth. Without them, capitalism in Germany unquestionably could not long have sur- vived under any circumstances. With them, it may be enabled to endure for a considerable period of time in the future.
From the standpoint of practical propaganda, it seemed advan- tageous to Nazi officialdom to describe this new arrangement as noncapitalistic, or even anticapitalistic. The "profit motive," it is said, no longer dominates business decisions. In its place has come "service to the community. " This is, of course, exactly what is meant by the American authors, Mooney and Reiley, when they lay down the dictum on behalf of highly organized American business that the real function of capitalism is to make "profits through service, profit in this sense meaning the compensatory material gain or reward obtained through service. " ^^ It reflects a point of view which is consonant with that expressed in the famous "You and Industry" series of the National Association of Manufacturers.
tion of the "circulating elite," provisions are made for especially gifted outside of- the-ruling-class recruits to rise to the top. These are regarded, however, primarily as sport cases--exceptions to the rule.
69 Of course, it may be correcdy upheld that this analogy with feudalism is un- happy, because feudalism is opposed to bureaucratization and contains the essential element of personal relationship. Nevertheless, it would seem to illuminate the na- ture of the property holdings and spheres of economic control in the Third Reich.
70 James D. Mooney and Alan C. Reiley, Onward Industry! (New York, 1931), p. 342.
? GERMAN INDUSTRY
In making "business responsible to the community" through the revamped control network of the "'new social order," the Nazi leaders profess to be promoting "self-government" or "self- management" in industry. It is also interesting to note that much of the time spent by officials in German central business offices has to do with what they term problems of "fair trade practices," "fair prices," rules against "selling below cost," and the like/^
Now an inevitable corollary of making such a system of busi- ness "self-management" work is the possession of the necessary power to punish offenders. It was on this particular rock that the price and production control measures of NRA were rent asunder. The Nazis have made no such mistake. That many concerns would be liquidated when the central control apparatus possessed the necessary power to force "free riders" into line was inevitable. This accounts for many of the cases of forced liquidation of small con- cerns. But even the large and giant enterprise is not necessarily exempt from the laws of its own making, for the simple reason that domestication of warfare does not necessarily do away with the basis of conflict. It may, however, change a good many of the rules. Thus many of the largest businessmen in Germany were forced to
hand over their properties to competitors because they were Jews. And Thyssen, of the heavy industries, apparently chose to play a lone hand and got caught in a combine which he was unable to overcome. Like Schacht, at the critical point he played with the wrong crowd of "insiders," and, as has happened to many unsuc- cessful promoters in American business (Fisk, Drew, Gould), was forced outJ^
71 See in particular Marktordnungsgrundsdtze der Reichsgruppe Industrie, a primer of rules for "regulating the market" according to the new "fair trade practice rules. "
72 Insull, Mitchell, and Whitney are in a different class only because they were caught via regulatory machinery which the business community either assented to, or, opposing, had had forced on them by political forces which held that only through such controls could the business community, and with it the capitalistic system, be saved from the disaster its own malpractices were bringing down upon it. Numerous observers have found in the spectacular rise of the Hermann Goring Works proof of an inherent Nazi tendency towards "Socialization," Nothing could be farther from the truth, as the party-approved Berliner Tageblatt, Dec. 2, 1938 ("Vom Wachstum des 'Reichswerke'-Konzerns") has pointed out at some length. Kurt Lachmann in "The Hermann Goring Works," Social Research (Feb. , 1941), pp. 24-40, finds the
company a new version of the postwar Stinnes or Haniel groups, and a type of "in- dustrial empire building" which bears a dose "resemblance to the amassing of lands and fortunes by the feudal lords of the seventeenth century. " The analogy is intrigu-
49
? GERMAN INDUSTRY
None of these considerations are inconsistent with the point made that, under the Nazis, previous trends in the evolution of centralized business control were carried on, with the principal dif- ference residing in the facts that under the new regime they could be brought to their logical conclusions more swiftly, more ruth- lessly, and more rationally than theretofore, and that all economic issues must now be openly decided in a political frame of reference.
