Friendly Fascism: The New Face of Power in America
Crisis Investing: Opportunities and Profits in the Coming Great Depression
Bertram Gross, a liberal Democrat, a former congressional aide, the major author of the Humphrey-Hawkins Full Employment Act of 1978 in its original form, and now a professor, says in his new book that big business and big government may be turning America toward fascism. What Gross sees is not a conspiracy on the part of the ruling class but a “powerful logic of events,” leading to “concentrated, unscrupulous, repressive and militaristic control…to conserve the profits of the ultra rich, the corporate overseers and the (military and civilian) brass to squelch the rights and liberties of people at home and abroad.”
Friendly Fascism, however, will probably enjoy neither the influence of Mills’s Power Elite nor the popularity of Lundberg’s The Rich and the Superrich. It adds nothing to what these earlier populist attacks on concentrated power have already said; its prose is often nearly impenetrable and its argument obscure. One characteristic of friendly fascism, for example, will be its “internal viability, grounded in system strengthening reforms, multi-level co-optation, creative counter-revolution and innovative apathetics.” What this means is only that American fascism won’t come rattling down Pennsylvania Avenue in a tank, but will arrive in such familiar forms as government infiltration of hostile political groups, official toleration of drug-taking to dull the resentfulness of the poor, the use of drugs to tame inmates, and of jobs in the bureaucracy to tame dissidents. But how or whether these abuses may result in something that can plausibly be called fascism is unclear from Gross’s account. Friendly Fascism is nonetheless interesting in so far as it reflects what seems to be a widespread feeling among liberals as well as conservatives that democracy in America has played itself out: that soon Americans won’t be able to govern themselves.
Douglas Casey, an investment counselor specializing in offshore situations, is the author of this season’s best-selling addition to the apocalyptic literature of the populist right, a genre that owes to Ayn Rand what Gross’s left-wing populism owes to C. Wright Mills. Casey, too, says that concentrated bureaucratic power is tending toward dictatorship. He believes, however, that our rulers aim not to preserve but to squander the possessions of the rich and the superrich by transferring their hard-earned money to the undeserving poor in exchange for votes. For Gross, our totalitarian future will be Argentinian. For Casey it will be Cuban. Though both writers say they love the United States, neither trusts or likes it much.
As a defense against fascism, Gross recommends the practice of grass roots democracy. Casey is equally quixotic, but blunter. He would let the government keep the police and the military, but make it sell everything else, including the interstate highway system. Whatever can’t be run for profit shouldn’t be run at all, Casey thinks. As for the welfare poor, their dependent children, the unemployed, the sick, the aged, the low achievers, the unlucky, he would let them find work at whatever wages the market offers and have them pay for their necessities on the same basis. If they suffer and die, that isn’t Casey’s problem. Like so many rightwing populists, Casey is an anarchist at heart; not simply the monster of selfishness he appears to be, but a self-imagined pioneer trapped in a three-piece suit, beset by revenue agents and zoning laws, fighting to keep what’s his in a land where a man’s true measure should be nothing more than the heft of his gold and the design of his tax shelter.
In his introduction to Casey’s book, Robert Ringer, the author of Looking Out for No. 1, a mighty classic of rightwing populism published a few years ago, says that “the chances of averting economic collapse, chaos, and ensuing totalitarian rule are slim,” unless Casey’s solutions are adopted by “the power holders” in Washington. But Ringer doesn’t have much hope. His tone implies the foregone conclusion that even Reagan must have made his deals with the back-room boys not to sell the Lincoln Memorial, the federal prisons, and the VA hospitals to private operators but to let the public go right on enjoying them free of charge.
Casey’s book has risen quickly to the top of the nonfiction best-seller lists, sharing these heights with Rose and Milton Friedman’s Free to Choose, a book written from a similiar intellectual perspective. A year ago the best-seller lists were dominated by Howard Ruff’s How to Prosper During the Coming Bad Years, another example of this genre, which urged its readers to prepare for the apocalypse by buying gold and silver, avoiding stocks and bonds, being careful of real estate, and opening a Swiss bank account. Since Casey’s advice is the same, readers may be buying his book less to find new ways to make money than for its confirmation of their apocalyptic fantasies, fantasies which are even more vividly catered to on the fiction side of the bestseller lists, where tales of alien conspiracies to disrupt our tranquillity currently abound: Arabs plotting to upset the stock market, other Arabs planting a nuclear bomb in Manhattan, a Russian plot to mislead and corrupt American journalists, and so on. The main difference between these thrillers and Casey’s book is that for him and his many readers, the alien force is the United States government and the American majorities who elect it.
