Dark Continent, page 17
New domestic sources of financing emerged to replace the capital markets of the West. Defaulting on foreign debt—or “rescheduling”—was worth a lot to the debtor states of central and eastern Europe—the equivalent of more than 10 per cent of government spending for Greece, Romania and Bulgaria, for example, between 1931 and 1935. What could have been more rational than borrowing heavily in the 1920s and repudiating the debt in the 1930s? British and American bondholders were resentful but helpless.33
Domestically, consumer spending could be squeezed, as could wages, especially in police states where independent unions had been smashed. Inflation, high tax rates, tight control of wages and other forms of forced and “voluntary” savings kept real wages low and funnelled resources into the state’s coffers. The Nazi regime constructed motorways and public buildings, the British council houses; nearly everyone subsidized farmers and sooner or later invested in rearmament. Thus a third form of development strategy emerged between, on the one hand, relying on foreign borrowing and, on the other, Soviet forced industrialization. It permitted a slower rate of growth than in the Soviet Union, but cost fewer lives and helped stabilize the political class.
On the whole, however, autarky remained a short-term option for European capitalism. True, it encouraged industrial recovery but only in a sheltered and uncompetitive environment. Established firms were shielded from foreign rivals and even from new entrepreneurs at home, through state-sponsored cartel schemes. Lucky businessmen reaped high profits but had little incentive to reinvest these in plant and equipment, especially when this needed to be imported. The main exception was where—as in the Third Reich—the nationalist state made it clear that it expected results for its protection. A Nazi public utility like Volkswagen, or private corporation like Daimler-Benz, laid down plant, equipment and profits in the 1930s (and early 1940s) that would form the basis for post-war growth. But these were the exceptions: most states were either insufficiently nationalist (like the British), or too disorganized (like the French and Italians) to make autarky pay. For all the talk of “efficiency” and “coordination,” there was overall no leap forward in technology to compare with the “rationalization” drive of the 1920s, and in some cases actual regression. Not until the 1950s would European industry truly modernize; ironically, the post-war Soviet Union became a case study of what could happen when a country persisted with autarky too long.34
In farming the story was similarly mixed, especially in backward eastern Europe. There was some modernization of agriculture—better strains of seed, more intensive use of fertilizers, greater cultivation of cotton and other import substitutes—but too many “battles for grain” kept the countryside alive yet unable to prosper. Peasants retreated from the market back into a subsistence economy. In the long run, autarky offered no solution to Europe’s overcrowded villages: these too would have to wait till the 1950s when communism and international capitalism would between them propel peasants into the towns and create new industrial jobs.
National capitalism in the 1930s had plenty of other drawbacks as well: working-class employment grew but wages were kept low, especially in authoritarian regimes. The Nazi Labour Front organized tourist trips and pressured factory bosses to improve some working conditions, all of which helped dissipate worker dissatisfaction; but none of this helped raise wages substantially. Thus the kind of consumer-led recovery which took place in Britain in the 1930s, based around growing employment in light industry, was essentially incompatible with the kind of recovery pursued in Nazi Germany or Fascist Italy. What, moreover, kept recovery going there was not the consumer but the military state. The Ethiopian war was vital for helping Italy out of recession. Until 1939 German spending on rearmament was roughly double the proportion of GNP that it was in the UK, and ten times what it was in the USA. For Hitler, of course, recovery was not the reason for rearmament; that was, quite simply, the need to prepare for the inevitable “new conflict” with Soviet Bolshevism. Nevertheless, the consequence was a tremendous stimulus to growth, which generated serious labour shortages and inflationary pressures by the end of the 1930s.
International trade did not come to a complete stop after 1932, but it ran at such reduced levels that it could not stimulate growth in the way it would after 1950. Levels of world trade had plummeted after 1929 and never recovered: even in 1937 world trade was below the 1929 figure, though world production had increased. Europe split into trading blocs with the British building up a zone of Imperial Preference outside the continent, and the French trying unsuccessfully to keep a small gold zone (the Netherlands, Belgium, Switzerland, Poland and Czechoslovakia) in existence. The most determined effort to build a new trading system compatible with autarky was pursued by Germany after 1934 with the New Plan—a network of bilateral clearing accounts with the countries of eastern and south-eastern Europe.
Heralded by some Nazi geopoliticians as the start of a New Order, and attacked by anti-Nazis as a system of fascist exploitation, the New Plan was in reality more modest in its impact. The rather poor and backward economies of eastern Europe were hardly a substitute for Germany’s old export markets. The Nazi regime really wanted their goods, not their custom, and they got their way by running large trade deficits with their poorer neighbours. Bulgaria, Yugoslavia and Greece thus helped pay for the German recovery. Yet no one else would take their exports anyway, and governments continued to humour the Germans because it was important to keep their own farmers happy. When the Greek government threatened to stop tobacco sales to the Third Reich because they were not getting much in return, it was the protests of their own tobacco growers that made them think again.