But how far has the war altered the picture? Under the decree of October 26, 1936, giving Field Marshall Hermann Goring dicta-
ing, but actually the combination represents a somewhat "privitized" regrouping of industrial properties previously owned by the Reich, Prussia, various municipalities, properties taken over from the governments of conquered Austria (e. g. , Steyr- Daimler-Puch A. G. , Maschinen- und Waggon-Fabrik A. G. Simmering, and Donau- Dampt-Shiffahrts-Gesellschaft) Czechoslovakia (e. g. , Skoda), Poland, Roumania (most important of which is the Reshitza iron works), Norway, and--more recently--Bel- gian, Dutch, and French concerns.
German banks and "the industrialists" participated in the founding and expansion of the combination, though to what extent is unknown. It is significant, however, that the primary purpose of the new industrial complex--leaving aside liquidation of Goring's private debts--was the exploitation of low-grade domestic iron ores at government expense, for delivery to Krupp, Vereinigte Stahlwerke, and others, as raw steel for fulfilling armament contracts with fixed but generous profit allowances. Its subsequent expansion into a unified vertical combination and the regrouping of its holdings along functional lines (i) mining and smelting, (2) munitions and ma- chine building, (3) shipping on rivers and canals, is entirely in keeping with past practices of German industrial concentration. Private control is greater, and private interests are served more clearly, under the new regrouping than was the case of the properties before they were brought together in the new combination. It is very difficult, if not at present entirely impossible, to evaluate the status of other such public or semi-public corporate enterprises. Neumann, op. cit. , pp. 298-304, inter- prets the Goring set-up as a party combine with heavy-industry participation. Fig- ures are produced in this book.
The Labor Front now does the biggest travel business in the world. Ley recently announced plans for the mass production of cheap farm tractors to be produced, ap- parently, along lines similar to the Labor Front-financed "Peoples Car" plant at Fallersleben (now producing tanks). The Labor Front has also taken over some 9,000 consumer cooperatives in Germany, and is also, through the Labor Front Bank (which collects around 500,000,000 marks annually in dues), possessor of one of the largest European banking systems (Business Week, March 15, 1941, p. 96). On the Labor Front combine, see Neumann, op. cit. , p. 304.
Goring, Funk (head of the Reichsbank) and other leading Nazi officials have also organized a continental -wide oil trust, capitalized at $32,000,000. PM (March 4), 1941. On the Continental Oil Corporation, see Neumann, op. cit. , pp. 276-77, 356-68, 396-98.
Certain only is this, that (a) these trusts are privately directed by Nazi officials acting in collaboration with private interests for non-democratic purposes, and (b) that they are being organized on an European-wide basis. See Albert T. Lauterbach, "German Plans for a New Economic Order in Europe," in Germany's Challenge to America's Defense (Planning Pamphlet No. 4 of the National Economic and Social Planning Association).
50
? GERMAN INDUSTRY
torial power to carry through the Second Four Year Plan, all eco-
nomic activities in Germany were brought into six special groups:
(1) ProductionofGermanRawMaterialsandSemi-Manufactures (2) AllocationofRawMaterials
(3) EmploymentofLabor
(4) Agricultural Production
Price Policies
(6) ForeignExchangeSupply.
On July 13, 1937, section (2) was dissolved, and there was created
in its place two divisions, those of Foreign Trade and of Iron and
Steel Utilization. Since that date the plan has apparently under-
gone many--and possibly in some respects far-reaching--changes.
Its general purpose called for exhaustive detail on the present and
potential resources of the Reich, and for ways and means of mo-
bilizing these to the fullest extent and with the maximum speed. An
observer, present in Germany during the elaboration of the various
phases of the Plan, details the functions of the new machinery as
^3
1. Supplyofdetailedinformationforachievingproductionpotentials, including data on working conditions.
Envisaged were: possible elim- ination of dual and overlapping capacities; amalgamation and co- ordination of plants and enterprises, mainly in an effort to save on transport and distribution costs; a report was made on how far labor hours could be increased, based on the fact that there were no new or unemployed workers to be absorbed; detailed data on obsolescence, which had already made itself prominent in mining and the steel industry (having become very much worse since 1937, particularly in the railroad industry). Particular emphasis was placed upon the development of synthetic or Ersatz industries.
