The Wall Street Journal reports the following today:
Policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial institutions.
David Kramer calls this “Bank Salary Socialism.” But the essence of socialism is government ownership of the means of production. The essence of fascism as an economic system is that private property is kept in private hands but subject to extensive government control. Sheldon Richman, in his article, “Fascism” in The Concise Encyclopedia of Economics, writes:
Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically.
READER COMMENTS
RL
Sep 18 2009 at 5:09pm
Why the next thing you know, crazy economists will be calling the minimum wage laws fascistic!
🙂
Mike
Sep 18 2009 at 6:30pm
Had there been no bailouts, your points would be well-taken. Given that banks now operate as implicit federal guarantees, then socialism is indeed called for. There should also be higher taxes on banks. After all, we taxpayers are subsidizing huge bank profits. Why shouldn’t we get our fair share back?
Methinks
Sep 18 2009 at 7:53pm
Had there been no bailouts, your points would be well-taken.
So, are you saying that all we need to complete a fascist state is to force businesses to take some version of TARP funds so that we can justify fascism?
Ironically, setting comp limits simply encourages the best and brightest to flee to foreign banks and private financial firms with no such comp limits and increases the probability that the dregs left to run the bank for which you now provide an explicit (let’s face it, it’s no longer implicit) guarantee will need more subsidy in the future.
Burk
Sep 18 2009 at 8:06pm
So, I take it that jingoism and nativism on, say, FOX news, has nothing to do with fascism? Or that conflating church and country as they like to do on, say, FOX news, has nothing to do with fascism? Or that war-mongering and whipping up fear by politically motivated terror alerts, lies about WMDs, and the like have nothing to do with fascism?
This blog crew needs a bit of perspective, frankly. The right is being damaged enough by its teabagging wingnuts. It shouldn’t have to regret bad economics and bad history by supposed scholars, in the fullness of time.
David R. Henderson
Sep 18 2009 at 9:14pm
Dear Burk,
You might want to check out my archives on http://www.antiwar.com before you make assumptions about my views on war. Look at my latest, on Cindy Sheehan, for example.
Actually, I do agree with you that Bush (and now Obama) are whipping up fear of terrorism to justify stripping away our freedom. Go to your nearest airport and check the signs. I got body-imaged in Detroit on Wednesday when I flew from there to LAX. If I had refused, I would not have been allowed to fly. Obama has the power to stop that. Don’t hold your breath.
Best,
David
Arin D
Sep 18 2009 at 10:42pm
“The essence of fascism as an economic system is that private property is kept in private hands but subject to extensive government control.”
David – I thought that was the essence of Social Democracy.
I didn’t realize those East Germans escaped the yokes of Stalinism only to be ruled by Fascism after the Berlin wall fell. For by your definition today’s Germany with administered wages, works councils, and regulations in product, labor and capital market must be a Fascist den.
Dezakin
Sep 18 2009 at 11:34pm
When people are dismissing torture as a valid tactic for law enforcement, concerns over wage regulation strike me as a bit of a problem in perspective.
Good luck with that argument all the same.
Burk
Sep 18 2009 at 11:50pm
Hi, David-
It is great that you have been active over at antiwar.com. My comments were still relevant in terms of the minuscule economic element of fascism that we are seeing in this economic crisis, compared with the huge dollop of cultural fascism that we have been seeing over the last decade, and continuing through today from the right. It seems less than serious on your part to stake Obama’s creeping fascism on the miniscule fig leaf of continuing airport screening indignities.
Fascism was never principally an economic proposition, but a nationalistic and cultural one. The Nazis were called national socialists, just to make the combination crystal clear and in that order. Islam typically has the kind of cultural and imperialist fixations that characterize fascism, and whether we do also … well, that depends on who is in charge at any one time.
The current economic crisis necessitated deep government involvement. Now that we are out of the woods, it is easy to criticize the shoddier aspects of its response. But government control is simply the other shoe to drop if you have run your company into the ground and threatened the civilized world with dissolution in the process. The other way through this all was via sackcloth and ashes.
And keeping the system well regulated in the future is going to take more government involvement- by making rules, not via direct control, which I am sure will dissipate as all these moneys get paid back over time (cough, cough). Rules reforming corporate governance, leverage, and high-volume transactions of all kinds will be key. That will not be fascism, but painfully learned (if learned at all) lessons to save the system from its own pathetic and perennial excesses. Capitalism depends in the state completely- to think it somehow can be free of the state is pure illusion. But it operates best when the rules are clear and corruption is minimized, which is surely still a long way off.
David R. Henderson
Sep 19 2009 at 12:06am
Arin D writes:
I didn’t realize those East Germans escaped the yokes of Stalinism only to be ruled by Fascism after the Berlin wall fell. For by your definition today’s Germany with administered wages, works councils, and regulations in product, labor and capital market must be a Fascist den.
Arin,
I’m wondering if you know what the term “step towards” means.
David
Matt
Sep 19 2009 at 1:03am
How about having bank salaries governed by creative destruction as opposed to “bank salary socialism?”
Oh wait, creative destruction only applies to factory workers, not bankers.
Kurbla
Sep 19 2009 at 1:26am
The fascism is extreme nationalist, reactionary movement, searching past glories, the power of the national state that should be re-established using traditional means – unity, leadership, discipline, heroic character, family … The economy is instrumental to that. The fascists were adherents of various economic ideas from free market to slavery to “third way” and even anarchist ideas, and experimented a lot in practice… Mussolini’s speeches before and his economy few years after he won the power was very free market oriented, and it is evidence that fascist system in general is not in opposition to free market, although some fascist regimes might be.