But from a less tendentious perspective than either Casey’s or Gross’s, the great proto-fascist power centers that threaten our liberties according to these writers seem, in fact, to be falling apart. Since Eisenhower, the presidency, which Casey thinks is becoming a dictatorship and Gross thinks is an instrument of oppression manipulated by the superrich, has been occupied by men who, whatever their views, their personal qualities, or the influence of their backers, have been unable either to complete their terms or convince the public that they deserve a second one. Congress drifts. Except for the oil companies, most of the great trans-national corporations are heavy with debt, uncompetitive, short of capital. But the oil companies which Gross says are our masters are also OPEC’s slaves. The great banks are caught between short-term Arab lenders and long-term third-world borrowers, their liquidity hostage to the will of Islam. Neither the banks nor the government can stabilize the value or control the supply of our deteriorating currency, or even anticipate its vicissitudes. For all the money they spend, the admirals and generals can’t win even their marginal fights, much less the ultimate one which they seem powerless to prevent. Their war planes won’t fly. Their divisions aren’t ready. Their early warning computers give false signals. With respect to most crimes, the police do nothing.
In fact, authoritarianism seems less likely to arise at the center than at the increasingly autonomous bureaucratic outposts—the maternity wards, the classrooms, the asylums, the welfare agencies, the nursing homes; but these institutions are not what Gross is mainly worried about, any more than the populists of the right are mainly worried about the IRS, which they tend to regard with a matador’s practiced arrogance and the toss of an accountant’s cape. What frightens them instead is the prospect that there will arise from the chaos of our national government a centrally manipulated, interlocking, deliberate system of political authority, much like Hitler’s, determined, in Gross’s view, to enslave us for the sake of the rich, and in Casey’s, to fill the bottomless purses of welfare mothers with other people’s money.
Prophecies like these seldom do more than distort the present for the sake of a portentous statement about the future. Though Hitler came to power at a time of great uncertainty, not unlike the present, and promised the unemployed workers, the conservative farmers, and the ambitious bureaucrats who supported him a simpler world without Bolsheviks, Versailles, Jews, abstract painters, quantum physicists, and other deviants, his fascist regime was hardly inevitable. Hitler was not thrust into office by “a powerful logic of events,” but by the most unlikely series of accidents whose developing pattern was obscure at the time even to the Nazis themselves. Had the young Adolf been admitted to art school in Vienna, he might never have considered a career in politics. Had he breathed a bit more gas on the Western Front; had the policeman’s bullet that killed his bodyguard after the Beer Hall Putsch been a few inches to the left and killed Hitler instead; had his chronic flatulence (after his conversion to vegetarianism, Hitler suffered incurably from meteorism) embarrassed him at a delicate passage in his ascending career—for instance, at the now famous secret meeting with Krupp von Bohlen and his fellow industrialists at which it was decided to back Hitler for the Chancellorship; had Papen and Schleicher played a shrewder hand with Gregor Strasser or had Strasser played a better one with Hitler; had Brüning been a smarter politician or Hindenberg less addled, Germany might have found a less bizarre leader than Adolf Hitler.
Despite their passion for discipline and their craving for disaster, the Germans under saner leadership might have muddled on as a constitutional republic, their economy gradually reviving, their war wounds healing, their attention increasingly focused on the need for alliances with their former enemies in the West, and perhaps also with the Poles and Czechs, against the growing strength of the Soviet Union. Had any of countless potential mishaps or distractions occurred to Hitler on his way to the Chancellery the Nazi Party would probably have expired in the cellars of Munich and fascism would be remembered as an Italian aberration as one hopes falangism will prove to have been a Spanish one. Auschwitz would have remained an obscure Polish railway junction and western Marxists would have congratulated themselves for having chosen a master so prescient as to foresee that totalitarianism, essentially an Asiatic and Latin phenomenon, could never take hold in Protestant, ego-ridden, humanist Germany. Gross would have had to invent another title and hypothesis for his book. He would, in fact, have had to look where Marx intended him to look in the first place for the true centers of despotism, beyond the Caucasus to the brutal capitals of Asia and its adjacent lands.
