WEBVTT NOTE The Austrians on Fascism: Hayek, Mises, and Roepke 1 00:00:00.000 --> 00:00:09.000 I'm going to be discussing today the interpretation of fascism by three major Austrian economists, 2 00:00:09.000 --> 00:00:13.000 Ludwig von Mises, Friedrich Hayek and Wilhelm Röpke. 3 00:00:13.000 --> 00:00:22.000 And I'm going to limit the topic in this way that by fascism I'm not going to cover the whole, 4 00:00:22.000 --> 00:00:29.000 all the governments that have been called fascist, were fascist such as the Italian fascism, Romanian fascism. 5 00:00:29.000 --> 00:00:42.000 I'm going to consider only the German National Socialism, which was what each of these economists devoted a book, or at least a large part of a book, to analyzing. 6 00:00:42.000 --> 00:00:54.000 I'll be dealing with their interpretation of the Nazi system and their very distinctive analysis. 7 00:00:54.000 --> 00:01:00.000 All three economists had basically the same interpretation of National Socialism. 8 00:01:00.000 --> 00:01:06.000 They're minor differences of emphasis, but they all had really the same model. 9 00:01:06.000 --> 00:01:17.000 Now, I think we can best understand what this model is by looking at what the way of understanding National Socialism 10 00:01:17.000 --> 00:01:30.000 and Socialism that was characteristic of the 1940s, which was when all three of these authors wrote their respective books on National Socialism. 11 00:01:30.000 --> 00:01:37.600 Now, surprisingly, if we think of the name of the Nazi party, which is the National Socialist German Workers' Party, 12 00:01:37.600 --> 00:01:53.900 surprisingly, the interpretation that was dominant during the 1940s of the Nazi system was that the Nazi system was a stage of capitalism, 13 00:01:53.900 --> 00:01:55.900 The Final Stage of Capitalism 14 00:02:23.900 --> 00:02:39.900 In this interpretation, the Nazi economy was really dominated by big business interests. 15 00:02:39.900 --> 00:02:50.900 We can see this interpretation, say, in the book by the Anglo-Indian R. Palm Dutt, Fascism and Social Revolution. 16 00:02:50.900 --> 00:02:59.740 And then probably the most important book giving this interpretation was by the German social 17 00:02:59.740 --> 00:03:08.540 democrat Franz Neumann. He had a book published by Oxford in 1942 called Behemoth. It's second 18 00:03:08.540 --> 00:03:15.140 edition, 1944. He was a member of the Frankfurt School, which was the kind of dissident group 19 00:03:15.140 --> 00:03:29.140 The Marxists, who were notorious later on, Herbert Marcuse, who you may remember as the 1960s leader of the radicals, was a member of this group. 20 00:03:29.140 --> 00:03:39.140 So Neumann, who taught at Columbia University, was probably the most scholarly advocate of this view that Mises, Hayek and Rupp could oppose. 21 00:03:39.140 --> 00:03:49.140 And what he said in his book, in his phrase, the Nazi system was totalitarian monopoly capitalism. 22 00:03:49.140 --> 00:04:03.140 Now, Mises, in his book, 1944, Omnipotent Government, really argued against this view on two basic grounds that I want to go into. 23 00:04:03.140 --> 00:04:08.740 That first he considered, what is the nature of the Nazi system? 24 00:04:08.740 --> 00:04:18.540 Can it be really described as a capitalist system, as Neumann and Arpam Dutt and many other people said? 25 00:04:18.540 --> 00:04:21.340 Or was this a completely false view? 26 00:04:21.340 --> 00:04:26.340 And secondly, how did the Nazi system arise? 27 00:04:26.340 --> 00:04:36.840 Now, in response to the first point, Mises emphasized that the Nazi economy was not a capitalist system at all, 28 00:04:36.840 --> 00:04:47.840 that appearances were deceiving in this respect because there were ostensibly prices and wages in the Nazi system, 29 00:04:47.840 --> 00:05:05.840 There were private businesses that would post prices, just as in a capitalist system, if you wanted to buy something, you would just go in and pay your money for it, just as you do in an ordinary capitalist economy. 30 00:05:05.840 --> 00:05:11.840 People could invest money in the stock market and have bank accounts. 