2. The direction of the maximum of the available potential into mili- tary uses. A final and amazing estimate was made of just how far con- sumption--and more important--production of capital equipment for home use could be cut so that arms and exports would benefit.
3. Estimates of various national costs and subsidies involved in the use of admittedly poorer raw materials and minerals which exist at home, when substituted for better materials imported from abroad. Particular attention was paid to iron and lumber, but re-use of old materials also received a good deal of attention.
73 The author of these remarks, anonymous for obvious reasons, was in an un- usually fortunate position for observation of the whole plan as it was unfolded from 1936 on. His summary checks in the main with every bit of evidence I have been able to obtain from other sources.
(5)
follows:
51
? GERMAN INDUSTRY
4. The financial end of operations: for the first year it was planned that 80 percent of the costs involved would be carried by private in- dustry, of which 30 percent was to be based on existing assets, and 50 percent handled through new financing (stocks and bonds): banks would supply 8 percent and the government 12 percent by subsidy.
5. A detailed plan for possible markets abroad, and a statement of why Germany was having difficulties in foreign markets (mostly attribu- table to lowered qualities).
6. Unified control by staff under the direction of Field Marshall Her- mann Goring.
Great as these and subsequent changes have been, yet the Second Four Year Plan seems clearly, and in all leading particulars, to have been directly in line with the First Four Year Plan. Although the earlier plan (1932-36) had as its declared objective the aboli- tion of unemployment and the creation of German self-sufficiency, it was during this period that all the important Nazi social, eco- nomic and legal organizations were established, the basic new price and marketing controls elaborated, the foundations for remili- tarization laid and the task of rearming actually begun. The Second Four Year Plan (1936-40) bridged the gap between a militarized peace and full belligerent status, but involved little more than further elaboration and strengthening of previous machinery, to- gether with a more deliberate reorientation of all efforts toward the impending war. The Third Four Year Plan (sometimes referred to as the Second Four Year Plan in the Nazi literature) looks towards the dual objectives of still more complete coordination of civil and belligerent control efforts on the one hand, and towards the reor- ganization of occupied territories with a view to the "organic" in- corporation into the imperial network of the German dominated "new order in Europe" on the other.
Thus the Four Year Plans have followed a fairly consistent pat- tern from the beginning. Tracing what little may be learned about them from their inception, it seems that there is little, at bottom, to distinguish them from other war plans of the First World War, particularly those of Hohenzollern Germany, except the much higher levels of organization and control and the greatly expanded perspectives of imperial aggression. So far as industrial and business organization is concerned, practically every significant idea elab- orated in the new system is to be found, at least in germinal form,
52
? GERMAN INDUSTRY
in the Central Purchasing Corporation (Zentraleinkaufsgesellschaft --ZEG) and the series of semi-autonomous "mixed" control com- mittees and compulsory syndicates which dominated the war con- trol measures in Germany from 1 9 5 on through to the cessation of
1
hostilities/*
The Four Year Plans appear thus as straight-line development
from these predecessor plans. Both anticipated the whole of eco- nomic activity coordinated to the needs of the war, with separate all-inclusive planning and control bodies for each important trade, industry, or functional activity (e. g. , price control), and with all these dovetailed through an appropriate machinery. The First World War supplied experimental results on a big scale. Marshal Goring is bringing all the isolated strands together on a new and more comprehensive basis. Now business leaders are sitting down with governmental officials, military chieftains, and imperial party leaders, and are working out policies governing all economic activi- ties in the entire Reich.