Both the traditional view of fascists as flat extreme rightist and libertarian view of fascists as semi-communists are too simplistic. If you ever visited (lurked) on some fascist board on the net, you’ll see wide variety of economic beliefs. One fascist believes that the world is way too capitalist, and the reason is Jewish conspiracy. One next to him believes that the world is way too socialist, and the reason is Jewish conspiracy. Both agree that Jews are the main problem, and they should collaborate on that task. Both see their economic differences are minor. That is the way they think.
Michael Keenan
Sep 19 2009 at 8:09am
Hi
I really enjoy reading Econlog and have been reading it for years. I recommend it to others, especially progressives, who often find a previously-unknown viewpoint, presented politely and effectively. Econlog and Econlib have been really valuable persuasive resources for me.
For this reason, I suggest (not demand of course – it’s your blog) that you refrain from using the word “fascist” to describe the American government. I don’t disagree with your content; I just find it rhetorically unwise. Most people don’t know exactly what fascism means, and they don’t care; they just know it’s “something very bad, and a lot like Hitler”.
I’d rather my progressive friends find Econlog to be a welcoming place, with level-headed, friendly arguments. Again, it doesn’t matter that your use of fascism was actually correct and therefore level-headed; I just think may people would interpret it as unfriendly and unwelcoming.
YMMV
Michael
Alfred Centauri
Sep 19 2009 at 8:57am
@Arin:
Stalin: “Social democracy is objectively the moderate wing of fascism. They are not antipodes, they are twins.”
David R. Henderson
Sep 19 2009 at 10:20am
Dear Michael Keenan,
Thanks for your thoughtful comment. I will think about it.
Best,
David
Burk
Sep 19 2009 at 11:39am
Let me make my point in a stronger way- are any of our European friends fascist? No, they are not. They are socialist to various degrees, but none are fascist to any degree (other than Russia, perhaps, but let’s stick with NATO). The reason is that, while fascism may have minor economic correlates, it is not fundamentally an economic phenomenon, but a social/political one. Many Islamic states are quasi-fascist today (with xenophobia, anti-intellectualism, totalitarianism, victimization narratives, and imperialist pretensions), and we may even show signs of the same insofar as we remain unthinkingly imperialist with war of civilizations and God&Country rhetoric. But economics has precious little to do with it.
Arin D
Sep 19 2009 at 7:18pm
David,
I do know what “step towards” means, I am just rather astounded by your use of it in conjunction with “fascism.”
Mild social democratic reforms are steps towards fascism? If post war history showed one thing, Social Democracy in Europe was not a road to serfdom, or fascism. And actual fascism did not start with arguments about prudential regulation of the financial sector. So what gives?
Can we ditch the fascism hyperbole? If we want to argue about merits of banking regulation, let’s have it. But while cries of fascism has cache in town hall meetings, I hope we can do better.
Arin
Rodger Malcolm Mitchell
Sep 20 2009 at 12:47pm
The questions surrounding “excessive” pay for bankers strike an emotional chord, but have no economic significance.
Whether or not Andrew Hall receives his $100 million pay, will have zero effect on the economy or on any taxpayer. Zilch. If he receives the money he won’t keep it more than one day. He’ll spend it or invest it, immediately. If he doesn’t receive the money, Citigroup will spend it or invest it. Either way, the money will move every day, from one hand to another, to another, on and on, never stopping. Some very well might wind up with you.
Economic growth requires money growth, and is less concerned with which entity has the money on any given day, than with how much money there is in total.
These stories get play, not because of their economic significance, but because of class envy. They outrage the low and middle classes, who hate the uppers.
Ironically, few will be concerned when Mr. Hall pays $35 million in federal taxes, which will hurt the economy by reducing the money supply. For brevity of this blog, you can read more about this at http://rodgermmitchell.wordpress.com/2009/09/16/203/
Rodger Malcolm Mitchell
bil. A.
Sep 21 2009 at 12:45am
I will admit that for those who do not understand fascism David’s comments might seem hyperbole, and thus impede understanding.
Commentors like Burk and Kurbla seem distracted by the specific popular rhetoric used by particular fascists in the past to seize power. David is focused on the actual grabbing of power, despite the change in rhetoric. A fascist today in the U.S. is not going to look like a fascist in 1930’s Germany, Italy, or Spain.
Other similarities will no doubt appear: the protectionism/nationalism (tariffs on Chinese tires (Obama) or steel/furniture (Bush)), increased domestic surveillance (Bush and Obama), etc…
The key difference between communism and fascism is that the former involves a rapid ‘revolutionary’ takeover of the private sector, stripping previous owners of property, while the latter involves a more gradual piecemeal extension of control, typically by bringing established property owners and non-government elites into the fold by paying them off somehow (the Bush-Obama bailouts, the Obama backroom meetings with major players in the health insurance and pharmaceutical industries, etc…), cartelizing sectors of the economy (NLRA, etc…), and the like. Fascism swept the world in various guises in the early 20th century – in the U.S. it manifested as the ‘progressivism’ of people like Wilson (militarist and racist) and FDR (concentration camps, war, domestic power grab) – today it can be seen in those who follow them.
So yes, the specific rhetorical tools used by the fascists have changed, but the fundamental issue of who controls what – the state vs. individual citizens is the same.
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