The View From 1776

Hillary Wants Fascist Corporatism

In her recent address to the Economic Club of Chicago, Senator Hillary Clinton advocated a version of the New Deal’s state-corporatism that was patterned on Mussolini’s fascist Italy of the 1920s.

State-corporatism, as practiced by Mussolini and Hitler, was the economic aspect of Fascism.  What the New Deal termed “saving capitalism from itself” and liberals today call “industrial policy” is just fascist state-corporatism under different names. 

Fascism’s essential economic feature is centralized planning, euphemistically called “harmonizing.” Activities of businesses and labor unions are to be coordinated by government planning boards.  Individual economic liberty must be subordinated to the national interests as defined by the ruling party. 

President Roosevelt said in his first inaugural speech in 1933 that only the Federal government is capable of making sound economic decisions, and that power to control those decisions must be collectivized at the national level: “...[capitalist businessmen] have failed through their own stubbornness and their own incompetence?It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definite public character?if we are to go forward we must move as a trained and loyal army willing to sacrifice for the good of the common discipline, because, without such discipline, no progress is made?” 

When put to the test, however, New Deal corporatism failed to end the Depression.  The median annual unemployment rate from 1934 to 1940 was 17.2%, and at no time did it drop below 14%, almost triple today’s rate. 

Most of Senator Clinton’s speech was platitudes such as “...sticking with fiscal discipline, rewarding hard work, investing in our people, growing a strong middle class by giving everyone a chance to succeed.”  Her prescription to accomplish those ends, however, is straight out of New Deal corporatism. 

The core of her speech was its reference to a proposal by Felix Rohatyn and Warren Rudman.  They recommend creation of a National Investment Corporation (NIC)  modeled on the 1932 Reconstruction Finance Corporation (RFC).

Of the NIC, they write: “Today state and local governments spend at least three times as much on infrastructure as the federal government does. In the 1960s the shares for both were even. Even so, increases in state spending have not been enough to check the decline in many of our public assets. A new type of federal involvement would be a powerful initiative and would require a new focus. Rebuilding America is a historic task; we have the means to do it.

“The shortfall in investment is aggravated by the fact that most infrastructure money is given out by formulas that do not force all projects to be evaluated on consistent or rational terms. The solution to both issues could begin with a national investment corporation (NIC) that would be the window through which states and groups of states and localities would request financing or grants for all infrastructure projects requiring federal participation.

“The NIC could use its financial power to bring about improvements in policy. Funds for new highways, airports or water projects would not be granted unless modern technology, appropriate user fees and other non-structural solutions had been brought to bear. Capital grants to individual school districts would be contingent on adopting management and human resource practices that would improve school performance.

“The NIC should have the authority to issue bonds with maturities of up to 50 years to finance infrastructure projects. The bonds would be guaranteed by the federal government.”

This same independent borrowing power enabled the RFC to expand its activities unchecked by Congress.  The NIC may be expected to follow the same course.

Like the proposed NIC, the RFC’s proclaimed focus was public works projects.  Soon, however, it became President Roosevelt’s mechanism for Enron-style off-balance-sheet funding for thousands of projects never contemplated by authorizing legislation.  It was Roosevelt’s principal dispenser of vote-buying political pork.

Congress had essentially no control over the RFC’s activities.  It became the behind-the-scenes funder of quasi-governmental corporations operating businesses in Canada and Mexico, as well as in the United States, bypassing the Constitution’s Article I, Section 7 requirement that all revenue bills originate in the House of Representatives.  In effect, the RFC gave President Roosevelt the monarchial and unconstitutional spending powers that English barons had curbed in 1215 with Magna Carta.

The NIC could be used to fund a re-run of Senator Clinton’s National Socialist Health Care project, as well as other planning ideas of Bill Clinton’s gurus in the late 1980s.  Liberal intellectuals then believed that only by copying Japan, Inc. (the tight coordination among big Japanese corporations, banks, and government agencies) could the United States survive Japanese economic competition.

Thomas J. DiLorenzo described the NIC state-plannning mentality in his 1994 article “Economic Fascism”:

“These exact sentiments were expressed by Robert Reich ([1990s] U.S. Secretary of Labor) and Ira Magaziner ([Hillary’s] federal government’s health care reform “Czar”) in their book “Minding America’s Business.” In order to counteract the “untidy marketplace,” an interventionist industrial policy “must strive to integrate the full range of targeted government policies-procurement, research and development, trade, antitrust, tax credits, and subsidies-into a coherent strategy . . . .”

“Current industrial policy interventions, Reich and Magaziner bemoaned, are “the product of fragmented and uncoordinated decisions made by [many different] executive agencies, the Congress, and independent regulatory agencies . . . There is no integrated strategy to use these programs to improve the . . . U.S. economy.”

In Mussolini’s words, Fascist state-corporatism was intended to “secure collaboration . . . between the various categories of producers in each particular trade or branch of productive activity.” Government-orchestrated “collaboration” was necessary because “the principle of private initiative” could only be useful “in the service of the national interest” as defined by government bureaucrats.

Welcome to Hillary’s proposed NIC.

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