Economics of fascism

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The economics of fascism refers to the economic policies implemented by fascist governments. "Fascism" itself is a term used to refer to a variety of far-right, nationalist movements and regimes that existed in parts of Europe (and, according to some, Latin America) during the early to mid 20th century. There is no single established definition of fascism, and most groups identified as "fascist" usually claim to be based on the particular traditions of their country of origin and to have no connection with each other. This, in addition to the fact that fascist ideologies rarely concern themselves with economic issues, poses serious obstacles to any comparative study of the economics of fascism.

Nevertheless, some scholars and analysts argue that there is an identifiable political economy of fascism that is distinct from other systems, comprised of essential characteristics that fascist nations shared.[1] Others argue that while fascist economies share some similarities, there is no distinctive form of fascist economic organization.[2] A few see echoes of fascist economic policies in the modern welfare state;[3] in the expanding imperial power of U.S. based transnational capitalism;[4] and in neo-corporatist relationships between the state and private enterprise.[5]

Currently, there is considerable social stigma associated with the words "fascism" and "fascist," which are often used with pejorative connotations. For this reason, many people commit the fallacy of guilt by association: assuming that any policy employed by fascists must be bad simply because fascists approved it.[6][7][8][9] See also Reductio ad Hitlerum. The present article aims only to describe the economic policies employed by several governments that are widely regarded as having been fascist, without making any value judgements as to the desirability of those policies. It should also be noted that most of these economic policies have also been employed by non-fascist governments both before and after the rise of fascism.

Contents

[edit] General characteristics of fascist economies

The first fascist or proto-fascist movements arose in the last years of World War I. They carried a promise of national rebirth, they blamed liberalism, socialism and materialism for the decadence they perceived in society and culture, and they advocated a return to traditional conservative values (though they proposed to achieve this through a new political system).[10]

One significant fascist belief was that prosperity would naturally follow once the nation has achieved a cultural and spiritual re-awakening.[11] As a result, fascists considered the economy to be of little importance and did not have clear economic views. Often, different members of a fascist party would make completely opposite statements about the economic policies they supported.[12] Once in power, fascists usually adopted whatever economic program they believed to be most suitable for their immediate political goals. Long-lasting fascist regimes (such as that of Benito Mussolini in Italy) made drastic changes to their economic policy from time to time.

Nevertheless, fascists did have a number of important political views that shaped many of their economic decisions. The first of these was the fundamental fascist opposition to both socialism and liberal capitalism. Fascists argued that the implementation of their ideas into the economic sphere would represent a "third way", and they favoured corporatism and class collaboration. They believed that the existence of inequality and separate social classes was beneficial (contrary to the views of socialists)[13], but they also argued that the state had a role in mediating relations between these classes (contrary to the views of liberal capitalists).

Fascism also operated from a Social Darwinist view of human relations. Their aim was to promote "superior" individuals and weed out the weak.[14] In terms of economic practice, this meant promoting the interests of successful businessmen while destroying trade unions and other organizations of the working class.[15] Lawrence Britt suggests that protection of corporate power is an essential part of fascism.[16] Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social."[17]

Finally, fascism was highly militaristic. As such, fascists often increased military spending significantly, and their main reason for economic development was the wish to have a strong economy backing a strong military. Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the "national interest".[18] In most cases, this meant that foreign trade was discouraged or outright banned; fascists believed that too much international trade would make the national economy dependent on international capital, and therefore vulnerable to international economic sanctions. Economic self-sufficiency, known as autarky, was a major goal of most fascist governments.[19]

There have been considerable debates over the adoption of allegedly fascist economic policies in democratic nations. Some critics of President Franklin D. Roosevelt in the United States argued that certain parts of the New Deal - particularly the National Recovery Administration - represented collusion between business and government and were therefore fascist. President Herbert Hoover, in his Memoirs, accused the New Deal of being a "remaking of Mussolini's corporate state." Likewise, Ronald Reagan said that "it was Mussolini's success in Italy, with his government-directed economy, that led the early New Dealers to say 'But Mussolini keeps the trains running on time." The conservative historian John T. Flynn wrote an influential book in 1944, called As We Go Marching, which detailed the claimed similarites between the New Deal and the economy of Fascist Italy.