But the larger significance of these business-government rela- tionships is found in the fact that during the between-wars inter- lude there was no fundamental departure from the basic organiza- tional patterns of the World War. Many of the forced syndicates, notably those in coal, lignite, and potash, continued in force. The war stepped up the speed of cartelization tremendously, but the postwar period carried on the process. The "mixed" corporations, some of which sprang into existence during the war, continued to dot the economic landscape, particularly in the fields of power, gas, coal, iron and steel, and shipping. War-type price controls, pro- duction controls, internal and external market allocations, pooling of patents, technical innovations such as standardization and typi- fication (of assembled products) were not given up. Rigidity of con- trol was in many respects relaxed, and there was certainly a marked decline in the role of the government and the military.
Yet certain leading ideas remained, first of a completely coor- dinated economic system, based upon the full "cooperative" par- ticipation of the upper business baronry in politico-economic decisions; this was in turn to be divided into all-inclusive "self-
74 See "Kriegswirtschaftslehre und Kriegswirtschaftspolitik," Handworterbuch der Staatswissenschaft (4th ed. , Jena, 1928), V, 984-1022.
53
? GERMAN INDUSTRY
governing" trade and industrial central policy-controlling bodies, which should be endowed with legal or quasi-legal power to en- force decisions in the name of the state, and which, finally, would be guaranteed successful results through an elaborate system of governmental subsidies, allowances, and guarantees. In the inter- lude of peace, business leaders had acquired the habit of looking back at the experience of the war as the training ground and the ger- minal source of ideas for the coordinative efforts which time and circumstance were persuading them to extend to the outermost reaches of the German economic system.
At the critical juncture the Nazi solution, with its abolition of trade unions and its wholesale destruction of democratic institu- tions, seemed a necessary and logical fulfillment of these processes of growth. Therefore, though not without some occasional mis- givings, German business leaders embraced it. Now they face the prospect of being able to expand their private economic empires, by the aid, advice, and consent of the new German-dominated to- talitarian system which they expect shortly to extend to the outer- most bounds of Europe and Africa, upon a continental and inter- continental basis.
How far such expansion will mean further modification of part capitalistic forms of organization remains to be seen. Regimenta- tion through the instrumentality of the state will doubtless con- tinue, but there is as yet no reason for believing that it will depart far from the present principles of "self-government in business" " which did so much to bring the regimentation on. But it is impor-
ts The wartime control of industry rests today: a) with the general deputies under the Four Year Plan, primarily concerned with nationalization (now coordinated by Wilhelm Fanger, president of the Mannesman combine and leader of the national group industry); b) with the Reichsstellen for raw-material allocation. The Reichs- stellen are now merely raw-material allocation offices; however, they are slowly being dissolved and their functions taken over by the existing cartels or by newly created cartels (coal and cellulose, wool and steel). See Economist, April 4, 1942 (radio broad- cast from Germany); c) with the national Price Commissioner; d) with the general commissioner for labor supply; e) with the Reichsbank (for capital issues); f) with the Wehrwirtschaft (Riistungsamt) of the Supreme Command of the Armed Forces, which is represented especially in the combing-out commission for the adequate dis- tribution of labor; g) with the National Economic Chamber; h) the supreme au- thority is vested in the ministerial council for the defense of the nation. This has i) delegated a large part of its authority to the minister of economics, W. Funk, as gen- eral commissioner for economic affairs. See Neumann, op. cit. , p. 252, and the scheme, P- 253-
54
? GERMAN INDUSTRY
tant to note that given this principle fused with the companion Nazi ideology of class and racial predation it follows from extension of the old patterns over the new terrain that Wirtschaft and Krieg become but two internally related phases of the many faceted and inherently expansionist Herrenstaat.
55
? Chapter II
THE FASCIST SYSTEM OF COLLATERAL SYNDICATES
THE ROLE and significance of the Fascist Confederation of Indus- tries is inextricably bound up with the development of Fas- cism and the unfolding of its appropriate institutional expression, the Corporate State. This is true because, at bottom, it is not only fair but also entirely accurate to speak of Fascism as a "revolution from the right," or, more simply, as "counterrevolution. " ^ And in counterrevolution the forces centered around the more compactly organized, possessing classes must of necessity choose the issues and shape--with whatever compromises the Realpolitik of Domination
may enforce--the course of future events.