The inflation of large conclusions from insufficient premises is only part of the problem with these books. A worse difficulty is their assumption—particularly Gross’s—that victim and predator live in morally distinct worlds, worlds in which guilt and innocence are impersonal functions of one’s place in a society divided between the exploiters and those they torment; an assumption of popular innocence which many Americans still reject on behalf of Hitler’s Germans.
Gross believes that the American people are helplessly manipulated by an interlocking hierarchy which includes the universities, the media, the corporations, the foundations, the government agencies, the president, Congress, the courts, and so on, all dominated by “the secret Bilderburg conferences and the more open Trilateral Commission.” But how this evil hierarchy actually works and what the plotters agree to do at their secret Bilderburg meetings or their more open Trilateral ones and how they then carry these schemes out, Gross doesn’t say. Nor does he say how it happens that such an irritable population as ours so quick to turn on its leaders and so corrosive in its scorn for their transparent failings, can be so easily fooled year after year. In this respect, Gross is a kind of deist, arguing backward from the evidence of our defective institutions to the existence of the prime mover that must be manipulating them.
The Hobbesian populism of the right makes more sense. “Everyone wants to be a member of the leisure class,” Casey says. Everyone wants to “loaf” while someone else does the work. This, Casey believes, is why politicians, fearful of imposing further burdens on their luxurious constituents, finance their giveaway programs by borrowing rather than by adding new taxes. In this corrupt atmosphere of easy credit, the banks, according to Casey, follow the government’s cue and lend money to anyone who comes through the door. The result, Casey says, is inflation, the ruin of capital, and the eventual enslavement of a supine and impoverished people. Whether the banks force this credit down the throats of their spitting and gagging customers, or whether the borrowers, already corrupted by years of Keynesian financing, simply swallow these poisonous loans dissolved in Kool-Aid, Casey doesn’t say.
Nowhere in his book, however, does he so much as imply that Americans are or ought to be an industrious people earning their privileges through industry and thrift rather than by buying gold and silver; speculating against their own currency while letting others produce the goods. For all its cynicism, Casey’s low estimate of the American character nevertheless avoids Gross’s facile Manichaeanism, in which the masses differ from their leaders not because they have less power but because they have more virtue. But Casey fails to explain how this nation of Micawbers, so deeply in debt to banks that are themselves insolvent, can blame the welfare poor for its troubles. What he shares with Gross, however, is the idea that Americans have lost their guiding virtues and are about to pay for this self-betrayal with their freedom. For both writers inflation is an important measure of how much freedom we have already lost.
Gross has a more naïve theory of inflation than Casey’s. “Most people,” he says, “know intuitively that the new inflation is a profit-inflation,” a conclusion that Gross himself must have reached intuitively, since he gives no evidence for it. Encouraged by a complacent government, the oil companies, agribusiness, the health-care industry, the banks, and so on, have all been raising prices on instructions, presumably from the Trilateral Commission. What restrained them from having raised their prices decades or even centuries earlier, or what permits them to do so now, Gross doesn’t say, as if the possibility of profiteering had occurred to American businessmen only recently, or as if the combination of falling productivity and easy credit were not in itself enough to account for rising prices. What this criticism of concentrated power implies is that the helpless consumers would, for their part, sell their goods and services, when they have any to sell, at hypothetically fair margins, regardless of supply and demand; as if the maximization of profit offends an American ideal of equitable distribution from which only the rich have exempted themselves.
In truly marginal economies balanced on the edge of extinction, in which one man’s gain is every other man’s loss, the fair distribution of strictly limited supplies is a matter of great practical and moral interest. But the genius of capitalism, especially in America, has been to replace the confining laws of distributive equity with the prospect of growth, a promised transcendence underwritten by our steam engines and dynamos and our abundant frontiers, and powerfully stimulated by the example of the rich to whom the principle of a fair share never applied in the first place. The concession that our plutocrats have made to democracy is to provoke the question, unthinkable in simpler economies, that if the rich are entitled to more than their share of production, why, in this land of plenty, aren’t we all?