Thus although Germany came to dominate their trade, the Balkan states never became more than minor trading partners for the Reich. Their value lay chiefly in specific commodities—Yugoslav bauxite, Greek tobacco, Romanian oil—vitally needed for the overheated German armaments boom. This was exploitation, perhaps, but not of a kind which could offer a country like Germany anything more than short-term benefits. From 1938, barter trade was overshadowed by more direct forms of economic exploitation: valuable minerals, foreign-exchange reserves and extra steel capacity from the Anschluss with Austria; then, with the occupation of Czechoslovakia the following year, more gold and the Škoda works, the most important arms producer in central Europe. Foreign conquest—the primary goal of Nazi economic policy—had begun.35
FASCIST CAPITALISM
“We are now burying economic liberalism,” Mussolini proclaimed in 1933. By then, the end of laissez-faire had been accepted by most people. The active state had taken the place of the free market; the liberal’s selfish individual had been succeeded by the disciplined collectivity. It was easy to see how such trends might make fascism look like the capitalist economics of the future. But was there a specifically fascist economics? If liberalism was now dead, did that mean fascism had all the answers?36
Fascism certainly brought its own style to the management of the economy—activist, heroic, militaristic: Mussolini’s “Battle of Wheat” was followed by a “Battle of the Lira,” a “Campaign for the National Product” and later by Hitler’s “Battle for Work.” Fascists also liked to turn “economic problems” into “questions of will,” which was often another way of saying the leadership had no idea what to do next. In fact, fascist ideology was almost wilfully obscure on economics, partly because the leadership needed to keep both Left and Right wings of the movement happy, but partly too because it was not very interested in the subject, seeing economics as means to an end. Hitler wanted to use “the production technique of private enterprise in line with the ideas of the common good under state control,” a formula which satisfied everyone and no one. Fascism was strongly anti-communist but also anti-plutocratic. It was opposed to international finance—often condemned as “parasitic” and “cosmopolitan”—but in favour of national “production.” Did this make it socialist? Perhaps in a special, airily non-class sense. “Our socialism is a socialism of heroes, of manliness,” declared Goebbels, who came from the left wing of the Party.37
A “socialism of heroes” implied endless hymns to the Worker: every dictator in Europe must have posed at some time as his country’s First Peasant or First Worker. But fascism stressed manual labour rather than machinery and technology as in the USSR or the USA. Fascist men wielded scythes, they did not drive tractors. “I am a socialist,” Hitler stated, “because it appears to me incomprehensible to nurse and handle a machine with care but to allow the most noble representatives of labour, the people, to decay.” Posters emphasized craftsmen and artisans—a look backwards which perhaps helped draw labour away from its contemporary strong class connotations. Even motorway workers—according to Nazi publicity brochures—were pictured above the caption: “We plough the eternal earth.”38
In practice, however, fascism was scarcely the worker’s friend. Both Mussolini, the former socialist, and Hitler spoke one way to the workers before they had achieved power, and another way after it. Left-wing Italian Fascists had feared just this, and urged Mussolini not to cave in to the employers; anti-capitalist “Red Nazis” like the young Goebbels had exactly the same fear. “All the disgust provoked by parliamentarianism, and the just criticism of socialism and democracy, will end in bitter disappointment and inconclusive rhetoric and—worse still—a fatal reactionary illusion,” a leading pro-labour Fascist warned the Duce, “if Fascism is not to have a more solid, realistic and human base … The Communist utopia might still recover its deleterious influence if the new order were to show itself incapable of ensuring a minimum of economic welfare.” But such warnings not to sell out the workers were disregarded: Fascist and Nazi left-wingers were quietly brought to heel and the principle of private property was never seriously challenged. Left-wing Nazis dreamed of a “second revolution” against capitalism, but in Germany this prospect ended with the Night of the Long Knives and the murder of Gregor Strasser in 1934; in Italy it had vanished years earlier.39 In industrial relations, fascist regimes clearly leant towards the bosses. Independent unions were smashed in both Italy and Germany, but employers’ associations were permitted to exist, and there was little check to employers’ power except through the power of the labour market once full employment returned. Fascism remained a low-wage economy, different in kind from that of post-1945 western Europe.
If the kind of working-class protest which generations of Leftist historians have searched for failed to materialize, this may be partly because of the success of the regime’s German Labour Front (DAF) and its subsidiaries in organizing welfare and improving working conditions in the factory; after all, with an income three times that of the Nazi Party itself, and a membership many times larger, the DAF was not completely without influence. In Italy, the Dopolavoro organization also signalled the regime’s interest in workers’ leisure and welfare. At the same time, the new hierarchical order introduced into workplace relations made collective action harder to achieve.