[edit] Political economy of Fascist Italy

The National Fascist Party of Benito Mussolini came to power in Italy in 1922, at the end of a period of social unrest. Working class activism was at a high point, militant trade unions were organizing increasingly frequent strikes to demand workers' rights, and the Italian Socialist Party was making significant electoral gains. This caused widespread fear among Italian business circles and part of the middle class, who believed that a communist revolution was imminent. With the traditional right-wing parties appearing incapable of dealing with the situation, King Victor Emmanuel III turned to the young Fascist movement, which had demonstrated a hardline right-wing orientation by violently suppressing strikes, and appointed Benito Mussolini prime minister. Soon after his rise to power, Mussolini defined his economic stance by saying that:

   
“
The [Fascist] government will accord full freedom to private enterprise and will abandon all intervention in private economy."[20]
   
”

During the first four years of the new regime, from 1922 to 1926, the Fascist government sought to break the unions while pursuing a laissez-faire economic policy under the Finance Minister Alberto De Stefani. Free competition was encouraged. De Stefani reduced taxes, regulations and trade restrictions.[21] He also reduced government expenditure and balanced the budget. Some former government monopolies (such as the telephone system) were privatized. Some previous legislation introduced by the Socialists, such as the inheritance tax, was repealed.[22] There was rapid economic expansion, but also high inflation. Overall, this was a period when Fascist economic policy mostly followed classical liberal lines, with the added features of stimulating domestic production and balancing the budget.[23]

However, De Stefani was forced to resign in 1925 because his policy of free trade was opposed by many Italian business leaders, who favored protectionism and subsidies to insulate domestic business from international competition. In 1926, Mussolini gave an impassioned speech demanding monetary policies to halt inflation and stabilize the Italian currency (the lira). He also took the final step of officially banning any kind of strike action. From 1927 to 1929, under the leadership of the new Finance Minister Alberto Beneduce, the Italian economy experienced a period of deflation, driven by the government's monetary policies.[24][25]

In 1929, Italy was hit hard by the Great Depression. The Italian economy, having just emerged from a period of monetary stabilization, was not ready for this shock. Prices fell and production slowed. Unemployment rose from 300,787 in 1929 to 1,018,953 in 1933.[26] Trying to handle the crisis, the Fascist government began enlisting the help of various cartels (consorzi) that had been created by Italian business leaders since 1922. The government offered recognition and support to these organizations in exchange for promises that they would manipulate prices in accordance with government priorities.[27] A number of mixed entities were formed, called instituti or enti nazionali, whose purpose it was to bring together representatives of the government and of the major businesses. These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business. The government considered this arrangement to be a success, and Italian Fascists soon began to pride themselves on having survived the Great Depression without infringing on private property. In 1934, the Fascist Minister of Agriculture said:

   
“
While nearly everywhere else private property was bearing the major burdens and suffering from the hardest blows of the depression, in Italy, thanks to the actions of this Fascist government, private property not only has been saved, but has also been strengthened.[28]
   
”

This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism. From 1934 onwards, believing that Italy could have avoided the Great Depression if it had not been linked to international markets, Benito Mussolini insisted that autarky should be one of the primary goals of his government's economic policy. To this end, the Fascists began to impose significant tariffs and other trade barriers.[29]

In 1935, following the Italian invasion of Ethiopia, the League of Nations imposed trade sanctions on Italy. This forced Italy to achieve autarky immediately, and strengthened Mussolini's belief that economic self-sufficiency was vital to national security. The sanctions did not have their intended effects, because the Italian government had already begun restricting trade and preparing for autarky. In particular, Italy imposed a severe ban on most imports, and the government sought to persuade consumers to buy Italian-made products. For instance, it launched the slogan "Preferite il Prodotto Italiano" (Buy Italian).[30] On July 15, 1936, the economic sanctions on Italy were lifted, but the Fascists continued to insist on economic isolation.

Throughout the 1930s, the Italian economy maintained the corporatist model that had been established during the Great Depression. At the same time, however, Mussolini had growing ambitions of extending Italy's foreign influence through both diplomacy and military intervention. After the invasion of Ethiopia, Italy began supplying both troops and equipment to the Spanish nationalists under General Francisco Franco, who were fighting in the Spanish Civil War against a leftist government. These foreign interventions required increased military spending, and the Italian economy became increasingly subordinated to the needs of its armed forces.

