My previous post about the political orientation of fascists got a response from Jonah Goldberg, the author of Liberal Fascism. This is my brief response to his.

Goldberg assumes that I was criticising his book, which I was not. That’s my fault. I should have clarified that I was not commenting on his book at all, because I have never read it. I was reacting to the general meme that fascists were left-wingers or socialists — which one hears quite frequently these days. I suppose that was inevitable, given the longstanding promiscuous use of the epithet ‘fascist’ by the left.

(1)

A theme common to Goldberg, the people at his comments section, and many who have tweeted at me is that fascists should be judged from a classical liberal or a Hayekian perspective. I agree that’s a possible and valid way of looking at things — if you’re interested in an ahistorical ethical or ideological evaluation of fascist economics. Or if you’re interested in characterising a figure from history in terms of the current definitions of left and right.

But, historically, ‘pro-business’ or ‘pro-property’ fits the definition of the right in politics much better than ‘laissez-faire’. Businesses everywhere and always want pro-business policies — not laissez-faire, unless that happens to be consistent with pro-business at that point in history.

For example, when tariffs were considered beneficial for business, the pro-business party in the USA supported them during the 19th century, and the more populist party wanted to reduce or eliminate them. It was the same in the UK: the liberals advocated free trade while the conservatives wanted protection. In 1901-2, the Tories sought to abandon free trade, but the liberals waged a successful populist campaign to keep it.

The common thread to the right in history is not laissez-faire, but the tendency to support business or property. The common thread to the left is to redistribute income and property.

(2)

In my previous post I quoted at length from Buchheim & Scherner, which documents that the Nazis, at least in peace time, respected the private property rights of industrialists. State-industry relations were governed by contract and negotiation, not by compulsion and diktat. This line of reasoning was neglected by Goldberg, who in the comments section of his own post had this to say :

The economy was arranged in ways that benefitted the state. Industries that resisted the State were punished (as with the steel industry). Industries that complied with the State were rewarded (as with the chemical industry).

The punishment of the steel & iron industry was quite exceptional. Even then, according to Buchheim & Scherner,

An obligation to serve a specific demand hardly existed for the majority of firms. That also applied to orders from state agencies. Firms could, in principle, refuse to accept them. One of the rare exceptions to that rule occurred in late summer 1937 when the iron and steel industry was obliged to accept orders from the military and other privileged customers. This step, however, was qualified even by Hermann Göring as a “very strong” measure and after two months it was to be lifted automatically.31 Even in November 1941 Ernst Poensgen, director of the iron and steel industry group, still could frankly explain to the plenipotentiary for iron and steel rationing General Hermann von Hanneken that the members of his group were not prepared to accept further military orders; instead they wanted to serve orders from exporting companies, shipbuilding, and the Reichsbahn.32 Only in 1943 was an obligation to supply certain requirements reintroduced under the utmost exigencies of total war.

The above must be kept in my mind when it comes to the only substantive criticism I have seen of my post by Goldberg :

Yes, Nazis squelched independent labor unions. Yes, yes, Nazis repressed socialists and Communists. Fine, fine. You know who else treated independent labor unions roughly? You know who else repressed socialists and Communists? The Soviet Union. The Soviets surely killed and arrested more domestic socialists, starting with the Mensheviks, than the Nazis did. And how did labor unions fare in the Soviet Union? How were strikes treated? Let’s ask the survivors of the Novocherkassk massacre or the Kengir uprising. Were they not for all practical purposes folded up into paper-tiger fronts as extensions of the State?

Goldberg ignores that the state was the employer in the Soviet Union, whereas in Nazi Germany employers were mostly private. This makes all the difference in the world. By herding workers into the state labour union, the Nazi state directly intervened to weaken the bargaining power of labour against employers. And if you suppress wage growth when the economy itself is growing, then the capital share of income should rise. Unless the Nazis also fixed commensurately lower prices for output — which seems unlikely given Buchheim & Scherner — then labour repression by the Nazis must have redounded to the financial benefit of private employers. That’s starkly different from the Soviet situation.

[Source of the table] Real hourly wages grew only by 6% or so between 1932 and 1939, with weekly earnings rising more than 25% as a result of working longer hours per week. Yet Germany’s GDP per capita rose by 60% between 1932 and 1939 [source]. Where did the rest of the growth go ? By default, it went to the capital share of national income, whose effect can be seen here :

[Source: Tooze 2006] The long-run rate of return on capital is 4-5% in industrial economies. So the leap in profitability for German business in the 1930s was pretty hefty. Much of this profitability did not show up in the income of the top decile; rather it showed up mostly in the top 1% :

[Source: Dell 2005]

So let’s consider another passage from Goldberg’s post :

So Pseudoerasmus (and many others) notes that the Nazis maintained (limited and often purely rhetorical) respect for private property! The Soviets didn’t! Therefore, the Nazis were not left-wing! Well, Elizabeth Warren and Bernie Sanders believe in private property a good deal more than the Nazis did. Does that make them right-wingers?

I’ve heard of Bernie Saunders (the only socialist member of the US Congress), but I had to look up Elizabeth Warren. I can’t imagine their economic policy preferences would include increasing the profitability of the business sector or the income of the top 1% at a rate faster than that of workers… In fact I’m pretty sure they would prefer to invert that drastically.

Update/Addendum: Originally I could not find the measured factor shares of income for Germany in the 1930s, so I only posted the rate of return on capital. But now I’ve found it. According to Barkai, the labour or compensation share of German national income dropped by 5 points between 1932 and 1936. That’s quite drastic for such a short period ! Also see similar estimates for real wages & labour share from Braun but larger estimates for the drop in the labour share from Overy. Here’s a graphic from Schneider 2011 :

Update/Addendum 8 May 2015:

The combined votes for Socialists (SDP) & Communists (KPD) in German elections :

1932: <36%

1930: <40%

1928: <41%

1924: ~35%

There was remarkably little defection out of the left in general. Even more constant through thick and thin was the support for the Catholic Zentrum :

1932: ~12%

1930: >12%

1928: ~12%

1924: <14%

The quasi-separatist Bavarian People’s Party also always got around 3%. In other words, the Nazis went from 2.6% in 1928 to >37% in 1932 by pinching votes from the traditional non-socialist parties other than the Catholic Centre Party.

Update/Addendum 9 May 2015: The Great Depression spurred a small wave of nationalisations of private enterprises in the industrial countries, including Germany prior to 1932. But the Nazis reversed this trend. Enterprises privatised by the Nazis include: Germany’s largest banks controlling up to 40% of banking assets; the railways (which were one of the largest state-owned enterprises in the world); as well as ship-builders, shipping lines, public utilities, mining companies, and a steel works which was Germany’s second largest company. None of this was done with principle in mind, but with a view toward gaining support from industrialists. See “Against the Mainstream: Nazi privatisation in 1930s Germany“.

Update: This post got picked up by David Keohane of FT Alphaville.