A century and more ago the exploitation of what Marx called surplus value—the marginal difference between the value of the labor spent on making a commodity and what the capitalist then sells it for—was the special privilege of a limited class, a privilege and a class that Marx hoped would be swept away by the revolution. Instead the opposite happened. Now great numbers of people, encouraged by America’s example, feel entitled to consume more value than they produce, including, of course, the destitute who can’t help getting more than they give. This widespread presumption of entitlement is both the source and definition of inflation, an affliction that has now crossed the Iron Curtain into Poland, whose national debt approaches $20 billion, a sum which represents the difference between what Poland’s inefficient industry produces and what the Polish government has had to spend to meet the growing demands of its people.
But this is nothing compared to what has happened in America itself. According to the banking house of Salomon Brothers, the combined credit market liabilities—the accumulated debt—of American government, industries, and households is now some $4.2 trillion.1 In 1964, when this debt was a mere trillion, the value of outstanding equities—roughly the worth of America’s productive facilities measured by what investors were willing to pay for shares of their stock—was $634 billion. Today, as America’s debt has increased by more than four times, the market value of its productive facilities has hardly more than doubled to about $1.2 trillion. In other words, since 1964 we have borrowed slightly more than two dollars for every dollar’s worth of productive capital we have created. The other borrowed dollar we consumed or otherwise failed to use productively. During this period, according to the economist Otto Eckstein, the growth of real GNP fell from an average annual rate of 3.9 percent to only 3 percent, which means that we have increasingly been financing this debt not with the proceeds of increased efficiency as a solvent enterprise would do, but with further borrowing, much as the Germans after World War I increasingly paid their reparations account with credit rather than goods and as New York City was doing in the late Seventies. As a result of the excess demand created by this borrowing and our declining production, inflation rose from about 2.3 percent to more than 9 percent by the end of the 1970s. Productivity, according to Lester Thurow, has been falling for “an unprecedented” eighteen months.2
According to Henry Kaufman, who wrote the Salomon Brothers report, government borrowing since 1964 increased from 6 percent to 23 percent of the total. Since slightly more than half of what the government spends goes for transfer payments—payments to veterans and other pensioners, people on welfare, and so on—Kaufman thinks that the government should spend less for these purposes, leaving more for investment in new production. But Casey says that about a third of our borrowing has gone to industry, which according to Kaufman has increased its equity value—i.e., the value of its outstanding shares—by considerably less than a dollar for every two dollars it has borrowed. Like the government, American businesses have distributed a disproportionate share of their incomes for purposes of consumption, in the form of dividends, wages and salaries, instead of investing these earnings in new productive capacity. But the largest share of borrowing has gone to households to finance such nonproductive assets as housing. It seems unfair, therefore, for Kaufman to emphasize the cost of transfer payments to the poor, as it is for Gross to complain only about the profligacy of the rich, when we are all guilty of spending more than we earn.
Whoever borrowed it and no matter how it was spent, these great sums eventually will have to be repaid out of earnings, otherwise America’s creditors, its institutional and individual lenders, will find that they have been holding worthless bonds, savings accounts, and other paper. What complicates the question of repayment, however, is that the huge interest charges on this debt so reduce profits as to make still further borrowing inevitable, if businesses are to survive, much less grow. In this respect the United States has become rather like a third-world country or like New York City, endlessly renewing its loans—in effect converting short-term to long-term debt—against ever diminishing collateral.
This is why Kaufman, a much more sophisticated analyst than Casey, nonetheless concludes his paper with the apocalyptic claim that America is in as much danger as the Russians at Stalingrad, though for Kaufman the enemy is not an alien invader, but ourselves. Kaufman says that “we are facing a last ditch opportunity to strike a new balance between social and economic objectives,” which means that if we don’t consume less and produce more, our capital will be gone and with it our way of life. But whether we can undo the democratization of extravagance that has put us in this mess—and who, beside the welfare poor, ought to be asked to sacrifice for the common good?—Kaufman doesn’t say.
Since our accumulated debts also represent the major assets on the books of American and other lenders, the Trilateral Commission, if it does in fact run everything as Gross believes, should be charged with breach of its fiduciary responsibility not only for getting us into such debt but for letting us hold so much of our own dubious paper. No wonder the conservative tyrants who run the Soviet Union continue to restrict the exploitation of surplus value—the right to consume more than one produces—largely to their own narrow aristocracy.