Finally, Italy's involvement in World War II as a member of the Axis powers required the establishment of a war economy. This put severe strain on the corporatist model, since the war quickly started going badly for Italy and it became difficult for the government to persuade business leaders to finance what they saw as a military disaster. The Allied invasion of Italy in 1943 caused the Italian political structure - and the economy - to rapidly collapse. The Allies, on the one hand, and the Germans on the other, took over the administration of the areas of Italy under their control. By the end of the war, the Italian economy had been all but destroyed; per capita income in 1944 was at its lowest point since the beginning of the 20th century.[31]

[edit] Political economy of Nazi Germany

Nazis in general, and Adolf Hitler in particular, regarded economic issues with disdain. In 1922, Hitler proclaimed that "world history teaches us that no people has become great through its economy but that a people can very well perish thereby", and later concluded that "the economy is something of secondary importance".[32] Hitler and the Nazis held a very strong idealist conception of history, which held that human events are guided by small numbers of exceptional individuals following a higher ideal. They believed that all economic concerns, being purely material, were unworthy of their consideration. Hitler went as far as to blame all previous German governments since Bismarck of having "subjugated the nation to materialism" by relying more on peaceful economic development instead of expansion through war.[33] For these reasons, the Nazis never had a clearly defined economic program. Hitler believed this to be one of the Nazi Party's strengths, saying: "The basic feature of our economic theory is that we have no theory at all."[34] Once in power, the Nazis preferred to leave the running of the economy in the hands of professional economists and bankers who had little or no relation to the Nazi Party. Only during World War II did the Nazis take a more active role in controlling economic activity, for the purpose of supporting the war effort.

Hitler's political beliefs drew heavily upon Social Darwinism - the view that natural selection applies as much to human society as it does to biological organisms.[35] However, Hitler's interpretations of this idea produced two separate and almost incompatible conclusions: On the one hand, Hitler believed that history was shaped by a violent struggle between nations and races, and that a nation needed to be united under a strong, centralized state led by an heroic leader in order to succeed in this struggle. On the other hand, Hitler also believed that individuals within a nation battled with each other for survival, and that such ruthless competition was good for the health of the nation, because it promoted "superior individuals" to higher positions in society.[36] But it is difficult to reconcile the idea of a centralized, all-encompassing nation-state with the idea of unlimited competition for survival between individuals. Hitler himself could never fully reconcile the two, particularly when it came to the national economy. As a result, whenever Hitler or the Nazi Party drew up economic priorities, their policy choices tended to be illogical or contradictory.

[edit] Pre-war economy: 1933-1939

As noted above, the Nazis disliked direct involvement in economic matters and had a rather contradictory view of the purpose of economic activity. Before World War II, they sought to avoid this problem by placing non-Nazi professionals in charge of economic policy. Hitler appointed Hjalmar Schacht, a former member of the German Democratic Party, as Chairman of the Reichsbank in 1933 and Minister of Economics in 1934.

At first, Schacht continued the economic policies introduced by the government of Kurt von Schleicher in 1932 to combat the effects of the Great Depression. These policies were mostly Keynesian, relying on large public works programs supported by deficit spending - such as the construction of the Autobahn - to stimulate the economy and reduce unemployment (which stood at 30% in early 1933). There was indeed a major reduction in unemployment over the following years, while price controls prevented the recurrence of inflation.

Meanwhile, the Nazis outlawed trade unions and banned strikes. They also directed Schacht to place more emphasis on military production and rearmament. Germany slowly began to recover from the Great Depression, but this recovery was driven primarily by a military build-up. A number of economists, starting with Michal Kalecki, have seen this as an example of military Keynesianism.

In June 1933, the "Reinhardt Program" was introduced. It was an ambitious project for the development of infrastructure; it combined indirect incentives, such as tax reductions, with direct public investment in waterways, railroads and highways.[37]

The Reinhardt Program was followed by other similar initiatives, with the result that, between 1933 and 1936, the German construction industry was greatly expanded. In 1933 only 666,000 Germans worked in construction; by 1936 the number had gone up to 2,000,000.[38]

In particular, road construction was expanding at a very rapid pace. This was part of Hitler's war preparations: Germany needed a state-of-the-art highway system in order to be able to move troops and materials quickly. As a side effect, cars and other forms of motorized transport became increasingly attractive to the population. Therefore, the German car industry also experienced a boom in the 1930s.[39]

In 1936, military spending in Germany exceeded 10% of GNP (higher than any other European country at the time). Military investment also exceeded civilian investment from 1936 onwards. Armaments dominated government expenditures on goods and services.[40]

The year 1936 also represented a turning point for German trade policy. World prices for raw materials (which constituted the bulk of German imports) were on the rise. At the same time, world prices for manufactured goods (Germany's chief exports) were falling. The result was that Germany found it increasingly difficult to maintain a balance of payments. A large trade deficit seemed almost inevitable. But Hitler found this prospect unacceptable. Thus Germany, following Italy's lead, began to move in the direction of economic self-sufficiency.[41]