31 00:05:11.840 --> 00:05:19.840 One would think isn't this just a regular capitalist economy, but Mises says, no, no, this is not the case at all. 32 00:05:19.840 --> 00:05:28.840 That what you have in the Nazi system is not real prices, even though they appear to be prices, 33 00:05:28.840 --> 00:05:36.840 because the government was telling everybody, all the businessmen, what the prices and wages were to be. 34 00:05:36.840 --> 00:05:40.440 is a system of complete price control. 35 00:05:40.440 --> 00:05:47.760 So this is not a genuine market, it's one in which the government is telling people 36 00:05:47.760 --> 00:05:53.360 what to produce and in what quantities and what prices to charge. 37 00:05:53.360 --> 00:06:03.280 So this is really a form of socialism that keeps some of the forms of capitalism. 38 00:06:03.280 --> 00:06:05.440 It isn't a capitalist system at all. 39 00:06:05.440 --> 00:06:14.380 It's exactly the same, really, as a system in which the government own the means of production. 40 00:06:14.380 --> 00:06:21.040 This would be one where the government controls all the means of production, but simply allows 41 00:06:21.040 --> 00:06:30.720 them to maintain the fiction that they're owners of the firm, but they're really not. 42 00:06:30.720 --> 00:06:36.280 Similarly, in the stock market, there were stock exchanges in Germany. 43 00:06:36.280 --> 00:06:38.480 I think they were reduced. 44 00:06:38.480 --> 00:06:43.960 There were over 20 stock exchanges in Germany in the 1930s. 45 00:06:43.960 --> 00:06:47.220 Under the National Socialist system, they were reduced to about nine. 46 00:06:47.220 --> 00:06:55.200 But there were very strong restrictions on what people could do with the stocks. 47 00:06:55.200 --> 00:06:56.200 They had to invest. 48 00:06:56.200 --> 00:07:00.400 They could only have dividends as prescribed by the government. 49 00:07:00.400 --> 00:07:14.400 I had to put them in bank accounts or loan the funds to the government, just as the government directs it, so it wasn't a genuine capitalist system at all. 50 00:07:14.400 --> 00:07:42.400 So, now, given this, and this social system had arisen in part, the system notion of total price control, had arisen in part by Hitler's copying the plan of Erich Ludendorff during World War I, it was called the Hindenburg Plan, which had price control over much of the German economy. 51 00:07:42.400 --> 00:07:50.140 was actually instigated by Eric Ludendorff, who was the quartermaster general of the German 52 00:07:50.140 --> 00:08:00.040 army during World War I. He was the real brains behind Hindenburg. So he had a system of total 53 00:08:00.040 --> 00:08:06.080 price and wage control over the bulk of the German economy that was dominant during World 54 00:08:06.080 --> 00:08:18.080 In 1931, Hitler had been strongly allied with Ludendorff during the early 1920s before Hitler went to prison. 55 00:08:18.080 --> 00:08:28.080 Although Ludendorff wasn't a supporter of Hitler during the 1930s, 56 00:08:58.080 --> 00:09:21.080 Mises in accounting for this system in omnipotent government, in his interpretation, in one way resembles that of Franz Neumann. 57 00:09:21.080 --> 00:09:35.080 Neumann said in his view that the large businessmen cartels were very important and dominated the Nazi system. 58 00:09:35.080 --> 00:09:43.080 Mises didn't agree, as I just said, that the businessmen were in control of the Nazi economy. 59 00:09:43.080 --> 00:09:53.480 But in his account of how the fascist economy had arisen, he also emphasized the role of cartels. 60 00:09:53.480 --> 00:10:00.840 However, it was in a completely different way from Neumann. It wasn't in his, in Neumann's view, 61 00:10:00.840 --> 00:10:08.040 there's an inevitable tendency for capitalist business to amalgamate into larger and larger 62 00:10:08.040 --> 00:10:10.040 Units into Monopolies. 63 00:10:10.040 --> 00:10:13.040 Mises, of course, said this isn't right. 64 00:10:13.040 --> 00:10:16.600 Hayek also said there is no general tendency of monopoly 65 00:10:16.600 --> 00:10:18.440 on the free market. 66 00:10:18.440 --> 00:10:24.760 How large firms will be just depends 67 00:10:24.760 --> 00:10:27.880 on the particular circumstances of an industry or product. 