But why should such vigorous and sweeping counterrevolution-
ary action occur first in Italy, one of the least industrialized amongst the capitalistic states? There is an interesting historical analogy here with the contemporary situation in Russia, which helps to throw the Italian situation at the end of the war into sharp relief. In Fascism capitalistic institutions were able to triumph; in Com- munism they faced defeat. Yet both Italy and Russia were among the "weakest links" in the chain of capitalist nations. In each case, at a critical point the pendulum seems barely to have swung the way it did. It is probably not too far from the truth to say that had Russia not turned Socialist in 1917 it would have adopted some form of "Fascism," and had Italy in 1922 not fallen unexpectedly to the Fascists it would have become a Socialist state (though the "March on Rome" came after the high tide of postwar revolution- ary Socialism).
iSee Carl Schmidt, The Plough and the Sword (New York, 1938), Chapter III, "Counterrevolution. "
? THE FASCIST SYSTEM
Both countries were primarily agricultural. ^ In both, rural life was characterized by deep contrasts between vast estates owned by politically powerful and immensely wealthy families on the one hand, and an overwhelming majority of more or less propertyless, poverty-stricken, ignorant, and repressed peasantry on the other. In both, important feudal carry-overs survived intact down to the outbreak of the World War. In neither had Parliamentary institu- tions or the first grudging concessions to popular sovereignty seri- ously affected the vast proportion of the population. Both were still political patchworks, and in neither had largely borrowed, nation- alistic sentiments penetrated far beneath the thin upper layers of class-conscious jingoism. ^
In both, the level of industrialization was, comparatively speak- ing, low, and what industrial nuclei had developed were highly localized. Of these, most were foreign transplantations, represent- ing primarily English, French, and German capital. What local capital was involved in each case came largely from the great land- owning families, with which rising industrial, trading, and finance capital was, consequently, closely associated from the beginning. * Industrialization came comparatively late, and in both cases, once begun, the pace of growth and development was unsually swift. At a time when industrial technique of its own momentum was be-
2 See the summary given in Robert Michels, Italien von Heute (Leipzig, 1930), pp. 19-20, of Bakunin's description of Italian social classes in 1870. It needs only minor alterations to be held valid for Italy of 1914 or 1940.
3 "Before the World War Italian nationalism was the concern of a group of snob- bish writers rather than of serious thinkers. Every effort was made to adapt the philosophy of the German imperialist Treitschke, or that of French prototypes such as Maurras and Barr^s, to Italian conditions. " William Ebenstein, Fascist Italy (New York, 1939), p. 4. "The state has been dominated by classes. But now we begin to conceive of the state as an emanation of the entire nation. The state is the active organ of the entire nation, for the entire nation. " E. Corradini (founder of the Na- tionalist Association) // volere d'ltalia (Naples, 1911), p. 175. The lack at that time of any deeply felt national or articulate and cohesive social ideologies among the two peoples goes far to explain why, of all the soldiers fighting in the World War, the Italians and the Russians were equally and by all odds the worst. The slaughter of the Masurian Lakes was paralleled by the demoralizing catastrophe of Caporetto --a catastrophe which appears to have been repeated in but slightly different form on the plains below the Guadarramas during the Spanish Civil War.
4 The more important and more highly organized latifondi were located in the rich Po Valley. At the two ends of the Valley are to be found the more important in- dustrial and commercial centers of Italy. The great landowners constituted the social and economic aristocracy in the great cities where industrial undertakings first struck root. From the same closely knit social circles came the leadership for the great em- ployers' associations in both agriculture and industry.