Perhaps more crucial, though, was the memory of unemployment. As an observer of Germany noted in 1938, “although [the workers] know there is a labour shortage—they are all scared of losing their jobs. The years of unemployment have not been forgotten.” But the Nazi achievement could also be expressed more positively; in 1938 unemployment stood at just 3 per cent compared with 13 per cent in the UK, 14 per cent in Belgium and 25 per cent in the Netherlands. Much higher levels of unemployment in Italy may explain why Italian workers seemed to stay more alienated from the regime than their German counterparts. Nazi slogans about the “dignity of work” and the “honour of German labour” may actually have struck a chord; caught between the threat of “emergency labour” camps, on the one hand, and organized concerts, films, sports and travel, on the other, the average worker put political struggle behind him.40
After all, in both Italy and Germany, private property no longer reigned supreme either. As Hitler put it, one did not require expropriation when one had a strong state. There were now higher values—the Italian “Nation” and the German Volk—in whose name the economy was now to be administered. “In future the interests of individual gentlemen can no longer play any part in these matters,” Hitler had stated in 1936 as he gave the green light for rearmament. “There is only one interest, the interest of the nation.” In a wonderfully precise formulation, a senior German civil servant advised businessmen that “at bottom we do not seek a material but a mental nationalization of the economy.” This was a warning to private enterprise as well as a disclaimer. Likewise, Italian bankers were reminded that “the Banks are no longer the dominators of the economy of the Nation but only the instrument of the exercise of a particular form of credit”; business had “the right and the duty to enjoy the use of all the sources of credit which the Nation puts at the disposal of the productive activity of the Italian people.”41
Despite the endless appeals to “efficiency” and “coordination,” though, it is difficult to discern a distinctive fascist approach to the state. The state as modernizer? Hardly. In Italy, the need to rescue failing industrial concerns led to the formation of giant public-sector holding companies. On paper, there was a great increase in state control over the economy. In practice, however, industrial managers continued much as before. The Third Reich developed a panoply of state controls, before the 1936 Four-Year Plan spearheaded the rearmament drive under Goering’s leadership: by the late 1930s, his ministry determined around 50 per cent of total industrial investment in Germany. Inspired in part by the Soviet example, the German state undertook a massive scheme of capital investment, building up the most powerful military-industrial complex in Europe. Yet the gargantuan achievements—such as the Brunswick metallurgical works, the world’s largest aluminium industry, the high-quality weaponry—belied a chaotic reality, bedevilled by bureaucratic in-fighting and lack of central planning or even mere coordination. Standards of craftsmanship were high, but distracted attention from what was really needed—efficient mass-production. When it was put to the test, the German war economy—despite the attention lavished on it by the Nazi regime—was unable to match its rivals, both capitalist and communist.42
REFORMING A DEMOCRATIC CAPITALISM
“It suffices to consider countries as different as the United States of America, Soviet Russia, Italy or Germany,” insisted the leading Belgian socialist Hendrik de Man in October 1933, “to understand the irresistible force of this push towards a planned national economy.” The question for western Europe in the 1930s was whether democracy could learn from these striking new tendencies in economic life.43
The fascist and communist emphasis on will and action impressed west European intellectuals who felt increasingly surrounded by mediocrity and fatalism. After 1933, it was above all younger socialists—stunned by the swift annihilation of German social democracy—who became impatient with their own leaders’ caution. Mocking the mood of the French socialist leadership at their 1933 congress, one critic wrote sarcastically that the delegates had been told “it was necessary to be prudent, it was necessary to be patient, it was necessary to measure the opposing forces accurately. We were not to advance towards power because that would be too dangerous; we would be crushed by the resistance of capitalism itself; we were not to advance toward revolution because we were not ready, because the time was not ripe … We are to advance nowhere!”44
In Britain, similar feelings attracted Labour MP Oswald Mosley to fascism; he was not alone in feeling exasperated by what a fellow-MP called the Labour leadership’s “passion for evading decisions.” Mosley proposed a radical plan for economic recovery at the 1930 Labour Party conference; its rejection by the leadership on grounds of cost prompted him to leave the party and begin the move rightwards which would culminate in the British Union of Fascists.45
A generational gulf of outlook and temperament separated young men like Mosley, who had fought in the First World War, from the older socialist leadership. The latter were keen to show the electorate they could play by capitalism’s rules; the “Front Generation” thought the rules themselves irrational and the leadership passive, defeatist and geriatric. “This age is dynamic, and the pre-war age was static,” argued Mosley. “The men of the pre-war age are much ‘nicer’ people than we are, just as their age was much more pleasant than the present time. The practical question is whether their ideas for the solution of the problems of the age are better than the ideas of those whom that age has produced.” For many of the “Front Generation,” fascism and communism both represented more “modern” and more dynamic forms of economic organization than either liberalism or reform socialism.46
Their exasperation was understandable. Only occasionally did socialist parties even try rethinking theory and practice in the light of unemployment and the slump. The best example was Sweden, which devalued early and recovered fast, thanks to the reflationary policies of its 1932 Social Democratic government. Here was an administration keen and prepared to use fiscal policy to engineer an upswing. “There will be no spontaneous recovery,” affirmed the Swedish finance minister in 1933, “except to the extent that the policy of the state will help to bring it about.” The government gave a massive boost to investment and by 1937–8 unemployment was shrinking fast (from 139,000 in 1933 to under 10,000) and there was a manufacturing boom. Official policy was worked out in advance and carefully planned. It is true that Sweden enjoyed certain economic advantages which protected the country from the worst of the international depression: nevertheless, in its counter-cyclical fiscal policies and the pact between unions and employers which helped regulate industrial relations, it looked ahead to the managed capitalism which the rest of western Europe only adopted after 1945.47