68 00:10:27.880 --> 00:10:30.000 There's no reason in general to think 69 00:10:30.000 --> 00:10:34.600 that it's always going to be the case that one or a few large 70 00:10:34.600 --> 00:10:36.840 firms will dominate an industry. 71 00:10:36.840 --> 00:10:46.320 But there'd been, in the German economy, there'd been a tendency toward cartelization monopoly 72 00:10:46.320 --> 00:10:54.700 because of the attempt in the 19th century to the government interference with the free 73 00:10:54.700 --> 00:10:55.700 market. 74 00:10:55.700 --> 00:11:05.380 Mises stressed in omnipotent government, especially the importance of labor unions in pressuring 75 00:11:05.380 --> 00:11:11.020 or wages above the market rate, which would be determined by the marginal productivity 76 00:11:11.020 --> 00:11:22.020 of the workers, if firms were, how would firms be able to pay wage rates above marginal productivity? 77 00:11:22.020 --> 00:11:29.900 Well, one way they could do that is if the government put in a very extensive protective 78 00:11:29.900 --> 00:11:36.540 with Tariffs, then businesses could charge higher prices than they would have charged 79 00:11:36.540 --> 00:11:47.540 had they been paying market wages, and they wouldn't be losing money because of the tariffs. 80 00:11:47.540 --> 00:11:57.100 They could sell their products at lower prices overseas, and so the tariffs would act as 81 00:12:27.100 --> 00:12:43.100 The problem here is that what happens if you have a policy of high protective tariffs, well, then it's going to be more difficult for a country that has this to get goods that it needs in trade. 82 00:12:43.100 --> 00:12:49.100 Other countries won't be able to pay for the goods with products of their own. 83 00:12:49.100 --> 00:12:55.100 And what if there are products that the German economy needs from other countries? 84 00:12:55.100 --> 00:13:15.100 Germany was at a very high population density, so they needed to import raw materials, but the high protective tariffs made it very difficult for them to do so, so what was the solution to this? 85 00:13:15.100 --> 00:13:39.100 According to Mises, a number of German intellectuals said the only way Germany can solve this problem is to seize other European land or colonial areas so they can have areas where they can get raw materials under their own control. 86 00:13:39.100 --> 00:14:02.700 Mises stresses the influence in promoting this program of Gustav Schmoller, who was the professor at the University of Berlin for a long time, I think from around 1882 to 1917, until his death in 1917, he was the leading economist in Germany. 87 00:14:02.700 --> 00:14:26.700 and he was one who, in his writings, stressed very much the need for expansion in order to seize raw materials and this was a very prominent program of many of the German intellectuals, they said, of the World War I period, they said we have to get, expand, we have to get territory in order to continue with this policy of tariffs. 88 00:14:26.700 --> 00:14:45.700 This became a very prominent theme after the war when, of course, the German economy was really doing very badly in the 1920s when it had the inflation, the 1921 collapse, so there was, again, very much a stress on the need for expansion. 89 00:14:45.700 --> 00:15:01.060 The famous novel came out in 1926 by Hans Grimm called Folke, Own Around, People Without 90 00:15:01.060 --> 00:15:02.060 Space. 91 00:15:02.060 --> 00:15:05.460 This was a best seller at the time. 92 00:15:05.460 --> 00:15:12.100 Grimm himself was not, I think it was not always Hitler supported. 93 00:15:12.100 --> 00:15:20.440 In fact, in 1934, when there was a proposal to unify the office of president and chancellor 94 00:15:20.440 --> 00:15:26.400 in one office, Grimm voted against it. 95 00:15:26.400 --> 00:15:33.020 But he later became, it was strange, he after the war, where most of the Germans were saying, 96 00:15:33.020 --> 00:15:36.620 oh, we of course never supported Hitler, there were no Nazis left. 97 00:15:36.620 --> 00:15:41.460 He said after the war, people didn't realize what a great leader Hitler had been. 98 00:15:41.460 --> 00:15:48.460 This is an unusual position, but that's a bit of a digression. 