67
? THE FASCIST SYSTEM
coming large-scale, and capitalism of its own native driving power was resorting everywhere to monopoly devices, this forced-draft growth tended at once to sharpen the social cleavages and to strengthen and unify the forces of antidemocratic reaction. By the "accidents of history" monopoly forms of capitalism, mercantilistic sentiments, and feudal social institutions were in both immediately juxtaposed.
In Russia proletarian forces won the throw of the die; in Italy, property. For the spread of the Socialist-Communist state Russia lacked industrialism; for the dominance of capitalist institutions and controls Italy lacked a widespread business system. Russia undertook to solve her problem by a backward step into NEP, in order to lead more easily into the industrialization program of the Socialist Five Year Plan. Italy devised the Corporate System. ^ And the Corporate System is to be understood as that morganatic alli- ance between organized, Italian, patrimonial capitalism and the type of feudal controls long advocated by the Papacy, from which it was hoped to find at once an end to class war and full defense of the existing social-economic status quo.
ANTECEDENTS OF THE CORPORATE STATE
Without dipping farther into the historical background than is necessary to make clear the component elements out of which this apparently novel "experiment" was compounded, attention may be focused on three factors of unique importance; ^ (a) the "social program" of the Catholic hierarchy; (b) the rise and peculiar com- position of the pre-Fascist labor movement; and (c) the strategic power of the closely cooperating central associations of industry and agriculture.
The social program of the Catholic hierarchy. --This was evolved as means for counteracting the rise of class-conscious trade unions dominated by left wing and materialistic--in particular by Marx-
5 The essence of the Fascist corporate system is found in hierarchical implementa- tion of patrimonial class domination by monopolistically oriented and compactly organized vested-interest groups.
6 The "Nationalist" movement, though important, can be ignored for our present purposes. Like Fascism, which it preceded, it was not in itself a causal or contributory force, but the result of such force. Nor was its strength, as expressed in numbers or influence, of much importance.
58
--
? THE FASCIST SYSTEM
59
ian--social philosophies. It may be divided into three phases: from the first third of the 19th century to the delivery of the Papal Encyclical Rerurri Novarum in 1891; from Rerum Novarum to the inauguration of the Fascist system in 1922; after the Papal Ency- clical in commemoration of Rerum Novarum, delivered in 1931 and known as Quadragesimo AnnoJ Beginning, in the first phase, as a general criticism of conditions created out of the capitalistic milieu, the papal position had shifted until by 1931 it not only for- mally endorsed Mussolini's fascism per se, but also recommended the formula as a panacea for all other industrial countries as well.
In the first phase. Catholic writers took their place among vari- ous proponents who hoped to solve the issues of class conflict and industrialism by recourse to doctrines inspired by Christianity. ^ Le Play, the French engineer, hoped to transform the employer into a benevolent master who would care for his workmen as father to his children. Protestant writers such as Kingsley, Carlyle, and Ruskin wanted something less patriarchal, but saw in various forms of class collaboration good Tory means for turning the lion of indus- trial capitalism into the lamb of social harmony. The leading Cath- olic writers, however, went straight to the Middle Ages--the period in which the Church dominated the whole of European society for their inspiration.
Under one form or another a series of Catholic spokesmen ^ ad- vocated recrudescence of the medieval conception of a corporatively organized society. Many of these initial expositions were the work of French emigres returning to the homeland following the Treaty of Vienna in 1815 and the inauguration of the Holy Alliance. On the
7 The intervening period, 1922 to 1931, might, in turn, be divided into two inter- vals: a period of partial and at times bitter conflict between church and state reach- ing from the inauguration of Fascism to the Lateran Accord in 1929; and from the Lateran Accord, which recognized Catholicism as the official religion in return for Papal support of Fascist leadership in the upbuilding of the new Roman Empire, to recommendation of corporate ideas by the papacy as'the solution of the "Social question" in general. Most notable of its successes has been the "clerical fascism" of the ill-starred Austrian totalitarians, Dollfuss and Schuschnigg, and the system of General Franco which emerged from the Spanish Civil War.