In some primitive economies the ruler’s job in principle is to assure the sufficient apportionment of limited supplies for the sake of the tribe’s survival and thus his own. In modern economies the problems of leadership are more complicated, for the democratization of extravagance makes the satisfaction of demand, rather than the apportionment of supply, the key to political longevity, as Lyndon Johnson knew when he refused to raise taxes to finance the Viet Nam war, and as the congressional majorities knew when they voted overwhelmingly against President Carter’s proposed tencents-a-gallon tax on gasoline. The Soviets during the war were able to impose the most extreme demands upon their still largely underdeveloped society, but in Germany Goering, who sometimes held Stalin’s centralized economy up as a model to German industry, nevertheless catered to civilian demand, often at the expense of war production, even during Germany’s darkest days. In the year of Stalingrad, for instance, according to the historian Norman Stone,3 German factories produced for domestic use 12,000 tons of wallpaper and 4,800 tons of hair oil, even though Germany’s failure to meet its aircraft production goals was an important factor, according to Stone, in the stalemate before Moscow.
Goering felt that inflation would be the end of everything for the Nazis. The way to keep prices down, he believed, was not to reduce demand, as the Russians were doing, but to try to maintain supplies in so far as he could by borrowing, so to speak, against the future prospects of the Third Reich. This was how Hitler, Goering’s fellow Keynesian, financed the war in the first place, to the dismay of such a conservative banker as Hjalmar Schacht. But Schacht need not have worried. Had Hitler won the war he could have retired his debt easily. When he lost, the least of his problems was how much he owed.
Goering’s fear of inflation turned out to be irrelevant. Germany would have lost even if he had cut the production of wallpaper to nothing or doubled it. Germany lost the war for many reasons, among them Hitler’s inclination toward such a simple and clarifying outcome as disaster rather than toward the difficult and ordinary business of governing a complex society in a period of great cultural transformation. Repeatedly he offered his followers victory or death, and unlike other politicians was enough of a lunatic to mean what he said. What is worrying, in view of our own growing appetite for apocalyptic simplifications, is how easily Hitler managed to persuade his followers that this was a possible alternative.
Gross thinks Germany lost because it lacked “a mature technostructure closely linked with political and military leadership.” It was such a technostructure, he says, that enabled the United States to build an atomic bomb while Germany’s weaker technostructure forced Speer to abandon his nuclear project in 1943. In other words, what Gross elsewhere in his book calls the essential component of fascism—the presence of a military-industrial-political complex—was in fact a characteristic of the democratic West, but was fatally lacking in fascist Germany. The point is not the inconsistency of Gross’s analysis, for in fact the failure of Hitler’s atomic project had little if anything to do with what kind of technostructure Germany had, nor is Speer’s account of the German bomb project true. Hitler failed to get the bomb and thus may have lost a chance to win the war because Heisenberg and his colleagues simply didn’t consider the use of isotopes as the explosive agent, even though a German scientist as far back as 1941 anticipated the derivation of plutonium from U-235.
According to the Dutch-born American physicist Samuel Goutschmidt,4 who served with the secret OSS mission that followed the American advance into Germany to learn the status of the German bomb project, the Germans were fiddling with their nuclear piles right to the end. But Heisenberg’s scientists had so thoroughly missed the essential clue that when they first heard the news of Hiroshima they assumed the Americans had dropped an entire pile on the Japanese. Only later, when they recognized the magnitude of their error, did they conclude that their neglect of isotopes had disgraced German physics and probably cost Germany the war. Several of these scientists were afraid to return home after their internment in England for fear they would be killed by angry German nationalists. It was then that the abashed German scientists began to propagate the fiction which Speer repeats: that they had never been so barbaric as to try for the bomb in the first place; that all they wanted was to make a nuclear pile to produce electricity.
Had Heisenberg considered plutonium and had the technostructure that worked well enough at Peenemunde and at I.G. Farben at least in the early war years been devoted to building the bomb, who can say what the outcome might have been? That Hitler failed to get the bomb was as fortuitous as his having come to power in the first place. Nor was Heisenberg’s fateful oversight Hitler’s only lost opportunity to win the war.