99 00:15:48.460 --> 00:16:08.460 This Lebensraum was an extremely influential idea, so Mises said, well, this is where the Nazis came in, that they were the ones who had the ruthlessness to put into practice the ideas that were prominent among the socialist intellectuals. 100 00:16:08.460 --> 00:16:23.460 The Nazis were the ones who said, we can really do this. We have a very risky program that may involve the dangers of war, but we're the ones who can solve this economic problem. 101 00:16:23.460 --> 00:16:33.460 We have a very risky program that may involve the dangers of war, but we're the ones who can solve this economic problem. 102 00:16:33.460 --> 00:16:47.460 We can get raw materials, so this became an extremely popular idea that enabled them to gain widespread popularity. 103 00:16:47.460 --> 00:17:03.460 They never got a majority of votes in any of the elections, even in the one in March 1933, after Hitler had already taken over and the Reichstag building had burned. 104 00:17:03.460 --> 00:17:14.140 I think the Nazi party got 43% of the vote, but they were the largest, even before Hitler 105 00:17:14.140 --> 00:17:18.940 came to power, they were the largest party in the parliament. 106 00:17:18.940 --> 00:17:23.900 They become very popular because, according to Mises, they were the ones who said, we 107 00:17:23.900 --> 00:17:32.460 can achieve this Lebensraum that is necessary for Germany to become prosperous. 108 00:17:32.460 --> 00:17:40.740 Now, I'm going to turn now to another book that also came out in 1944, which is Friedrich 109 00:17:40.740 --> 00:17:47.020 Hayek's very famous book, The Road to Serfdom, and what he says is, I think, supplements 110 00:17:47.020 --> 00:18:00.660 to a great extent the Mises model in omnipotent government. 111 00:18:00.660 --> 00:18:08.260 The fundamental argument of Road to Serfdom is that, according to Hayek, what's going 112 00:18:08.260 --> 00:18:17.140 to be the case if government tries to institute a socialist program? 113 00:18:17.140 --> 00:18:23.980 What if it tries to have everything produced according to some plan, whether by government 114 00:18:23.980 --> 00:18:29.820 ownership and the means of production or this other type of socialism where the government 115 00:18:29.820 --> 00:18:31.820 The Theory of Money and Credit 116 00:18:59.820 --> 00:19:07.580 General Agreement on what to produce. If we had tried to have some sort of votes on what 117 00:19:07.580 --> 00:19:15.140 would be produced, people would never be able to reach any agreement on what could be, what 118 00:19:15.140 --> 00:19:21.740 should be produced. To sort of have a hierarchy, we have to have really government imposing 119 00:19:21.740 --> 00:19:34.500 its views on the rest of the country. To do this, Hayek suggests that to get at least 120 00:19:34.500 --> 00:19:41.500 people to agree on what would this program, it's very much the case that there's a tendency 121 00:19:41.500 --> 00:19:54.500 for the government to say, to view the people as really a unified force against other countries. 122 00:19:54.500 --> 00:20:02.340 So the problem with the internationalist movement, such as Marxism was, at least before the Russian 123 00:20:02.340 --> 00:20:09.740 Revolution was, that people would have no sense of solidarity with those in other countries. 124 00:20:09.740 --> 00:20:18.940 To have a socialist system, we have to have a sense of solidarity. 125 00:20:18.940 --> 00:20:31.060 To do this, the government will tend to pick certain people as enemies, just as the Nazis 126 00:20:31.060 --> 00:20:34.060 did with the Jews during the 1930s. 127 00:20:34.060 --> 00:20:50.060 In the 1930s, they'll say, well, we have to be all unified against this out group and they'll tend to pitch their appeals in a very crude way so that they'll be able to drum up popular support for their ideas. 