Unlike Italy, however, Germany did not strive to achieve full autarky. Hitler was aware of the fact that Germany lacked reserves of raw materials, and full autarky was therefore impossible. Thus he chose a different approach. The Nazi government tried to limit the number of its trade partners, and, when possible, only trade with countries within the German sphere of influence. A number of bilateral trade agreements were signed between Germany and other European countries (mostly countries located in Southern and South-Eastern Europe) during the 1930s. The German government strongly encouraged trade with these countries but strongly discouraged trade with any others.[42]

By the late 1930s, the aims of German trade policy were to use economic and political power to make the countries of Southern Europe and the Balkans dependent on Germany. The German economy would draw its raw materials from that region, and the countries in question would receive German manufactured goods in exchange. Already in 1938, Yugoslavia, Hungary, Romania, Bulgaria and Greece transacted 50% of all their foreign trade with Germany.[43]

Throughout the 1930s, German businesses were encouraged to form cartels, monopolies and oligopolies, whose interests were then protected by the state.[44] In his book, Big Business in the Third Reich, Arthur Schweitzer notes that:

   
“
Monopolistic price fixing became the rule in most industries, and cartels were no longer confined to the heavy or large-scale industries. [...] Cartels and quasi-cartels (whether of big business or small) set prices, engaged in limiting production, and agreed to divide markets and classify consumers in order to realize a monopoly profit.[45]
   
”

As big business became increasingly organized, it developed an increasingly close partnership with the Nazi government. The government pursued economic policies that maximized the profits of its business allies, and, in exchange, business leaders supported the government's political and military goals.[46]

[edit] Wartime policies: 1939-1945

Initially, the outbreak of World War II did not bring about any large changes in the German economy. Germany had spent six years preparing for war, and a large portion of the economy was already devoted to military production. Unlike most other governments, the Nazis did not increase direct taxes by any significant amount in order to fund the war. The top income tax rate in 1941 was 13.7% in Germany as opposed to 23.7% in Great Britain.[47]

During the war, as Germany acquired new territories (either by direct annexation or by installing puppet governments in defeated countries), these new territories were forced to sell raw materials and agricultural products to German buyers at extremely low prices. Hitler's policy of lebensraum strongly emphasized the conquest of new lands in the East, and the exploitation of these lands to provide cheap goods to Germany. In practice, however, the intensity of the fighting on the Eastern Front and the Soviet scorched earth policy meant that the Germans found little they could use. On the other hand, a large quantity of goods flowed into Germany from conquered lands in the West. For example, two-thirds of all French trains in 1941 were used to carry goods to Germany. Norway lost 20% of its national income in 1940 and 40% in 1943. [48]

Even before the war, Nazi Germany maintained a supply of slave labour. This practice started from the early days of labour camps of "undesirables" (German: unzuverlässige Elemente), such as the homeless, homosexual and criminals as well as political dissidents, communists, Jews, and anyone that the regime wanted out of the way. As the war progressed, the use of slave labour experienced massive growth. Prisoners of war and civilian "undesirables" were brought in from occupied territories. Hundreds of thousands (perhaps millions) of Jews, Slavs and other conquered peoples were used as slave labourers by German corporations such as Thyssen, Krupp, IG Farben and even Fordwerke - a subsidiary of the Ford Motor Company.[49] By 1944, slave labour made up one quarter of Germany's entire work force, and the majority of German factories had a contingent of prisoners.[50]

The proportion of military spending in the German economy began growing rapidly after 1942, as the Nazi government was forced to dedicate more and more of the country's economic resources to fighting a losing war. Civilian factories were converted to military use and placed under military administration. By late 1944, almost the entire German economy was dedicated to military production. At the same time, Allied bombings were destroying German factories and cities at a rapid pace, leading to the final collapse of the German war economy in 1945.

[edit] Political economy of Franco's Spain

In 1933, Jose Antonio Primo de Rivera, son of the former authoritarian Prime Minister, founded a political movement known as the Falange, or "phalanx." The Falange was not successful in the elections of 1936, elections that resulted in the creation of a Popular Front government.

When conservative elements of Spanish society supported Francisco Franco and the military in his war against the Popular Front, the Falange became associated with Franco's side in that war, and the government that arose from Franco's successes appropriated the ideas and some of the terminology of the Falange, including a nostalgia for the interventionism of Miguel Primo de Rivera.