8 See "Doctrines Inspired by Christianity," in C. Gide and C. Rist, History of Economic Doctrines, pp. 483-514.
9 An early representative of these was Philip Buchez, Essai d'un traite complet de philosophic, du point de vue du catholicisme et du progres (Paris, 1838-40), and Abb^ de Lamennais, La Question du travail (1848).
? 6o THE FASCIST SYSTEM
other wing a few were highly reminiscent of the social-communism
advocated so vehemently by the early church fathers/^ since they
appeared in large part as attacks on the institution of private prop-
erty and in defense of workers' rights to a fair wage and a decent
standard of living. But Catholic writers of a more "practical" turn
of mind advocated simply mixed or collateral syndicates in which
the principles of hierarchy would dominate and the employer would
play the role of "leader" or "master" to his flock. The model was the
Church/^ and "the corporations which would be set up under the
aegis of religion would aim at making all their members contented
with their lot, patient in toil, and disposed to lead a tranquil, happy
^2
life. "
Though never entirely free of important schismatic differences,
the Social-Catholic movement maintained almost from the begin- ning a fairly coherent reform program. Prior to the revolutionary upheavals of 1848 it was predominantly antiliberal, generally op- posing both laissez faire and free competition on the grounds that the doctrines of the Physiocrats and the early French liberals on the one hand and the socially irresponsible practices of certain traders and manufacturers on the other largely accounted for the French Revolution, its tempestuous aftermath, the rise of anticlericalism, and the spread of class antagonisms. The "free thinking" bour- geoisie were distrusted almost as much as the popular democracy for which it appeared inevitably to prepare the way. ^^
The events of 1 848 convinced Catholic thinkers that socialism, as the residuary legatee of liberal and democratic doctrines, was the
10 Such as Tertullian, St. Ambrose, St. Cyprian, Gregory of Nazianze. See the pro- gram of Vicomte de Villeneuve-Bargemont as outlined by Thomas Parker Moon, The Labor Problem and the Social Catholic Movement in France (New York, 1921), pp. 19-25. See also Paul K. Grosser, Ideologies and American Labor, New York, 1941.
11 "The corporation is simply the model of the Ghurch. Just as for the Ghurch all the faithful are equal in the sight of God, so here. But equality ends there. For the rest of it is a hierarchy. " Quoted by Gide and Rist, op. cit. , p. 500, from Segur- Lamoignon, L'Association catholique, July 13, 1894.
12 Gide and Rist, loc. cit. , quoted from the Encyclical of Leo XII, December 28, 1878, called Quod Apostolici.
13 Veuillot, a clerical journalist, was opposed to the "free thinking bourgeoisie" but held that, while misery must be destroyed, "poverty is a divine institution" and charity the true social science. He proposed a Holy Roman Democracy to parallel the Holy Roman Empire; the latter, of course, was to lead the former by authorita- tive principles and both were to be hierarchically directed from above. The Confed- eration of Italian Industries was later to refer to its own program, patterned along these lines, as "authoritarian democracy. " Moon, op. cit. , p. 30.
? THE FASCIST SYSTEM 61
greatest of all the Church's enemies. Moderates like Melun and Le Play lost out, and, under the stimulus of the official patronage of Napoleon the Third, the movement began to take more definite shape around three leading objectives; first, to overcome the radical- ization of the working classes through an ideological conquest of the "workers' souls"; second, to transform the employer from a hard- hearted profit seeker into an aristocratic and paternal "leader" of his men; and third, to revive the medieval guild or corporate form of organization.
The first objective called for universal indoctrination with official Catholic Christianity, the second for various forms of benevolent social legislation, and the third for integral or mixed syndicalism. Under Count Albert De Mun and Count La Tour du Pin, these three phases were forged into an effective political program which was shortly taken up abroad--particularly in Germany under the leadership of Baron Wilhelm Emmanuel von Ketteler
soon received official papal blessing.