128 00:20:50.060 --> 00:21:01.060 Hayek describes this process in probably the most famous chapter of Road to Serfdom, which is the tenth chapter, why the worst get on top. 129 00:21:01.060 --> 00:21:09.180 So, what Hayek is saying, Mises had said that there's a tendency because of this protective 130 00:21:09.180 --> 00:21:17.940 tariff policy and carnalization that there was a need in Germany, at least part of the 131 00:21:17.940 --> 00:21:23.860 intellectual class thought there was a need for expansion and the Nazis were the ones 132 00:21:23.860 --> 00:21:29.060 who said they would be able to do this, so Hayek supplements this by saying, well, any 133 00:21:29.060 --> 00:21:37.780 Any attempt to put into practice a collectivist policy was likely to lead to a very violent 134 00:21:37.780 --> 00:21:48.020 policy of opposition between the nation and other nations, and there would be crude propagandistic 135 00:21:48.020 --> 00:21:49.020 appeals. 136 00:21:49.020 --> 00:21:56.660 Now, another aspect in which Hayek very usefully supplements Mises is that he points out, as 137 00:21:56.660 --> 00:22:06.300 As in the twelfth chapter, the socialist roots of Nazism, he points out various prominent 138 00:22:06.300 --> 00:22:20.300 intellectuals whose views very much tended to amalgamate with the Nazis. 139 00:22:20.300 --> 00:22:27.940 One he mentions is Werner Zumbart, who was one of the leading Marxists in Germany. 140 00:22:27.940 --> 00:22:36.020 Friedrich Engel said this Zumbart was the only German professor who understood das Kapital. 141 00:22:36.020 --> 00:22:42.540 So what Zumbart, in his later writings, he'd been a very strong Marxist, but he turned 142 00:22:42.540 --> 00:22:50.240 And away from Marxism, he favored, actually his main argument against Marxism was that 143 00:22:50.240 --> 00:22:57.840 Marx had talked about proletarian revolution, but the proletariat would never become a majority 144 00:22:57.840 --> 00:22:59.380 of the population. 145 00:22:59.380 --> 00:23:02.620 He estimated it would be about one-third of the population, so you could never have a 146 00:23:02.620 --> 00:23:06.260 revolution if you relied on the proletariat. 147 00:23:06.260 --> 00:23:18.460 Sombart said in a book that came out around 1950 called Merchants and Heroes, he contrasted 148 00:23:18.460 --> 00:23:27.420 the English culture based on trade and exchange, which he thought was retinial and unheroic, 149 00:23:27.420 --> 00:23:31.900 with the warrior culture of Germany. 150 00:23:31.900 --> 00:24:00.900 So here we have a socialist who, just as Hayek has suggested in the theoretical part of the book, is now saying we have to have militaristic values, sort of a way to put socialist ideas into practice is to have a sort of militarized form of activity and that by, just as Hayek has suggested, a militarist policy really is the outcome that it's likely to have if we favor socialism. 151 00:24:00.900 --> 00:24:11.180 And by the 1930s, when Hitler came to power, Sombart was writing in his book, New Social 152 00:24:11.180 --> 00:24:17.920 Philosophy, which came out in 1934, he says that the Fuhrer, the leader of Germany, receives 153 00:24:17.920 --> 00:24:24.580 his order direct from God, who is the supreme Fuhrer of the universe. 154 00:24:24.580 --> 00:24:32.500 So he had become, one time believing German academic Marxists had become a supporter of 155 00:24:32.500 --> 00:24:39.420 the Nazis and if Mises and Hayek are right, this is no coincidence, it's what we would 156 00:24:39.420 --> 00:24:41.340 be likely to expect. 157 00:24:41.340 --> 00:24:54.300 Now, another figure Hayek discusses is the famous philosopher of history, Oswald Spengler, 158 00:24:54.300 --> 00:25:15.300 Spengler's essay Prussianism and Socialism, where Spengler said that he admired the way the Socialist Party in 1914 had supported the German war aims. 159 00:25:15.300 --> 00:25:26.300 The Socialist had built up a very militant party who could act in a decisive way. He compared this to the traditions of the Prussian army. 160 00:25:26.300 --> 00:25:44.300 So, again, we have this policy, this rather unusual spectacle, in this case a very right-wing German conservative who was finding something to admire in the Socialists. 161 00:25:44.300 --> 00:25:51.820 The Socialist, so we have this kind of convergence where a very strong nationalist view with 162 00:25:51.820 --> 00:26:00.180 a socialist system, just as Mises and Hayek had suggested. 