One falangist theorist, Federico de Utturia, described the goal of the movement as "to kill the old soul of the liberal, decadent, masonic, materialist and frenchified nineteenth century." [2]

See a work by Stanley G. Payne, Falange. A History of Spanish Fascism Stanford University Press (1961).

[edit] References

  1. ^ Baker
  2. ^ Payne; Paxton, Sternhell, et al.
  3. ^ DiLorenzo
  4. ^ Falk
  5. ^ Wolin, Britt
  6. ^ Logical fallacy: The Hitler card
  7. ^ Appleton, Josie "I'm right because... you're a Nazi"
  8. ^ "The greening of hate", Interview of Betsy Hartmann by Fred Pearce (20 February 2003)
  9. ^ Fleming, Thomas. Chronicles (Rockford, Illinois), May 2000, p. 11. [1]
  10. ^ Joseph A. Leighton, "Social Philosophies in Conflict", D. Appleton-Century Company, 1937. pp. 32
  11. ^ William G. Welk, Fascist Economic Policy, Harvard University Press, 1938. pp. 38-39
  12. ^ Henry A. Turner, "German Big Business and the Rise of Hitler", 1985, pp. 61-68
  13. ^ "The Doctrine of Fascism". Enciclopedia Italiana. (1932). Rome: Istituto Giovanni Treccani. "[Fascism] affirms the irremediable, fruitful and beneficent inequality of men"
  14. ^ Alexander J. De Grand, Fascist Italy and Nazi Germany, Routledge, 1995. pp. 47
  15. ^ Alexander J. De Grand, Fascist Italy and Nazi Germany, Routledge, 1995. pp. 48-51
  16. ^ Britt, Lawrence, 'The 14 characteristics of fascism', Free Inquiry, Spring 2003, p. 20.
  17. ^ Salvemini, Gaetano. Under the Axe of Fascism 1936.
  18. ^ Alexander J. De Grand, Fascist Italy and Nazi Germany, Routledge, 1995. pp. 57
  19. ^ Alexander J. De Grand, Fascist Italy and Nazi Germany, Routledge, 1995. pp. 60-61
  20. ^ Carl T. Schmidt, "The corporate state in action; Italy under fascism", Oxford University Press, 1939. pp. 115
  21. ^ Sheldon Richman, "Fascism".
  22. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 160-161
  23. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 163
  24. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 165
  25. ^ Adrian Lyttelton (editor), "Liberal and fascist Italy, 1900-1945", Oxford University Press, 2002. pp. 75
  26. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 166
  27. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 169
  28. ^ Carl T. Schmidt, "The corporate state in action; Italy under fascism", Oxford University Press, 1939. pp. 128
  29. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 172
  30. ^ William G. Welk, "Fascist economy policy; an analysis of Italy's economic experiment", Harvard University Press, 1938. pp. 175
  31. ^ Adrian Lyttelton (editor), "Liberal and fascist Italy, 1900-1945", Oxford University Press, 2002. pp. 13
  32. ^ Henry A. Turner, "Hitlers Einstellung", 1976, p. 90-91
  33. ^ Henry A. Turner, "German Big Business and the Rise of Hitler", 1985, p. 73
  34. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 78
  35. ^ Adolf Hitler, "Mein Kampf", vol. 1, chapter 11.
  36. ^ Henry A. Turner, "German Big Business and the Rise of Hitler", 1985, p. 76
  37. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 83
  38. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 84
  39. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 83-84
  40. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 85
  41. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 86
  42. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 101
  43. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 102
  44. ^ Arthur Schweitzer, "Big Business in the Third Reich", Bloomington, Indiana University Press, 1964, p. 265
  45. ^ Arthur Schweitzer, "Big Business in the Third Reich", Bloomington, Indiana University Press, 1964, p. 269
  46. ^ Arthur Schweitzer, "Big Business in the Third Reich", Bloomington, Indiana University Press, 1964, p. 288
  47. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 114
  48. ^ Hans-Joachim Braun, "The German Economy in the Twentieth Century", Routledge, 1990, p. 121
  49. ^ Sohn-Rethel, Alfred Economy and Class Structure of German Fascism, CSE Books, 1978 ISBN 0-906336-01-5
  50. ^ Michael Thad Allen, "The Business of Genocide", The University of North Carolina Press, 2002. p. 1

[edit] Bibliography

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[edit] See also

[edit] External links