Industrial organization, De Mun held, should take the form of
"the Catholic Guild, which is neither a trade-union, nor a tribunal of arbitration, but a center of Christian activity where the interest of the profession is superior to private interest, where antagonism between capitalist and workingman gives way to patronage exercised in a Christian spirit and freely accepted. . . . It is always the same thought: limit competition, associate common interests, impose upon the employer the duty of patronage, uplift labor and the con- dition of the laborer. " ^*
Contemporaneously with De Mun's agitation (in the seventies and eighties), a great deal of interest in programs for class collabora- tion was aroused by the "experiment" of the French spinning firm of Harmel at Val-des-Bois. In the words of a very sympathetic ob- server, the "Christian Guild" of the Harmels was evolved as follows:
The simple principle of union by itself was considered inadequate; it tended to create labor-unions hostile to capital and bent on class war- fare. The principle of democratic control of industry would logically lead to the elimination of the employer. The principle of capitalistic paternalism, if taken alone, was inadequate because it failed to awaken any vital response among the workingmen. The Harmels attempted to
14 Ibid. , pp. 99-100.
--and which
--
? 62 THE FASCIST SYSTEM
make a Christian synthesis of these principles. In the first place, the workers were permitted, nay encouraged, to form various associations
a men's club, a woman's association, a girls' society, a mutual benefit society. Democratic control was practiced in the management of these associations, and was represented by elected shop-committees, but was not carried to the extreme. The Guild Board, an elective council of workingmen, was consulted on such questions as shop-management and wage-schedules, but had no sovereign authority in these matters; the policy of the employers was to act with democratic advice and consent, but not to abdicate their authority. The third principle, paternalism, received expression in manifold efforts on the part of the employers to promote the material and moral welfare of the workingmen, to foster and guide even the institutions controlled by the workers. The paternal influence may be seen in the fact that one of the employers acted as chairman of the Guild Board, and the supervision of general guild in-
terests was entrusted to a committee composed of the members of the firm, the chaplain, the school-director, and representatives of the vari- ous workingmen's associations. In this fashion the three principles of association, democratic control, and capitalist paternalism were com- bined and balanced in a complex organism consisting of first, employ- ers, second, the general committee of employers and representatives of the workingmen's institutions, third the workingmen's Guild Board, fourth, shop committees, fifth, various economic, social and religious associations among the work-people. ^^
Here is a precis not only for much of the social legislation that was to follow, but also for the more benevolent type of company union as well as the more violently counterrevolutionary Fascist syndicates of the Mussolini regime. Gone completely was the attitude of hos- tility toward capitalist and employer wherever he could be per- suaded to add to his entrepreneurial functions those of father and leader to his employees. And also, by the same token, gone com- pletely was the hostility to labor organization wherever workers could be gathered into associations, governed and directed by em- ployer interests from above in a fixed hierarchy of command and subordination and deliberately modeled after the pattern of the
Universal Church.
Until late in the century the papacy had paid relatively little at-
tention to the Social-Catholic movement. The general idea, of course, of universal guild organization under the benevolent super- vision of the Church has never been abandoned. From time to time
15 Ibid. , pp. 1 14-15.
? THE FASCIST SYSTEM
references had been made to guilds in various papal utterances, such as, for example, Humanum genus in 1854, Quod Apostolici mu- neris in 1878, and Aeterni Patris in 1879. But it was with the ency- clical letter of Pope Leo XIII on "The Condition of Labor" (Rerum Novarum)in1891 thatrecrudescenceofthecorporateorganization of society became the official doctrine. The Encyclical was directed specifically at the Socialists, and in condemning their social doc- trines Leo XIII saw fit for the first time to commit the Church to full support of capitalistic institutions. Social inequality, private ownership of the means of production, free competition, laissez faire, the accumulation of great wealth, and the rest, were justified as "just" and according to the "laws of nature. " Conversely, "class war" was declared "irrational," since "in a state it is ordained by nature that these two classes (the rich and the poor) should exist in harmony and agreement. " The employer was to treat his labor "justly" and render him that which was due. The multitudes must, he said, be kept "within the line of duty.