163 00:26:00.180 --> 00:26:07.220 I should say in his later work, the Our Decisions, actually, the German title is The Year of 164 00:26:07.220 --> 00:26:14.260 Decision, that Spengler claims he was misunderstood, but what he says, they were all economic, 165 00:26:14.260 --> 00:26:28.260 The economics really isn't that important. That's just emphasizing money. He doesn't care about money. What he cares is the militarist virtues the socialists displayed in 1914. 166 00:26:28.260 --> 00:26:36.260 So, in effect, he's really confirming what Hayek said about him, although Hayek didn't discuss that book. 167 00:26:36.260 --> 00:27:01.260 We find in the work of the third economist I have to discuss, Wilhelm Röpke, a similar emphasis, and I want to mention in this connection a series of very important articles that Röpke wrote in September 1931 that appeared in the Frankfurter Zeitung. 168 00:27:01.260 --> 00:27:11.260 Röpke was not only wrote about the Nazis after the war, but he was a very active opponent of them before they came into power. 169 00:27:11.260 --> 00:27:25.260 So what Röpke wrote in these articles in 1931, he was replying to the views of a man called Ferdinand Fried, 170 00:27:55.260 --> 00:28:22.260 Ferdinand Fried, who was actually using very standard anti-capitalist arguments, he was 171 00:28:52.260 --> 00:28:57.860 The Stalin had succeeded in eliminating the business cycle in Germany. 172 00:28:57.860 --> 00:29:02.060 Wouldn't it be wonderful if we could do this here in Germany? 173 00:29:02.060 --> 00:29:07.560 So, Röpke stresses that, just along the same lines I've been indicating, 174 00:29:07.560 --> 00:29:13.860 that Friedman Fried's program was very much a socialist program. 175 00:29:13.860 --> 00:29:19.460 He pointed this out as saying that Friedman Fried, I should say, was an alias. 176 00:29:19.460 --> 00:29:29.460 The man's real name was Friedrich Zimmermann, but I don't suppose that affects the argument in one way or the other. 177 00:29:29.460 --> 00:29:39.460 Now, Röpke published a book, which in the English translations is called The Solution of the German Problem, 178 00:29:39.460 --> 00:29:45.900 came out in English in 1946 and second edition in 1947, I think it originally came out in 179 00:29:45.900 --> 00:29:48.820 Germany in 1945. 180 00:29:48.820 --> 00:29:56.420 I should indicate that these, all the authors I'm talking about agree with each other. 181 00:29:56.420 --> 00:30:02.940 Hayek wrote the preface to the English London publication of the book. 182 00:30:02.940 --> 00:30:09.340 Now, Rupka's interpretation is very much compatible with what I've already said about Mises and 183 00:30:09.340 --> 00:30:39.340 Hayek, but one detail he mentioned, which I'll conclude that he stresses very much, is that the Nazi system was one of centralization, in the sense that there'd been under the Germany before that, especially before Bismarck came to power, there'd been a great many separate German states 184 00:30:39.340 --> 00:30:52.340 When Bismarck came to power, he had the three wars of German unification against Denmark in 1864, Austria in 1866, and France in 1870-71. 185 00:30:52.340 --> 00:31:05.340 Bismarck, in some cases, completely amalgamated and suppressed the various German states and centralized them into one country. 186 00:31:05.340 --> 00:31:15.140 In some countries, some of them remained somewhat independent. Bavaria had its own foreign consuls 187 00:31:15.140 --> 00:31:22.860 in countries even down through World War I. There was a King of Bavaria who was still 188 00:31:22.860 --> 00:31:32.580 very much active after Wilhelm I became the German Emperor in 1870. There was a King 189 00:31:32.580 --> 00:31:40.220 of Hanover, also. There were certainly German states that remained independent, but Rupka 190 00:31:40.220 --> 00:31:47.660 says there was very much a move toward centralization, which was continued by the Nazis. This, again, 191 00:31:47.660 --> 00:31:55.300 taking up a theme from Mises, is that we can't have a federal system where you have a government-centralized 192 00:31:55.300 --> 00:32:02.300 of Money, The Theory of Money and State, The Theory of Money and State, The Theory of Money 193 00:32:55.300 --> 00:33:11.300 It was in fact just a variety of socialism that had arisen through interventionist policies that had very drastic consequences for the germination that put them into practice.