In the end the United States won much of the empire for which Hitler had gambled everything. It was more than we could manage and now we are faced with the bill that Salomon Brothers has added up. Maybe Gross and Casey are right to think that the sheriff is about to take over the premises, but is it likely that a more coercive system than the present one will be more productive? Had Heisenberg thought of plutonium and had Hitler won, would he have managed more efficiently? Had he liquidated or enslaved the Slavs and other inferior races—the people he called planet lice—as he promised to do: had he disposed of the world’s poor as Casey and others seem to want us to dispose of ours, would his fascist government have been better than we ourselves at containing the appetites of a triumphant people or at coercing productivity from reluctant workers and indifferent managers?
Even in the face of disaster, Goering found the burden of maintaining industrial efficiency more than he could bear. In his own words, according to Stone, he had become “sick to death of the whole business” and, not unlike some of our own tycoons, turned to other pursuits. He spent much of his time at Karinhall, “devising ever more gorgeous costumes, taking morphine and playing with his enormous toy train.” Even with access to all the resources of the Nazi state, including 900 million marks and some 300,000 slave workers of whom 25,000 were worked to death, I.G. Farben, which created the modern military-industrial-political technostructure, and which was efficient enough in the early, relatively freer fascist years, was unable to produce a pound of Buna rubber or more than a trickle of synthetic gasoline at its Auschwitz plants. Whether or not we are facing a fascist future ourselves, dictatorial methods are not the answer to low rates of industrial efficiency as the repeated failures of the Soviets and the revival of German industry after Hitler also show.
As our ancient habits of denial give way to the widespread conviction of entitlement, the loss of efficiency that this shift implies may indeed alter our political and economic life, though what form these alterations will take is anything but clear. Perhaps the authors of these books are right to assume that we are now about to descend to more primitive material and political conditions. But the question remains whether any possible adaptation or institution can any longer contain the boundless demands or reverse the inertia that we are now used to. Certainly the presidential candidates of our two major parties have said nothing so far about sacrifice, but eagerly assure the voters that something will turn up. If we are really at Stalingrad as Kaufman thinks, who will be the first to volunteer his assets for the common good? If even Hitler’s unfriendly fascists facing Stalingrad itself could not coerce their constituents into giving up their wallpaper and their hair oil for the sake of building an extra airplane or two, who will be able to coerce us?
These two books are no better at predicting the future than books have ever been. But they may be saying something worth considering about the current mood of the readers they are intended for. What Casey is telling his readers and what they seem willing to believe is that the old republic as they choose to imagine it, with its sacred liberties and its shared values, is being devoured by its own constituencies, though not, of course, those to which Casey and his readers belong. America is no longer the mighty nation it once was but a wilderness of factions, each represented by its own bureaucracy; each corrupting the treasury in its own interest. Inflation is the economic expression of this degenerate factionalism as bureaucracy is its political expression. The only cure for this situation is the cleansing discipline of the free market place. But no such outcome is in sight. Therefore each citizen should follow Casey’s advice and arm himself against the coming apocalypse since a common defense is no longer possible.
Gross’s liberalism doesn’t permit such self-serving advice, but his view of America is much the same as Casey’s. He too thinks that factionalism, inflation, and omnipresent bureaucracy may no longer be correctible aberrations within an otherwise healthy system, but may define the system itself in the present stage of its development. For Gross’s inert liberalism this calls for the usual dismayed tongue clucking as the world goes up in flames. For Casey’s readers, however, the apocalypse provides one last chance before it’s all over to make a killing in offshore tax havens, gold and silver coins, and, as a last resort, custom-made knives which Casey himself collects and urges his readers to collect too.
Both of these authors encourage their readers to see themselves as passive victims of a nation that has failed them and may soon enslave them rather than as participants for better or worse in their country’s ongoing vicissitudes. In so far as nations like religions exist by virtue of the shared consent—the cumulative faith—of their citizens, the United States, these writers seem to be saying, may hereafter exist for their readers only as an alien menace. To the extent that these views may be shared by the millions of people who have recently been buying books like Casey’s and even by the liberal remnant that may agree with the assumptions of Friendly Fascism, one might wonder what realities such troubled visions foreshadow.
The Disregard for Capital by Henry Kaufman (Salomon Brothers, May 1, 1980).↩
New York Times Magazine, August 10, 1980.↩
Hitler (Little, Brown, 1980).↩
Alsos (Abelard-Schuman, 1947).↩